Quesada v. Herb Thyme Farms, Inc.

• Decision Date: 03 December 2015
• Docket Number: No. S216305.,S216305.
• Citation: 361 P.3d 868,195 Cal.Rptr.3d 505,62 Cal.4th 298
• Court: California Supreme Court
• Parties: Michelle QUESADA, Plaintiff and Appellant, v. HERB THYME FARMS, INC., Defendant and Respondent.

62 Cal.4th 298

361 P.3d 868

195 Cal.Rptr.3d 505

Michelle QUESADA, Plaintiff and Appellant,

v.HERB THYME FARMS, INC., Defendant and Respondent.

No. S216305.

Supreme Court of California

Dec. 3, 2015.

Kiesel Boucher Larson, Law Office of Raymond P. Boucher, Boucher, Raymond P. Boucher, Woodland Hills, Maria L. Weitz, Beverly Hills; Whatley Kallas, Edith M. Kallas, Alan M. Mansfield, San Diego; Public Justice, Leslie A. Brueckner ; Kiesel + Larson, Helen Zukin, Beverly Hills; Johnson & Johnson and Neville Johnson, for Plaintiff and Appellant.

Lexington Law Group, Mark N. Todzo and Howard Hirsch, San Francisco, for Center for Food Safety and Organic Consumers Association as Amici Curiae on behalf, of Plaintiff and Appellant.

Public Citizen Litigation Group, Adina H. Rosenbaum; Chavez & Gertler and Mark A. Chavez, Mill Valley, for Public Citizen, Inc., as Amici Curiae on behalf of Plaintiff and Appellant.

Kamala D. Harris, Attorney General, Nicklas A. Akers, Assistant Attorney General, Michele Van Gelderen and Steven De Salvo, Deputy Attorneys General, for State of California as Amicus Curiae on behalf of Plaintiff and Appellant.

Greenberg Traurig, Mark D. Kemple, Karin L. Bohmholdt, Los Angeles, and Angela L. Diesch, Roseville, for Defendant and Respondent.

U.S. Chamber Litigation Center, Inc., Kate Comerford Todd, Tyler R. Green ; Morrison & Foerster, Ruth N. Borenstein

and William L. Stern, San Francisco, for Chamber of Commerce of the United States of America as Amicus Curiae on behalf of Defendant and Respondent.

WERDEGAR, J.

To buyers and sellers alike, "labels matter." (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 328, 120 Cal.Rptr.3d 741, 246 P.3d 877.) They serve as markers for a host of tangible and intangible qualities consumers may come to associate with a particular source or method of production. (Id. at pp. 328–329, 120 Cal.Rptr.3d 741, 246 P.3d 877.) Misrepresentations in labeling undermine this signifying function, preventing consumers from correctly identifying the goods and services that carry the attributes they desire while also hampering honest producers' attempts to differentiate their merchandise from the competition.

Among those labels Kwikset cited as making a difference to some consumers, and as potentially actionable under state unfair competition law if misused, was the designation of produce or other food as "organic." (Kwikset Corp. v. Superior Court, supra, 51 Cal.4th at pp. 332–333, 120 Cal.Rptr.3d 741, 246 P.3d 877.) Here we must decide whether such a state law claim is viable, or whether the federal regulatory regime for certifying organic growers preempts a state claim that a certified grower is intentionally mislabeling conventionally grown produce and selling it as organic.

We hold a state law claim that produce is being intentionally mislabeled as organic is not preempted. When Congress entered the field in 1990, it confined the areas of state law expressly preempted to matters related to certifying production as organic, leaving untouched enforcement against abuse of the label "organic." Moreover, a central purpose behind adopting a clear national definition of organic production was to permit consumers to rely on organic labels and curtail fraud. Accordingly, state lawsuits alleging intentional organic mislabeling promote, rather than hinder, Congress's purposes and objectives.

Because the Court of Appeal concluded to the contrary, finding these state fraud claims impliedly preempted, we reverse its judgment.

PROCEDURAL AND FACTUAL BACKGROUND

This case is a putative class action challenging an herb grower's marketing of its herbs as organic. Because this appeal follows the granting of a motion for judgment on the pleadings (Code Civ. Proc. § 438 ), we accept as true the allegations of the complaint (Angelucci v. Century Supper Club (2007) 41 Cal.4th 160, 166, 59 Cal.Rptr.3d 142, 158 P.3d 718 ).

Defendant Herb Thyme Farms, Inc. (Herb Thyme), is a large herb-growing operation with multiple farms throughout California. Most of its farms use conventional growing methods, but one of its farms uses organic processes and has been properly certified by a registered certifying agent. When it comes time for distribution and marketing, however, Herb Thyme brings its conventionally grown and organic herbs to the same packing and labeling facility, processes them together, and sends blended conventional and organic herbs out under the same "Fresh Organic" label and packaging. As well, Herb Thyme packages and labels as organic some herbs that are entirely conventionally grown.

Plaintiff Michelle Quesada is a consumer who purchased Herb Thyme herbs at a premium in the belief they were, in fact, 100 percent organic. Her suit, filed as a class and representative action, challenges as false advertising and unfair competition Herb Thyme's practice of selling conventionally grown herbs under an organic label. The operative complaint, the second amended complaint, alleges violations of the Consumers Legal Remedies Act (Civ.Code § 1750 et seq. ), unfair competition law (Bus. & Prof.Code § 17200 et seq. ), and false advertising law (Bus. & Prof.Code § 17500 et seq. ).

Herb Thyme sought judgment on the pleadings on federal preemption and primary jurisdiction grounds. The Organic Foods Production Act of 1990 (7 U.S.C. §§ 6501 –6522 ; Organic Foods Act), Herb Thyme argued, vests the United States Department of Agriculture (USDA) with exclusive authority to regulate the labeling and marketing of organic products and both expressly and impliedly preempts state truth-in-advertising requirements. In the alternative, Herb Thyme asked the trial court to defer action under primary jurisdiction principles unless and until an administrative complaint had been pursued through the USDA. The trial court agreed with both express and implied preemption arguments and entered a defense judgment.

The Court of Appeal affirmed. It disagreed with the trial court's finding of express preemption, reasoning that the express preemption provisions in the Organic Foods Act limited state organic certification programs but did not foreclose state false advertising suits. However, it agreed such suits were a potential obstacle to Congress's purposes and objectives of establishing uniform national standards for organic production and labeling, and thus impliedly preempted.

We granted review to consider these preemption questions.

DISCUSSION

I. State and Federal Regulation of Organic Products

The "first [use of] the word ‘organic’ to describe a method of farming in which the farmer strove for improved natural soil condition through the use of natural additions of manure and compost and the avoidance of chemical amendments" traces to the 1940s, perhaps not coincidentally the time when use of synthetic pesticides first became widespread. (Watnick, The Organic Foods Production Act, the Process/Product Distinction, and a Case for More End Product Regulation in the Organic Foods Market (2014) 32 UCLA J. Envtl. L. & Pol'y 40, 45 & fn. 20 (Watnick) ; see Pasquinelli, One False Move: The History of Organic Agriculture and Consequences of Non–Compliance with the Governing Laws and Regulations (2010) 3 Golden Gate U. Envtl. L.J. 365, 368 & fn. 13.) Sales of organic products remained a niche industry for another generation, but by the 1970s a broader market for organic food had begun to emerge. (Amaditz, The Organic Foods Production Act of 1990 and Its Impending Regulations: A Big Zero for Organic Food?

(1997) 52 Food & Drug L.J. 537, 538 (Amaditz) ; Lathrop, Pre-empting Apples with Oranges: Federal Regulation of Organic Food Labeling (1991) 16 J. Corp. L. 885, 886 (Lathrop).)

This nascent unregulated market was not without its problems. For one, the absence of any uniform, agreed-upon standards created consumer confusion: "Even the most sophisticated organic consumer finds it difficult to know, with certainty, what the term ‘organic’ really means." (Sen.Rep. No. 101–357, 1990 U.S.C.C.A.N. 4656, 4943, 2d Sess., p. 289 (1990), reprinted in 1990 U.S.Code Cong. & Admin. News, p. 4943.) For another, the combination of consumers willing to pay a premium for organic products and the absence of definite standards created incentives for sharp practices. (Id. at pp. 289–290, reprinted in 1990 U.S.Code Cong. & Admin. News, at pp. 4943–4944; Amaditz, supra, 52 Food & Drug L.J. at p. 539 ["Because no regulations existed, unscrupulous producers could proffer almost any organic claim to render their food more marketable."]; Lathrop, supra, 16 J. Corp. L. at pp. 890–891.)

The several states stepped in first. Oregon enacted a first-of-its-kind state organic certification law in 1973. (Or.Rev.Stat. former § 632.925; see Watnick, supra, 32 UCLA J. Envtl. L. & Pol'y at p. 45 & fn. 24 ; Lathrop, supra, 16 J. Corp. L. at pp. 886, 891.) California followed in 1979, modeling its statute on Oregon's template. (Health & Saf.Code, former §§ 26469, 26569.11–26569.17, 26850.5–26850.6, added by Stats.1979, ch. 914, pp. 3143–3149; see Bones, State and Federal Organic Food Certification Laws: Coming of Age? (1992) 68 N.D. L.Rev. 405, 410 ; Lathrop, at p. 891.) By 1990, 22 states had some form of regulation of organic production. (Sen.Rep. No. 101–357, 2d Sess., p. 289, supra, reprinted in 1990 U.S.Code Cong. & Admin. News, p. 4943; Bones, at p. 408 & fns. 11–13; Lathrop, at pp. 891–892 & fn. 53.)

Frustratingly, however, no two state laws were the same. (Sen.Rep. No. 101–357, 2d Sess., p. 289, supra, reprinted in 1990 U.S.Code Cong. & Admin. News, p. 4943.) This multiplicity of certification procedures and standards presented ongoing difficulties for both consumers and the marketplace. (Ibid. ["While State action represents a positive step forward for the organic foods industry, the differing state laws have also [led] to consumer confusion and troubled interstate commerce."].) Seeking uniformity, the organic producer community lobbied for federal regulation. (Id. at p. 290,...