Did Congress intend to preempt false advertising claims under state law?

1. IS IT REALLY ORGANIC?THIRD-PARTY CERTIFICATIONS FOR ORGANIC PRODUCTSCONSUMER PROTECTION? PRODUCER PROTECTION?April 1, 2011Barry Reingold Perkins Coie LLP

2. Organic Foods Production Act of 1990, 7 U.S.C. 6501 et seq., establishes National Organic Program, 7 C.F.R. pt. 205 • Unhappy with patchwork of state regulation of organic products, Congress intends to establishes uniform standard "so that farmers know the rules, so that consumers are sure to get what they pay for, and so that national and international trade in organic foods may prosper" • S. Rep. 101-357 (1990) No private right of action

3. Did Congress intend to preempt false advertising claims under state law? • Does NOP structure suggest preemptive intent? Probably not: • certification program not administered by government agency like FDA • still no preemption • Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996) • Wyeth v. Levine, 129 S. Ct. 1187 (2009) • 55 DOA-accredited certifying agents throughout USA • many agent organizations include producers of organic products whose products are subject to certification

4. Certification preempts some but not all false advertising claims under state law • In re Aurora Dairy Corp. Organic Milk Marketing and Sales Practices Litigation, 621 F.3d 781 (Eighth Cir. 2010) • 19 consolidated consumer class actions against • milk producers (Aurora Defendants), • retailers (Wal-Mart. Costco, Publix, Safeway, Target, Wild Oats), and • accredited certifying agent (QAI, Inc.). • core allegation: Aurora products certified by QAI as organic - and so advertised by Aurora and the retailer defendants - were not because products were produced by non-organically managed cows • non-frivolous claim: Aurora in 2007 had been subject to USDA revocation proceeding resulting in administrative consent decree

5. But advertising claims at issue neither uniform nor simple • milk cartons did not state simply "organic," "USDA organic" or "made with organic ingredients." • "For example, several of the cartons featured depictions of pastoral scenes with cows grazing in pastures, and advertising the idyllic conditions under which the dairy cows lived. • Aurora advertised, "As producers of organic milk, our motto is 'Cows First,'" and "We believe that animal welfare and cow comfort are the most important measures in organic dairy."

6. But advertising claims at issue neither uniform nor simple (cont’d) • Retailer A represented its milk was "produced without the use of antibiotics or pesticides, and organic farmers were committed to the humane treatment of animals." • Retailer B asserted its dairy cows "enjoy a healthy mix of fresh air, plenty of exercise, clean drinking water and a wholesome, 100% certified organic diet." • Retailer C stated "Our milk comes from healthy cows that graze in organic pastures and eat wholesome organic feed."

7. Plaintiffs also challenged advertising claims in media other than on the milk cartons • Retailer D reported in an article about a visit to Aurora's dairy farm: "The cows on the farm have quite the life. They feed on a balanced organic vegan diet and have access to organic pastures for grazing." • District Court dismissed, finding all claims preempted by OFPA.

8. Eighth Circuit affirmed in part, reversed in part • claim against QAI (certifying organization) based on assertion it should have revoked Aurora's certification. Claim preempted because "to the extent state law permits outside parties, including consumers, to interfere with or second guess the certification process, the state law is an obstacle to the accomplishment of congressional objectives of the OFPA." 621 F.3d at 795 • "For similar reasons," claims that Aurora and the retail defendants "sold milk as organic when in fact it was not organic are preempted because they conflict with the OFPA." ibid.

9. Eighth Circuit affirmed in part, reversed in part (cont’d) • only penalty for selling milk in non-compliance with NOP is revocation and/or civil penalties through DOA enforcement actions • plaintiffs cannot invoke state law to "seek damages from any party for Aurora's milk being labeled as organic in accordance with the certification . . " 621 F.3d at 797 • so simple statement on carton "organic," "USDA organic" or "made with organic ingredients." cannot be basis for challenge if product has been so certified • plaintiffs may not raise Buckman Company v. Plaintiffs' Legal Committee, 531 U.S. 341 (2001), "fraud-on-the-FDA" types of claims to challenge validity of NOP certification

10. BUT state law may be invoked to challenge "the facts underlying certification" • What are those facts? • Because court did not deal with class certification, did not have to address key issues: • Is the fact of NOP certification relevant to plaintiffs' claims? • Probably not: plaintiffs cannot challenge facts "[ ]related to the decision to certify [as organic], and certification compliance. . ." • So how define term "organic" for purposes of litigation? • "reasonable consumer" standard? • an invitation to create a "parallel universe"?

11. If the term "organic" is effectively off the table, what "facts underlying certification" may be challenged? Court cites examples: • Aurora "misrepresent[ed] the manner in which its dairy cows were raised and fed" and "suppress[ed] or omitted]] material facts regarding the production of its 'organic' milk or milk products, specifically that . . the dairy cows were not raised at pasture." 621 F.3d at 799. • The retailer defendants as a group "misrepresented the manner in which the dairy cows were raised and fed in violation of state deceptive trade practices laws and [are] alleged to have suppressed or omitted material facts regarding the production of [their] products." 621 F.3d at 800. • Retailer A falsely advertised "that its milk is antibiotic and hormone free" and "made knowing false statements on its packaging about the humane treatment of cows." ibid.

12. Open Questions • what are litigable facts? • whether cows were raised "at pasture"? • whether cows were treated "humanely"? • How do "reasonable" consumers interpret these terms? • consumer surveys? • How do defendants prove cows were raised "at pasture" and "humanely" • expert witnesses?

13. Class certification hurdles • How determine "commonality" and typicality" under Fed. R. Civ. P. 23? • In re Sears, Roebuck & Co. Tool Marketing and Sales Practices Litigation, 2009 WL 3460218 (N.D. Ill.) • Plaintiff alleged that Sears falsely advertised its" Craftsmen" line of tools as "Made in USA." • Introduced evidence that 57% of Sears' "do-it-yourself" customers and 72% of "professional" customers would pay 20 to 50% more for a domestically-made tool. • Court denies certification, rejecting plaintiff's argument that certification was mandated because plaintiffs were injured by the "same fraudulent scheme." • Certification inappropriate where "advertising for Craftsmen tools varied" and putative class "was exposed to a varied mix of representations, communicated through different channels and absorbed in different ways and to different degrees."

14. Uncertain exposure to FTC enforcement action • Revised "Green Guides" expressly decline to address organic food claims covered by NOP standards, or organic textile claims outside NOP standards • but Green Guides "substantiation" analysis will apply: • ". . . to the extent that reasonable consumers perceive organic or natural claims as general environmental benefit claims or comparative claims, the marketer must be able to substantiate those claims and all other reasonably implied claims [as required by Part V. A. 4 of the Green Guides]. (Green Guides Summary of Proposal at 136)(emphasis added) • For producers of NOP-certified organic products, what does this mean? • must prove environmental benefits flowing from organic food production? – assumption underlying the Organic Foods Production Act?!

15. Questions? Barry Reingold, Perkins Coie LLP BReingold@PerkinsCoie.com