Monday, August 17, 2009

State Law Consumer Fraud Suit Based on "All Natural" Ad Claim Not Preempted

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

Federal law does not preempt class action claims that beverage manufacturer Snapple deceptively marketed its iced tea and juice drinks as “all natural” in violation of the New Jersey Consumer Fraud Act and common law, the U.S. Court of Appeals in Philadelphia has ruled.

A Snapple purchaser sought to pursue a class action on the theory that the drinks were not all natural because they contained high fructose corn syrup (HFCS), a highly processed sugar substitute. While first challenging other Snapple advertising claims, the purchaser dropped those theories in the lower court leaving only the challenge to the HFCS labeling.

The court reversed and remanded for further proceedings a lower court decision (CCH Advertising Law Guide ¶63,038) that the state law claims were impliedly preempted. The lower court had held that the federal Food, Drug, and Cosmetics Act and the Food and Drug Administration regulations thoroughly occupied the field of beverage labeling.

Express Preemption

Snapple argued that the purchaser’s claims were expressly preempted by the federal Nutrition Labeling and Education Act (NLEA) enacted in 1990. However, Snapple waived this contention by failing to raise it in the lower court with respect to the purchaser’s HFCS claim, the court determined.

Snapple did not raise any express preemption argument in response to the HFCS claim and explicitly disclaimed the applicability of express preemption to this claim, according to the court.

Implied “Field” Preemption

Snapple next contended that the purchaser’s claim that HFCS is not “natural” was preempted because federal law comprehensively regulated the misbranding of food in general, and juice beverages in particular. However, the NLEA’s express preemption provision demonstrated that Congress recognized the existence of state laws relating to beverages generally and juice products specifically and therefore enacted only limited exceptions in the NLEA, according to the court.

The FDA had stated that it did not intend to occupy the field of food and beverage labeling, even with regard to juice products regulations, the court noted. For example, in a 1986 rule concerning juice drinks, the FDA stated that it would not use its authority to preempt state requirements unless there was a genuine need to stop the proliferation of inconsistent requirements.

The court’s review of the federal regulatory scheme led to the conclusion that neither Congress nor the Food and Drug Administration intended to occupy the fields of food and beverage labeling and juice products.

Implied “Conflict” Preemption

Finally, Snapple argued “conflict” preemption based on a 1991 FDA policy statement on the use of the word “natural.” Implied conflict preemption is applicable when it is impossible for a private party to comply with both state and federal requirements.

The court determined that policy statement was informal and lacked preemptive weight. The policy statement predated an FDA request for public comments on use of term “natural,” and the agency later declined to define the term in a formal rule.

Neither the policy statement, nor an FDA letter indicating that some forms of HFCS may be classified as “natural,” had the force of law required to preempt conflicting state law, the court concluded.

The August 12 opinion in Holk v. Snapple Beverage Corp. appears here. It will be reported in CCH Advertising Law Guide.

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