<i>Pom v. Coke</i> Could Create a Juicy Precedent on Food Labels

Coke's product label includes the disclaimer in small script print “enhanced juice” above the Minute Maid trademark. Directly below the trademark, the label refers to “100% fruit juice blend.” Next, the label contains a boxed claim that the Omega'3/DHA contained in the product will “help nourish your brain” with “5 nutrients to support brain and body.” Directly below that box is an artist's rendering showing half a pomegranate, half an apple, and three blueberries, three grapes and two raspberries. Finally, on the label's bottom, the words “pomegranate blueberry” appear in all capitals, and in smaller capital letters directly below, the label reads “flavored blend of 5 juices.” The largest fonts are dedicated to the trademark Minute Maid and the boxed claims about nutrition.

In September 2008, POM sued for misleading labeling and advertising under the Lanham Act. POM's lawsuit claims that Coke violated the Lanham Act's false advertising section (15 U.S.C. '1125(a)), as well as California's unfair competition and false advertising laws. (Cal. Bus. & Prof'l Code '18200 et. seq. Id. Section 17500 et. seq.)

POM alleges that Coke's product bears a deceptive label and “many misleading elements not required by federal or state requirements.” POM argues that the label misleads consumers into thinking the product is mostly pomegranate and blueberry juices, when in fact, it only contains “trivial amounts.” POM's complaint asserts that these misleading characteristics have injured its “business, reputation, and goodwill,” and POM seeks damages, profits, and an injunction.

POM introduced survey evidence showing 36% of consumers believed that the juice contains mostly pomegranate and blueberry juice. In addition, through discovery, POM found evidence that Coke “received a record number of complaints” about this product. In fact, one internal e-mail from Coke before the product launch conceded the possibility of consumer confusion but said that the President and General Manager of Minute Maid is “willing to assume the risk.”

In rebutting this evidence, Coke, cites the art on the label that shows all the fruits used in the product as well as all the other disclaimers on the label. It also points out that the product name and label meet federal labeling standards.

Regulatory Background

The case asks the court to examine how two federal statutes work together.

The Federal Drug and Cosmetics Act (FDCA) regulates food and beverage labeling and only permits enforcement by the FDA or Department of Justice. The relevant section of the FDCA, 21 U.S.C. '343 defines misbranding of food. If the label is false or misleading or if disclosures on the label are “not prominently placed thereon with such conspicuousness ' and in such terms as to render it likely to be read and understood by the ordinary individual under customary conditions of purchase and use.”

The FDA has issued regulations to interpret the statute that specifically address naming and labeling of juice beverages. See , 21 C.F.R. '102.33. These require that juice labels which include the names of the juices “must be [named] in descending order of predominance by volume unless the name specifically shows that [a nonpredominant] juice [supplying a] represented flavor is used as a flavor e.g. raspberry-flavored apple and pear juice drink.” The regulations also require that if multiple juices are present, then the name must indicate that it is a blend and that the non-predominant juice is used as a flavor. It is undisputed that Coke's label meets the FDA's requirements.

The Lanham Act prohibits false advertising and authorizes private suit against those who use a false or misleading description or representation of the “nature, characteristics, [or] qualities” of their goods. The statute is designed to protect and compensate a private party for the damages that flow from such deceptive statements. The issue in this case is whether a false advertising case can proceed even if a product's name and label meet the minimum standards established by the FDA's regulations.

The District Court Ruling

POM sued Coke in the U.S. District Court for the Central District of California. It asserted a cause of action under the Lanham Act for deceptive advertising and several state law claims. Coke responded that its name and label fully comply with applicable Food and Drug Administration (FDA) regulations.

Partially granting Coke's summary judgment motion on an amended complaint, the district court refused to hear POM's Lanham Act claims because of the FDA regulations. The district court did not want to interpret FDA regulations on juice beverage labeling. It also refused to hear the state law claims, citing a standing issue and preemption. At the same time, the district court held that POM could bring a Lanham Act challenge to other advertising and marketing components for the product that did not require the court to interpret FDA regulations.

Ultimately, however, POM could not meet its burden on the advertising and marketing claims without including discussion of the name and label, and the district court entered judgment for Coke. The lower court had held that: 1) the FDCA barred POM's Lanham Act claims concerning the name and labeling of Coke's product; 2) POM lacks statutory standing for its state law claims; and 3) the FDCA preempted the state law claims.

POM appealed to the Ninth Circuit Court of Appeals.

The Circuit Court Decision

In trying to resolve the applicability of the Lanham Act and the FDCA, the Ninth Circuit pointed out that where two federal statutes conflict, “[c]ourts try to give as much effect to both statutes as possible.” Schering-Plough Healthcare Prods., Inc. v. Schwarz Pharma, Inc., 586 F.3d 500, 508 (7th Cir. 2009). In the instant case, the Ninth Circuit refused to give effect to the Lanham Act. It ruled that a plaintiff cannot bring suit under the Lanham Act in an area where the FDCA governs since Congress intended the federal authorities to enforce the FDCA, not private parties.

The Court of Appeals cited PhotoMedex, Inc. v. Irwin, 601 F.3d 919, 924 (9th Cir. 2010). In this case, “a manufacturer of the dermatological laser alleged that its competitor violated the Lanham Act by misrepresenting that its product had been 'cleared' (approved) by the FDA.” The Ninth Circuit refused to hear the plaintiff's Lanham Act claim because it would have had to evaluate the truth of defendant's FDA clearance statement. The POM court explained: “PhotoMedex teaches that the Lanham Act may not be used as a vehicle to usurp, preempt, or undermine FDA authority. That teaching, however, operates as a presumption or general principle ' not as an automatic trump or a firm rule.”

Applying PhotoMedex, the Ninth Circuit barred POM's claims “because, as best we can tell, FDA regulations authorize the name [Coke] has chosen.” The Court of Appeals applied the same reasoning to POM's claims regarding Coke's label. Noting that Coke's label complies with the FDA regulations and that the court lacked the FDA's expertise in juice beverage labeling, the Ninth Circuit barred the Lanham Act claim and deferred to the FDA to decide if Coke's label is deceptive. The court stated succinctly, “If the FDA believes that [the label's] context misleads consumers, it can act.”

Simultaneously concerned that its precedent not be overly broad, the Court of Appeals did note that compliance with the FDCA or FDA regulations may not always “insulate a defendant from Lanham Act liability.” It did not give any explanation, however, of the circumstances under which such liability might exist.

With regard to the state law claims, the Circuit Court vacated the district court holdings and remanded them to the district court because of an intervening California Supreme Court ruling which clarified that standing “does not depend on eligibility for restitution.” The Circuit Court similarly refused to rule on whether POM's state law claims are preempted.

Petition Before the Supreme Court

Following the Ninth Circuit decision, POM filed a petition for a writ of certiorari before the United States Supreme Court. After arguing that the Court of Appeal's decision created a conflict among the circuits about reconciling potentially overlapping federal statutes, POM focused its arguments on alleged fallacies in the court's reasoning. It noted that, “the Court of Appeals reached its conclusion that the FDCA barred POM's Lanham Act claim without identifying a single provision of the FDCA that purports to displace the Lanham Act or even conflicts with it.” POM also pointed out a scenario under which Coke could have complied with the FDA regulations “and marketed a product that was not misleading under the Lanham Act.”

POM further argues that the Lanham Act's purpose “is not just [to protect] consumers from being misled; it is intended to protect businesses from unfair competitive acts by providing a private cause of action to a commercial plaintiff that has been harmed by a competitor's false advertising.” The FDCA, on the other hand, protects consumers but does not provide any redress to a competitor which has been harmed. Consequently, POM argues that its suit does not create an “irreconcilable conflict” with the FDCA, the standard enunciated by the U.S. Supreme Court repeatedly. In addition, POM cites to the Supreme Court case Wyeth v. Levine, 555 U.S. 555 (2009), which established that “the FDCA sets a floor for regulation upon which other laws can build, not a ceiling.” POM finally argues “the Ninth Circuit made no effort to reconcile the Lanham Act with the FDCA.”

Coke responded to POM's petition by reminding the Supreme Court that the product's name and label had been specifically authorized by the FDA's regulations and deemed “not misleading,” thereby prohibiting a private cause of action under the Lanham Act. Coke pointed out a line of precedents that deferred to the FDA and its “mandatory regulatory scheme.” Coke argued that “manufacturers should not be exposed to lawsuits by competitors under the Lanham Act simply because they have adhered to these FDA prescriptions.”

Coke also distinguished Wyeth, arguing that it was a preemption case concerning the state's ability to regulate drug labeling. It also argued that the FDA enacted its regulations based on its considerable expertise and to create standards for beverage manufacturers. If the Supreme Court allowed POM's case to proceed, it would pave the way for confusion in the marketplace as uninformed judges and juries establish a maze of requirements for juice labels. In a final jab at POM, Coke reminded the Supreme Court that the federal government has the ability to regulate the juice industry and in fact had chosen to do so several times by investigating POM for false and deceptive marketing practices. Coke stated “the Government does not need allies like POM to help it fight deception in the realm of juice labeling.”

The Government's Amicus Brief

The United States government filed an amicus curiae brief arguing that while the court of appeals reached an incorrect holding, the Supreme Court should not grant certiorari. The Solicitor General took issue with the Court of Appeals reasoning that the FDA's failure to regulate certain features of Coke's labeling precludes a Lanham Act claim. The brief complained that the Ninth Circuit court's “reasoning endowed the FDCA's food labeling provisions with too broad a preclusive reach.”

The brief also noted that the preamble to the FDA's juice labeling rule leaves room for particular labels to be misleading even if they complied with the provisions. Consequently, if the FDA's lack of action preempted all Lanham Act claims, then it would do so for foods that the FDA does not regulate at all. The Solicitor General also noted that previous precedents exist for challenging food labels with the Lanham Act, and Congress has had an opportunity and yet failed to “[address] the application of section 43a of the Lanham Act to food labels.”

Finally, the United States brief argued that the FDA “has no authority to resolve the competitor's claim of competitive injury due to a misleading label.” Even if the FDA were to promulgate new regulations, it could not address competitive injury, meaning that there still would be room for a Lanham Act claim. Therefore, the United States concluded that the court of appeals ruled in error.

Nonetheless, the United States amicus brief argued against granting certiorari, because there is no circuit court conflict and the factual record is sufficiently unclear as to the “product-name/product-label dichotomy necessary for a sound treatment of the question presented.”

Conclusion

After reply briefs, the Supreme Court granted POM's petition and set argument for April 21, 2014. The case is likely to set an important precedent as to the reach of federal regulations and their ability to impede private Lanham Act causes of action as well as state law causes of action. If the Supreme Court upholds the Ninth Circuit holding, it will clearly establish the FDA's authority, and food and beverage manufacturers may see a decrease of challenges to their labels from competitors and class actions. If, on the other hand, the Supreme Court finds in POM's favor and reverses the Ninth Circuit, depending on the scope of its holding, this precedent could keep manufacturers in the line of fire for private lawsuits.

In addition, none of the briefs filed in this case has focused on Coke's health claims on its product label. Purportedly, these are some of the claims that could face challenge under the Lanham Act, regardless of FDA label requirements. If the Supreme Court decides in dicta to address health claims and substantiation requirements, that could help guide an industry that faces a slew of class action challenges and regulatory investigations.

In short, this litigation should be an important precedent for food and beverage companies. The Supreme Court holding may broadly influence marketing efforts in the industry for years to come.

Kyle-Beth Hilfer, Esq., specializes in advertising, marketing, promotions, intellectual property and new media law. She is Of Counsel to the law firm Collen IP. For more information about her law practice, please visit www.kbhilferlaw.com. ' Kyle-Beth Hilfer, P.C. 2014.

Food companies will be watching closely a Supreme Court case this spring that could establish the fate of private causes of action challenging food labeling. In a case brought by POM Wonderful (POM) against Coca-Cola Co., Inc. (Coke), the Supreme Court will decide “whether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the Food, Drug, and Cosmetic Act.” While the case focuses on federal law, it also has implications for state causes of action. In particular, the class action bar has been prolific in its challenges to food labels, and this case could affect the future viability of such actions.

Factual Background

On its website, POM calls itself the “largest grower of pomegranates in the United States.” Among its offerings, the company sells “POM WONDERFUL” brand bottled pomegranate juice and a pomegranate blueberry juice blend. Its competitor Coke markets a “pomegranate blueberry flavored” juice. Coke's product is 99.4% apple and grape juice, 0.3% pomegranate juice, 0.2% blueberry juice, and .1% raspberry juice. The parties cannot agree on the product's name, with POM saying it is called “Pomegranate Blueberry” and Coke retorting that the full name is “Pomegranate Blueberry Flavored Blend of 5 Juices.”

Coke's product label includes the disclaimer in small script print “enhanced juice” above the Minute Maid trademark. Directly below the trademark, the label refers to “100% fruit juice blend.” Next, the label contains a boxed claim that the Omega'3/DHA contained in the product will “help nourish your brain” with “5 nutrients to support brain and body.” Directly below that box is an artist's rendering showing half a pomegranate, half an apple, and three blueberries, three grapes and two raspberries. Finally, on the label's bottom, the words “pomegranate blueberry” appear in all capitals, and in smaller capital letters directly below, the label reads “flavored blend of 5 juices.” The largest fonts are dedicated to the trademark Minute Maid and the boxed claims about nutrition.

In September 2008, POM sued for misleading labeling and advertising under the Lanham Act. POM's lawsuit claims that Coke violated the Lanham Act's false advertising section (15 U.S.C. '1125(a)), as well as California's unfair competition and false advertising laws. (Cal. Bus. & Prof'l Code '18200 et. seq. Id. Section 17500 et. seq.)

POM alleges that Coke's product bears a deceptive label and “many misleading elements not required by federal or state requirements.” POM argues that the label misleads consumers into thinking the product is mostly pomegranate and blueberry juices, when in fact, it only contains “trivial amounts.” POM's complaint asserts that these misleading characteristics have injured its “business, reputation, and goodwill,” and POM seeks damages, profits, and an injunction.

POM introduced survey evidence showing 36% of consumers believed that the juice contains mostly pomegranate and blueberry juice. In addition, through discovery, POM found evidence that Coke “received a record number of complaints” about this product. In fact, one internal e-mail from Coke before the product launch conceded the possibility of consumer confusion but said that the President and General Manager of Minute Maid is “willing to assume the risk.”

In rebutting this evidence, Coke, cites the art on the label that shows all the fruits used in the product as well as all the other disclaimers on the label. It also points out that the product name and label meet federal labeling standards.

Regulatory Background

The case asks the court to examine how two federal statutes work together.

The Federal Drug and Cosmetics Act (FDCA) regulates food and beverage labeling and only permits enforcement by the FDA or Department of Justice. The relevant section of the FDCA, 21 U.S.C. '343 defines misbranding of food. If the label is false or misleading or if disclosures on the label are “not prominently placed thereon with such conspicuousness ' and in such terms as to render it likely to be read and understood by the ordinary individual under customary conditions of purchase and use.”

The FDA has issued regulations to interpret the statute that specifically address naming and labeling of juice beverages. See , 21 C.F.R. '102.33. These require that juice labels which include the names of the juices “must be [named] in descending order of predominance by volume unless the name specifically shows that [a nonpredominant] juice [supplying a] represented flavor is used as a flavor e.g. raspberry-flavored apple and pear juice drink.” The regulations also require that if multiple juices are present, then the name must indicate that it is a blend and that the non-predominant juice is used as a flavor. It is undisputed that Coke's label meets the FDA's requirements.

The Lanham Act prohibits false advertising and authorizes private suit against those who use a false or misleading description or representation of the “nature, characteristics, [or] qualities” of their goods. The statute is designed to protect and compensate a private party for the damages that flow from such deceptive statements. The issue in this case is whether a false advertising case can proceed even if a product's name and label meet the minimum standards established by the FDA's regulations.

The District Court Ruling

POM sued Coke in the U.S. District Court for the Central District of California. It asserted a cause of action under the Lanham Act for deceptive advertising and several state law claims. Coke responded that its name and label fully comply with applicable Food and Drug Administration (FDA) regulations.

Partially granting Coke's summary judgment motion on an amended complaint, the district court refused to hear POM's Lanham Act claims because of the FDA regulations. The district court did not want to interpret FDA regulations on juice beverage labeling. It also refused to hear the state law claims, citing a standing issue and preemption. At the same time, the district court held that POM could bring a Lanham Act challenge to other advertising and marketing components for the product that did not require the court to interpret FDA regulations.

Ultimately, however, POM could not meet its burden on the advertising and marketing claims without including discussion of the name and label, and the district court entered judgment for Coke. The lower court had held that: 1) the FDCA barred POM's Lanham Act claims concerning the name and labeling of Coke's product; 2) POM lacks statutory standing for its state law claims; and 3) the FDCA preempted the state law claims.

POM appealed to the Ninth Circuit Court of Appeals.

The Circuit Court Decision

In trying to resolve the applicability of the Lanham Act and the FDCA, the Ninth Circuit pointed out that where two federal statutes conflict, “[c]ourts try to give as much effect to both statutes as possible.” Schering-Plough Healthcare Prods., Inc. v. Schwarz Pharma, Inc., 586 F.3d 500, 508 (7th Cir. 2009). In the instant case, the Ninth Circuit refused to give effect to the Lanham Act. It ruled that a plaintiff cannot bring suit under the Lanham Act in an area where the FDCA governs since Congress intended the federal authorities to enforce the FDCA, not private parties.

The Court of Appeals cited PhotoMedex, Inc. v. Irwin, 601 F.3d 919, 924 (9th Cir. 2010). In this case, “a manufacturer of the dermatological laser alleged that its competitor violated the Lanham Act by misrepresenting that its product had been 'cleared' (approved) by the FDA.” The Ninth Circuit refused to hear the plaintiff's Lanham Act claim because it would have had to evaluate the truth of defendant's FDA clearance statement. The POM court explained: “PhotoMedex teaches that the Lanham Act may not be used as a vehicle to usurp, preempt, or undermine FDA authority. That teaching, however, operates as a presumption or general principle ' not as an automatic trump or a firm rule.”

Applying PhotoMedex, the Ninth Circuit barred POM's claims “because, as best we can tell, FDA regulations authorize the name [Coke] has chosen.” The Court of Appeals applied the same reasoning to POM's claims regarding Coke's label. Noting that Coke's label complies with the FDA regulations and that the court lacked the FDA's expertise in juice beverage labeling, the Ninth Circuit barred the Lanham Act claim and deferred to the FDA to decide if Coke's label is deceptive. The court stated succinctly, “If the FDA believes that [the label's] context misleads consumers, it can act.”

Simultaneously concerned that its precedent not be overly broad, the Court of Appeals did note that compliance with the FDCA or FDA regulations may not always “insulate a defendant from Lanham Act liability.” It did not give any explanation, however, of the circumstances under which such liability might exist.

With regard to the state law claims, the Circuit Court vacated the district court holdings and remanded them to the district court because of an intervening California Supreme Court ruling which clarified that standing “does not depend on eligibility for restitution.” The Circuit Court similarly refused to rule on whether POM's state law claims are preempted.

Petition Before the Supreme Court

Following the Ninth Circuit decision, POM filed a petition for a writ of certiorari before the United States Supreme Court. After arguing that the Court of Appeal's decision created a conflict among the circuits about reconciling potentially overlapping federal statutes, POM focused its arguments on alleged fallacies in the court's reasoning. It noted that, “the Court of Appeals reached its conclusion that the FDCA barred POM's Lanham Act claim without identifying a single provision of the FDCA that purports to displace the Lanham Act or even conflicts with it.” POM also pointed out a scenario under which Coke could have complied with the FDA regulations “and marketed a product that was not misleading under the Lanham Act.”

POM further argues that the Lanham Act's purpose “is not just [to protect] consumers from being misled; it is intended to protect businesses from unfair competitive acts by providing a private cause of action to a commercial plaintiff that has been harmed by a competitor's false advertising.” The FDCA, on the other hand, protects consumers but does not provide any redress to a competitor which has been harmed. Consequently, POM argues that its suit does not create an “irreconcilable conflict” with the FDCA, the standard enunciated by the U.S. Supreme Court repeatedly. In addition, POM cites to the Supreme Court case Wyeth v. Levine, 555 U.S. 555 (2009), which established that “the FDCA sets a floor for regulation upon which other laws can build, not a ceiling.” POM finally argues “the Ninth Circuit made no effort to reconcile the Lanham Act with the FDCA.”

Coke responded to POM's petition by reminding the Supreme Court that the product's name and label had been specifically authorized by the FDA's regulations and deemed “not misleading,” thereby prohibiting a private cause of action under the Lanham Act. Coke pointed out a line of precedents that deferred to the FDA and its “mandatory regulatory scheme.” Coke argued that “manufacturers should not be exposed to lawsuits by competitors under the Lanham Act simply because they have adhered to these FDA prescriptions.”

Coke also distinguished Wyeth, arguing that it was a preemption case concerning the state's ability to regulate drug labeling. It also argued that the FDA enacted its regulations based on its considerable expertise and to create standards for beverage manufacturers. If the Supreme Court allowed POM's case to proceed, it would pave the way for confusion in the marketplace as uninformed judges and juries establish a maze of requirements for juice labels. In a final jab at POM, Coke reminded the Supreme Court that the federal government has the ability to regulate the juice industry and in fact had chosen to do so several times by investigating POM for false and deceptive marketing practices. Coke stated “the Government does not need allies like POM to help it fight deception in the realm of juice labeling.”

The Government's Amicus Brief

The United States government filed an amicus curiae brief arguing that while the court of appeals reached an incorrect holding, the Supreme Court should not grant certiorari. The Solicitor General took issue with the Court of Appeals reasoning that the FDA's failure to regulate certain features of Coke's labeling precludes a Lanham Act claim. The brief complained that the Ninth Circuit court's “reasoning endowed the FDCA's food labeling provisions with too broad a preclusive reach.”

The brief also noted that the preamble to the FDA's juice labeling rule leaves room for particular labels to be misleading even if they complied with the provisions. Consequently, if the FDA's lack of action preempted all Lanham Act claims, then it would do so for foods that the FDA does not regulate at all. The Solicitor General also noted that previous precedents exist for challenging food labels with the Lanham Act, and Congress has had an opportunity and yet failed to “[address] the application of section 43a of the Lanham Act to food labels.”

Finally, the United States brief argued that the FDA “has no authority to resolve the competitor's claim of competitive injury due to a misleading label.” Even if the FDA were to promulgate new regulations, it could not address competitive injury, meaning that there still would be room for a Lanham Act claim. Therefore, the United States concluded that the court of appeals ruled in error.

Nonetheless, the United States amicus brief argued against granting certiorari, because there is no circuit court conflict and the factual record is sufficiently unclear as to the “product-name/product-label dichotomy necessary for a sound treatment of the question presented.”

Conclusion

After reply briefs, the Supreme Court granted POM's petition and set argument for April 21, 2014. The case is likely to set an important precedent as to the reach of federal regulations and their ability to impede private Lanham Act causes of action as well as state law causes of action. If the Supreme Court upholds the Ninth Circuit holding, it will clearly establish the FDA's authority, and food and beverage manufacturers may see a decrease of challenges to their labels from competitors and class actions. If, on the other hand, the Supreme Court finds in POM's favor and reverses the Ninth Circuit, depending on the scope of its holding, this precedent could keep manufacturers in the line of fire for private lawsuits.

In addition, none of the briefs filed in this case has focused on Coke's health claims on its product label. Purportedly, these are some of the claims that could face challenge under the Lanham Act, regardless of FDA label requirements. If the Supreme Court decides in dicta to address health claims and substantiation requirements, that could help guide an industry that faces a slew of class action challenges and regulatory investigations.

In short, this litigation should be an important precedent for food and beverage companies. The Supreme Court holding may broadly influence marketing efforts in the industry for years to come.

Kyle-Beth Hilfer, Esq., specializes in advertising, marketing, promotions, intellectual property and new media law. She is Of Counsel to the law firm Collen IP. For more information about her law practice, please visit www.kbhilferlaw.com. ' Kyle-Beth Hilfer, P.C. 2014.