The Eighth Circuit Reverses District Court That Held There Was No Use Crying Over Certified Organic Milk
Thanks largely to the Hydra-headed jurisprudence that has emanated in recent years from the U.S. Supreme Court, decisions about federal preemption get harder and harder to follow. Take, for example, In re Aurora Dairy Corp. Organic Milk Marketing and Sales Practices Litig., No. 09-2762, Slip op. (8th Cir. Sept. 15, 2010).
Aurora Dairy forced the Eighth Circuit to consider the preemptive scope of the federal laws governing organic foods, namely the Organic Foods Production Act of 1990 ("OFPA"), 7 U.S.C. sec. 6501 et seq., and its implementing regulations, the National Organic Program ("NOP"), 7 C.F.R. pt. 205. OFPA sets national standards for the sale and labeling of organically-produced agricultural products, and provides for the accreditation of certification agents who inspect producers and can make recommendations to the US Department of Agriculture about the producers' certification.
Aurora Dairy is a certified organic milk producer that sold its own "High Meadow" brand and also packaged house brands of organic milk for Wal-Mart, Target, Costco, Safeway, and Wild Oats Markets. At all times, Aurora was a certified organic producer, having been inspected and certified by QAI, Inc. In early 2007, however, the USDA proposed revoking Aurora's certification as an organic producer because of fourteen alleged violations, including using nonorganic cows to produce organic milk, failure to notify its certifying agent of certain facts, and failing to report and keep records as required by statute and regulation. In August 2007, Aurora entered into a consent agreement with the USDA requiring it to take a number of remedial actions, including removing non-organic cows from its herds, reducing the size of its herds, and removing the certification of one of its facilities.
This sparked a flood of nineteen class actions filed around the country, which were consolidated for pretrial purposes into an MDL in the Eastern District of Missouri. The district court ordered the plaintiffs to file a consolidated complaint. The defendants moved to dismiss, and the district court granted the motion, finding that the state law causes of action -- including alleged violations of state consumer protection statutes -- were preempted by OFPA. Specifically, the district court held that both field preemption and conflict preemption applied to preempt plaintiffs' state law claims.
The Eighth Circuit reversed, in large part. Its preemption analysis ultimately is as confusing as it is instructive. The court began by applying the "presumption against preemption" recently resurrected in Altria Group, Inc. v. Good, 129 S. Ct. 538, 543 (2008). (This, even though the OFPA statute itself has an express preemption provision, evincing that Congress clearly intended some form of preemptive effect.) The court then looked to the statute's express preemption provision, concluding that although it expressly preempted state certification laws, it did not preempt state common law or statutory claims by private litigants. Moreover, the court concluded that the fact that Congress included a narrow preemption provision should generally weigh against finding any implied preemption. Slip op. at 20.
The trial court had held that OFPA preempted the entire field of certification, labeling and marketing of organic agriculture, likening OFPA's broad scope to that of the Occupational Health and Safety Act of 1970. The Eighth Circuit, however, rejected this analysis, finding that OFPA's scope was not nearly as comprehensive as OSHA's. Thus, field preemption did not apply, either.
The Eighth Circuit then analyzed whether conflict preemption applied. It observed that Congress had intended to "replace the patchwork of existing state regulations with a national standard for defining organic food" and reasoned that "State law that poses an obstacle to the establishment of the national standard should therefore be preempted." Id. at 23. The court held that state consumer protection suits against QAI, which was the certifying inspector for Aurora, would directly interfere with and contradict the federal laws governing how QAI was to do its job, so conflict preemption required dismissal of the suits against QAI. Id. at 24-25 ("it would be impossible, on the one hand, for QAI to comply with the OFPA and its regulations, which detail the process for revoking certifications, and, on the other hand, to comply with any additional state law duty and process to revoke certifications").
The Eighth Circuit also held that the claims against Aurora and the retailers that amounted to imposing liability on them for selling product as certified organic that was not, in fact, organic (or did not comply with federal regulations) was preempted under conflict preemption principles:
Aurora maintained its certification at all times relevant to this appeal. Therefore, any attempt to hold Aurora or the retailers liable under state law based upon its products supposedly not being organic directly conflicts with the role of the certifying agent . . . To the extent the class plaintiffs, relying on state consumer protection or tort law, seek to set aside Aurora's certification, or seek damages from any party for Aurora's milk being labeled as organic in accordance with the certification, we hold that state tort law conflicts with federal law and should be preempted.
Id. at 27-28.
But the Eighth Circuit held that conflict preemption did not require the dismissal of state law claims against Aurora or the retailers based on the so-called "facts" underlying the organic certification. Id. at 30. Thus, the court held that the following would state a cause of action that would not be preempted:
"misrepresenting the manner in which its dairy cows were raised and fed," and "suppressing or omitting material facts regarding the production of its 'organic' milk or milk products, specifically that . . . the dairy cows were not raised at pasture."
Id. at 32. Accordingly, the court remanded the case to the district court to determine what claims survived against Aurora and the retailers.
To me, this is a distinction without a difference. If you can be held liable for not "disclosing" that your cows were raised in a barn -- rather than in a field, as the organic laws apparently require -- then it's the same exact thing as being liable for marketing a certified organic product that is out of compliance with the federal laws (which claim the court held would be preempted).
I continue to hope for a day when there is a synthesized preemption jurisprudence that courts (and laywers like me) can easily apply.
