FDA's Juice Labeling Regulations Do Not Bar False Advertising Claim Under Lanham Act

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By Anandashankar Mazumdar

June 12 -- The federal food labeling law and its accompanying regulations do not bar a juice manufacturer from asserting a false advertising claim against a competitor based on an allegation that a juice label is misleading, the U.S. Supreme Court ruled July 12 in a unanimous decision (POM Wonderful LLC v. Coca-Cola Co., U.S., No. 12-761, 6/12/14).

Reversing a ruling by the U.S. Court of Appeals for the Ninth Circuit, the court also rejected an argument by the Solicitor General that the juice labeling regulations act as a “ceiling” on the scope of false advertising claims.

In an opinion authored by Justice Anthony M. Kennedy, the court rejected the argument by Coca-Cola Co., producer of Minute Maid brand juices, that Congress intended that the food labeling law preclude false advertising actions.

The court noted that the only explicit preemption in the labeling law applied to certain specific state law claims. The court said that preemption was not the question to be adjudicated. Rather, this was merely a statutory interpretation case.

Under that rubric, the court determined that there was no inherent incompatibility between the labeling law and the false advertising law. Furthermore, the court emphasized the complementary interaction of the two, in terms of their scope, purpose and remedies.

The court also found that barring such false advertising claims would be contrary to congressional intent.

Observers Agree With Court's Conclusion.

Experts consulted by Bloomberg BNA largely agreed with the court's ruling in this case.

James D. Crowne of the American Intellectual Property Law Association said that the Supreme Court had “made the right call in this case.”

Indeed, he noted that the court's ruling was “even stronger than” the position that the AIPLA had taken on the case, which had “left some room for FDA regulations to prevail where there was an explicit and detailed labeling requirement.”

“In some sense, I think the case really goes beyond the Lanham Act or the Food, Drugs and Cosmetics Act and underscores how the U.S. Supreme Court appears to be not all that impressed by creative arguments of counsel.”
--Adam R. Fox, Squire Patton Boggs (US) LLP, Los Angeles

Adam R. Fox of Squire Patton Boggs (US) LLP, Los Angeles, commented that this was “a case of straightforward statutory interpretation involving the harmonization of two statutes that overlap in their governance of product labeling and for which there is no clear, explicit preclusion of one by the other.”

But putting this decision together with the court's recent decision in Lexmark Int'l, Inc. v. Static Control Components, Inc., No. 12-873 (U.S., March 25, 2014) , another case addressing the scope of Section 43(a), Fox told Bloomberg BNA that it seemed that the Supreme Court might be signaling a broader change in how it approaches statutory interpretation.

“In some sense, I think the case really goes beyond the Lanham Act or the Food, Drugs and Cosmetics Act and underscores how the U.S. Supreme Court appears to be not all that impressed by creative arguments of counsel.”

The court is showing signs that it is “viewing cases as being over-lawyered,” Fox said, and that the message is that “well-crafted arguments cannot defeat the simple interpretation of the clear language of the statute.”

He said that the court seemed to be “essentially saying that they're no longer interested in reading between the lines. They are simply going to read the plain text of the statute.”

The decision might extend to other regulated industries, such as banking: “If they were hoping to say that 'our advertising has been blessed by the agency that regulates us, so we shouldn't be subject to Lanham Act liability,' that argument is going to be difficult.”
--B. Brett Heavner, Finnegan, Henderson, Farabow, Garrett & Dunner LLP, Washington, D.C.

This decision has potential impact beyond this particular interaction between the Lanham Act and the FDA, B. Brett Heavner of Finnegan, Henderson, Farabow, Garrett & Dunner LLP, Washington, D.C., told Bloomberg BNA.

“This reasoning lends itself to application beyond the FDCA, to the extent that other federal agencies have input on regulating advertising for their particular industries”--such as the Federal Reserve and the Federal Deposit Insurance Corp.'s regulations regarding advertising of financial services, he said.

“If they were hoping to say that 'our advertising has been blessed by the agency that regulates us, so we shouldn't be subject to Lanham Act liability,' that argument is going to be difficult,” Heavner suggested.

A similar point was made by Philip G. Hampton II of Haynes & Boone LLP, Washington, D.C., who was assistant commissioner for trademarks at the U.S. Patent and Trademark Office from 1994 to 1998. He made a comparison between the FDA's role in this case to some of the regulatory activities of the Bureau of Alcohol, Tobacco, Firearms and Explosives.

“I'll be interested to see if this extends to some of the other agency regulations, for example some of the ATF regulations part when it comes to, for example, liquor labeling,” Hampton said. “I think there are certain rules for labeling of liquor that you can get approved by the ATF, but I think just because you get an approval from the ATF, that may not end the discussion.”

Hampton did note that the decision might “only slightly affect what trademark attorneys do, in that even in the process of drafting an application, you may have to ask one or two more questions.”

For example, if a trademark lawyer is drafting a trademark registration application related to a beverage, “like in this case if you see that the trademark is for any sort of beverage and it talks about particular ingredients, you need to ask about the makeup of the juice--or even alcoholic beverages” to avoid getting entangled between such regulatory structures.

Both Hampton and Heavner also expressed doubt that this ruling would open the gates to a “tidal wave of litigation.”

“It may be true that beverage makers want to think a little more carefully about how they do their labeling,” Heavner said. “But I wasn't under the impression that beverage makers were somehow hesitant to bring a Lanham Act claim before this.”

The Supreme Court's ruling, according to Timothy J. Kelly of Fitzpatrick, Cella, Harper & Scinto LLP, New York, means that “at least in the false advertising/unfair competition context, manufacturers cannot hide behind one Federal statute in order avoid liability under another.”

“The situation presented here is not really very different from any other Lanham Act §43(a) situation,” Kelly said. “Yes, it potentially opens up the manufacturer to multiple suits and multiple assertions of what is 'clear' or not 'misleading,' but that has always been the case under §43(a).”

Pomegranate Blueberry Juice Has Little of Either.

The dispute began with Coca-Cola Co.'s Minute Maid juice division, which began selling a juice called “Pomegranate Blueberry” whose pomegranate and blueberry juice content was 0.5 percent of the total volume of the juice. Competitor Pom Wonderful LLC brought a claim of false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. §1125(a).

However, a federal district court and the Ninth Circuit ruled that such an action was precluded because juice labeling was under the sole supervision of the Food and Drug Administration, pursuant to The Food, Drug and Cosmetic Act, 21 U.S.C. §301 et seq, as amended by the Nutrition Labeling and Education Act, Pub. L. No. 101-535, 104 Stat. 2353 .

No Statutory Support for Preclusion.

Kennedy began by thoroughly rejecting the Ninth Circuit's ruling:

There is no statutory text or established interpretive principle to support the contention that the FDCA precludes Lanham Act suits like the one brought by POM in this case. Nothing in the text, history, or structure of the FDCA or the Lanham Act shows the congressional purpose or design to forbid these suits. Quite to the contrary, the FDCA and the Lanham Act complement each other in the federal regulation of misleading food and beverage labels. Competitors, in their own interest, may bring Lanham Act claims like POM's that challenge food and beverage labels that are regulated by the FDCA.

The court first rejected the argument that any form of preemption was at issue in this matter. According to the court, this was a matter only of statutory interpretation. Turning to the principles of such interpretation, however, the court found no need to decide between two such principles, one being forwarded by each party.

Pom Wonderful argued that the principle at stake was the one that gives full effect to two statutes that are not in “irreconcilable conflict.” Coca-Cola championed the principle that when two statutes must be reconciled, the one that is given effect is the one that is more specific.

However, according to the court, whichever of the two principles were to be applied, the result would be the same, because “assuming that Coca-Cola is correct that the Court's task is to reconcile or harmonize the statutes and not, as POM urges, to enforce both statutes in full unless there is a genuinely irreconcilable conflict, Coca-Cola is incorrect that the best way to harmonize the statues is to bar POM's Lanham Act claim.”

In reaching this conclusion, the court first noted that neither statute explicitly required Lanham Act claims to be precluded in this situation. Furthermore, the court noted that the statutes have been in effect jointly for 70 years and that during that time, Congress has frequently amended both without ever enacting explicit preclusion language.

To the extent that the limited state law preemption in the NLEA was significant, the court said, it was in that it was evidence that Congress had not done so with respect to the Lanham Act.

Statutes Are Complementary.

Furthermore, the court said, the FDCA and the Lanham Act “complement each other in major respects.” Specifically, the court noted that the Lanham Act was directed at protecting commercial entities from unfair competition; whereas, the FDCA was concerned with public health and safety.

The two statutes also complemented each other in terms of remedies. This was particularly important because the FDA did not have expertise in the area of commercial competition and competitors themselves were the best judge of such clashes.

“A holding that the FDCA precludes Lanham Act claims challenging food and beverage labels would not only ignore the distinct functional aspects of the FDCA and the Lanham Act but also would lead to a result that congress likely did not intend,” the court said. Such result would be “less effective protection in the food and beverage labeling realm than in many other, less regulated industries.”

Tackling Coca-Cola's argument that Congress had enacted the FDCA and the NLEA in order to ensure a nationally uniform regime for food and beverage labeling, the court rejected the notion that allowing Lanham Act claims would disturb national uniformity.

To the extent that the Lanham Act's regime of private action produced any variability, it was only in the sense that false advertising claims are decided on a case-by-case basis. The court emphasized that all these individual cases were “a means to implement a uniform policy to prohibit unfair competition in all covered markets.”

Regarding the specificity of the FDCA as opposed to the broad character of the Lanham Act, the court again noted that the two statutes were complementary and there was no need to neutralize one in order for the other to function.

Finally, the court rejected the federal government's argument that because the FDA had specifically allowed juices to be named for a flavoring ingredient that might not be the largest ingredient by volume, that the Minute Maid label had been explicitly authorized by the FDA and thus this set a “ceiling” of sorts on Lanham Act claims.

As a result, the government said, Pom Wonderful could challenge several different aspects of the label, but not the name of the juice blend.

The court said this argument had the same flaw as Coca-Cola's argument, that there was no need to limit the scope of the Lanham Act when it operated to complement the FDCA.

Furthermore, the court noted that in promulgating its juice regulation, the FDA had not made any reference to the types of concerns addressed by the Lanham Act. The court thus viewed with extreme skepticism the “after-the-fact” claim of the FDA, by way of the Solicitor General, that its rulemaking had indeed been intended to cover unfair competition concerns.

The court said that “it is a bridge too far to accept an agency's after-the-fact statement to justify that result here. An agency may not reorder federal statutory rights without congressional authorization.”

Again emphasizing the complementary operation of the statutes, the court concluded: “The position Coca-Cola takes in this Court that because food and beverage labeling is involved it has no Lanham Act liability here for practices that allegedly mislead and trick consumers, all to the injury of competitors, finds no support in precedent or the statutes.”

Justice Stephen G. Breyer had recused himself from this matter.

By Anandashankar Mazumdar

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com

Crowne is a member of this publication's board of advisors and a former managing editor of this publication.

Text is available at http://pub.bna.com/ptcj/12761SupCt20140612.pdf.

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