Client Alerts
June 12, 2014

Supreme Court rules deceptive labeling claim may proceed

Stites & Harbison Client Alert, June 12, 2014

by Amy Sullivan Cahill and John W. Scruton

The Supreme Court today resolved a dispute about misleading product labeling. The issue was whether a private party can sue a competitor on the grounds that the competitor’s beverage was misleadingly labeled, even though the label complies with regulations issued by the Food and Drug Administration (FDA). The court held that such private suits are permitted.

Minute Maid Bottle Label

The case is POM Wonderful LLC v. The Coca-Cola Company. It arose from a dispute about the labeling of a Minute Maid "Pomegranate Blueberry" juice product, which prominently shows the words “Pomegranate Blueberry” and shows a picture of those fruits. (The label is shown here.) Despite the name, the drink is only 0.3% pomegranate juice and 0.2% blueberry juice - the remaining 99% being apple and grape juice, with a trace of raspberry juice. POM argued that the labeling was deceptive and presented evidence that it actually misled consumers about the amount of pomegranate and blueberry juice in the drink. The trial court refused to consider that evidence because it held that POM's claim was precluded by the Food, Drug, and Cosmetic Act (FDCA), which regulates food and beverage labeling. The Ninth Circuit Court of Appeals agreed, holding in effect that the courts would not second-guess the regulator with expertise in the area in light of the FDA's "comprehensive" regulation. If a label satisfied the FDA, the Ninth Circuit held, competitors could not challenge it as deceptive.

Before the Supreme Court, POM made several arguments:

  1. The Lanham Act - which allows a private party to sue for false advertising and deceptive descriptions in the sale of products - was not in "irreconcilable conflict" with the FDCA and therefore both statutes should be given effect. POM pointed out that neither the Lanham Act nor the FDCA explicitly indicated that they were in conflict, such as by excepting food labels from the Lanham Act’s coverage. Although the FDA regulations allowed Coca-Cola’s labeling, they did not require it, so that Coca-Cola could have used a label that complied with the regulations and was not misleading.
  2. The lower courts’ holding was inconsistent with the recent Supreme Court decision in Wyeth v. Levine holding that the FDA's approval of warnings on a drug label did not prevent a tort suit based on a claim that the label failed to adequately warn of danger.
  3. POM challenged the idea that the FDA's regulation was “comprehensive” in light of Government Accountability Office findings that the FDA was understaffed and underfunded and that there were significant gaps in its regulation, particularly in the assessment of whether food labeling is misleading.

The old jingle said “things go better with Coke,” but at the oral argument before the Supreme Court, things did not go so well. More than one justice asked questions indicating skepticism about Coca-Cola’s contention that compliance with the FDA’s labeling requirements would immunize a label that was deceptive. After Coca-Cola’s attorney argued that consumers were not so easily fooled and knew about labeling practices, Justice Kennedy retorted: "Don't make me feel bad because I thought that this was pomegranate juice."

As it turned out, Justice Kennedy's comment presaged the result. In its decision, the Court noted that the Lanham Act's unfair competition provisions were intended to protect competitors such as POM because competitors are injured by misrepresentations in labeling. The FDCA's labeling requirements, on the other hand, were intended to protect the health and safety of the public at large, but those requirements are enforced by the FDA, not private parties. The Court examined the language of the two statutes and found nothing in either that suggested an intention that compliance with the FDCA requirements would preclude a Lanham Act suit for deceptive labeling. The Court also found it important that in all of the 70 years during which the two statutes have coexisted, Congress has never found it necessary to include an express provision stating that the FDCA would trump the Lanham Act. Further, because the FDA does not pre-approve food and beverage labels, allowing competitors to sue to prevent misleading labeling ensures more comprehensive protection against consumer deception than the FDCA alone provides.

The result is that, although food and beverage makers will still have to comply with the FDA's labeling requirements, that compliance will not immunize them from suits from competitors if their labels are misleading. Manufacturers will be well-advised to examine their packaging to confirm that they are not deceptive. Things may be changing in the juice aisle and elsewhere.

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