Passing on Preemption: Ninth Circuit Holds That California’s Sherman Law Is Not Impliedly Preempted

While it rarely rules on questions of preemption, the Ninth Circuit took an even rarer step on July 1, 2024 when it took up the question of whether private parties can seek to enforce the provisions of California's Sherman Law that parallel federal law.

Plaintiffs brought suit against Sprout Foods, Inc. ("Sprout"), a manufacturer of baby food, arguing that the labels on the baby food were deceptive and unlawful because they made statements regarding the nutritional content of the baby food, like "3g of Protein" and "5g of Fiber." Plaintiffs alleged that Sprout's baby food products were mislabeled under the "unlawful" prong of California's Unfair Competition Law (UCL) because they were mislabeled under California's Sherman Law. Plaintiffs asserted that FDA regulations prohibit certain nutrient content claims on foods intended for children under the age of two and argued that Sprout's products therefore violated those regulations and the identical provisions of California's Sherman Law. Sprout argued that Plaintiffs' UCL "unlawful" prong claim was impliedly preempted because a violation of the Sherman Law requires a finding that the FDCA has been violated, and the FDCA, in turn, can be enforced only by the United States. The lower court agreed with Sprout on the issue of preemption, holding that because a violation of the Sherman Law requires a finding that the FDCA has been violated, and the FDCA can be enforced only by the United States, Plaintiffs' claims were preempted insofar as they originated from, were governed by, and terminated according to federal law.

Prior to the Ninth Circuit's decision, litigants frequently battled over whether lawsuits alleging a violation of the FDCA, but brought under state consumer protection laws, were impliedly preempted. Federal law preempts state law when Congress has expressly stated or impliedly intended its purpose to do so. Under the Supreme Court's holding in Buckman Co. v. Plaintiffs' Legal Committee, a state law can be preempted in two instances: (1) a plaintiff may not impose food label requirements under state law that are different from those imposed under the FDCA and its regulations, and (2) a plaintiff cannot privately enforce the FDCA.[1] Accordingly, private claims that "exist solely by virtue of the FDCA," or where the claim would not exist but for the alleged violation of the FDCA, are impliedly preempted.[2] In recent years, Plaintiffs in consumer class actions targeting food labeling have argued that even though their claims are based on an underlying violation of the FDCA, their claims are not impliedly preempted.

Ninth Circuit Clarifies Preemption

In reversing the district court's holding that enforcement of state standards is impliedly preempted by federal law, the Ninth Circuit, in an opinion written by Judge Schroeder, reasoned that federal law contemplated the ability of states, like California, to enact their own parallel laws permitting private rights of action. The Ninth Circuit held that the critical distinction between Davidson and Buckman was that, in Buckman, Plaintiffs attempted to use state causes of action to obtain damages for violations owed under the FDCA, but in Davidson, Plaintiffs claimed violations of California's Sherman Law (which runs parallel to the federal FDCA and whose standards are identical to the federal FDCA).[3] In other words, because Plaintiffs' UCL "unlawful" prong claim was premised on a violation of California's Sherman Law, which was identical to the FDCA, Plaintiffs' claims were not preempted. The Ninth Circuit reasoned that Congress did not intend for state standards, like those under California's Sherman Law, to be impliedly preempted and thus permitted states to adopt them: "there is no reason we can perceive why Congress would permit states to enact particular legislation and then deny enforcement by their citizens. . . . Federal law does not support such a strange result."[4]

Furthermore, the Ninth Circuit reasoned that even if it had doubts regarding the interaction between FDA regulations and California's Sherman Law as applied through the UCL, it would still reverse the lower court's holding because of the Ninth Circuit's longstanding presumption against preemption. The Ninth Circuit reiterated that even if Sprout's interpretation of preemption were equally plausible to that of Plaintiffs, the Court would be bound to ultimately hold that the FDCA does not impliedly preempt private enforcement of the Sherman Law and allow the case to proceed.

Judge Collins Dissents

Judge Collins dissented from the Ninth Circuit's preemption holding, writing that a private claim based on state law that simply copies the FDCA's requirements and has no independent substantive content is impliedly preempted. Judge Collins distinguished between cases where plaintiffs sought to impose state-law standards with independent content, and state law standards that merely "parasitically cop[y]" the federal standard.[5] State law standards with independent content were not impliedly preempted, but standards that merely copied the federal standard (as does the Sherman Law) were impliedly preempted.[6]

Moreover, Judge Collins reasoned that the Sherman Law may have been intended to provide a right of action for state authorities to bring claims premised on federal regulations, not necessarily to grant private citizens a right of action. The FDCA prohibits private enforcement of federal law, instead giving that authority to the federal government.[7] By "permitting" states to enact statutes that mirror the FDCA, it would not be "strange" for the federal government to also limit the enforcement of state laws to state actors.[8] Judge Collins further noted that enforcement by state authorities would allow for additional remedies provided by state courts that are not afforded by the FDCA, such as monetary damages.

Takeaways

The Ninth Circuit's holding in Davidson clarifies the outer bounds of implied preemption in cases in which plaintiffs seek to leverage highly technical federal regulations in litigation through California's Sherman Law and the "unlawful" prong of the UCL. Notably, Davidson is the first case to reach the Ninth Circuit on implied preemption, California's Sherman Law, and food labels. Accordingly, the legal landscape is likely to continue to evolve as courts grapple with Davidson's application. Morrison Foerster will continue to monitor the impact of this ruling and is available to provide legal guidance to clients on the ramifications of this decision.

[1] Buckman Co. v. Plaintiffs' Legal Comm., 531 U.S. 341, 353 (2001); 21 U.S.C. §§ 343-1, 337(a).

[2] Id.

[3] Id.; Davidson v. Sprout Foods, Inc., 2024 WL 3213277, at *6 (9th Cir. June 28, 2024).

[4] Davidson v. Sprout Foods, Inc., 2024 WL 3213277, at *6.

[5] Id. at *12.

[6] Id.

[7] Id. at *17.

[8] Id.

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