Thornton v. Kroger
Co., 2022 WL 488932, No. CIV 20-1040 JB/JFR (D.N.M. Feb. 17, 2022)
269 print pages!
Thornton sued over
logos that allegedly misrepresented the US origin of meat. She alleged both
health and moral concerns about foreign beef, which she alleged was produced
under dangerous and environmentally destructive/harmful labor conditions.
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| examples of challenged labels: USDA Choice, "produced in the USA" over American flag |
The court held that federal
law did not preempt her claims; she was not seeking to reinstate
country-of-origin labeling requirements for beef, but to avoid false
advertising, which was consistent with federal law (which specifies that labels
can’t be false/misleading). She challenged both use of a “U.S.D.A.
CHOICE/Produced in the USA” graphic, as well as use of the official USDA grade
shields in red, white and blue. Although Kroger claimed that it was no longer using
“ ‘Produced in the USA’ language in connection with any beef advertisements,”
the court pointed out that it saw promotional stickers saying that in the
store, and thus “understood” Kroger’s statement to mean only that the logos
were no longer in mailings or other out-of-store ads.
Likewise, the New
Mexico Unfair Practices Act’s safe harbor provision didn’t exempt the
defendants’ conduct because it wasn’t “expressly permitted” by USDA. Defendants
fundamentally argued that federal law dictated that “labels which indicate that
products which only have been processed in the United States can be labeled as
a United States product, regardless whether these labels are false or
misleading.” The court disagreed.
Part of the problem
came from the feds themselves:
It takes a certain amount of mental gymnastics to reconcile the
Agricultural Marketing Act’s plain language—as well as the USDA’s public
pronouncements—about how the USDA grade shields promote “American beef” and
“American agricultural products,” with the thicket of USDA regulations that
implicitly undermine those stated goals.
Comment: The feds
have long preferred the interests of packers over those of US ranchers. “Although
the Defendants’ practice of using USDA grade shields on their labels and in
advertisements may be prevalent and customary in the retail industry, and the
USDA may even ratify that use to the extent that the shields are used to
indicate ‘American agricultural products,’ ‘[n]either inferential pre-conduct
agency permission nor post-conduct agency review has even been held to satisfy
the requirement of the statute.’” A regulatory “patchwork” that defendants
argued gave them permission was not a safe harbor and USDA never approved the
conduct at issue here.
Similarly, the
dormant commerce clause didn’t preclude the claim. Because advertising beef as
“U.S.D.A. CHOICE/Produced in the USA,” or with the USDA official grade shield,
is permissive and not mandatory, it was possible for the defendants to comply
with state law without affecting international trade agreements. “It is
difficult to see how, if the Defendants can no longer advertise imported beef
products with promotional stickers or advertising graphics indicating that
those products have a geographic origin in the United States, this would upend
WTO rulings.”
Core plausibility:
It was plausible that the “Produced in the USA” claim was deceptive, but not
that the red white and blue USDA official shield was (plaintiffs had argued
that defendants should have to use the black and white version). As to the
first, it was plausible that consumers would believe that the advertised beef
was from cattle born and raised in the United States when it was not. But “on
their face, the official USDA grade shield states merely the beef’s grade and
implies that it has passed USDA inspection.”
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| USDA choice shield in red white and blue |
It was true that, viewed in conjunction with government statements about the meanings of the grade shields, the shields could be misleading, but Thornton didn’t allege reliance on government statements. The court wouldn’t attribute the government message to defendants. Thornton didn’t plead sufficient facts to show that the public would have relied on the government statements. The court commented that liability would be possible for some third party statements. “If, for example, the USDA or AMS ran television advertisements every night stating that the USDA grade shields are symbols of high quality American beef and that their purchase supports rural America, then Thornton plausibly could allege, and the Court could conclude, that reasonable consumers could be misled by the Defendants’ use of the official USDA grade shields, even though the Defendants’ advertisements are not facially misleading.” But that wasn’t alleged here.
Breach of warranty
was plausible for “Produced in the USA,” which was ambiguous as applied to beef
products. Thus, the jury should determine its meaning as the ultimate
factfinder. [Compare the reasoning here—perfectly good common-law reasoning—with
the reasoning on the preliminary injunction motion, which invokes Lanham Act
distinctions.]
For the preliminary
injunction, Thornton lacked a substantial likelihood of success on the merits
because she didn’t show that the general public was aware of or relied on
government statements about the official shield grades—which were the only
thing she sought preliminary injunctive relief on. Also, and this is something
that the court doesn’t seem to know is a total innovation, “because the
official USDA grade shields are not inherently misleading, they enjoy First
Amendment protection, and Thornton does not demonstrate that a PI is the least
restrictive method of vindicating the important State interest in truthful
commercial speech.” That is, the court seemingly unites the explicitly
misleading/implicitly misleading divide from the Lanham Act with the inherently
or actually misleading/potentially misleading divide from an older line of
First Amendment cases about direct government regulation. This doesn’t work
super well—including because “actually misleading” includes situations where
the statement is ambiguous but shown to deceive consumers, so the First Amendment
divide encompasses both parts of the Lanham Act categorization system.
This was an invited
confusion, since defendants insisted that the court should use the Lanham Act
explicit/implicit distinction to evaluate the case, requiring “evidence
(usually in the form of market research or consumer surveys) showing how the
statements are perceived by those who are exposed to them.” The court, in
adopting this view, cited a lot of Lanham Act cases—including a quote saying “Lanham
Act”—without explaining why this standard was also the standard for consumer
protection cases: “While it is true that the issue whether an advertisement is
misleading is a factual question to which individual jurors would bring their
own opinions, perceptions, and experience—and would ultimately determine, were
this case to go to trial—the Court determines that, in the absence of consumer
surveys, market research, or expert testimony to the contrary, a reasonable
jury would not consider the USDA grade shields to be misleading facially.” The
USDA grade shields “do not assert facially anything about the beef’s origin,
but assert only the meat’s grade and that it passes USDA inspection standards.”
Although the court was “reluctant … to require consumer surveys for implicit
falsehood claims at the PI stage,” it still found the distinction between
explicit and implicit falsehood “worth considering when determining whether
Thornton meets her burden of production.”
[For such a
comprehensive opinion pursuing almost every thought down multiple possible
pathways, it is surprising that the court spends no time distinguishing the
Lanham Act from consumer protection law. The plaintiff here doesn’t even have
Lanham Act standing; applying the implicit/explicit distinction—which stems not
from the text of the Lanham Act but from judicial interpretation of it in part
to deal with worries about anticompetitive suits brought by competitors to
suppress competition—would seem to require more justification.]
The red, white and
blue scheme was potentially misleading—the court rejected defendants’ arguments
that it could not indicate geographic origin as a matter of law. Unlike the
words “American Girl” as a trademark for shoes, the terms here were “literal
descriptors of the products on sale, and denote the beef’s quality and
character.” Milso Indus. Corp. v. Nazzaro, 2012 U.S. Dist. LEXIS 123999 (D.
Conn.), also held that the defendant’s company name, “Liberty Casket,” and the
iconography of the Statue of Liberty and the American flag “evoke clear
associations with the United States of America,” but were “too general to evoke
any specific geographical associations or to support an inference that there is
an implied claim of domestic manufacture.” But plaintiff’s survey didn’t test
the right question—it asked about omission of a made in China label, not what
messages were conveyed by the US iconography. The court read it only to require
that “pertinent and targeted consumer surveys must support adequately any such
allegations, particularly at the summary judgment stage.”
Defendants argued that “no reasonable consumer would believe that these USDA grading shields imply anything about the origin of beef,” because the “USDA grading criteria [are] publicly available on the USDA’s website,” and also in USDA consumer guides, “none of [which] suggest that these shields have anything to do with where the cow was born.”
 |
| defendants' partial reproduction of USDA website not referencing geographic origin for meaning of grades |
They showed the court part of the blog post, but two
paragraphs above that, the USDA said:
The USDA grade shields are highly regarded as symbols of safe,
high-quality American beef. Quality grades are widely used as a “language”
within the beef industry, making business transactions easier and providing a
vital link to support rural America. Consumers, as well as those involved in
the marketing of agricultural products, benefit from the greater efficiency
permitted by the availability and application of grade standards.
The other website
said basically the same thing. Thornton’s belief that the shield signified US
origin “is not unreasonable in light of the USDA and AMS’ statements that the
grading shields are ‘symbols of high-quality American beef’ and which provide a
‘vital link to support rural America.’” Still, Thornton didn’t plead that either she
or the general public was aware of or relied upon the government websites’
statements about the official USDA grade shields when they purchase beef
products.
The court was
somewhat less sympathetic to defendants’ arguments that Thornton couldn’t prove
that she bought non-US-raised beef because they commingle all the meat in
processing. “[T]he regulatory scheme currently in place permits the obfuscation
of beef products’ origins. … Federal guidance allows imported beef to be
indistinguishable from domestic beef.” As the White House has noted, “[M]ost
grass-fed beef labeled ‘Product of USA’ is actually imported. That makes it
hard or impossible for consumers to know where their food comes from and to
choose to support American farmers and ranchers.” The President has issued an
Executive Order directing the Secretary of Agriculture
to ensure consumers have accurate, transparent labels that enable them
to choose products made in the United States, consider initiating a rulemaking
to define the conditions under which the labeling of meat products can bear
voluntary statements indicating that the product is of United States origin,
such as “Product of USA.”
Thus, Thornton had a
substantial likelihood of proving that some of the beef that the Defendants
sell and which they advertise using the official USDA grade shields originates,
in fact, from foreign countries. But that was immaterial without misleadingness.
Next move: even
assuming misleadingness, Thornton didn’t show likely success on the merits
because she didn’t show that enjoining use of official USDA grade shields on
beef would be the least restrictive method of regulating potentially misleading
speech. [I don’t understand why her proposal—make them use black and white
shields—wouldn’t allow all the truthful benefits without the misleading aspects,
which sure sounds like the least restrictive alternative.]
 |
| black and white version of shield |
When commercial speech is only potentially misleading, that is, when “the information also may be presented in a way that is not deceptive,” then it may not be banned outright. In contrast, inherently misleading speech is “incapable of being presented in a way that is not deceptive.” But because the official grade shields are not inherently misleading, as concluded above [where the court concluded that they were at best implicitly misleading—here’s the equation of inherent with implicit], they were protected by Central Hudson. “Thornton does not demonstrate that enjoining the Defendants’ use of the official USDA grade shields is the least restrictive means of ensuring that consumers are not misled about the beef products’ origin.”
Thornton also couldn’t
show irreparable injury. She argued that this wasn’t just about her health, but
also about “extreme degradation practices” such as “deforestation” and the use
of slave labor in countries such as Brazil and Argentina. But she didn’t show
that this injured her, or how the proposed injunction would remedy those ills.
There was also an
important public interest in using the shields: to indicate the beef’s grade to
retailers or consumers.
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