POM Won: a summary of the ruling

POM Wonderful LLC v. Coca-Cola Co., No. 12–761, 573 U.S. -- (June 12, 2014)

POM sued Coca-Cola for falsely advertising a “pomegranate blueberry” juice blend with 0.3% pomegranate juice and 0.2% blueberry juice. The Ninth Circuit found this claim precluded by the FDA’s extensive juice labeling regulations, and the Supreme Court reversed in a broad opinion that nonetheless leaves room for preclusion arguments, certainly in pharmaceutical cases. Examining text, history, and structure of both laws showed no congressional purpose to forbid private suits in cases of this type, but the Court left room to fight about just what POM’s “type” is. (E.g., does this ruling have any bearing at all on a case in which at least part of the plaintiff’s evidence of falsity is use of a term that is inconsistent with a FDA definition thereof, such as “generic”? Consider in this regard what the Court says below about the FDA’s area of expertise ….)

We know that Congress, in the Lanham Act, intended to protect competitors from deceptive advertising/unfair competition. (The Court uses “competitor” as a shorthand for people with standing under Lexmark.)

The FDCA “is designed primarily to protect the health and safety of the public at large.” It prohibits misbranding of food and drink, which includes false or misleading labeling. The FDA promulgated extensive regulations about juice labeling to implement this mandate. Under these regulations, “[i]f a juice blend does not name all the juices it contains and mentions only juices that are not predominant in the blend, then it must either declare the percentage content of the named juice or ‘[i]ndicate that the named juice is present as a flavor or flavoring,’ e.g., ‘raspberry and cranberry flavored juice drink.’” The FDA does not preapprove juice labels, unlike drug labels, “consistent with the less extensive role the FDA plays in the regulation of food than in the regulation of drugs.”  The FDCA may not be privately enforced, and the NLEA preempted many non-identical requirements from a state or political subdivision of a state.

Minute Maid Pomegranate Blueberry ...

“Despite the minuscule amount of pomegranate and blueberry juices in the blend,” “pomegranate blueberry” is prominent and set-off on the label, with “flavored blend of 5 juices” in much smaller type, then “from concentrate with added ingredients,” in still smaller type, then “and other natural flavors.” There’s also a vignette of blueberries, grapes, and raspberries in front of a halved pomegranate and a halved apple. The Ninth Circuit held that the FDA’s extensive regulation precluded a Lanham Act claim against these elements.

The court began by distinguishing preemption, which involves a state-federal balance and a resulting presumption against preemption.  Nonetheless, preemption principles were instructive “insofar as they are designed to assess the interaction of laws that bear on the same subject.”

But at the core, this was a statutory interpretation case.  POM argued that two statutes must be given full effect unless they are in “irreconcilable conflict.” Coca-Cola argued that a more specific law, the FDCA, narrowed the scope of a more general law, the Lanham Act.  Even if the Court’s task were to reconcile the two laws, Coca-Cola was wrong that the best way to harmonize them was to bar the Lanham Act claim.

The Lanham Act, by its own terms, has a “comprehensive imposition of liability” extending to food and beverage labels.  And the FDCA, by its own terms, doesn’t bar Lanham Act suits. The absence of textual preclusion is especially significant because the Lanham Act and the FDCA have coexisted since the passage of the Lanham Act in 1946.  Congress has amended both during the last 70 years, and could’ve addressed interference by the Lanham Act with the FDA if it had concluded that there was any, for example when it enacted the express preemption provision in the NLEA.  “This is ‘powerful evidence that Congress did not intend FDA oversight to be the exclusive means’ of ensuring proper food and beverage labeling.”  If anything, applying expressio unis to the NLEA suggests that Lanham Act suits are not precluded:

It is significant that the complex pre-emption provision distinguishes among different FDCA requirements. It forbids state-law requirements that are of the type but not identical to only certain FDCA provisions with respect to food and beverage labeling. Just as significant, the provision does not refer to requirements imposed by other sources of law, such as federal statutes…. By taking care to mandate express pre-emption of some state laws, Congress if anything indicated it did not intend the FDCA to preclude requirements arising from other sources.

Structure reinforced text.  “When two statutes complement each other, it would show disregard for the congressional design to hold that Congress nonetheless intended one federal statute to preclude the operation of the other.”  So here: each statute has its own scope and purpose.  “[T]he Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety.”  They complement each other more fundamentally, in that the FDA is largely responsible for enforcing the FDCA, but it doesn’t have “the same perspective or expertise in assessing market dynamics that day-to-day competitors possess.”  Those competitors have detailed knowledge about consumer reaction to “certain sales and marketing strategies,” and “[t]heir awareness of unfair competition practices may be far more immediate and accurate than that of agency rulemakers and regulators.”  The Lanham Act allows this market expertise to be brought to bear on a case-by-case basis.  By providing compensation that may motivate injured parties to come forward, the Lanham Act provides additional incentives for manufacturers to behave well.  Allowing Lanham Act suits “takes advantage of synergies among multiple methods of regulation.”  Each statute thus has its own mechanisms to enhance the protection of competitors and consumers.

(As I wondered after oral argument, I wonder how this conclusion about competitor expertise plays out in First Amendment challenges to FDA regulations.  There’s room here, especially given the Court’s reference to “synergies,” to argue that the FDA may underidentify misleading behavior, but still has expertise to determine a minimum blanket rule for what’s false/misleading—but I worry the DC Circuit won’t go for that.) 

A preclusion finding for food and beverage labels would cut a hole in consumer protection.  The FDA doesn’t preapprove such labels, as it does for drugs, and the FDA acknowledges that it doesn’t pursue enforcement against all objectionable labels.  If Lanham Act claims weren’t allowed, then competitors, and indirectly the public, “could be left with less effective protection in the food and beverage labeling realm than in many other, less regulated industries. It is unlikely that Congress intended the FDCA’s protection of health and safety to result in less policing of misleading food and beverage labels than in competitive markets for other products.”

Coca-Cola argued that preclusion was appropriate because Congress wanted national uniformity in food and beverage labeling.  But that desire wasn’t enough.  Congress did delegate FDCA enforcement to the feds, but POM wasn’t trying to enforce the FDCA.  Preemption of a possible patchwork of state standards was different:

Although the application of a federal statute such as the Lanham Act by judges and juries in courts throughout the country may give rise to some variation in outcome, this is the means Congress chose to enforce a national policy to ensure fair competition. It is quite different from the disuniformity that would arise from the multitude of state laws, state regulations, state administrative agency rulings, and state-court decisions that are partially forbidden by the FDCA’s pre-emption provision.

Congress often allows variability “even in areas of law where national uniformity is important.”  (Citing Bonito Boats’ statement about the importance of national uniformity in IP, then noting the private right of action for patent infringement, and noting that the FDCA contemplates that federal juries will resolve most misbranding claims.)  The Lanham Act is uniform in the sense that it protects an entire class against unfair competition; it varies only in being enforced on a case-by-case basis.  That’s no different than the variability to which any industry is subject.

Coca-Cola argued that the FDCA regulations were much more specific than the Lanham Act.  That’s true.  But that specificity would matter “only if the Lanham Act and the FDCA cannot be implemented in full at the same time.”  However, there was no structural or empirical reason to see “any difficulty in fully enforcing each statute according to its terms.”

The Court then rejected the government’s confusing halfway approach, which wouldn’t have allowed POM to challenge the name but would have allowed other challenges to the configuration of the label.  The government wanted preclusion “to the extent the FDCA or FDA regulations specifically require or authorize the challenged aspects of [the] label.”  The Court was concerned about the practical difficulty of distinguishing between regulations that “specifically . . . authorize” a course of conduct and those that merely tolerate that course.  Also, this position had the same problem of treating the FDCA as a ceiling on regulation of food and beverage labeling, but that was inconsistent with the Lanham Act’s complementarity.  (It’s pretty clear that requirements would not be subject to this analysis—if someone challenged a label that said “zero fat” even though it had a tiny detectable amount of fat, the obvious defense is that the FDA requires the use of “zero fat” under such circumstances, and the Court doesn’t suggest that preclusion would be unavailable then.)

The FDA had not, despite what the government said, fully balanced the competing interests at issue. While the rule mentioned “provid[ing] manufacturers with flexibility for labeling products while providing consumers with information that they need,” it didn’t discuss or even cite the Lanham Act. Plus, the FDA explicitly encouraged manufacturers to include material on labels that wasn’t required by the regulations, which was inconsistent with the idea that the regulations were comprehensive.  “A single isolated reference to a desire for flexibility is not sufficient to transform a rulemaking that is otherwise at best inconclusive as to its interaction with other federal laws into one with preclusive force, even on the assumption that a federal regulation in some instances might preclude application of a federal statute.” 

This was distinguishable from Geier v. American Honda Motor Co., 529 U. S. 861 (2000), in which the agency’s regulation deliberately allowed manufacturers to choose between options to encourage diversity in the industry.  A subsequent lawsuit against one of the choices was barred because it directly conflicted with the agency’s policy choice.  But the FDA hadn’t made a policy judgment inconsistent with POM’s suit, “and in any event the FDA does not have authority to enforce the Lanham Act.” “Even if agency regulations with the force of law that purport to bar other legal remedies may do so, it is a bridge too far to accept an agency’s after-the-fact statement to justify that result here. An agency may not reorder federal statutory rights without congressional authorization.”

Reversed and remanded.

Final note: because the 9th Circuit's ruling was so broad and ill-defined, and because the Court is careful to distinguish pharmaceutical regulation, it's hard to say that this will directly affect many lawsuits, though plaintiffs may draw on the Court's emphasis on the Lanham Act's breadth.