The Supreme Court issued a unanimous opinion in the highly anticipated dispute between Pom Wonderful and Coca-Cola.

The Petitioner, Pom Wonderful, LLC (“POM”), is a grower of pomegranates, distributor of pomegranate juices, and markets pomegranate products, including a pomegranate-blueberry juice blend. Pom competes in the pomegranate juice market with The Coca-Cola Company (“Coca-Cola”) Minute Maid® products. Id. Coca-Cola created a juice blend containing 0.3% pomegranate juice, 0.2% blueberry juice, 0.1% raspberry juice and the remaining 99.4% a combination of apple and grape juices. Id. at 6. The labeling displays prominently “pomegranate blueberry” in large capital lettering accompanied in much smaller type by “flavored blend of 5 juices” and in much smaller type “from concentrate with added ingredients” and “and other natural flavors.” Id. The wording is supported by imagery featuring a halved pomegranate accompanied by blueberries, apples, grapes and raspberries. Id.

Pom sued Coca-Cola under the Lanham Act for unfair competition arising from false and misleading product descriptions. Pom alleged loss of sales due to the name, label, marketing and advertising of Coca-Cola’s pomegranate-blueberry juice blends because they mislead consumers into believing the product predominantly contains those juices when in fact they were largely composed of less expensive juices, such as apple or grape. The District Court granted partial summary judgment for Coca-Cola, on the basis that the Federal Food, Drug and Cosmetic Act (FDCA) precluded the Lanham Act challenge and the Ninth Circuit affirmed in relevant part.

A crossroads

This case is centered around two large federal acts colliding with each other, “which have coexisted since the passage of the Lanham Act in 1946.” Id. at 9.

The Lanham Act

The Lanham Act among other things permits a competitor to sue another for unfair competition arising from false or misleading product descriptions. 15 U.S.C. §1125. This cause of action, although through enforcement, benefits consumers, and is for competitors. Id. at 3. “The term ‘competitor’ is used to indicate all those within the class of persons and entities protected by the Lanham Act” and “may invoke the Lanham Act because they may suffer ‘an injury to a commercial interest in sales or business reputation proximately caused by a defendant’s misrepresentations.” Id. The Lanham act is enforced by private suits brought by injured competitors who allege an injury to their commercial interest in reputation and sales. Id. at 3-4.

The FDCA

The FDCA is designed to protect the health and safety of the public at large, in part through regulations regarding food and beverage labeling, including juice blends, upon which this case stems. 21 U.S.C. §§331, 343. A food and drink label can be deemed false or misleading if:

  1. its labeling is false or misleading;
  2. information required is not prominently displayed on the label; or
  3. a label does not bear the common or usual name of the food.

21 U.S.C. §343.

The FDCA has regulations that specifically address beverage labeling of mixes of different types of juice into one juice blend. See CFR §102.33 (2013). In comparison to the Lanham Act, which is predominantly enforced by private suits, the FDCA does not permit private enforcement suits and grants the United States nearly exclusive enforcement authority and pre-empts certain state misbranding laws. The FDCA, however, does not address or refer to the preclusion of other federal statutes.

Does the FDCA preclude the Lanham Act? Supreme Court says No.

The issue presented to the Supreme Court was whether a private party may bring a Lanham Act claim challenging a food label that is regulated by the FDCA. 571 U.S. __ (2014). The Supreme Court held that “competitors may bring Lanham Act claims like POM’s challenging food and beverage labels regulated by the FDCA.” (slip op., at 2).

The Supreme Court first held that this case is not one of preemption because it’s not a question of whether state law is being preempted by a federal statute or federal agency. The case turns on whether the FDCA precludes the provisions of the Lanham Act. Id. at 7. The court reasoned there could not be a presumption as to preemption, nor would the analysis be governed by the court’s “complex categorization of the types of preemption.” Id. Reasoning that this case is a statutory interpretation case, the court relied on traditional rules for such interpretation. Id. at 8.

Statutory Interpretation

The Supreme Court started with the text of both federal statutes, observing that neither the Lanham Act nor the FDCA in express terms forbids or limits claims based upon the Lanham Act dealing with labels within the FDCA’s bailiwick. Id. at 9. The Lanham Act provides that any person who “misrepresents the nature, characteristics, qualities, or geographic origin of goods and services” could be subjected to a suit. 15 U.S.C. §1125(a). The court found by these terms, the Lanham Act does not exclude labeling of food and beverages nor does the Act purport to set limits on its reach relating to the FDCA, and the FDCA similarly does not limit Lanham Act suits, resulting in two statutes of which neither limits the other’s reach.

The Supreme Court turned to the intentions of Congress next. The court stressed that if Congress was concerned or worried that the Lanham Act would conflict with the FDCA, it very well could have enacted provisions addressing this issue sometime during the 68 years of the statutes coexistence, noting Congress has made amendments to both statutes. Of primary significance is the amendment added to the FDCA, which pre-empted similar state laws addressing food and beverage labeling, however, Congress did not enact a similar provision pre-empting other federal laws. Id. at 10. The fact that a state pre-emption provision was added and not a federal pre-emption provision would reason that the two acts were to be complementary and that Congress’s intention was not to preclude the Lanham Act suits. Id. at 11.

The Supreme Court stresses the two statutes are meant to be complimentary based upon the structure of statutes and the reading of the text. Id. Both statues have their own scope and purpose. Id. The Lanham Act protects commercial interests while the FDCA protects public health and safety. Id. The enforcement provisions also point to the statutes working together rather than against each other. The FDA, the FDCA’s regulatory body, does not have the same perspective as market competitors. Id. Competitors have significant knowledge and expertise relating to how consumers rely on sales and marketing which heightens their awareness to unfair competition practices. Id. Based on these theories, the Lanham Act is best suited to allow competitors to protect their interests while “’provid[ing] incentives’ for manufactures to behave well.” Id. at 12. The court stated that “if the Lanham Act claims were to be precluded then commercial interests — and indirectly the public at large — could be left with less effective protection as to labeling,” a result Congress likely did not intend. Id.

Coca-Cola’s argument — is a losing argument

Coca-Cola argued vigorously that the Lanham Act was precluded by the FDCA because Congress intended national uniformity as to food and beverage labeling. Id. at 13. Coca-Cola relied on three aspects of the FDCA:

  1. enforcement authority delegated to the federal government rather than private parties;
  2. express state law pre-emption provisions; and
  3. specificity of the FDCA and implementation of its regulations.

Id.

The Supreme Court disagreed with all three arguments on the basis that:

  1. the FDCA’s enforcement authority does not indicate that Congress intended to “foreclose private enforcement” of the Lanham Act;
  2. pre-emption applies only to state laws — Congress meticulously drafted and enacted state pre-emption laws not federal pre-emptions laws regarding the FDCA; and
  3. though the FDCA regulates labeling with immense specificity, the two acts “are complementary and have separate scopes and purposes” and the FDCA’s heightened specificity would only work in Coca-Cola’s favor if the two acts could not be implemented together.

Id. at 15.

The government’s argument — another losing argument

The government argued that “the Lanham Act claim is precluded ‘to the extent the FDCA or FDA regulations specifically require or authorize the challenged aspects of the label.’” Id. The court characterized the government as assuming that the FDCA regulations are the ceiling of food and beverage labeling therefore insulating companies from being sued by competitors for unfair competition but rejected this argument because the two acts are intended to complement on another with respect to food and beverage labeling. Id. at 15.

The effect

This ruling allows Pom to go forward with its Lanham Act suit against Coca-Cola, alleging loss of sales resulting from Coca-Cola’s false and misleading juice labels, and sends a cautionary message to the food and beverage industry: FDCA labeling compliance does not preclude liability for false or misleading advertising under the Lanham Act.

Will this opinion result in a flurry of similar lawsuits? Time will tell.