United States: Pom Wonderful And Consumer Class Actions Under State Law

The newest wave of false advertising consumer class actions asserts that consumer labeling or marketing violates state unfair competition laws by confusing (or potentially confusing) consumers. While brought under state consumer protection laws, many are sparked by some sort of Food and Drug Administration or other agency action, or involve products or labeling regulated by the FDA. The result is a delicate interplay between, on the one hand, what is allowed, what is required and what is prohibited under federal law; and on the other hand, what is required under a given state's consumer protection law. This interplay, however, does not always provide straightforward guidance to manufacturers marketing their wares.

Additional guidance may soon arrive from the U.S. Supreme Court. On April 21, the court is scheduled to hear oral argument on whether a private action may be brought by a competitor under the Lanham Act for deceptive labeling and marketing that allegedly creates a likelihood of confusion even when the product's labeling complies with FDA regulations that govern deception and confusion in food labeling. The case before the court, Pom Wonderful LLC v. Coca-Cola Co., will require the justices to weigh a competitor's private action under the federal Lanham Act against the regulatory structure of the federal Food, Drug and Cosmetics Act (FDCA). Since many state consumer protection statutes contain Lanham Act "likelihood of confusion" prohibitions, the court's decision also may inform consumer protection actions brought under state law.

The Pom Wonderful case began as a claim in a California district court involving Coca-Cola's Minute Maid Pomegranate Blueberry juice blend. Although labeled as a pomegranate blueberry juice blend, the drink actually was 99.4 percent apple and grape juices, 0.3 percent pomegranate, 0.2 blueberry juice and 0.1 percent raspberry juice. Pom Wonderful—Coca-Cola's competitor—claimed that the font size of the words "Pomegranate Blueberry" was larger than "Flavored Blend of 5 juices," thereby deceiving consumers about the predominance of pomegranate and blueberry in the juice blend. The district court granted summary judgment to Coca-Cola based on FDA regulations to the extent the claim challenged the name and labeling of the product, but denied summary judgment on marketing beyond the name and label. The district court concluded that the FDA had spoken directly through its regulations to allow juice manufacturers to identify their juice products with a nonprimary, characteristic juice. Any further determination regarding font size or location of the name on the label to avoid deception or confusion should be reserved for the FDA to decide.

On appeal, the U.S. Court of Appeals for the Ninth Circuit ruled that Pom Wonderful's Lanham Act claim was barred because Congress entrusted to the FDA the task of interpreting and enforcing the FDCA rather than authorizing enforcement through private right of action. It ruled that "as presumption or a general principle," claims under the Lanham Act may not "usurp, preempt or undermine FDA authority." The Ninth Circuit concluded that the name and labeling presumably complied with FDA regulations that were intended to prevent deceptive labeling.

Given the FDA's comprehensive regulation of juice labeling, the court counseled that the federal regulatory structure would bar: 1) a private litigant from suing under the Lanham Act to enforce the FDCA or its regulations; 2) a private litigant from maintaining a Lanham Act claim that would require a court to interpret ambiguous FDA regulations; and 3) a private litigant from bringing a Lanham Act claim if the issue litigated involved whether conduct violates the FDCA. In effect, courts must not be used to undermine through private litigation the "FDA's considered judgments." Although not specifically so identified, the Ninth Circuit's rationale is close to the "primary jurisdiction doctrine," although that doctrine typically stays or dismisses litigation pending an agency decision rather than providing an outright bar of claims.

Adding a twist to the appeal is that Coca-Cola was not the only juice manufacturer sued by Pom Wonderful. See, e.g., Pom Wonderful LLC v. Ocean Spray Cranberries, Inc.; Pom Wonderful LLC v. Welch Foods, Inc.; Pom Wonderful LLC v. American Dairy Queen Corp. Moreover, Pom Wonderful itself is defending a Federal Trade Commission enforcement action relating to health promises concerning its antioxidant products.

The Supreme Court will embark on a path of either agency deference or legislative conflict. The deference approach will acknowledge the lack of an available private action under the FDCA and will defer to the FDA's expertise in determining the propriety of food labels. A conflict approach will be steeped in preemption-like analysis, focusing on whether the contours of the specific Lanham Act claim conflict with the FDCA and its regulatory structure, and whether there is room for private enforcement of the specific deceptive conduct involved.

Both sides of the conflict-deference debate have merit. On the one hand, the FDA may not view itself as the exclusive enforcement mechanism for deceptive labeling, and in an era of budget cuts it may not have the means to address manufacturer-specific labeling issues or to ensure that all consumer labeling is devoid of deception. Gaps in enforcement arguably should be supplemented through private actions brought under non-FDCA theories, providing the claimant has standing. On the deference side, Congress did not create a private right of action to enforce the FDA's deceptive labeling rules and could not have intended for private parties to enforce it through the Lanham Act. Moreover, since the FDA has concluded that juice manufacturers may identify juice products with a nonprimary, characteristic juice, manufacturers should be permitted to do so without slicing and dicing whether features of an otherwise compliant label render it deceptive. Indeed, it may be very difficult (and costly) for a manufacturer to embark on a national sales campaign that complies with detailed federal regulations, only to later learn that state consumer protection laws enforced privately prohibit that same labeling as deceptive.

The Supreme Court decisions in Wyeth v. Levine, PLIVA, Inc. v. Mensing and Mutual Pharmaceutical Co., Inc. v. Bartlett have focused on conflict preemption and whether state tort law can co-exist with the FDCA—some would say with conflicting results. Some observers also contend that a distinction exists between FDA regulation of pharmaceuticals and medical devices and FDA regulation of food labeling under a different subpart of the FDCA. Pharmaceutical and medical devices go through an extended approval process, which may include testing over a period of years, and sometimes specific approval of warnings and marketing. A distinction also can be drawn between state tort laws and state consumer protection laws, the former having occupied the field and generally predated the FDA's enforcement mechanisms, while the latter were enacted after federal consumer protection law in an effort to supplement federal remedies.

The Supreme Court's decision in Pom Wonderful likely will impact state consumer protection actions, regardless of whether the court focuses on deference to the FDA or on conflict between two federal statutes. An analysis turning on the conflict between the Lanham Act and the FDCA and its regulations likely will result in an uptick in state consumer protection claims, if only because it is relatively simple to conjure up an allegedly deceptive aspect of labeling that is not directly addressed by the FDCA or its regulations. Conversely, if the court focuses on agency deference or broadens the primary jurisdiction doctrine, state unfair competition cases that overlap with the FDA administrative and enforcement functions probably will be quelled.

This article originally appeared in Corporate Counsel Magazine, April 17, 2014.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.