Wednesday, September 15, 2010

In re Aurora Dairy Corp. Organic Milk Marketing and Sales Practices Litigation[1]

Opinion issued September 15, 2010
Link to Eighth Circuit Opinion

In a consolidated class action dispute regarding federal laws pertaining to certification of organically produced goods, the Eighth Circuit Court of Appeals held that (1) state laws that interfere with the federal certification process are subject to conflict preemption and (2) if preemption defeats the purpose of the Federal law, the state law claims are not preempted.

I. Facts and Holding

The Organic Foods Protection Act of 1990 (OFPA) is a federal statute that “establishes national standards for the sale and labeling of organically produced agricultural products, and creates a certification program through which agricultural producers become certified to produce organic products.”[2] The OFPA also has a process for accrediting “certifying agents” who conduct inspections and submit recommendations to the United States Department of Agriculture (USDA) pertaining to certification.[3] The OFPA provides the USDA with authority to promulgate regulations defining which agricultural products to label as organic.[4]

Aurora Dairy Corporation (Aurora) received certification from the certifying agent QAI, Inc. (QAI) to produce organic milk.[5] Aurora’s organic milk was sold to consumers at multiple retail stores owned by Costco, Safeway, Target, Wal-Mart, and Wild Oats Markets (the retailers) under the retailers’ store brands or Aurora’s “High Meadow” brand.[6]

Various plaintiffs filed class action lawsuits in federal court against Aurora, the retailers, and QAI on behalf of organic milk consumers “claiming violations of state law arising from Aurora’s alleged failure to comply with the OFPA and NOP,” and thus arguing that Aurora’s milk could not be properly labeled “organic.”[7] The federal courts consolidated the cases in the Eastern District of Missouri, and the district court granted the defendants’ motions to dismiss, “finding the OFPA preempted all of the class plaintiffs’ claims.”[8] An appeal to the Eighth Circuit followed.[9]

A. Preempted Claims

Because the certification process under the OFPA was part of a federal program aimed at establishing national standards for organic food and facilitating interstate commerce in organically produced food,[10] the court found that any claim that would “interfere with or second guess the certification process” was “an ‘obstacle to the accomplishment of congressional objectives’ of the OFPA.”[11]

Plaintiffs asserted that QAI should have revoked Aurora’s certifications because of the dairy’s alleged failure to comply with the OFPA and NOP.[12] Thus, any claim against QAI was preempted by the federal statute, because “it would be impossible . . . for QAI to comply with the OFPA and its regulations” regarding certification and still comply with any state laws concerning certification processes.[13]

Similarly, “claims that Aurora and the retailers sold milk as organic when in fact it was not organic are preempted because they conflict[ed] with the OFPA.”[14] The court found that the OFPA provided an enforcement mechanism and allowing state law enforcement of the federal regulations would diminish the consistency of the regulations.[15] This was especially significant considering the purpose of the OFPA, namely “to establish national standards governing the marketing of certain agricultural products as organically produced products.”[16]

B. Not Preempted Claims

The court found it “important to distinguish between state law challenges to the certification determination itself, which conflict with the OFPA, and state law challenges to the facts underlying the certification.”[17] Here, the court addressed the plaintiffs’ claims under state consumer protection, fraud, and tort law, which would not interfere with determinations of Aurora’s certification under the OFPA’s specific regulations.[18] The Eighth Circuit reversed the district court’s dismissal of the non-interfering state law claims since the resolution of these claims would not interfere with the OFPA and the purposes of the OFPA would not be furthered by preemption.[19] The court remanded the claims consisting of allegations of misrepresentation, deceptive trade practices, and deceptive advertising because such claims would “best be resolved in the first instance by the district court.”[20]

II. Legal Background

The authority for federal preemption is rooted in the Constitution’s proclamation that federal law “‘shall be the supreme Law of the Land.”[21] When federal preemption issues arise, the courts look to congressional purpose,[22] but presume that the “‘historic police powers of the States’” will retain primacy “‘unless [preemption] was the clear and manifest purpose of Congress.’”[23] Courts find preemptive intent by looking to “‘a statute’s express language or through its structure and purpose.’”[24] This provides for two types of federal preemption: express and implied.

“[W]hen Congress has made its intent known through explicit statutory language,” express preemption is easy to identify.[25] Implied preemption is not so simple and may exist as either field preemption or conflict preemption.[26] Field preemption is inferred where a scheme of federal regulation is “‘so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.’”[27] Conflict preemption occurs “‘where a party’s compliance with both federal and state law would be impossible or where state law would pose an obstacle to the accomplishment of congressional objectives.’”[28]

The district court and Eighth Circuit agreed that express preemption did not bar any of the class plaintiffs’ claims.[29] However, the courts disagreed as to whether the OFPA was sufficiently pervasive to infer that Congress intended to preempt the entire field.[30] The Eighth Circuit found no field preemption, in light of “the OFPA’s text and purpose, the narrowness of its express preemption provision, the presumption against preemption and the tradition of state regulation.”[31]

Finding no express or field preemption, the Eighth Circuit reviewed the district court determination that conflict preemption also barred the class plaintiffs’ claims.[32] Here, the court analyzed the congressional objective that the OFPA would “replace the patchwork of existing state regulations with a national standard defining organic food.”[33] All claims against QAI essentially challenged the certification process and were preempted because they would “stand in conflict with the OFPA.”[34] The claims attacking Aurora’s certification were similarly preempted,[35] but the “state law challenges to the facts underlying certification” were not.[36] This distinction is important, because it allows claims based on other conduct, such as misrepresentations in marketing, to remain.[37]

III. Comment

In re Aurora Dairy Corp. may come off as a non-controversial discussion of the correct application of federal preemption standards.[38] However, the Eight Circuit decision should be viewed as a significant win for the plaintiffs in this case and for consumers in general. If the Eighth Circuit had affirmed the district court decision, everyday consumers would have minimal, if any, recourse in court when producers employ deceptive advertising of “organic” produce.

This case is significant because, in the United States, the organic food and beverage industry has grown from $1 billion in 1990 to $24.8 billion in 2009.[39] Without an appropriate consumer-based check on the industry, the push to achieve market share might induce some companies to push the boundaries with their practices. However, the Eighth Circuit decision in In re Aurora Dairy Corp. made winners out of losers and left state consumer protection laws intact with respect to marketing of organically produced agricultural products.[40]

-Chris Dandurand

[1] 2010 U.S. App. LEXIS 19254 (8th Cir. Sept. 15, 2010).
[2] Id. at *13.
[3] Id.
[4] Id. The regulations are known as the National Organic Program (NOP). Id. (citing 7 C.F.R. pt. 205).
[5] 2010 U.S. App. LEXIS 19254 at *13.
[6] Id. at *13-14.
[7] Id. at *14. The National Organic Program (NOP) is a set of regulations promulgated by the USDA. This program defines which agricultural products qualify as organic. Id. at
[8] Id.
[9] Id.
[10] Id. Congress enacted the OFPA in order “‘(1) to establish national standards governing the marketing of certain agricultural products as organically produced products; (2) to assure consumers that organically produced products meet a consistent standard; and (3) to facilitate interstate commerce in fresh and processed food that is organically produced.’” Id. (quoting 7 U.S.C. § 6501).
[11] 2010 U.S. App. LEXIS 19254 at *35 (quoting Pet Quarters, Inc. v. Depository Trust & Cleaning Corp., 559 F.3d 772, 780 (8th Cir. 2009)).
[12] Id. at *36.
[13] Id.
[14] Id. at *38.
[15] Id. at *40.
[16] Id. at *40.
[17] Id. at *41-42.
[18] Id. at *45-46.
[19] Id. at *46-48.
[20] Id. at *47.
[21] Id. at *25 (quoting U.S. Const. art. VI, cl. 2).
[22] Id. (quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 485-86 (1996)).
[23] Id. at *26.
[24] Id. (quoting Altria Group, Inc. v. Good, 129 S. Ct. 538, 543 (2008)).
[25] English v. General Elec. Co., 496 U.S. 72, 79 (1990).
[26] Id.
[27] 2010 U.S. App. LEXIS 19254 at*29 (quoting Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 98 (1992)).
[28] Id. at *32 (quoting Pet Quarters, Inc. v. Depository Trust & Cleaning Corp., 559 F.3d 772, 780 (8th Cir. 2009).
[29] Id. at *28. The OFPA did expressly preempt state certification laws, but this was not at issue in the case. Id. at *27-28.
[30] Id. at *29-30, *32.
[31] Id. at *32.
[32] Id.
[33] Id. at *33.
[34] Id. at *38.
[35] Id.
[36] Id. at *42. Preemption of the state consumer protection claims does not serve the purposes of OFPA and might actually “diminish consumer confidence that organic products meet consistent standards as consumers become aware” that meritorious state law claims are preempted simply because a certifying agent has not suspended certification. Id. at *46.
[37] Id. at *48.
[38] 2010 U.S. App. LEXIS 19254 (8th Cir. Sept. 15, 2010).
[39] See Industry Statistics and Projected Growth, Organic Trade Association, available at (last visited October 28, 2010).
[40] 2010 U.S. App. LEXIS 19254 (8th Cir. Sept. 15, 2010).