U.S.A v. Organic Pastures Dairy Co.

• Decision Date: 20 April 2010
• Docket Number: No. 1:08-CV-01786-OWW-GSA.,1:08-CV-01786-OWW-GSA.
• Citation: 708 F.Supp.2d 1005
• Court: U.S. District Court — Eastern District of California
• Parties: UNITED STATES of America, Plaintiff,v.ORGANIC PASTURES DAIRY COMPANY, et al., Defendants.

708 F.Supp.2d 1005

UNITED STATES of America, Plaintiff,v.ORGANIC PASTURES DAIRY COMPANY, et al., Defendants.

No. 1:08-CV-01786-OWW-GSA.

United States District Court,

E.D. California.

April 20, 2010.

Deanna Lynne Martinez, United States Attorney, Fresno, CA, Roger Gural, United States Department of Justice, Washington, DC, for Plaintiff.

Esau Soren Diaz, John Kenneth Gorman, Lombardo and Gilles, Salinas, CA, for Defendants.

MEMORANDUM DECISION AND ORDER RE: UNITED STATES OF AMERICA'S MOTION FOR SUMMARY JUDGMENT (Doc. 22.)

OLIVER W. WANGER, District Judge.

I. INTRODUCTION

This matter is before the Court on the government's motion for summary judgment and entry of a permanent injunction. The government seeks to permanently enjoin Defendants Organic Pastures Dairy Company and Mark McAfee from distributing and/or introducing raw milk across state lines, in contravention of the Federal Food, Drug, and Cosmetic Act (“FDCA”). The government's request for injunctive relief is based on separate agreements signed by Defendants in December 2008, resolving criminal cases against them. In the agreements, Defendants acknowledged that Organic Pastures' employees violated the FDCA by distributing raw milk to out-of-state customers in 2007.

Defendants do not dispute the liability portions of the United States' motion. Instead, they oppose the breadth of the government's proposed relief, arguing the terms of the permanent injunction are duplicative of their criminal plea arrangements, impose on California's regulation of the raw milk industry, are financially crippling, and constitute a personal attack on Mr. McAfee. Defendants also contend that they ceased distributing raw milk into interstate commerce following their criminal pleas, therefore the permanent injunction is unnecessary.

II. FACTUAL BACKGROUND

The following facts are taken from the parties' submissions in connection with motion for summary judgment. The facts are largely undisputed.¹

A. The Parties

Defendant Organic Pastures Dairy Company (“Organic Pastures”) is a California Corporation that maintains its principal place of business in Fresno, California. (SUF 1.) Organic Pastures is engaged in milking cows and packaging, labeling, selling, and distributing raw milk and raw milk products including cream, butter, buttermilk, and colostrum. (SUF 3.) It customers in California, selling its products including national retailer “Whole Foods Market,” and via its website (www. organic pastures. com).

Defendant Mark McAfee (“McAfee”) is the co-founder managing member of Organic Pastures. (SUF 2.) He is responsible for the day-to-day operations of Organic Pastures, including all manufacturing and distributing operations. ( Id.)

B. Defendants' Interstate Raw Milk Practices

According to the United States, Defendants have a long history of selling raw milk and raw milk products to out-of-state customers. In late 2008, pursuant to separate “Deferred Prosecution Agreements,” Defendants acknowledged that Organic Pastures' employees distributed raw milk to out-of-state customers in 2007. Specifically, Defendants admitted that two shipments were made to out-of-state customers “with the knowledge and consent of Organic Pastures” and were labeled as “pet food” to avoid detection:

On October 10, 2007, one or more of defendant Organic Pastures' agents or employees, with the knowledge and consent of Organic Pastures, caused a box of raw milk and dairy products, labeled as or otherwise represented to be “pet food,” to be sent by defendant Organic Pastures from Fresno, California to Renton, Washington, knowing that the intended use of such foods and/or dietary supplements was for human consumption. The box contained one 1/2 gallon of unpasteurized raw whole milk and one 1/2 gallon of unpasteurized raw Super Choco Colostrum. The invoice number was # 356546557.

On October 16, 2007, one or more of defendant Organic Pastures' agents or employees, with the knowledge and consent of Organic Pastures, caused one box of raw milk and dairy products, labeled as or otherwise represented to be “pet food,” to be sent by defendant Organic Pastures from Fresno, California to Reno, Nevada, knowing that the intended use of such foods and/or dietary supplements was for human consumption. The box contained one 1/2 gallon of unpasteurized raw whole milk and one pint of unpasteurized raw colostrum. The invoice number was # 165465524.

These products were foods and/or dietary supplements, and were misbranded when so introduced into or delivered for introduction into interstate commerce, in that they were falsely and misleadingly labeled as, or otherwise represented to be “pet food,” when they were actually intended for human consumption, in violation of Title 21, United States Code, Sections 331(a) and 333(a)(1).

(Doc. 24-14, Defendant McAfee's “Deferred Prosecution Agreement,” at 9:3-9:23.²)

In addition to the criminal plea agreements, the government supports its motion with evidence gathered by the FDA during its investigation of Organic Products. This evidence consists of packaging labels, Organic Pastures' web content, website testimonials, statements made by Organic Pastures' employees, and McAfee's own statements to FDA investigators and various news outlets. First, the government points to the exterior labeling of Defendants' shipping containers, which stated that the products “are labeled and intended for: ‘Pet Food’ consumption only.” ³ Nowhere on the individual retail products was there a label indicating that the products were to be limited to pet consumption or identifying the products as pet food. (SUF 16-17.) However, the individual retail products bore statements such as “the best milk you'll ever taste,” and that Organic Pastures products “are highly recommended by [...] thousands of happy healthy people.” (SUF 17.) On the United States' account, a prominent packaging statement on individual retail products clearly shows that Defendants' raw milk and raw milk products are intended for human consumption:

Raw (unpasteurized) milk and raw milk dairy products may contain disease-causing micro-organisms. Persons at highest risk of disease from these organisms include newborns and infants; the elderly; pregnant women; those taking corticosteriods, antibiotics or antacids; and those having chronic illnesses or other conditions that weaken their immunity.

(SUF 18.)

The United States also contends that statements by Defendants' employees demonstrate that Organic Pastures distributed and/or distributes raw milk and raw milk products in interstate commerce for human consumption. In particular, the United States points to an email from Kaleigh McAfee, Manager of Sales and Marketing at Organic Pastures, to an undercover FDA investigator in September 2007. In the email, Ms. McAfee states that Organic Pastures can “absolutely” send raw milk to all fifty states and espouses the health benefits of raw milk-that it “cures asthma.” (SUF 21.) The email does not state that raw milk is intended to be used as pet food. (SUF 22.)

The United States identifies another email, this one sent by Defendant McAfee to an FDA public affairs specialist in 2007. In the email McAfee stated that “when raw milk is tested and labeled as intended for direct human consumption it is extremely safe.” (SUF 23-24.) McAfee also indicated his intention to sell raw milk to humans and declared that “there is nothing the FDA can do about it.” (SUF 25.)

In a 2005 Portland Tribune article, Defendant McAfee stated that Organic Pastures consciously labels its raw milk products as “pet food” to avoid federal regulation of the interstate sale of raw milk:

The neat thing about the law is that it can be interpreted in many ways. The state of Oregon understood that there was a loophole by putting a pet sticker on the product. And there's no regulation that you can't eat pet food, either. I am a revolutionist in this, and I won't overlook any loophole that will get the milk out there.

(SUF 55.)

The United States provides additional examples of Defendants' intent to distribute raw milk and raw milk products into interstate commerce for human consumption. The United States points to several statements made by Organic Pastures on its website concerning the “pet food” labeling: “[Organic Pastures] has creatively labeled its products for sale outside of California in such a way that it is not illegal under the law [...] this provides raw food drinkers the freedom to choose a raw product over a dead product. It is also great pet food.” (SUF 50.)

According to the United States, Defendants' employees have also made statements reflecting Organic Pastures' intention to sell raw milk in interstate commerce. In July 2005, an FDA investigator ordered several raw milk products through Organic Pastures' website. (SUF 52.) When the investigator received the items, he called Organic Pastures to inquire about the pet food label. ( Id.) The Organic Pastures sales representative responded that the product was safe for humans and that the “ ‘pets only’ sticker is a legal loophole for us to sell out of state.” ( Id.)

C. Related Criminal Proceeding

While this case was pending, Defendant Organic Pastures faced similar charges in a criminal action involving similar conduct. The criminal matter concluded in settlement by plea agreement on December 22, 2008 and was approved by Magistrate Judge Sandra M. Snyder on January 9, 2009. (SUF 69.) Pursuant to the plea agreement, Defendant Organic Pastures pled guilty to two counts of misdemeanor introduction and delivery for introduction into interstate commerce of misbranded food, in violation of 21 U.S.C. §§ 331(a) and 333(a)(1). (SUF 70.) Defendant McAfee entered into a deferred prosecution agreement whereby he agreed to the filing of a two count information charging him and Organic Pastures with the same violations. (SUF 71.)

In these agreements, both Defendants admitted that: (1) on two separate occasions “one or more of defendant Organic...