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Quesada v. Herb Thyme Farms, Inc. The California Supreme Court Holds that State Law Claims are not Preempted by the Organic Foods Act

 

For the second time, the California Supreme Court has held that state law claims directed against food product labels are not preempted by federal law. The Court, in Quesada v. Herb Thyme, 62 Cal. 4th 298 (2015), held that the federal Organic Foods Act (“Act”) does not preempt state law claims that food products are intentionally being mislabeled as organic. This decision follows In re Farm Raised Salmon Cases, 42 Cal. 4th 1077 (2008), which held that state law claims for failure of labels to disclose that farm raised salmon is artificially colored were not preempted. Under these precedents, defendants have a heavy burden to prove that state law claims directed against false or incomplete labelling of food products are preempted by federal law.

I. The Claims, Defenses and Decisions Below

Defendant Herb Thyme grows herbs on multiple farms, most of which use conventional growing methods. But one of its farms uses organic processes and is properly certified by a registered certifying agent, as required by the Act. The defendant blends conventionally grown and organic herbs and markets them together under the “Fresh Organic” label and packaging. Also, the defendant packages and labels some conventionally grown herbs as organic.

The plaintiff, a consumer who purchased defendant’s herbs at a premium believing that the herbs were 100% organic, filed a class action suit alleging violations of the Consumers Legal Remedies Act, the unfair competition law and false advertising law. The defendant sought judgment on the pleadings that state causes of action are subject to express preemption and obstacle preemption, a species of implied preemption, because the Act vests the United States Department of Agriculture (USDA) with exclusive authority to regulate the labeling and marketing of organic products.  

The trial court agreed that the claims were subject to express and obstacle preemption and dismissed the case on the pleadings. The appellate court rejected the finding of express preemption, but agreed that the suit was impliedly preempted because it was a potential obstacle to Congress’s objectives of establishing uniform, national standards for organic production and labelling.

II. The Supreme Court's Decision

The questions presented were whether state law claims that produce is intentionally mislabeled as organic are expressly preempted (express preemption) by the Act; and whether those claims are an obstacle to Congress’ objectives in enacting the Organic Foods Act (obstacle preemption.)

A. The Organic Foods Act

The Court’s analysis of the Act focuses on the central role states play in implementing its goals. The Act permits complementary state standards, which may be more stringent than federal standards, if they are approved by the USDA. It directs the USDA to adopt regulations that permit producers to label and sell products as organic only if they are produced pursuant to an approved organic plan. Approval must come from either state officials or private certifying agents.

The USDA’s final rule adopted implementing regulations describes the procedures for states to draft their own organic programs. The regulations permit states to include more restrictive requirements in their programs, and submit them to the USDA for approval. When state programs are federally approved, states take principal responsibility for assuring compliance with the organic standards. The California Organic Products Act incorporates by reference the USDA’s regulations.

B. Express Preemption

Express preemption arises when Congress “define[s] explicitly the extent to which its enactments pre-empt state law.” Viva Int’l Voice for Animals v. Adidas Promotional Retail Ops., Inc., 41 Cal. 4th 929, 935 n. 2 (2007). The Court agreed with the appellate court that the state law claims are not explicitly preempted by the Organic Foods Act.

The Act explicitly displaces state law in only two respects. First, it establishes federal standards exclusively for organic production. Second, it establishes an exclusive process by which growers may seek to demonstrate their production methods comply with the federal standard. Although states may establish their own certification standards, the programs must be approved by the USDA before taking effect. The Court held that the state law claims at issue are not explicitly preempted because there is no language of exclusivity in the Act for misuse of the organic label.

C. Implied Preemption

Obstacle preemption permits courts to strike state law that stands as “an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” 62 Cal. 4th at 312, citing Hines v. Davidowitz, 312 U.S. 52, 67 (1941). According to the Court, “obstacle preemption requires proof that Congress had particular purposes and objectives in mind, a demonstration that leaving state law in place would compromise those objectives, and reason to discount the possibility that Congress was aware of the background tapestry of state law and content to let that law remain as it was.” Id.

The Supreme Court’s analysis begins by laying down a series of principles by which the implied preemption issue should be decided. These are:

  1. The determination of whether preemption exists is to be based on congressional intent.
  2. The United States Supreme Court and this Court have conducted the search for congressional intent through the lens of a presumption against preemption.
  3. The regulation of food labelling to protect the public is quintessentially a matter of long-standing local concern.
  4. The federal government has assumed a more peripheral role and left undisturbed local policy judgments about how best to protect consumers.
  5. The presumption against preemption applies with particular force where state consumer protection laws regulating deceptive food labelling are at issue.

The Court’s rejection of implied preemption is based on the following considerations. Permitting state consumer fraud actions would advance one of the prime purposes of the Act, which was to deter mislabeling of produce as organic. The USDA emphasized that its federal standards were designed to supplement and enhance, rather than foreclose, state law consumer remedies for deception. The USDA expected the standards established by its final rule to “fill in important State and regional gaps in enforcement in organic fraud cases.” Furthermore, Congress was aware of the extensive history of state regulation of food labelling and deception in the marketplace, but expressly set aside only those state laws establishing standards for the meaning of “organic” and standards for certification.

The appellate court had ruled that Quesada’s claims were preempted, relying heavily on In re Aurora Dairy Corp. Organic Milk Marketing, 621 F. 3d 781 (8th Cir. 2010). The Aurora Dairies court held that state law claims against a certified milk producer for mislabeling nonorganic milk as organic were impliedly preempted. The Quesada appellate court, following Aurora Dairy, ruled that Quesada’s claims were impliedly preempted because the federal certification process permitted Herb Thyme to label its produce as organic. As in Aurora Dairy, the appellate court held that state consumer claims that products certified under the certification program were nonetheless not organic conflicted with the federal scheme.

The Supreme Court overturned the appellate decision. The Court distinguished Aurora Dairies because Quesada is not contesting the fact that Herb Thyme has been certified, is compliant with federal regulations on its certified organic farm and is entitled to package and sell its certified products using an USDA Organic label. Quesada’s claim, instead, is that Herb Thyme intentionally sells some conventional herbs that are not certified under an organic label. The Court relied on the fact that Congress has singled out the deliberate mislabeling of conventional produce as organic as a major reason why federal legislation was needed. The Act cannot be interpreted as shielding from suit the precise misconduct that Congress sought to eradicate. To recover, the plaintiff would have to prove only that Herb Thyme did not comply with the national standards in selling produce that had not been certified as organic.

Conclusion.

It is clear under the Court’s ruling that state law suits that attack the organic label of produce that has not been certified as organic are not preempted by the Act. Although the Court distinguishes, but does not reject, the holding of Aurora Dairies, it is likely that suits that attack organic labels that have been approved by State officials or private certifying agents would be held preempted by the Act.

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