October 05, 2015 Top Story

Courts Disagree on Federal Preemption of "Organic" Labeling

District court concludes that state consumer protection laws advance federal scheme

Erin Louise Palmer

Federal law does not preempt state law claims challenging “organic” labeling of food and body care products, according to Segedie v. Hain Celestial Group, Inc.. In Segedie, the district court held that the Organic Foods Production Act of 1990 (OFPA) and the National Organic Program (NOP) regulations preempt California and New York state law claims related to “organic” labeling. In reaching this conclusion, the district court rejected the U.S. Court of Appeals for the Eighth Circuit‘s decision in Aurora Dairy Corp. Organic Milk Marketing & Sales Practices Litigation.

Federal Law Governing “Organic” Labeling 

Congress enacted the OFPA to “establish national standards governing the marketing of certain agricultural products as organically produced products,” “assure consumers that organically produced products meet a consistent standard,” and “facilitate interstate commerce in fresh and processed food that is organically produced.” The OFPA and the NOP regulations require certification by an accredited agency for use of “organic” in product labeling. The NOP regulations provide for administrative enforcement of labeling violations, including financial penalties and suspension or revocation of a company’s certification, but they do not provide a private right of action for aggrieved consumers.

District Court Permits State Law “Organic” Labeling Claims 

The plaintiffs are alleged purchasers of “Earth’s Best” food, body care, and home care products produced and sold by Hain Celestial. The plaintiffs sued in the U.S. District Court for the Southern District of New York under California and New York consumer protection laws, claiming that Hain Celestial misleadingly labeled many of their products as “organic.” According to the plaintiffs, these products contained ingredients prohibited under the OFPA and the NOP regulations, as well as artificial or synthetic ingredients.

The defendants filed a motion to dismiss, arguing that the OFPA and the NOP regulations preempted the plaintiffs’ claims. The district court first concluded that neither express preemption (where Congress expressly provides that a federal statute overrides state law) nor field preemption (where Congress legislates so comprehensively in one area that it occupies the field) applied.

The court next rejected obstacle preemption (where state law directly conflicts with the structure and purpose of a federal statute) because the defendants failed to carry their heavy burden of showing a direct conflict between state and federal law. Specifically, the court concluded that the plaintiffs’ claims “[were] not premised on a ‘reasonable consumer’ theory that diverge[d] from the national organic standards,” but rather sought to enforce a definition of “organic” in accord with federal law.

Potential Circuit Split Emerges Regarding “Organic” Labeling

The Southern District of New York discussed—and ultimately disagreed with—the Eighth Circuit’s decision in Aurora Dairy Corp., “the first and only circuit court to have addressed the preemptive scope of the OFPA in relation to state consumer protection claims.” In Aurora Dairy Corp., the Eighth Circuit held that the OFPA preempted certain state consumer protection claims related to “organic” labeling of milk.

Specifically, the Eighth Circuit distinguished claims that directly challenged the certification decision (i.e., claims challenging “organic” milk labels) from claims that touched on facts that were crucial to but did not interfere with the certification decision (e.g., claims challenging labels that milk was free from antibiotics and hormones or produced by humanely treated cows). In precluding claims challenging “organic” milk labels, the Eighth Circuit concluded that these claims constituted a direct challenge to an accredited agency’s certification of that product and could lead to inconsistencies in the application of national standards.

The Southern District of New York found the Eighth Circuit’s reasoning unpersuasive. According to the district court, the plaintiffs’ claims directly advanced one of the OFPA’s purposes: “to assure consumers that organically produced products meet a consistent standard.” In addition, the Southern District of New York had previously ruled that “state law causes of action are not preempted where they merely provide a damages remedy for claims premised on a violation of federal law that does not itself provide a private right of action.” The district court concluded that the plaintiffs’ claims sought to enforce national standards.

Section leaders dispute whether state law challenges to “organic” labeling uphold the purposes of the OFPA or instead allow consumers to circumvent the statute. “By not addressing relief for consumers who purchase mislabeled products, Congress neither expressly prohibited states from providing their own relief nor drafted the statute in a manner so as to ‘occupy the field,” concludes Kathryn A. Honecker, Scottsdale, AZ, cochair of the ABA Section of Litigation‘s Class Actions & Derivative Suits Committee. “State statutes that provide a means for misled consumers to secure restitution or other relief advance the purpose of and further motivate manufacturers to comply with the OFPA,” adds Honecker.

“If a company satisfies the OFPA and NOP regulations, and has its products certified ‘organic’ by an accredited agency, then the company should not be subject to state-based actions covering the same ground,” counters Jeffrey D. Gardner, Phoenix, AZ, cochair of the Section of Litigation’s Class Actions & Derivative Suits Committee. “Ignoring preemption and permitting numerous state-based consumer suits throughout the country likely will create inconsistent standards, and may place the courts in the middle of defining such standards,” adds Gardner.

Erin Louise Palmer is a contributing editor for Litigation News.

Keywords: organic, natural, labeling, preemption, Organic Foods Production Act

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