After the oral argument in POM Wonderful LLC v. Coca-Cola Co. (pdf), No. 12-761, the Supreme Court appeared all but certain to allow competitors to sue for false advertising under the Lanham Act over labels of FDA-regulated food products. Food manufactures have been waiting to see just how broad the ruling would be and whether it would affect the onslaughtof consumer class actions challenging food and beverage labels. The wait is over, and the POM v. Coke decision, while effecting a dramatic change in competitor actions, should have little impact on consumer class actions.
As described by the Supreme Court, here are the facts of the case: POM markets a juice product labeled “Pomegranate Blueberry 100% Juice,” which consists entirely of pomegranate and blueberry juices. Coke (under its Minute Maid brand) markets “Pomegranate Blueberry Flavored Blend of 5 Juices,” a competing product that contains 99.4% apple and grape juices, with pomegranate, blueberry, and raspberry juices accounting for the remaining 0.6%. The label on the Minute Maid product features a picture of all five fruits and the words “Pomegranate Blueberry” in a larger font than the words “Flavored Blend of 5 Juices.” Significantly, the Minute Maid label complies with the technical labeling rules set out in the federal Food, Drug, and Cosmetic Act (FDCA) and FDA’s related regulations for naming a flavored juice blend.
POM alleged that Coke’s product name and label violate the Lanham Act’s false-advertising provision because (according to POM) consumers will be fooled into thinking there is more pomegranate and blueberry juice in the product than there really is. The district court and Ninth Circuit rejected the Lanham Act claims, accepting Coke’s argument that because juice labeling is pervasively regulated by FDA, applying generalized principles of false advertising under the Lanham Act would destroy the uniform, national labeling standard announced by the agency under the FDCA. As the Ninth Circuit put it, “the FDCA and its regulations bar pursuit of both the name and labeling aspect” of the Lanham Act claim because allowing the claim would “undermine the FDA’s regulations and expert judgments” about how juices may and should be included in the product name.
The Supreme Court unanimously reversed the Ninth Circuit’s decision in an opinion by Justice Kennedy. In analyzing whether one federal statute (the FDCA) precludes a remedy available under another (the Lanham Act), the Court ruled that the FDCA and Lanham Act can be harmonized because they are “complementary and have separate scopes and purposes” and—unlike FDCA’s express preemption of state-law claims—neither statute “discloses a purpose” by Congress to bar competitor suits like POM’s. (A more detailed discussion of the Court’s opinion is available here.) Notably—although the Court repeatedly tells us that the FDCA and Lanham Act can get along—the opinion never actually does the hard work of harmonizing Coke’s compliance with the FDCA’s detailed rules for naming flavored juice blends with POM’s theory of liability challenging the FDCA-compliant name under a generalized theory of false advertising.
By contrast with competitor lawsuits, the Court’s decision should have virtually no impact on food labeling consumer class actions. While the Court expressed the view that consumers will be indirect beneficiaries of competitor Lanham Act claims over allegedly misleading labels, it made clear that its decision does not address or alter the interplay between state consumer protection laws or consumer suits and the FDCA. In other words, the decision does not in any way undermine preemption principles that would apply to state-law claims challenging labels regulated by FDA. That’s important not just for food companies facing consumer class actions, but also to avoid a problem the Court specifically recognized in its decision: the “disuniformity that would arise from the multitude of state laws, state regulations, state administrative agency rulings, and state-court decisions that are partially forbidden by the FDCA’s pre-emption provision.” Though the Court correctly recognizes the resulting chaos if each state could impose non-identical labeling requirements, it characterizes the potential disuniformity from the potential tension between the FDCA and the Lanham Act a result that Congress envisioned.
Whether the Court was right or wrong about that, one thing is clear: In creating food labels, food companies should consider not only what the FDCA and federal regulations say, but also analyze the potential risks of competitor lawsuits under the Lanham Act.