California Appellate Court Holds That Federal Law Preempts Unfair Competition Law Claims Tied to Organic Label

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In a case of first impression in the state courts, a California appellate court delivered an early Christmas present Dec. 23 to beleaguered food and beverage companies facing an avalanche of lawsuits under California’s Unfair Competition Law (“UCL”). In Quesada v. Herb Thyme Farms, Inc., Case No. B239602 (2nd Appellate District, Dec. 23, 2013), the court found that the federal Organic Foods Production Act (“OFPA”) preempted state law claims related to organic certification where Herb Thyme labeled its products as USDA Organic, but sold products with organically grown herbs mixed with conventionally grown herbs. The putative class action, alleging that the UCL was violated under California’s separate, but federally certified, organic program, was dismissed because the label met USDA’s certification requirements.

The state court also refused to apply the holding in a recent contrary federal district court decision, Jones v. ConAgra Foods, Inc., 912 F. Supp. 2nd 889 (N.D. CA 2012) (refusing to dismiss a potential class action claiming that ConAgra’s products contained disqualified ingredients under OFPA); instead, the state court relied on the logic and holding of a federal appeals court’s partial dismissal of Colorado state law claims related to organic certification. See, Aurora Dairy Corp. Organic Milk Mktg. & Sales Practices Litig. v. Aurora Organic Dairy, 621 F.3d 781 (8th Cir. 2010) (holding that OFPA does not provide for private enforcement under either federal or state law). In Aurora Dairy, while private enforcement of organic certification under OFPA was rejected, the court permitted continuation of a portion of the case that alleged that the packaging and advertising of the organic milk implied treatment and conditions beyond that required for organic certification under OFPA.

The distinction between a simple organic certification claim and going beyond that claim with additional labeling or advertising is an important and critical distinction, while the ConAgra holding appears to obliterate any such distinction. Indeed the Quesada discussion of OFPA and Aurora Dairy is more complete and robust than the federal district court decision in ConAgra.

For now, companies facing these kinds of claims should continue to argue that OFPA preempts California’s UCL.  But just as importantly, companies should be alert to the risk of making claims or assertions beyond “USDA Organic,” and be aware that at least one federal district court permits UCL claims generally under California’s (but not OFPA) organic program.