Happy St. Patrick’s Day. We will not be talking about corned beef (which we revere) and cabbage (which we revile) today. Something different is on the menu.
A couple of weeks ago we were delighted to report on a Ninth Circuit affirmance of a decision by one of our former AUSA colleagues. This week we are equally delighted to report on a California Court of Appeal affirmance of a decision by another one of those colleagues.
This time the Judge being affirmed is John Shepard Wiley, Jr. We already knew Wiley was brilliant, but his online biography contains many high points we did not know about until just now. For example, Wiley has been published in several of the top law reviews (topmost, of course, being our alma mater’s, U.Chicago L. Rev., though having articles in the Harvard and Yale journals is also fairly impressive), was an award-winning law professor at UCLA, and then, speaking of topmost, he has climbed The Nose on El Capitan and the Northwest Face of Half Dome. No wonder we always looked up to the guy.
Wiley is now a Justice on the Court of Appeal. He was on the Superior Court when he granted summary judgment in a case involving a claim of mislabeled poultry. It was chicken, to be precise. Gallus gallus domesticus. The Court of Appeals affirmed Wiley’s ruling in Leining v. Foster Poultry Farms, Inc., 2021 687941 (Cal. Ct. App. Feb. 23, 2021). The case does not involve drugs or medical devices, but it does involve preemption, which is something we love almost as much as Buffalo wings, chicken parmigiana, and, so help us, McNuggets.
The poultry company paid a license fee to the American Humane Association (AHA) so that it could label some of its chicken as “American Humane Certified.” Packages of yardbird with that certification cost more than packages without it.
The plaintiff alleged that she purchased chicken relying on that label to mean that the chickens had been “afforded a comfortable existence and a quick and painless death.” But, according to the plaintiff, the truth was that the chickens were treated no differently from any others and she had paid a premium for nothing. The logo was misleading because “the chicken was not treated in a manner that an objectively reasonable consumer would consider humane.” She sued the poultry manufacturer for unfair competition, negligent misrepresentation, and breach of warranties. She sued the Humane Association for negligent misrepresentation.
Both defendants moved for summary judgment. The poultry manufacturer’s argument is of more interest to us because it argued that its label, including the Humane Association certification, had been approved by the federal government. Poultry products sold in the U.S. are governed by the Poultry and Poultry Products Inspection Act (PPIA). Labels on poultry products must be pre-approved by the Food Safety and Inspection Service (FSIS). The FSIS had approved the labels at issue, including the American Humane Association Certified logo.
The PPIA contains an express preemption clause. It provides that “Marking, labeling, packaging, or ingredient requirements … in addition to, or different than, those made in this [chapter] may not be imposed by any State or Territory or the District of Columbia” etc.
Does that sound familiar to you stout-hearted lawyers who labor in the fields of drug and device litigation? It should.
At the same time, the PPIA provides that a state, territory, or D.C. may, “consistent with the requirements under this [chapter] exercise concurrent jurisdiction … for the purpose of preventing the distribution for human food purposes of any such articles which are adulterated or misbranded.”
The poultry company argued that the first part of the clause meant that the plaintiff’s lawsuit was preempted, while the plaintiff argued that her lawsuit was part of the concurrent jurisdiction referenced in the second part of the clause.
The Leining court held that the poultry company had the better argument. By preapproving the label, the FSIS had determined that the label, including the Humane certification, was not misleading. In fact, when the FSIS updated its labeling guidelines, animal welfare advocates had challenged the standards used by FSIS in approving labels claiming humane treatment of animals used for food. It turns out that lots of different people have lots of different views as to what constitutes humane treatment. No single standard could reflect the diverse views associated with those types of claims. The FSIS concluded that if a claim is certified by a third-party certifying organization, FSIS will approve the label if it includes the certifying organization’s name,website, and logo address. Consumers could contact the certifying agency to see if its standards met their expectations for humane animal-raising practices. Meanwhile, the FSIS had come up with a means of assuring national uniformity of labeling, and the express preemption provision in the PPIA was intended to protect such uniformity.
What about concurrent jurisdiction? The Leining court held that “[w]hile additional labeling claims are preempted, concurrent jurisdiction permits States to impose additional remedies for violation of the PPIA.” (Emphasis in original). The plaintiff’s lawsuit sought to impose additional labeling requirements, not remedies, so it was preempted.
The claim against AHA did not hinge on preemption. Instead, the court dismissed the negligent misrepresentation claim against AHA because the plaintiff claimed no physical injury. True, there are narrow circumstances under California law where one can sue for economic loss sustained by relying on someone’s negligent misrepresentations, but those are confined to professional negligence in business advice made to a limited group of persons for whose benefit the professional advice was intended. Think of auditors whose certification of a company’s books induces someone to buy the company. The issue often comes up in cases against investment ratings agencies, with results varying depending on whether the investment vehicles were sold to the general public (no liability) or a limited set of qualified investors (possible liability).
The plaintiff in Leining argued that she was in a small segment of the public – those who care about animal welfare when buying food – and that the Humane certification targeted that group. But the representation was made to the general public and anyone could buy the chicken. Extending the narrow professional advice exception to a “standard grocery-buying transaction” would swallow the general rule and render the “limitation to physical injury meaningless.”
We admit that we have always been worried about this negligent misrepresentation exception. You might even say we were chicken. Anyway, it is gratifying to see a California court respect the limits to the exception. If the court had ruled the other way, you know we would have had to cry fowl. But because the defense position prevailed, permit us to crow: Winner winner, chicken dinner.