Monday, August 20, 2012

USDA's ability to act on organic products precludes Lanham Act claim

All One God Faith, Inc. v. Hain Celestial Group, Inc., 2012 WL 3257660 (N.D. Cal.)

Plaintiff does business as Dr. Bronner’s Magic Soaps, personal care products labeled “organic.”  It sued a bunch of companies that make “organic” labeled personal care products, alleging that those weren’t organic as the term is understood by consumers because their products were made from conventional agricultural products, had ingredients made from petrochemicals, and/or contained synthetics.  Dr. Bronner’s also sued Ecocert, which certifies products as “organic” using its own standards.

The Organic Food Products Act of 1990 (OFPA), authorized USDA to create the National Organic Program (NOP), which provides national standards for labeling agriculture and food products as “organic.”   USDA was also authorized to create a National List of approved and prohibited ingredients for the production, handling, and processing of organic products.  The National Organic Standards Board (NOSB) has the exclusive authority to recommend placement on the National List.  Congress “expressly declined” to create a private right of action to enforce OFPA or the resulting regulations.  Only USDA can investigate and penalize violations.

The NOP’s labeling certification scheme is comprehensive—for agricultural products intended for food.  It defines when food can be labeled 100% organic, organic, made with organic, or use organic to describe an ingredient. 

Initially, the USDA concluded that cosmetics, body care products, and dietary supplements were outside its scope.  Later, it held that producers of cosmetics and body care products who used agricultural products were eligible for USDA organic certification, but not required to get it or otherwise subject to NOP standards.  Then it changed back, so such producers couldn’t participate voluntarily.  Then it changed back, allowing producers to use “100 percent organic,” “organic” or “made with organic” if they complied with the NOP regulations.  A few years later, it clarified that compliance with NOP standards was necessary to use USDA certification, whether explicit or implied, on cosmetic/personal care products, but reiterated that the NOP doesn’t govern such products unless the labeling itself implies USDA certification:

USDA has no authority over the production and labeling of cosmetics, body care products and personal care products that are not made up of agricultural ingredients or do not make any claims to meeting USDA organic standards. Cosmetics, body care products, and personal care products may be certified to the other, private standards and may be marketed to those private standards in the United States. These standards might include foreign organic standards, eco-labels, Earth friendly, etc. USDA's NOP does not regulate these labels at this time.

Of course, this finesses the key issue: given the comprehensive, uniform national scheme applied to food, won’t consumers expect that the related field of personal care/cosmetics containing agricultural products is subject to the same comprehensive, uniform regulation, and that “organic” therefore means the same thing on food as on avocado conditioner?  Thus, using “organic” on conditioner will itself imply “USDA organic,” even without more specific labeling.

Anyway, in 2009, the NOP issued a draft guidance on certification and labeling of soap products made from organic agricultural ingredients, and the standards board formally recommended to the Secretary of Agriculture that the existing rules be amended to provide that NOP standards for labeling a product as “organic” or “made with organic [ingredient]” apply to personal care products.  In 2010, the NOP basically said it would study and consult on the issue, and there matters stand.

Dr. Bronner’s initially alleged that consumers expected compliance with NOP standards for the use of “organic” or “made with organic,” so that defendants engaged in false advertising by not complying. Its third amended complaint eliminated reliance on NOP definitions, but alleged that surveys and other evidence demonstrated that consumers believe that organic-labeled products “do not contain any petrochemicals or petrochemical compounds in ingredients whatsoever, and are thus entirely free of petrochemical contaminants” and do not “contain synthetic compounds including preservatives.”  Dr. Bronner’s also filed an administrative complaint with the USDA.  The case was stayed for well over a year pending resolution by the USDA.

Defendants moved to dismiss.  Hain argued that the case should be dismissed because of the primary jurisdiction doctrine: resolving the Lanham Act claim would impermissibly require the court to interpret and apply USDA standards.  The court agreed, following Pom Wonderful LLC v. Coca–Cola Co., 679 F.3d 1170 (9th Cir. 2012).  Courts should defer to an agency’s primary jurisdiction “where, in order to determine the falsity or misleading nature of a defendant's representations about its products, the court would be required to interpret and apply federal standards governing those products.”  Dr. Bronner’s argued that it could establish falsity based on consumer research without reference to NOP standards.

But the USDA had taken pre-rulemaking steps, even if it was acting slowly, and the NOP has made reference to personal care products since 2005, allowing USDA organic claims that meet those requirements.  If the court allowed Dr. Bronner’s to proceed using consumer surveys, it would have to evaluate how consumer expectations compared to federal organic standards, which permit the use of certain synthetic ingredients, including petrochemicals, along with a certain percentage of non-organic ingredients.  Thus, there was a potential conflict with USDA’s authority. 

Dismissal without prejudice was appropriate since laches was unlikely to bar Dr. Bronner’s claim later, given its administrative complaint and vigorous litigation so far. 

Ecocert also moved to dismiss because it was a certifying agent, not a competitor/producer.  The court agreed that this was enough to dismiss the Lanham Act claim.

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