California Supreme Court Finds That The Organic Foods Act Does Not Preempt State Law Consumer Fraud Claims
In Quesada v. Herb Thyme Farms, Inc., a unanimous California Supreme Court held that a California putative consumer class can assert state law claims arising from the purportedly false “organic” labeling of produce. In so doing, the court reversed a decision stating that such claims are preempted by federal law addressing the use of “organic” on product labels. Quesada mirrors, in many respects, the U.S. Supreme Court’s ruling last year in Pom Wonderful LLC v. The Coca-Cola Company, which held that compliance with federal regulations governing product labeling will not insulate food and beverage companies from claims of false advertising arising under the Lanham Act.
In her complaint, Michelle Quesada alleged that Herb Thyme Farms, Inc. (“Herb Thyme”) sold bags of herbs labeled as “organic” although the bags contained a mix of organically-grown and conventionally-grown herbs. Indeed, she alleged that “Herb Thyme packages and labels as organic some herbs that are entirely conventionally grown.” Ms. Quesada accordingly contended having “purchased Herb Thyme’s ‘Fresh Organic’ herbs at a premium in the belief that they were, in fact, 100 percent organic” even though they were not. Her complaint asserted several California state consumer fraud protection and unfair competition causes of action.
At the trial court level, Herb Thyme sought judgment on the pleadings by arguing that the Organic Foods Production Act of 1990 (7 U.S.C. §§ 6501–6522, herein “the Organic Foods Act”) preempted Ms. Quesada’s state law claims. The trial court entered judgment in favor of Herb Thyme, finding that the Organic Foods Act preempted the state law claims, both expressly and implicitly. The Court of Appeal affirmed the trial court’s decision on the basis of implicit preemption only, explaining that “such [consumer fraud] suits were a potential obstacle to Congress’s purposes and objectives of establishing uniform national standards for organic production and labeling.”
The California Supreme Court granted review to examine these preemption issues. After examining the history of the use of the word “organic” and laws regulating its commercial use, the court explained that the Organic Foods Act explicitly preempts state laws in only two ways—to the extent they (1) define “organic” or (2) set up an organic certification process (unless the certification program is certified by the USDA).
The court observed no “language of exclusivity . . . included in the provisions of the Organic Foods Act governing sanctions for misuse of the organic label.” Thus, the court resolved that the Organic Foods Act imposes standards that “are minimum, not absolute.” After reviewing the opinions of other courts that have addressed the issue of express preemption of consumer fraud claims, the Quesada court “conclude[d that] the Organic Foods Act does not expressly preempt general state consumer fraud statutes.”
The court then turned its focus to the issue of implicit, or “obstacle,” preemption. Herb Thyme argued, and the lower courts agreed, that the state consumer fraud claims pled in this case would interfere with the congressional goals animating the Organic Foods Act. Noting the presumption against preemption still supported by a narrow majority of sitting justices of the United States Supreme Court, and that “[t]he regulation of food labeling to protect the public is quintessentially a matter of longstanding local concern,” the California Supreme Court reasoned that if “state consumer protection laws regulating deceptive food labeling are at issue[,]” the presumption “applies with particular force.”
The court next addressed Congress’s goals in passing the Organic Foods Act, identifying them as: (1) establishing nationwide standards for the marketing of “organic” products, (2) “assur[ing] consumers that organically produced products meet a consistent standard,” and (3) facilitating the interstate commerce of “organic” products.
A uniform national standard for marketing organic produce serves to boost consumer confidence that an ‘organic’ label guarantees compliance with particular practices, and also deters intentional mislabeling, ‘so that consumers are sure to get what they pay for.’
The court then reasoned that “permitting state consumer fraud actions would advance, not impair, these goals [because s]ubstitution fraud, intentionally marketing products as organic that have been grown conventionally, undermines the assurances the USDA Organic label is intended to provide.” The court summarized its analysis of this issue as follows:
[T]he complaint here alleges Herb Thyme has engaged in fraud by intentionally labeling conventionally grown herbs as organic, thereby pocketing the additional premiums organic produce commands. The purposes and objectives underlying the Organic Foods Act do not suggest such suits are an obstacle; to the contrary, a core reason for the act was to create a clear standard for what production methods qualify as organic so that fraud could be more effectively stamped out and consumer confidence and fair market conditions promoted. Nor does anything in the text or background of the act and its regulations indicate Congress intended remedial exclusivity for the enforcement mechanisms it provided. Finding no obstacle to congressional purposes and objectives, we conclude the complaint here is not preempted.
Thus, the mere existence of extensive regulations governing the labeling of “organic” produce, and nationwide uniformity as an explicit goal for such regulations can no longer serve to insulate food and beverage companies from consumer fraud claims in California.
More broadly, this decision adds to the growing body of law that is facilitating and encouraging the cottage industry of false advertising litigation, particularly in California, in which most of these cases have been filed during the past five years.