Monday, December 07, 2015

California claims against false use of "organic" not preempted

Quesada v. Herb Thyme Farms, Inc., 2015 WL 7770635, No. S216305 (Cal. S.Ct. Dec. 3, 2015)
Labels matter to consumers, and misrepresentations on labels hurt consumers in their search for information and also disadvantage honest producers attempting to differentiate themselves.  Thus, the Supreme Court of California concluded, federal law didn’t preempt claims against allegedly intentional misrepresentations of organic status by an herb grower.  Congress only preempted state law on matters related to certifying production as organic, rather than also reaching out to preempt action against abuse of the “organic” label.  Such state claims further Congress’ purpose of having a clear national definition of organic production, allowing consumers to rely on organic labels.
According to the complaint, Herb Thyme has multiple conventional farms and one farm that is properly certified as organic by a registered certifying agent. When it comes time for distribution and marketing, however, Herb Thyme allegedly brings its conventionally grown and organic herbs to the same packing and labeling facility, processes them together, and sends blended conventional and organic herbs out under the same “Fresh Organic” label and packaging. Herb Thyme also allegedly packages and labels as organic some herbs that are entirely conventionally grown.

The trial court and court of appeals found preemption of the state-law consumer protection claims based on the Organic Foods Production Act of 1990.  The Supreme Court recounted the history behind OFPA: the rise of consumer demand for “organic” food, but the persistence of consumer confusion and deception in the absence of uniform standards.  States reacted first, but created inconsistent standards.  Congress responded by creating national standards for the production, labeling, and sale of organic products. Producers may label products as organic only if they comply with an approved organic plan; approval must come from either state officials or private certifying agents.
California became the first state to have its own organic program approved.  Approved state programs take principal responsibility for certifying growers and instituting administrative proceedings for noncompliance with the governing standards. California’s state program authorizes anyone to file a complaint about noncompliance, and various state authorities may bring enforcement actions and impose penalties.
Express preemption applies to federalize (1) the term “organic”—a state can’t allow something the feds don’t, and (2) certification for growers, which must be carried out only by certifying agents who themselves have been federally accredited.  Whether production processes qualify as organic is to be measured “only ... in accordance with” the provisions of OFPA.  However, no such language of exclusivity appears in the provisions governing sanctions for misuse of the organic label.  There was no reason to conclude Congress wanted these sanctions to be a ceiling as well as a floor, especially since the law permits states to adopt more stringent standards governing “organic” production. Other courts to consider the issue have found no no express preemption of state consumer protection lawsuits.
Herb Thyme argued that obstacle preemption applied.  There’s a presumption against preemption, and the longstanding interest of the states in protecting consumers against deception in food labeling makes preemption especially unlikely.  Even if the minority on the Supreme Court who advocate for removing the presumption against preemption were in charge, it wasn’t clear that they’d apply a presumptionless test in matters of obstacle preemption.  State consumer fraud lawsuits promote Congress’ goals of avoiding consumer deception, building consumer trust in a standard definition of “organic,” and protecting legitimate organic producers from having their prices undercut by sharp dealers.  Indeed, the USDA’s final rule adopting implementing regulations emphasized that a standard definition of “organic” would aid state enforcement of consumer fraud laws by providing a clear benchmark.  Because OPFA has no private right of action, implied preemption “would render organic labeling uniquely immune from suits for deception because of legislation Congress passed, in part, to prevent food from being ‘deliberately mislabeled as “organic.”’”  It seems unlikely that Congress intended to do so. 
The Eighth Circuit preempted only consumer protection claims asserting the defendant dairy should not have been permitted to sell milk as USDA Organic because its production methods were not actually consistent with federal regulations—“that is, claims making a frontal assault on the validity of the organic producer’s government certification.” Nor could consumers sue the certifying entity on the grounds that it erred either in initially granting certification or in not revoking certification. But that case expressly distinguished state law claims that merely challenged the truth of facts relating to certification.  Herb Thyme argued that the claims here went to split operations involving both conventional and organic produce, which are required by regulation to institute precautions against inadvertent commingling, and thus allowing the case to proceed would conflict with organic regulations.  If the claim was that Herb Thyme’s anti-commingling protocols were inadequate for “true” organic production, notwithstanding the plan’s approval by a federal certifying agent, that might well be preempted.  But that wasn’t the argument here: the complaint accepted Herb Thyme’s certification and compliance with federal regulations on its certified organic farm.  It claimed intentional mislabeling of conventional herbs as organic. “The Organic Foods Act cannot be interpreted, under the guise of obstacle preemption, as shielding from suit the precise misconduct Congress sought to eradicate.... [T]hese claims do not contest Herb Thyme’s ability to do anything its federal certification actually permits it to do."
Further, the overall scheme was inconsistent with Herb Thyme’s claim that only one “umpire”—the federal government—should have a say, since it already delegated lots of decisions to certified growers, state and local officials, and certifying agents.

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