Consumers increasingly seek out and are often willing to pay a premium for “All natural” and “organic” products. Yet, these terms are often not precisely defined. Most recently, the FTC in its proposed Green Guides declined to define them “either because the FTC lacks a sufficient basis to provide meaningful guidance or because the FTC wants to avoid proposing guidance that duplicates rules or guidance of other agencies.” However, increasingly courts are being asked to provide legal definitions for these terms as consumers turn to them for relief from allegedly misleading uses of these terms.
No free pass for “Organic” related marketing claims under state law
In September the Eighth Circuit issued an opinion addressing to what extent the Organic Foods Production Act of 1990 (OFPA) preempts state consumer protection law. The OFPA establishes national standards for the sale and labeling of organically produced agricultural products and creates a certification program through which agricultural producers can become certified to sell organic products. Thus, in order to sell agricultural products as “100 percent organic,” “organic,” or “made with organic ingredients,” a producer must receive a certification from the USDA or pay a civil penalty of up to $10,000. In April 2007, the USDA proposed revoking Aurora Dairy Corporation’s certification for organic milk, alleging fourteen willful violations of OFPA and NOP, including multiple cases of using nonorganic cows to produce organic milk; willfully selling, labeling, and representing that milk was organically produced when such milk was not produced and handled in accordance with NOP regulations, failing to notify its certifying agent it had terminated its contract with a pasture and livestock management service provider, and failing to report and keep records in accordance with OFPA and NOP guidelines. Aurora entered into a consent decree with the USDA in August 2007.
Shortly thereafter, plaintiffs filed class action lawsuits in federal district courts around the country against Aurora; retailers that sold Aurora’s organic milk; and QAI, the certification agent that certified Aurora to produce organic milk. The plaintiffs alleged that from 2003 to 2007, Aurora’s milk did not meet the NOP regulations. The plaintiffs also alleged that Aurora and the retailers’ packaging and advertisements were false and deceptive under state consumer protection laws. Examples of allegedly deceptive statements include the following:
- Aurora advertised on their “High Meadow” branded cartons that “our motto is ‘Cows First,’” and “[w]e believe that animal welfare and cow comfort are the most important measures in organic dairy.”
- Wal-Mart said the milk was produced without the use of antibiotics or pesticides.
- Safeway, Target and Costco all made claims related to how their cows were raised and fed, including claims that their cows had “plenty of exercise,” “clean drinking water,” and access to “organic pastures for grazing.”
The cases were centralized in the Eastern District of Missouri., which dismissed all plaintiffs’ claims as preempted by the OFPA.
On appeal, the Eighth Circuit affirmed the district court’s ruling that state law claims related to QAI’s decision to not revoke Aurora’s certification under the OFPA, and claims against Aurora and the retailers for falsely selling milk as organic are preempted because they conflict with the OFPA. The court reasoned that if it allowed state laws to apply to the certification process, it could potentially lead to conflicting legal interpretations of the same provisions of the OFPA and NOP such that it would almost be impossible for certifying agents to meet both the federal standard and the various state standards, thus potentially undermining Congress’ intent to creating a uniform, national standard in governing the marketing and interstate commerce of organically produced products.
On the other hand, claims related to facts underlying the certification process (including the marketing claims regarding how the cows are raised and fed) are not preempted by the OFSA. The court stated that broad preemption over claims unrelated to the certification decision and certification compliance would not advance the goals of assuring consumers that organic products meet a consistent standard. In fact, granting broad preemption may decrease consumer confidence in such products based on the realization that organic producers have free license to defraud consumers and avoid liability under state law. These claims were remanded to the district court to determine which of plaintiffs’ claims are preempted. In other words, it appears that the use of the term “organic” itself under the OFPA is preempted but related marketing claims may not be.
FDA leaves it to the courts to define “All Natural”
With respect to “natural” we have previously blogged on cases dealing with this issue here and here. Stays in several of these cases, Ries v. Hornell Brewing Co.(N.D. Cal. Aug. 24, 2010); Holk v. Snapple Beverage Corp. (D.N.J. Sept. 2, 2010); and Von Koenig v. Snapple Brewing Corp. (E.D. Cal. Sept. 9, 2010) had been granted based upon the doctrine of primary jurisdiction, which applies when an action falls within the expertise and experience of an administrative agency. The purpose of the doctrine is “to maintain uniformity and consistency, uphold the integrity of a regulatory scheme, and establish a ‘workable relationship between the courts and administrative agencies.’”
If the doctrine applies, a court must “refer” the issue to the proper agency. The court can then stay or dismiss the action without prejudice so that an agency can issue a determination. In September, the FDA declined to issue a determination on the definition of “all natural.” Thus, in the short term look for the courts to continue to wrestle with this issue. Depending upon the outcome of these cases, regulators may or may not be prompted to more actively engage in this area.