Organic? Maybe. But is it kosher…?

5-21For those who prefer “organic” products, the Organic Foods Production Act of 1990 (“OFPA”) and the subsequent regulations set forth in the National Organic Program (“NOP”) govern the use of this term and provide a degree of assurance to consumers that foods and cosmetics labeled as such are indeed composed of organic ingredients. The bottom line is that these regulations require products to be certified by an accredited certifying agency and contain no more that 5% in weight of non-organic ingredients. That 5%, however, must be composed solely from ingredients included in the NOP’s National List of acceptable non-organic products, such as vitamins and minerals. What happens when these “organic” products contain ingredients that are not on the National List? We question how any rational consumer could feel aggrieved merely because a de minimis quantity of non-organic ingredients slipped into a product. Nevertheless, aggrieved consumers, or their lawyers, seeking to challenge a particular certification as misleading or deceptive may look to state law to intervene. This is exactly what occurred in Segedie v. The Hain Celestial Group, Inc., 2015 U.S. Dist. LEXIS 60739 (S.D.N.Y. 2015).

The Segedie plaintiffs claimed that some of defendant’s products, certified and labeled “organic.” were deceptive and misleading under California and New York consumer protection laws to the extent they contained ingredients which were neither organic nor approved on the National List. The defendant sought dismissal of the action under the theory that the federal statutes preempted any state law claims. Specifically, the defendant relied heavily on In re Aurora Dairy Corp. Organic Milk Mktg. & Sales Practices Litig., 621 F.3d 781 (8th Cir. 2010), which held that the OFPA impliedly preempted any consumer protection claims founded under state law. Plaintiff countered by citing numerous decisions, including one case involving the defendant (Brown v. Hain Celestial Grp., Inc., 2012 WL 3138013, at *9 (N.D. Cal. 2012)) that held the OFPA did not preempt state law claims. The Hon. Nelson S. Roman (S.D.N.Y.) found the defendant’s argument unpersuasive and concluded that allowing the claim to proceed would not pose a sufficiently “sharp” conflict with federal law to necessitate preemption, in part because e OFPA does not provide an avenue of recourse for aggrieved consumers.

The district court, in arriving at its conclusion, declined to follow Aurora, which was “the first and only circuit court to have addressed the preemptive scope of the OFPA in relation to state consumer protection claims.” Segedie, supra at 9-10. The court noted that, under Second Circuit precedent, obstacle preemption, or preemption based on conflicting laws, precludes state-law based claims only if those laws create an “actual conflict” with the federal law’s objectives. Here, no such conflict existed. The court drew further support from the Supreme Court case Wyeth v. Levine, 555 U.S. 555, 565 (2009). Wyeth involved a failure-to-warn claim alleging that a drug’s label was inadequately labeled, despite the fact that it had been approved by the FDA. Wyeth rejected the idea that allowing the lawsuit to proceed would present an obstacle to federal objectives, and instead found the state-law based action to be appropriate because federal law did not provide a remedy for harmed consumers.

On the other hand, if Segedie had been brought in a California state court, the result may have been more favorable for Hain Celestial.  In Quesada v. Herb Thyme Farms, Inc., 166 Cal. Rptr. 3d 346, 349 (Cal. App. 2d Dist. 2013), the California Court of Appeal held that federal law did indeed impliedly preempt state law. The lasting effects of this ruling are yet to be determined, because the California Supreme Court granted review, and accordingly Quesada may not be cited in California courts..

The trend in plaintiff-friendly decisions may be a siren’s call to the plaintiff bar. But how can manufacturers avoid state law deceptive trade practices and false advertising claims? Indeed, aside from the five-year old ruling in Aurora, which has been crushed under the weight of contrary decisions, and the recent decision in Quesada, which is now subject to review by the California Supreme Court, there may be little hope for manufacturers who are now unable to escape the threat of nuisance litigation on preemption grounds.  More than ever before, manufacturers are facing claims alleging misleading and deceptive practices.

The recent turbulence leaves manufacturers with a valuable lesson. The fact that courts now routinely decline Rule 12(b)(6) motions on preemption grounds may not in and of itself be detrimental to manufacturers; it merely allows litigation to proceed. It is crucial to bear in mind that in Segedie, the defendant was, as the court stressed, certainly not in compliance with the OFPA and NOP regulations because its products contained non-organic ingredients. Manufacturers seeking to avoid litigation should take every measure to ensure that their products are labeled in accordance with the regulations.