WASHINGTON—The U.S. Supreme Court on Thursday voted 8 to 0 to allow POM Wonderful to sue Coca-Cola for misleading consumers under a federal statute that is intended to prevent unfair competition, potentially opening the door to more lawsuits between rival food and beverage companies.
In an opinion written by Justice Anthony Kennedy, the court overturned an appellate ruling that had found Pom’s claims against Coca-Cola under the Lanham Act were precluded by the Federal, Food, Drug & Cosmetic Act (FDCA). Justice Stephen Breyer did not take part in the decision.
“Nothing in the text, history, or structure of the FDCA or the Lanham Act shows the congressional purpose or design to forbid these suits. Quite to the contrary, the FDCA and the Lanham Act complement each other in the federal regulation of misleading food and beverage labels," Kennedy wrote. “Competitors, in their own interest, may bring Lanham Act claims like POM’s that challenge food and beverage labels that are regulated by the FDCA."
The ruling represented a blow to Coca-Cola, which was accused by Pom in 2008 of duping consumers into believing a Minute Maid beverage contained mostly blueberry and pomegranate juices when in fact it contained very little of those substances. Kennedy pointed out the drink consisted nearly entirely of apple and grape juices (99.4 percent), containing a mere 0.3 percent pomegranate juice and 0.2 percent blueberry juice.
Wonderful Brands, the maker of Pom Wonderful, was obviously pleased with the decision. “The unanimous court ruling will translate into higher assurance for consumers that the labels on beverage and food are accurate," Pom said in a statement.
Coca-Cola did not immediately respond to requests for comment.
In 2008, Pom filed a complaint against Coca-Cola under the Lanham Act, a federal trademark statute through which rivals can sue each other for false advertising. Coca-Cola had persuaded a trial court and a federal appeals court (9th Circuit) that its compliance with FDA labeling regulations precluded the lawsuit. The Supreme Court disagreed—and the case against Coca-Cola will be sent back down to the lower court for what could culminate in a jury trial.
“Clearly the Supreme Court has spoken unanimously that compliance with FDA regulations does not provide a defense to a lawsuit by a competitor under the Lanham Act," said Ivan Wasserman, a food and supplement attorney in Washington, D.C. with the law firm Manatt, Phelps, & Phillips, LLP. “Any company is vulnerable to a suit under the Lanham Act by a competitor for virtually any category of FDA-regulated products including supplements and the Food Drug and Cosmetic Act is not a bar."
Kennedy said the FDCA and Lanham Act are complementary, with the former statute intended to safeguard the health and safety of the public and the latter designed to protect competitors against unfair competition.
He also noted enforcement of the FDCA is almost entirely delegated to the U.S. Food and Drug Administration while competitors like Pom have a better sense of unfair competition practices in the marketplace.
“Because the FDA acknowledges that it does not necessarily pursue enforcement measures regarding all objectionable labels … if Lanham Act claims were to be precluded then commercial interests—and indirectly the public at large—could be left with less effective protection in the food and beverage labeling realm than in many other, less regulated industries," Kennedy wrote.
As Kennedy noted, the Nutrition Labeling and Education Act bars states from imposing different labeling requirements than requirements under the FDCA. Permitting the Lanham Act to proceed, Coca-Cola argued, would undermine the objective of that provision: to enable food and beverage manufacturers to market their products across the nation without having to meet a hodge-podge of requirements.
Kennedy wasn’t persuaded. “A significant flaw in this argument is that the preemption provision by its plain terms applies only to certain state-law requirements, not to federal law," he wrote.
Dan Silverman, a partner in Los Angeles with the law firm Venable, LLP, knows the case inside and out. He was lead counsel for Pom in the lawsuit and remembers the day he learned after requesting Coca-Cola’s formula that its beverage only contained a tiny amount of pomegranate and blueberry.
“My jaw dropped," he said. “You got to be kidding me."
Technically, however, Coca-Cola was in compliance with FDA juice labeling regulations, which require that substances are listed in the order of predominance on the ingredient panel.
Kennedy pointed out Coca-Cola displayed on the label the words “pomegranate blueberry" in capital letters with the phrase “smaller blend of 5 juices" in tinier type.
Silverman said a federal judge granted summary judgment in favor of Coca-Cola on the eve of trial.
Now that the case is being remanded back to the trial court, he expressed the view that Pom will be able to show that consumers were hoodwinked.
“I feel very comfortable at trial they will be able to prove deception," Silverman said. “Whether they can prove damages I don’t have a crystal ball on that."
In lawsuits Pom filed under the Lanham Act against Ocean Spray, Welches and Tropicana, judges rejected the preemption argument and the cases went to trial, Silverman said. He said the jury found in two of the cases that consumers had been deceived but Pom ultimately walked away empty-handed because the jury didn’t find Pom had proven damages such as lost profits.
“The bottom line is, all you can ask for is your day in court," the trial lawyer said.
Although the Supreme Court ruling opens the door for more lawsuits under the Lanham Act, some lawyers don’t anticipate a huge swell in the number of complaints.
“I certainly don’t foresee any sort of frivolous lawsuits by responsible companies," said Wasserman, “but it is … likely we will see at least some uptick."
Silverman expressed a similar view, noting the difficulty of proving lost profits in cases filed under the Lanham Act.
Still, food and beverage companies “are going to be much more mindful … that they can’t get away with a technically compliant label regardless of whether it’s deceptive," Silverman said. “I think it’s a big day for competitors and consumers quite frankly at least in the food and beverage space."