U.S. Supreme Court Hears Oral Arguments in False Advertising Case

U.S. Supreme Court Hears Oral Arguments in False Advertising Case

 WASHINGTON, D.C. — (Mealey’s) An attorney for The Coca-Cola Co. told the U.S. Supreme Court today that a dispute over the veracity of a fruit juice label does not fall within the purview of the Lanham Act (POM Wonderful LLC v. The Coca-Cola Co., No. 12-761, U.S. Sup.; See 1/21/14, Page 4) [lexis.com subscribers may access Supreme Court briefs for this case.

Instead, according to Kathleen M. Sullivan, Coca-Cola’s label for its “Pomegranate Blueberry” fruit juice is subject to scrutiny only under the Food, Drug and Cosmetic Act (FDCA), a newer and more specific statute than the Lanham Act.  Accordingly, Sullivan maintains, there is no presumption of Lanham Act applicability to petitioner Pom Wonderful LLC’s false advertising claims.

“Pom is arguing here that it may challenge CocaCola’s name and label under the Lanham Act even if that name and label complies with the FDCA and all the relevant implementing regulations.  . . .  I need to make very clear that we believe that under the FDCA and the FDA regulations, Coke’s label is as a matter of law not misleading.  And once we reach that conclusion under [the] FDCA and FDA, [the] Lanham Act can’t come in from the side and say, ‘Oh, yes, it is, because that would undermine the express preemption provision that was designed to create national uniformity,’” Sullivan said.

Express Preemption

Pom sells bottled pomegranate juice and pomegranate juice blends, while Coca-Cola sells bottled juices and juice blends under the Minute Maid brand.  In 2007, Coca-Cola announced Pomegranate Blueberry, which was also marketed under the name “Pomegranate Blueberry Flavored Blend of 5 Juices.”  Pom sued Coca-Cola in the U.S. District Court for the Central District of California, alleging that Coca-Cola misled consumers to believe that Pomegranate Blueberry consists primarily of pomegranate and blueberry juices when it actually consists mainly of the cheaper apple and grape juices.  Specifically, Pom challenged the name, labeling, marketing and advertising of Pomegranate Blueberry.

Pom alleged that Coca-Cola committed false advertising under the Lanham Act and violated California’s unfair competition law (UCL) and false advertising law (FAL).  Pom sought damages, recovery of Coca-Cola's profits and an injunction barring further false advertising of Coca-Cola's juice.  Coca-Cola moved to dismiss the complaint, and the District Court partially granted and partially denied the motion.  The court found that Pom’s Lanham Act challenge to Pomegranate Blueberry’s name and labeling was barred because Pom's suit “may be construed as impermissibly challenging” FDA regulations permitting the name and labeling that Coca-Cola uses.  The District Court found that Pom’s claim could improperly require the court to interpret and apply FDA regulations on juice beverage labeling.

The District Court held that Pom’s Lanham Act challenge could otherwise proceed, however, because although Pom could not challenge Pomegranate Blueberry’s name and labeling, it could challenge Coca-Cola’s other advertising and marketing of the product because those parts of the claim would not require the court to interpret FDA regulations.  The court further held that the FDCA expressly preempted Pom’s state law claims to the extent that the UCL and FAL impose obligations that are not identical to those imposed by the FDCA and its implementing regulations.  Pom then amended its complaint to bring it within the scope of the court’s ruling, re-pleading the Lanham Act, UCL and FAL claims.

Coca-Cola again moved to dismiss, but the District Court this time denied the motion and ruled that Pom could conduct discovery to clarify which aspects of Coca-Cola’s conduct constituted labeling and therefore could not, under the court’s earlier ruling, support Pom’s Lanham Act claim, and which aspects constituted advertising or marketing and thus could support the Lanham Act claim.

PhotoMedex Cited

After discovery, the District Court partially granted summary judgment to Coca-Cola, reiterating that Pom’s Lanham Act challenge to Pomegranate Blueberry’s name and labeling was barred by the FDCA’s implementing regulations.  The court further ruled that Pom lacked statutory standing to pursue its state law claims.  The court said Pom had not established the statutory standing prerequisite of “lost money or property” because Pom had not shown that it was entitled to restitution.  The District Court concluded that triable issues remained on the non-naming and nonlabeling aspects of Pom's Lanham Act claim and permitted Pom to proceed to trial on those matters.  However, Pom conceded that the summary judgment order prevented it from carrying its burden on the claim, so the court entered judgment for Coca-Cola.

Pom appealed to the Ninth Circuit U.S. Court of Appeals, which in May 2012 affirmed the District Court’s ruling in part and vacated it in part.  The Ninth Circuit affirmed the District Court’s summary judgment to the extent that it barred Pom’s Lanham Act claim with respect to Pomegranate Blueberry’s name and labeling.  The panel then vacated the summary judgment ruling to the extent that it held that Pom lacked statutory standing on its UCL and FAL claims and remanded so that the District Court can rule on the state claims in accordance with the panel’s opinion.  On remand, the District Court granted summary judgment to Coca-Cola on the state claims.  Regarding the Lanham Act claim, the Ninth Circuit, using the guidance of PhotoMedex, Inc. v. Irwin, 601 F.3d 919, 924 (9th Cir. 2010) [an enhanced version of this opinion is available to lexis.com subscribers], held that the FDCA and its regulations bar pursuit of both the name and labeling aspects of the claim.  “The naming component of Pom's claim is barred because, as best we can tell, FDA regulations authorize the name Coca-Cola has chosen.  The FDA has concluded that a manufacturer may name a beverage using the name of a flavoring juice that is not predominant by volume,” the Ninth Circuit said.

“The same goes for the labeling component of Pom’s claim,” the panel continued.  “Pom focuses its labeling argument on how Coca-Cola presents the words ‘Pomegranate Blueberry’ and ‘Flavored Blend of 5 Juices’ on the product's label.  Pom apparently wants to force Coca-Cola to alter the size of the words on its labeling so that the words ‘Pomegranate Blueberry’ no longer appear in larger, more conspicuous type on Coca-Cola’s label than do the words ‘Flavored Blend of 5 Juices.’  But allowing Pom to achieve this result would again undermine the FDA’s regulations and expert judgments.”

Petition Filed

Pom filed a petition for writ of certiorari which presents the following question:  “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.”  The Supreme Court granted certiorari on Jan. 10, 2014.

Arguing for Pom, attorney Seth P. Waxman told the Supreme Court today that “this case presents an egregious violation of the law.”  Nothing in the FDCA limits application of the Lanham Act in challenges of misleading food labels, Waxman maintained, and when federal statutes overlap, both statutes must be given effect absent “irreconcilable conflict.”

“The Lanham Act provides a remedy for businesses whose market is misappropriated by competitors that misrepresent the character of the goods they sell.  . . .  CocaCola's label grossly misleads customers, as Coke anticipated, but Coke says that it need not answer under the Lanham Act because its label is authorized by FDA regulations.  The label is not, in fact, authorized for reasons we explain and with which the United States largely agrees, but even if it were consistent with FDA regulations that would not strip Pom of its right to prove a willful Lanham Act violation,” Waxman argued.

‘Tendency To Misrepresent’

Justice Elena Kagan then asked Waxman why the FDA’s determination that Coca-Cola’s label is not misbranded would not necessarily, by extension, foreclose a Lanham Act claim.  “The notion that Congress wanted to allow the FDA to apply substantive rules of decision in that very different inquiry using very different language in a different statute, I think, is completely unsupported,” Waxman replied.

“What’s misleading consumers here is they have no way on God’s green earth of telling that the total amount of blueberry and pomegranate juice in this product can be dispensed with a single eyedropper.  It amounts to a teaspoon in a half gallon.  And the FDA has explained in this case that it has no expertise, it has no warrant to interpret or understand or apply judgments about what kind of words and symbols and the combination thereof, to use the language of the Lanham Act, will have a tendency to misrepresent the nature or quality of the goods from the perspective of the competitor,” Waxman added.

Customers ‘Cheated’

Sullivan then told the Supreme Court that had Pom brought its claims in state court, the case “would be precisely preempted by the terms” of the express preemption provision of the 1990 Nutrition Labeling and Education Act (NLEA).  When Sullivan opined that “it cannot be that Congress meant to preempt these claims if brought as state law claims designed to go above the federal floor,” Justice Kagan voiced skepticism, however.

“Well, why can’t it be? I mean, there are plenty of statutes which say you can’t bring State law or Federal law claims.  Congress knows how to do that.  And instead, it said you can only not bring State law claims,” Justice Kagan said.

“You have said in numerous cases in which you have found a prior or more general law narrowed by a subsequent or more specific law, you have said Congress should not be put to the burden every time it enacts a statute of looking to the four corners of the U.S. Code and figuring out what it might displace,” Sullivan replied.

Sullivan then faced tough questioning from Justice Anthony M. Kennedy, who asked whether it is Coca-Cola’s position that “national uniformity [exists] in labels that cheat the consumers like this one did.” When Sullivan noted that the merits of the case have never been fully adjudicated, Justice Kennedy was unmoved.  “I think it’s important for us to know how the statutes work,” he said, “and if the statute works in the way you say it does and that Coca-Cola stands behind this label as being fair to consumers, then I think you have a very difficult case to make.”

“I think it’s relevant for us to ask whether people are cheated in buying this product.  Because Coca-Cola’s position is to say even if they are, there’s nothing we can do about it,” Justice Kennedy continued.

Safety Not An Issue

Sullivan responded by arguing that “safety is not at issue in this case” because “safety warnings are especially carved out” in the NLEA.  To that end, Sullivan eschewed concerns raised by Justice Samuel A. Alito Jr. and Chief Justice John G. Roberts Jr. regarding the implications of a misleading label for public health and potential allergic reactions by consumers.

“We’re not talking here about safety.  We’re talking here about labeling so that consumers have adequate information, at the same time as manufacturers are not put to the burdens and inefficiencies of having constantly shifting labeling standards imposed by juries, which ultimately will cost more to the consumer,” Sullivan said.

Pom is represented by Waxman, Randolph D. Moss, Brian M. Boynton, Felicia H. Ellsworth and Francesco Valentini of Wilmer Cutler Pickering Hale and Dorr in Washington, Craig B. Cooper of Roll Law Group in Los Angeles and Andrew S. Clare of Loeb & Loeb in Los Angeles.  Sullivan, Faith E. Gay, Sanford I. Weisburst, Todd Anten and Yelena Konanova of Quinn Emanuel Urquhart & Sullivan in New York and Steven A. Zalesin, Sarah E. Zgliniec and Travis J. Tu of Patterson Belknap Webb & Tyler in New York represent Coca-Cola.

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