Labels Matter

“To buyers and sellers alike, ‘labels matter.'” That is the first sentence in a recent case from the California Supreme Court, Quesada v. Herb Thyme Farms, Inc., Case No. S216305 (December 3, 2015). In that case, labels mattered because the California Supreme Court held that a state-law false advertising claim could go forward, notwithstanding federal regulation of the subject matter. The subject matter in question was “Certified Organic” labeling. The defendant, Herb Thyme Farms, allegedly mixed its organic herbs with conventionally grown herbs, labeled the mixture “Certified Organic,” and sold the herbs at a premium price.

Does the Federal Organic Foods Act Explicitly Prevent an Individual’s Claim of False Advertising Under State Law?

The allegations against Herb Thyme Farms would seem to be false advertising. However, because a “Certified Organic” label is regulated under a specific federal law, called the Organic Foods Act, the legal result was far from certain. This is because the issues surrounding federal preemption of state law can be difficult to predict.

Federal preemption arises out of the supremacy clause of the U.S. Constitution. The supremacy clause provides, in effect, that when a federal law and a state law conflict, the federal law governs. Congress passes laws in many different subject areas. Sometimes federal laws seek to take over the entire subject matter that is subject to regulation, and prevent State regulation, so as to promote national consistency in regulation. In other areas, the federal laws only seek to regulate up to a certain point, leaving further regulation to the states.

Congress often explicitly says in a federal statute that it intends to take over the field and preempt state law. That is called express preemption. The problem is that Congress is not always that obvious. In those circumstances, courts will try to discern Congress’ intent to see if there is “implied preemption.”

That was the situation that the California Supreme Court addressed in this Quesada case. Prior to the Organic Foods Act, each state had varying requirements for foods labeled “organic,” so a food that could be labeled “organic” in one state might not be organic in another.   Some producers ignored all requirements and labeled foods “organic” when there was no organic content at all. As a result, “even the most sophisticated organic consumer it difficult to know, with certainty, what the term ‘organic’ really means,” said the court.

Congress passed the Organic Foods Act to remedy the situation. The Act authorized the USDA to create regulations that would result in a certification process for organically grown products. The Act also permitted states to enact their own certification standards, subject to USDA approval. The Act further gave producers the ability to bring a complaint to the USDA or state agency alleging a violation of the Act.

Nothing in the Act, however, addressed whether a consumer could bring a private action under state law if a product labeled as “Certified Organic” was not actually produced organically.

The California Supreme Court found that the Organic Foods Act did not expressly preempt a state-law false advertising claim. The Court found that only the certification process under the Act was exclusive, not the enforcement procedures.

The Federal Act Also Did Not Impliedly Preempt False Advertising Claims Under State Law

 In reviewing the Act for implied preemption, the Court looked to whether private-party state law false advertising claims would help or hinder Congress’ goals in enacting the Act. Because one of Congress’ goals was to address false labeling of regular foods as “organic,” the Court held that California’s false advertising laws assisted Congress’ aim. The Court thus concluded that there was no implied preemption.

That result was not inevitable. The Eighth Circuit Court of Appeals reached the opposite result – but in a wrongful-organic-certification action, not a false advertising action. Also, recently, a federal district court rejected a false advertising case under FIFRA, the federal pesticide act, on the rationale that FIFRA preempts state law in the labeling of pesticides. Mirsaie v. Monsanto Co., C.D. Cal., Case No. 15-cv-04361-DDP (January 12, 2016).

The upshot is that federal preemption presents complicated issues involving the words of the federal statutes, Congress’ intent and the kind of state law action involved. Its use as a defense to false advertising is uncertain. It would be far better to rely on accurate advertising, than on Congress and what might be inferred from its statutes.

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Thomas E. Moore III

Thomas E. Moore III has practiced law in Palo Alto continuously since 1984, representing individuals and start-up to mid-size technology companies in intellectual property and commercial litigation matters. His approach is multi-disciplinary and is focused at gaining results in as efficient a manner as possible.
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