On Sunday, a judge for the U.S. District Court for the District of Columbia dismissed POM Wonderful's ("POM") declaratory judgment action against the Federal Trade Commission ("FTC"). With this suit, POM sought a declaratory judgment that the FTC's allegedly new rule governing disease claims in food advertising exceeds the FTC's statutory authority, violates POM's rights under the First and Fifth Amendments of the U.S. Constitution, violates the rulemaking procedures of the FTC and the Administrative Procedure Act, and is arbitrary and capricious. The allegedly new rule POM sought to overturn stems from settlement agreements the FTC entered into with two companies in July 2010 regarding allegedly deceptive health claims. Both settlements required the companies to root their future health claims in "competent and reliable scientific evidence… consist[ing] of at least two adequate and well-controlled human clinical studies." One of the settlements required that disease-based claims be pre-approved by the Food and Drug Administration. POM brought this declaratory judgment action soon after the two FTC settlements were announced. Shortly afterwards, on September 27, 2010, the FTC filed an administrative complaint against POM, alleging that certain health claims made by POM about the health benefits of its products are unlawful. In defending against the FTC's administrative action, POM has raised many of the same arguments as in its declaratory judgment action. For example, POM argued in its declaratory judgment action that these new standards departed from longstanding agency practice regarding health claims and that they constituted a final agency action under the APA, because the FTC allegedly intended to "universally apply" the new requirements. The judge dismissed POM's declaratory judgment action for three reasons: (1) the action would not fully resolve the parties' claims, because they "would still have to litigate whether POM's health claims about its products were false, misleading, and unsubstantiated in violation of the FTC Act"; (2) POM has a full opportunity to make these arguments (and appeal any potential negative outcome) in the FTC's administrative action; and (3) courts disfavor declaratory judgment actions that raise chiefly an affirmative defense. The FTC's administrative action against POM is ongoing.
TIP: This decision indicates that a court will likely dismiss a declaratory judgment action against the FTC that makes substantially similar arguments raised in defense of an FTC enforcement action.