Food and agribusiness companies operating in California that utilize the “organic” label on their products will want to take notice of yesterday’s California Supreme Court decision in Quesada v. Herb Thyme Farms, Inc. The opinion gives further support to class action plaintiffs who wish to challenge a company’s use of the label on products containing a combination of organically grown produce and conventionally grown produce. While organic production guidelines permit the combination of some conventionally grown produce with organic under the label, the California Supreme Court’s decision provides a basis for California consumers to challenge this practice on the grounds of false advertising and unfair competition. In particular, the Supreme Court joined other federal court decisions in holding that a consumer may pursue through a putative class action a state law claim that produce is being intentionally mislabeled as “organic,” and rejected the argument that policing such claims should be left to the federal and state regulatory authorities.
The case arose after consumer Michelle Quesada filed a putative class action in California state court in Los Angeles County against Herb Thyme Farms, Inc. (“Herb Thyme”) challenging Herb Thyme’s practice of labeling its herbs as “organic” under California’s false advertising and unfair competition laws. Ms. Quesada alleged that Herb Thyme combines its conventionally grown herbs with those grown at a single organic farm, processes the herbs at the same packing and labeling facility, and produces them in combination under the same label, “Fresh Organic,” which intentionally misleads consumers. She further alleged that Herb Thyme sells some herb packages under this label that do not contain any organically grown herbs. The trial court dismissed the complaint holding that the USDA has the exclusive authority to regulate the use of the organic label, under the Organic Foods Production Act of 1990 (7 U.S.C. §§ 6501-6522 (2012)). The Court of Appeal affirmed the trial court’s judgment on the grounds that state law class actions for false advertising would create an obstacle for federal enforcement of the Act, but disagreed with the trial court that the Act expressly preempted such suits.
The California Supreme Court disagreed with both of the lower courts’ decisions, holding that Ms. Quesada’s suit was not preempted either expressly or impliedly by the Organic Foods Production Act. The Court identified two domains in which the Act expressly displaces state law: the Act sets aside state standards for the term “organic” including the definition of organic production; and the Act defines the process through which growers can obtain organic certification. However, the Act is silent on the displacement of state laws relating to consumer deception. The Court then acknowledged that every other court to consider the issue had held that the Act does not expressly preempt state consumer protection laws. In re Aurora Dairy Corp. Organic Milk Mktg., 621 F.3d 781, 792 (8th Cir. 2010); Jones v. ConAgra Foods, Inc., 912 F. Supp. 2d 889, 894-95 (N.D. Cal. 2012); Brown v. Hain Celestial Grp., Inc., No. C 11-03082 LB, 2012 U.S. Dist. Lexis 108561, at *26 (N.D. Cal. Aug. 1, 2012). Accordingly, the Court rejected the argument that Act expressly preempts Ms. Quesada’s claim.
Then, the Court concluded that “[f]ar from posing an obstacle . . . claims such as these affirmatively further the purposes of the act.” The Court noted that “the prosecution of such fraud, whether by public prosecutors . . . or through civil suits by individuals or groups of consumers, can only serve to deter mislabeling and enhance consumer confidence.” The Court noted further that deterring misuse of the label supports honest growers by prohibiting the “bad apples” from cashing in on premium prices in the absence of playing by the rules of organic production.
The Court’s decision, though consistent with prior precedent in the California federal courts, will likely result in an increase of state law consumer class actions challenging California growers’ use of the organic label, especially when the products contain a combination of organically grown and conventionally grown produce. In anticipation of the potential increase in class actions, food producers and those in the agriculture industry in California should scrutinize their use of the word “organic” to label such products and ensure their practices comport with the federal and state standards governing the use of this label.