June 26, 2014
As previously reported, on June 12, 2014, the U.S. Supreme Court held in POM Wonderful LLC v. Coca-Cola Co. that POM Wonderful may maintain a Lanham Act suit against Coca-Cola over alleged misleading juice labeling. The Supreme Court’s unanimous decision reversed the Ninth Circuit’s ruling that another federal statute, the Federal Food, Drug, and Cosmetic Act (FDCA), precludes Lanham Act challenges.
The Lanham Act is a federal statute that generally permits one competitor to sue another for unfair competition arising from false or misleading product descriptions. The FDCA prohibits the misbranding of food and drink, including by false or misleading labeling. The FDCA and its regulations give the United States nearly exclusive enforcement authority and, unlike the Lanham Act, do not permit private enforcement suits. The issue before the Supreme Court was whether a private party such as POM Wonderful may bring a Lanham Act claim challenging a food or beverage label that is regulated by the FDCA.
The underlying dispute arose over a claim of mislabeling juice products. POM Wonderful produces and sells a variety of juices, including a pomegranate-blueberry juice blend. Coca-Cola, through its Minute Maid division, sells a competing blended juice beverage. POM Wonderful alleged that the term “pomegranate blueberry” was displayed prominently on the Minute Maid label but the product contains only 0.3% pomegranate juice and 0.2% blueberry juice. POM Wonderful brought an unfair competition claim under the Lanham Act, alleging that Coca-Cola’s labeling of its juice was deceptive.
The district court held that the FDCA precludes Lanham Act challenges to the name and label of Coca-Cola’s juice blend, and the Ninth Circuit affirmed. The Supreme Court then granted certiorari. In a unanimous opinion authored by Justice Kennedy, the Court reversed.
The Court first noted that the lawsuit raised issues of preclusion rather than preemption, such that issues surrounding balancing of state and federal interests did not frame the Court’s inquiry. Instead, the Court framed the issue as one of a statutory interpretation case.
Applying the traditional rules of statutory interpretation, the Court held that neither the express language of the Lanham Act nor the FDCA forbade Lanham Act claims. Indeed, the Court found that the two statutes are complementary, each with its own scope and purpose. While both are concerned with deceptive product labeling, the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety. Both statutes, however, ultimately protect the public in these complementary ways.
The Court further observed that the two statutes have coexisted for over 70 years, and concluded that this is “powerful evidence that Congress did not intend FDA [Food and Drug Administration] oversight to be the exclusive means” of ensuring proper food and beverage labeling. The Court reasoned that if Congress thought Lanham Act suits could interfere with the FDCA, it would have enacted a provision to address the issue. Therefore, any conclusion that the FDCA precludes Lanham Act claims challenging food and beverage labels would ignore the distinct functions of the FDCA and Lanham Act and would lead to a result that Congress likely did not intend, i.e., less policing of misleading food and beverage labels than in competitive markets for other products.
The Court also rejected the U.S. government’s view that a Lanham Act claim would be precluded if the FDCA or the FDA specifically required or authorized the aspects of the label challenged in the potential Lanham Act claim. The Court held that the FDCA and its regulations are not a “ceiling” on the regulation of food and beverage. Instead, the Court again emphasized that the FDCA and Lanham Act are intended to complement each other with respect to food and beverage labeling. Observing that “the FDA explicitly encouraged manufacturers to include material on their labels that is not required by the regulations,” the Court held “the FDA has not made a policy judgment that is inconsistent with POM’s Lanham Act suit,” and rejected the government’s contention.
This case provides important guidance to food and beverage companies and is of potential applicability to companies in other regulated industries. Companies should ensure they carefully analyze their labels from the standpoint of potential unfair competition claims, and they should be aware that the fact that a label complies with FDCA regulations does not constitute a safe harbor.
If you have questions regarding the implications of the POM Wonderful decision, please contact Fitch Even partner Sherri N. Blount.
Written by Fitch Even attorney Nicole L. Little
Fitch Even IP Alert®