Plaintiff does business as Dr. Bronner’s Magic Soaps. Dr. Bronner’s markets certain of its soaps as USDA-certified organic or made with organic, in compliance with the USDA’s National Organic Program (NOP) standards. Defendants (a whole bunch of them) make and sell soap and related personal care products labeled organic, in direct competition with Dr. Bronner’s. Dr. Bronner’s argued that these products aren’t organic as the term is understood by consumers because “the products are made from conventional agricultural material rather than organic material, contain ingredients made from petrochemicals, contain petrochemical compounds, and/or are preserved with synthetic petrochemical preservatives.”
Defendant Ecocert certifies products, including some of the other defendants’ products, as organic based on its own standards; Dr. Bronner’s alleged that Ecocert’s certifications were inconsistent with consumer expectations and in some cases violated its own standards. Ecocert counterclaimed that Dr. Bronner’s misleads consumers by labeling its products as USDA-certified but not separately listing sodium hydroxide as an ingredient, even though it uses sodium hydroxide to saponify organic oils.
Dr. Bronner’s initially sued in state court raising state claims; the complaint was dismissed for lack of standing, at which point Dr. Bronner’s refiled under the Lanham Act and the defendants removed.
By statute, the USDA is authorized to implement the NOP and create national standards for the marketing of certain agricultural products as organically produced. Those products, if labeled “organic,” must be certified as meeting the requirements of the regulations by a USDA-accredited certifying agent. There is a National List of approved and prohibited ingredients that may or may not be permitted in the production, handling, and processing of organic products. The statute provides that “no person may affix a label to, or provide other market information concerning, an agricultural product if such label or information implies, directly or indirectly, that such product is produced and handled using organic methods, except in accordance with this chapter.” There is no private cause of action to enforce the statute or its implementing regulations. The USDA accepts complaints regarding alleged misuse of “organic,” but only the USDA may sue under the statute.
The law defines the term “agricultural product” as “any agricultural commodity or product, whether raw or processed, including any commodity or product derived from livestock that is marketed in the United States for human or livestock consumption.” Dr. Bronner’s argued that the USDA has consistently applied the law and the regulations only to food; it has said that “[t]he ultimate labeling of cosmetics, body care products, and dietary supplements ... is outside the scope of these [NOP] regulations.” In May 2002, the USDA issued a policy statement that, because such products may contain agricultural products, producers could but need not seek NOP certification. In 2004, however, the USDA reversed course and denied even voluntary participation in the NOP; this lasted for a couple of months, and then the USDA went back to its previous voluntary participation stance.
In 2008, the USDA reconfirmed that participation was voluntary, but that personal care product producers and sellers couldn’t falsely state or imply that their products were USDA-certified, stating that “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 other, private standards and be marketed to those private standards in the United States.”
The first question the court discussed was exhaustion of administrative remedies: a person adversely affected by actions taken by the USDA can appeal such an action. Though the USDA expressly declined to impose NOP standards on personal care products, Dr. Bronner’s was not excused from the exhaustion requirement.
The court also considered the primary jurisdiction doctrine, which is a prudential doctrine allowing agencies the first bite at certain apples within their expertise. Given the USDA’s conclusion that it lacks authority over personal care products labeled organic, Dr. Bronner’s argued that the doctrine was inapplicable, but the court disagreed: the USDA has asserted jurisdiction over such products in other ways, such as by allowing them to seek NOP certification. Dr. Bronner’s argued that its claims didn’t require resolution of an issue of first impression or a particularly complicated question that Congress committed to a regulatory agency, but simply required comparing consumer understanding to what defendants’ products actually contained. The court found that, while Dr. Bronner’s might be able to assert this type of straightforward Lanham Act claim, the complaint as amended is premised on violations of the USDA framework.
Relatedly, the court was sympathetic to defendants’ arguments that resolution of the Lanham Act claim would require a court to interpret and apply statutes and regulations exclusively within the jurisdiction of the USDA. “While Plaintiff’s opposition papers carefully craft an argument that potentially could sustain a viable Lanham Act claim without reference to the NOP standards, Defendants note correctly that the [complaint] itself is replete with references to and regulatory history of the NOP, its definition of ‘organic,’ and its standards for labeling organic products.” Thus, the complaint as written was an attempt to get the court to do what the USDA repeatedly refused to: enjoin defendants for selling “organic” products that don’t meet USDA standards. (I should note that I think that the NOP would be an important background fact shaping consumer expectations, such that a properly-framed complaint would only be intelligible with reference to the NOP, but that doesn’t mean the court would need to interpret the NOP, only assess its effects on consumer expectations, which are likely to be significant.) Following this reasoning, the court gave Dr. Bronner’s leave to amend.
YSL Beaute, one defendant, argued that the complaint should be dismissed for failure to state a claim regardless, because it sells cleansing milk and purifying foaming cleanser, rather than liquid soaps as Dr. Bronner’s does, and thus does not directly compete. The court agreed that the allegations were too conclusory to state a claim. Dr. Bronner’s didn’t allege that its products could be found in the same store or even the same state as YSL Beaute’s, and an inference of direct competition was unwarranted just because they’re both cosmetic and both labeled organic; other defendants’ products were allegedly typically sold in the same sections, and often on the same shelves, of the same retail outlets. (This is an example of differences in what counts as a reasonable inference based on different life experiences. I’m not exactly a high-volume cosmetics consumer, but even I shop in multiple stores, including department stores/specialized makeup stores as well as the Whole Foods.)
Finally, the court dismissed Ecocert’s counterclaim, because it was premised on an alleged violation of a USDA regulation, but finding a violation would force the court to interpret regulatory language beyond its authority, and, independently, Ecocert failed to allege likely injury from Dr. Bronner’s allegedly false advertising. NOP regulations require an ingredient list to include any substance still present in the final commercial product as consumed, but sodium hydroxide is simply used in saponification and only glycerin remains in the final product. The USDA has recently proposed requiring listing ingredients used in saponification even when not present in the finished product, but that’s just a proposal.
The court also granted Ecocert leave to amend to correct the defects, including the lack of specific allegations or factual contentions of harm.
No comments:
Post a Comment