E-Alert Case Updates

Dueling FDA Regulations Do Not Preclude Private Parties from Bringing Lanham Act Suits, Thereby Permitting POM to Bring Action against Coca-Cola for Alleged Deceptive Drink Labeling

POM Wonderful LLC v. Coca-Cola Co.
--- S. Ct. ---, 2014 WL 2608859 (Supreme Court of the United States, June 12, 2014)
by Morgan N. Gough, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at http://www.supremecourt.gov/opinions/13pdf/12-761_6k47.pdf

SCOTUS reviewed its second Lanham Act challenge this Term in POM Wonderful LLC v. Coca-Cola Co. See Lexmark Int’l Inc. v. Static Control Components, Inc., 572 U.S. ---, 132 S. Ct. 1377 (2014) (articulating the standards for standing to bring false advertisement claims under the Lanham Act). POM brought this action in the United States District Court for the Central District of California against Coca-Cola under the Lanham Act, claiming that Coca-Cola’s deceptive labeling of a certain juice drink, causing POM to lose sales. The district court entered partial summary judgment for Coca-Cola, affirmed by the Ninth Circuit, holding that POM was precluded from bringing Lanham Act challenges to the name and label. Justice Kennedy authored the unanimous Court’s opinion for reversing the lower court.

POM grows, produces, markets, and sells a variety of pomegranate drinks, including a pomegranate-blueberry juice blend. Coca-Cola, through its Minute Maid brand, sells a competing juice blend: this product is labeled as “pomegranate blueberry,” yet contains 99.4% apple and grape juices, 0.3% pomegranate juice and 0.2% blueberry juice, and 0.1% raspberry juice. Its front label largely displays the words “pomegranate blueberry” in capital letters on two separate lines. Below, in smaller font, is the phrase “flavored blend of 5 juices” and below that, in even smaller font, reads “from concentrate with added ingredients,” with the final line reading “and other natural flavors.” This label also depicts a vignette of blueberries, grapes, and raspberries along with a halved pomegranate and a halved apple. POM brought suit under the Lanham Act, seeking damages and injunctive relief, for its commercial losses caused by Coca-Cola’s deceptive labeling. POM asserted that the label intentionally tricked consumers into believing that the Minute Maid product was comparable to POM’s pomegranate-blueberry drink, and because it cost much less, consumers were duped into buying the inferior product over POM’s drink.

Coca-Cola successfully argued at the trial courts that POM was precluded from bringing this Lanham Act challenge to the name and label. More specifically, Coca-Cola posited that the Federal Food, Drug, and Cosmetic Act (FDCA) preempted POM’s action, despite the facts that the FDA never approved this specific label and that neither Act expressly referred to the other. The FDCA strives to protect the health and safety of the public at large, in part through promulgating regulations applicable to food and drug labels, including a provision for juice blends. Private suits are not permitted under the FDCA, as the United States holds the exclusive right to enforce. The FDCA does, however, preempt some state misbranding laws. On the other hand, the Lanham Act provides a federal remedy for misleading advertising and labeling, going beyond trademark protection, which is achieved through private suits. Although consumers indirectly benefit from these actions, only commercial competitors whose sales or reputations may be harmed have standing to lodge an antitrust challenge based on unfair competition.

SCOTUS made clear that this case was not a question of preemption, since that would require a conflicting state law and not two (2) federal statutes, but rather this was a statutory interpretation case. In turn, POM argued that the FDCA does not impliedly repeal the Lanham Act through its amendments; therefore, SCOTUS should give full effect to both statutes, so long as they are not in “irreconcilable conflict.” Coca-Cola requested that the FDCA, being the more specific law, should limit the scope of the more general provisions of the Lanham Act; in reconciling the laws, the more specific language in the FDCA should bar certain causes of action under the more general langugae of the Lanham Act. The Court declined to resolve the global issue of how to appropriately choose between competing means of statutory construction, instead focusing on the narrow issue at hand. In comparing the two (2) regulatory regimes, which have coexisted since 1946, SCOTUS rejected Coca-Cola’s argument that they cannot be simultaneously implemented, finding the Acts to complement each other by each having their own scope, purpose, and remedies. As the FDA does not pursue every available administrative enforcement measure, permitting private Lanham Act suits “takes advantage of synergies among multiple methods of regulation.” The Court added that, as the two (2) statutes have complemented each other for almost seventy (70) years, adopting Coca-Cola’s argument would discount Congress’s legislative competency, noting that Congress could and would have made such preclusion, should that have been their intent.

This decision, coupled with the recent Lexmark holding, strengthens private commercial rights under the Lanham Act, which may lead to an increase in unfair competition claims. The Court further recognized the limits of administrative competence, commending the competitors’ detailed knowledge of consumer trends and “awareness of unfair competition practices [that] may be far more immediate and accurate than that of agency rule makers and regulators” as tools for powerful private regulation.