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19 August 2009

US Third Circuit Holds State-Law Deceptive Labeling Claims Not Preempted by Federal Law

A recent decision by the United States Court of Appeals for the Third Circuit suggests that manufacturers operating in heavily regulated industries may encounter difficulty when arguing that federal regulatory action impliedly preempts state-law claims. As one of the first appellate decisions to apply Wyeth v. Levine, 129 S. Ct. 1187 (2009), the Third Circuit’s ruling, in Holk v. Snapple Beverage Corp., ___ F.3d ___, 2009 WL 2449561 (3d Cir. 2009), may be a harbinger of things to come.

Holk involved a putative class action challenging Snapple Beverage Corporation’s marketing of juice and tea-based drinks as “All Natural.” Because Snapple products contained high fructose corn syrup, an ingredient manufactured from processed cornstarch, the plaintiff claimed that the use of the term “natural” on the beverage labels was deceptive and misleading in violation of New Jersey law. Snapple, however, contended that the plaintiff’s state-law claims were impliedly preempted by the federal regulatory scheme established by and pursuant to the Food, Drug, and Cosmetic Act (FDCA).

Reversing the decision below, which had dismissed the action, the Third Circuit held that the plaintiff’s claims were not impliedly preempted by federal law. In so concluding, the court found that Congress had not evinced a clear intent to fully occupy the field of food labeling and that enforcement of state labeling requirements would not present an obstacle to the achievement of federal objectives.

Following the Supreme Court’s lead in Wyeth, the Third Circuit began its implied preemption analysis by applying “a presumption against preemption.” That presumption applies, said the court, in areas that traditionally have been regulated by the states. According to the court, “food labeling has been an area historically governed by state law” notwithstanding the fact that the federal government has been regulating food labels for more than a century.

Under the doctrine of field preemption, federal law preempts state law when, in the relevant area, federal law “leave[s] no room for state regulation.” According to the Third Circuit, for field preemption to be applicable, Congress’s “intent to supersede state laws must be clear and manifest.”

In rejecting Snapple’s claim of field preemption, the Third Circuit held that neither condition was satisfied with respect to the regulation of beverage labels. The court emphasized the fact that Congress had explicitly limited the scope of federal preemption when it supplemented the FDCA through enactment of the Nutrition Labeling and Education Act. That statutory choice, the court concluded, demonstrates that Congress was both aware of and deliberately chose to preserve (at least some) state laws regulating food and beverage labels. Additionally, the court noted, the Food and Drug Administration (FDA), the agency charged with implementing the FDCA, had expressly declined to adopt a policy preempting state food and beverage regulations, despite several requests that it do so. Against this background, the Third Circuit concluded that Congress had not clearly manifested an intent to occupy the entire field of food and beverage labeling despite the arguably “comprehensive” nature of federal regulation in the area.

Even if Congress has not chosen to occupy a given field entirely, state law may nonetheless be impliedly preempted by federal law if state law stands as an “obstacle” to the achievement of Congress’s objectives. In Holk, Snapple argued that allowing the plaintiff’s state-law claim to proceed would interfere with the federal regulatory scheme established under the FDCA. In particular, Snapple argued that the plaintiff’s deceptive-labeling claim would, by imposing additional requirements not found in federal law, interfere with the definition of “natural” that the FDA had adopted in a policy statement published in the Federal Register and then subsequently implemented through enforcement letters. The Third Circuit rejected this argument, too.

Although recognizing that federal regulations carry the same preemptive force as federal statutes, the court held that the FDA’s definition of “natural” lacked preemptive effect because it had been adopted neither through “notice and comment” rulemaking nor in the course of formal adjudicatory proceedings. Under these circumstances, the Third Circuit concluded, the agency’s policy statement and enforcement letters lack “the force of law required to preempt conflicting state law.”

It is impossible to predict with certainty how other courts will approach questions of implied preemption in the wake of Wyeth. And of course each case turns on the details of the statutory and regulatory provisions involved, and the specific claims asserted. Nonetheless, the Third Circuit’s decision in Holk may be an early indication that it has become more difficult for defendants to convince courts that state-law claims are impliedly preempted by federal law.

For inquiries related to this alert, please contact Andrew Tauber.

Learn more about our Supreme Court & Appellate practice, or contact Lauren Goldman, Jeffrey Sarles, or Evan Tager.

Learn more about our Consumer Litigation & Class Actions practice, or contact John Nadolenco, Lucia Nale, or Archis Parasharami.


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