The defendant moved for judgment on the pleadings, arguing that the suit was preempted by the federal OFPA. The defendant also contended that the United States Department of Agriculture (USDA) had primary jurisdiction over the matter. Thus, in the defendant’s view, the trial court action should not have moved forward until the plaintiff pursued administrative remedies through the USDA.
Both the trial court and the California Court of Appeal, Second Appellate District, concluded that the class action was preempted. Specifically, the appellate court held that a state consumer lawsuit would frustrate the congressional purpose of OFPA, which was “designed to create a national organic standard” for food production and labeling. The plaintiff then appealed to the California Supreme Court.
Mislabeling Suit Not Preempted
Finding a distinction between a claim that a food product is being intentionally mislabeled and one that relates to certifying food production as organic, the California Supreme Court reversed the intermediate court’s preemption ruling. Focusing on obstacle preemption, a type of implied preemption, the high court analyzed whether the class action interfered with congressional goals. The court concluded that state claims, like the plaintiff’s, “affirmatively further the purposes” of OFPA to promote reliance on organic labels and curtail fraud. Thus, the court held, claims based on intentional organic mislabeling are not preempted by the federal statute.
On the other hand, the California Supreme Court concluded that OFPA federalizes “the process by which growers may seek to demonstrate their production methods” meet the uniform federal “organic” standard. Accordingly, in the court’s view, Congress intended matters related to certification to be expressly preempted. The California Supreme Court declined to consider whether the USDA had primary jurisdiction regarding this matter, leaving the issue for the lower courts to decide.
The court found that the “especially strong presumption against preemption” in the area of food labeling supported its conclusion. “The presumption against preemption is a big component of the opinion,” notes Andrew J. Ennis, Kansas City, MO, cochair of the Class Actions Subcommittee of the ABA Section of Litigation’s Commercial & Business Litigation Committee. “It is a pretty close issue and the court’s emphasis on the presumption appears to have facilitated its result.”
A Big Impact
As a result of the Quesada case, “it is inevitable that more and more lawyer-driven, shake-down consumer class actions are going to be filed,” predicts Dale J. Giali, Los Angeles, CA, newsletter board member of the ABA Section of Antitrust Law Advertising Disputes & Litigation Committee and Consumer Protection Committee. Food producers in California “will have to be cognizant of exposure,” Ennis agrees. The California court “leaves open a civil remedy that some producers might have thought closed,” Ennis says.
“By recognizing the plaintiff’s state-law theory of liability, the California Supreme Court opens what plaintiffs’ attorneys will no doubt try to turn into a gaping hole,” Giali says. “Busy state and federal trial judges may well find it difficult to apply the exquisitely fine line drawn by the Quesada decision at the pleading stage,” he contends, “meaning these lawsuits, even when baseless, may be very difficult to get rid of at the outset.” “As we have learned from the crush of consumer class action litigation already facing the food industry, the mere existence of these types of class actions and all that comes with them inevitably leads to significant settlement pressure unrelated to the merits,” according to Giali.
Making Preemption Arguments
When arguing in support of preemption, attorneys should emphasize that Quesada “recognizes a single narrow exception for fraud,” Giali recommends. Plaintiffs “have to show true fraud and intentional misconduct, presumably with particularized allegations,” he contends, and “anything less than that” would not fall within the Quesada holding.
From a plaintiff’s perspective, parties seeking “to get the benefit of Quesada should make sure their pleadings are not directed at activities falling under states’ certification programs,” Ennis suggests. Instead, such parties should “focus on intentional mislabeling,” he concludes.
Sara E. Costello is an associate editor for Litigation News.