Antitrust Law Daily Wrap Up, ADVERTISING—W.D. Ark.: State law claims concerning misleading tea labels preempted, (Feb 9, 2015)

By Dan Selcke, J.D.

The federal district court in Fayetteville, Arkansas dismissed a variety of state law claims brought against a company that allegedly put misleading labels on its tea products, since allowing the claims to proceed would have imposed liability inconsistent with the federal Food, Drug, and Cosmetic Act, (FDCA), 21 U.S.C. Section 301. Jenny Craig, the plaintiff, brought five claims, all of which were based on violations of the Arkansas Food, Drug, and Cosmetic Act (AFDCA). To start, she accused Twinings of violating the Arkansas Deceptive Trade Practices Act (ADTPA), Ark. Code Ann. Section 4-88-101. She also brought claims of unjust enrichment, breach of the implied warranty of merchantability, breach of express warranty, and negligence (Craig v. Twinings North America, Inc., February 5, 2015, Brooks, T).

Deceptive tea labels. Twinings North America, Inc. sold a variety of tea products. It marketed and labeled these products as being a “natural source of antioxidants.” Craig purchased some of these teas, but later alleged that the labels were deceptive, since the teas did not contain enough nutrients to rightly be called a natural source of antioxidants. Such teas, according to Craig, could not be legally sold or possessed, and the only reason Twinings labeled them as it did was so it could charge a price premium. She brought suit on behalf of herself and other Arkansas consumers. Twinings, in turn, brought a motion to dismiss her claims.

Economic injury. First, the court considered Twinings’ argument that Craig did not have standing to bring her claims because she not suffered any injury that would satisfy the “case or controversy” requirement under Article III of the U.S. Constitution. The court disagreed. It accepted Craig’s argument that she had suffered an economic injury, since she would not have purchased Twinings’ tea products at a premium price had she known that the claim about antioxidants was false. In the Eighth Circuit, this was enough to establish an injury-in-fact under Article III, even though Craig had not come to any physical harm, Wallace v. ConAgra Foods, Inc., 747 F.3d 1025, 1029 (8th Cir. 2014).

Preemption. Although it sided with Craig on the standing issue, the court still dismissed her claims brought under the AFDCA because they were preempted by the FDCA as amended by the Nutrition Labeling and Education Act (NLEA). The NLEA, which was codified as part of the FDCA, provided for national uniform nutrition labeling and expressly preempted state law that was inconsistent with its requirements, but that preemption did not extend to state law that paralleled those requirements. The preemption question, then, was whether the label violations on which Craig based her claims imposed a requirement under state law that differed from those under the FDCA.

Nutrient content claims. Craig contended that the AFDCA was identical to the food labeling regulations of the FDA, which themselves were incorporated into the FDCA. Accordingly, the court considered whether Craig’s claims could proceed by looking at the language of the FDCA.

21 C.F.R. Section 101.54(g), the section on antioxidants which Craig accused Twinings of violating, established a set of requirements for labels making “[a] nutrient content claim that characterizes the level of antioxidant nutrients present in a food.” Although Twinings advertised its teas as being a “natural source of antioxidants,” the labels did not make any claim about the level of antioxidants the teas contained. To do that, they would have had to replace the word “natural,” which did not imply a level of content, with a word like “good” or “high,” or else make a more specific statement about the level of antioxidants in the tea (e.g. 3 grams of fat). Therefore, Twinings’ labels did not make any nutrient content claims, so this regulation did not apply to them.

FDA warning letter. To bolster her argument, Craig cited to a warning letter issued by the FDA to a different food seller in which the agency cautioned that certain claims using the word “source” were nutrient content claims. However, this letter was not relevant to Craig’s situation. For one thing, the label that inspired the letter described the food within as “one of our finest food sources of…saponin.” The word “finest” implied a certain amount of saponin, while the word “natural” did not imply an amount of antioxidants. Also, FDA warning letters did not necessarily represent FDA decisions. They were only informal and advisory.

Having concluded that Twinings’ labels did not violate the FDCA, the court returned to the preemption question, and held that Craig’s state law AFDCA claims were preempted. If allowed to proceed, they would impose liability inconsistent with the FDCA.

Final claim and conclusion. Lastly, the court considered Craig private cause of action under the ADTPA, which she accused Twinings of violating by knowingly selling mislabeled tea. The court dismissed this cause of action because Craig could not show that she had suffered an injury as defined by the statute. Unlike under Article III, an assertion that she would not have bought the teas if she had known about their allegedly misleading labels was not enough. Even if she could show injury, Twinings’ labels were compliant with FDA regulations, so they were not actually false or misleading as required under the statute. The court dismissed all of Craig’s claims with prejudice.

The case number is: 5:14-CV-05214

Attorneys: Kenneth R. Shemin (Shemin Law Firm, PLLC) for Jenny Craig. David Wallace (Herbert Smith Freehills NY LLP), and Kevin A. Crass (Friday, Eldredge & Clark) for Twinings North America, Inc.

Companies: Twinings North America, Inc.

Cases: Advertising StateUnfairTradePractices ArkansasNews