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Holk v. Snapple Beverage Corp.

August 12, 2009

STACY HOLK, APPELLANT
v.
SNAPPLE BEVERAGE CORPORATION



On Appeal from the United States District Court for the District of New Jersey. District Court No. 3-07-cv-03018 District Judge: The Honorable Mary L. Cooper.

The opinion of the court was delivered by: Smith, Circuit Judge

PRECEDENTIAL

Argued June 24, 2009

Before: BARRY, SMITH, Circuit Judges and RESTANI, Judge*fn1

OPINION

This appeal presents three issues related to the federal preemption of state causes of action. Plaintiff-appellant Stacy Holk brought several state law claims against defendant-appellee the Snapple Beverage Corporation in the Superior Court of New Jersey. After removing Holk's lawsuit to the United States District Court for the District of New Jersey, Snapple sought to dismiss Holk's complaint on, inter alia, the grounds of express preemption, implied field preemption, and implied conflict preemption. The District Court granted Snapple's motion on the basis of implied preemption. For the reasons discussed below, we will reverse.

I.

A.

Congress has regulated food and beverage labeling for more than 100 years. In 1906, it passed legislation commonly known as the "Wiley Act" that established labeling standards. Pure Food and Drug Act of 1906, Pub. L. No. 59-384, 34 Stat. 768, repealed by Act of June 25, 1938, ch. 675, § 902(a), 52 Stat. 1059. At the time, the Wiley Act was considered a substantial reform because it prohibited the adulteration and misbranding of food sold and distributed in interstate commerce. Pub. L. No. 59-384, §§ 7--8. By today's standards, however, the Wiley Act offered only modest reforms: it "enabled the Government to go to court against illegal products but lacked affirmative requirements to guide compliance. Labels were not even required to state the weight or measure-only that a contents statement, if used, must be truthful." U.S. Food and Drug Administration, The Story of the Laws Behind the Labels, Part II (1981).

Congress replaced the Wiley Act in 1938 with the Federal Food, Drug, and Cosmetic Act ("FDCA"). Pub. L. No. 75-717, 52 Stat. 1040 (1938). Mounting public concern over unsafe food and drug products and marketing prompted its passage. United States v. Bhutani, 266 F.3d 661, 665 (7th Cir. 2001). The FDCA authorized the Food and Drug Administration ("FDA") to regulate food safety and labeling. Fellner v. Tri-Union Seafoods, L.L.C., 539 F.3d 237, 251 (3d Cir. 2008). Specifically, under the FDCA, the FDA could "promulgate food definitions and standards of food quality;" "set tolerance levels for poisonous substances in food;" and take enforcement action on adulterated and misbranded foods. Id. The FDCA had its shortcomings, however. Neither the FDCA nor FDA regulations required detailed nutritional information on all food labels. Emily J. Schaffer, Is the Fox Guarding the Henhouse? Who Makes the Rules in American Nutrition Policy?, 57 Food & Drug L.J. 371, 404 (2002). In fact, nutrition labeling was required only if the manufacturer made a nutrition claim about the product such as "low-fat" or "high in fiber." Id.

In response to growing concerns from consumer groups about unsubstantiated health claims on food and beverages, the FDA and Congress began considering a national labeling law. Claudia L. Andre, Note, What's in that Guacamole? How Bates and the Power of Preemption Will Affect Litigation Against the Food Industry, 15 Geo. Mason L. Rev. 227, 232 (2007). In 1990, Congress passed the Nutrition Labeling and Education Act ("NLEA"). Pub. L. No. 101-535, 104 Stat. 2353 (1990) (codified at 21 U.S.C. § 343 et seq). NLEA introduced a number of substantial reforms: (1) it required nutrition labeling for nearly all food products under the authority of the FDA, with exemptions for small businesses, restaurants, and some other retail establishments; (2) it changed the requirements for ingredient labels on food packages; (3) it imposed and regulated health claims on packages; (4) it standardized all nutrient content claims; and (5) it standardized serving sizes. The Impact of the Nutrition Labeling and Education Act of 1990 on the Food Industry, 47 Admin. L. Rev. 605, 606 (1995).

B.

Snapple Beverage Corporation ("Snapple") manufactures a variety of beverages, including a number of juice and tea-based drinks. In its marketing and advertising materials, Snapple represents that these beverages are "All Natural." As the FDA has acknowledged, "[t]he word 'natural' is often used to convey that a food is composed only of substances that are not manmade and is, therefore, somehow more wholesome."

Food Labeling: Nutrient Content Claims, General Principles, Petitions, Definition of Terms, 56 Fed. Reg. 60,421, 60,466 (Nov. 27, 1991). Snapple products, however, contained high fructose corn syrup ("HFCS"), an ingredient manufactured from processed cornstarch.*fn2

Stacy Holk bought two bottles of Snapple on May 4, 2007. She paid $1.09 for each bottle. She had purchased other Snapple products over the preceding six years. Holk contends that the labels on these products are deceptive. She argues that consumers "have been, and continue to be, easy prey for Snapple's unlawful activities because of their willingness to pay a premium price for foods and beverages, including Snapple beverages, that are represented to be 'All Natural.'"

C.

Holk filed a class action lawsuit against Snapple in the Superior Court of New Jersey, asserting claims on the basis of:

(I) the New Jersey Consumer Fraud Act; (II) unjust enrichment and common law restitution; (III) breach of express warranty; and (IV) breach of the implied warranty of merchantability. Holk's claims were predicated on her belief that a number of statements on Snapple's labels were misleading. She argued that (1) Snapple products were not "All Natural" because they contained HFCS; (2) Snapple products were not "Made from the Best Stuff on Earth," as indicated on the label; and (3) Snapple falsely labeled some beverages, for example, calling one drink "Acai Blackberry Juice," despite the fact that the drink contained neither acai berry juice nor blackberry juice.

Snapple removed the case to the United States District Court for the District of New Jersey pursuant to the Class Action Fairness Act, 28 U.S.C. 1453(b). It then filed a motion to dismiss. The parties subsequently agreed that Holk could amend her complaint, rather than respond to Snapple's motion. In October 2007, Holk filed an Amended Complaint, which reasserted that Snapple's labels were misleading because they claimed the products were "All Natural" and because Snapple advertised some products as containing juice that was not in the beverages. The Amended Complaint did not allege any claims based on Snapple's use of the phrase "Made From the Best Stuff on Earth." Snapple filed a second motion to dismiss, arguing that Holk's claims were preempted, that the claims should be dismissed under the doctrine of primary jurisdiction, and that the allegations ...


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