11th Circuit holds “skim milk” label protected by 1st Amendment

In a case with potentially significant ramifications for the labeling and advertising of foods and pharmaceuticals, the Eleventh Circuit held the First Amendment precluded the Florida Department of Agriculture’s Bureau of Dairy Industry (the “Florida Bureau”) from prohibiting a dairy company’s use of the phrase “skim milk” to describe its milk product. Ocheesee Creamery LLC v. Putnam, Case No. 16-12049, 2017 WL 1046104 (11th Cir. Mar. 20, 2017).

The Ocheesee Creamery is a Florida dairy that sells all-natural dairy products, including milk from which all cream has been skimmed. Removing the cream, however, also removes all of the Vitamin A (a fat-soluble vitamin). Under Florida law, milk cannot be sold as “milk” unless it is “Grade A,” and skim milk cannot be Grade A unless the Vitamin A lost during the skimming process is replaced as an additive. Ocheesee, however, refused to add vitamin A to its “all-natural” milk.

Florida law allowed Ocheesee to sell its skimmed milk without added vitamin A, but only if it labeled the product as an “imitation milk product.” Ocheesee proposed using one of several alternative labels, all of which used the term “skim milk.” The Florida Bureau rejected these suggestions, but offered a final labeling compromise:

“The State requires us to call this: ‘Non Grade ‘A’ Milk Product, Natural Milk Vitamins Removed.’ All natural milk product with vitamins removed by separating cream from milk.”

Though almost identical to one of Ocheesee’s suggestions, the use of “milk product” rather than “skim milk” was a deal-breaker for Ocheesee. Ocheesee rejected the proposed compromise and a lawsuit followed.

The Florida Bureau initially prevailed in the District Court, with Judge Robert L. Hinkle granting the state’s motion for summary judgment. Case No. 4:14-cv-621, 2016 WL 3570480 (N.D. Fla. Mar. 30, 2016). Noting that the Florida law closely parallels federal regulations, the District Court explained that both federal and state law require that skim milk “must include the same nutritional value, that is, substantially the same amount of vitamin A, as unfortified whole milk.”

Applying Central Hudson Gas & Elec. Corp. v. Publ. Serv. Comm’n of N.Y., 447 U.S. 557 (1980), the District Court held that these “federal and state statutes adopting standards of identity and nutrition standards for foods easily pass muster,” and that: “A state can recognize—and indeed deliberately create—a standard meaning of a term used to describe a food product, including, in this instance, skim milk.” The District Court therefore rejected the argument that “Ocheesee has a right to label its vitamin-deficient nonfat milk as ‘skim milk,’ even though the product does not meet the standard of identity for skim milk established long ago at both the federal and state levels.” Indeed, the District Court construed this argument as “a frontal assault on the Federal Food, Drug, and Cosmetic Act and its state counterparts, whose validity was established long ago.”

Going further with the Central Hudson analysis, the District Court held that Florida had a substantial “interest in establishing a standard of identity and nutritional standards for milk,” and that the “challenged restriction directly advances that interest,” concluding: “indeed, the match is nearly perfect.”

The Eleventh Circuit rejected the District Court’s analysis and the State’s arguments, holding that the state was in fact attempting to regulate Ocheesee’s truthful (or at least, not inherently misleading) description of its product as “skim milk,” despite the availability of less restrictive measures, all in contravention of the First Amendment.

The Court of Appeals focused on the “threshold question” of the Central Hudson analysis: “‘whether the expression is protected by the First Amendment’ at all,” or if “(1) the speech concerns unlawful activity or (2) the speech is false or inherently misleading.” If the speech does not fall within these exceptions, “then the government may only regulate the speech if its restriction satisfies intermediate scrutiny . . . .” This requires the showing of a substantial governmental interest, that the regulation directly advances the interest asserted, and that the regulation is not more extensive than is necessary to serve that interest. The burden, the Court held, lies with the government on all of these issues.

Answering the threshold question largely resolved the case. Because the state was willing to allow Ocheesee to sell the milk product in question, the Court reasoned, the “activity” at issue was not illegal, and thus: “The State’s action is a speech regulation because the only difference between the two courses of conduct,” that is, selling the product as “skim milk” or an “imitation milk product,” “is the speech.” In other words, “the State cannot escape full Central Hudson scrutiny by characterizing its restriction as a regulation of speech relating to unlawful conduct because the Creamery’s conduct is not unlawful, only its speech is.”

The Court similarly rejected the contention that the speech at issue was inherently misleading, and rather held that it was merely “potentially misleading.” The description of the product as “skim milk” was not literally false, and the fact that it was noncompliant with a legal definition was not dispositive:

It is undoubtedly true that a state can propose a definition for a given term. However, it does not follow that once a state has done so, any use of the term inconsistent with the state’s preferred definition is inherently misleading. Such a per se rule would eviscerate Central Hudson, rendering all but the threshold question superfluous. All a state would need to do in order to regulate speech would be to redefine the pertinent language in accordance with its regulatory goals. Then, all usage in conflict with the regulatory agenda would be inherently misleading and fail Central Hudson’s threshold test. Such reasoning is self-evidently circular, and this Court has already had occasion to refute it.

The Court conceded “that a state’s definition of a term might [] become, over time and through popular adoption, the standard meaning of a word, such that usage inconsistent with the statutory definition could indeed be inherently misleading.” However, in the case before it, the state failed to “present evidence to that effect . . . .”

The Eleventh Circuit went on to assume that the Florida Bureau enjoyed a substantial interest, and did not address whether the restriction advanced that interest. This is because the “least restrictive measure” requirement clearly was not met: “the State was unable to show that forbidding the Creamery from using the term ‘skim milk’ was reasonable, and not more extensive than necessary to serve its interest.”

Notably absent from the Eleventh Circuit’s analysis was any discussion of the role and weight of federal authority, from which the Florida Bureau had drawn its own standards of identity and on which the District Court had heavily relied. Indeed, in a footnote, the Court of Appeals emphasized that: “This case concerns only its intrastate sales and no challenge is made to any federal action or regulation.” However, there is no suggestion in the Court’s analysis that the result would have been any different if the challenge had been to the identical federal regulation. And if this is so, then federal misbranding regulations—which allow the sale of a product in the abstract, but regulate (and even criminalize) the speech used in selling it—become immediately suspect under Central Hudson.

The Ocheesee ruling issued about a week before the Supreme Court’s commercial speech decision in Expressions Hair Design v. Schneiderman, 581 U.S.___, Case No. 15-1391, 2017 WL 1155913 (Mar. 29, 2017). There, the Supreme Court vacated and remanded a Second Circuit opinion rejecting a challenge to a New York state statute which barred merchants from charging a sur-charge for credit card purchases, but which allowed them to offer a discount for cash. Chief Justice Roberts, writing for five justices, concluded that the statute at issue regulated speech, rather than the conduct of pricing, and thus warranted a full Central Hudson analysis:

The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer. Sellers are free to charge $10 for cash and $9.70, $10, $10.30, or any other amount for credit. What the law does regulate is how sellers may communicate their prices. A merchant who wants to charge $10 for cash and $10.30 for credit may not convey that price any way he pleases.

Id. at *6. The Court remanded the matter to the Second Circuit to conduct the First Amendment analysis in the first instance. Writing separately, Justice Breyer reasoned that “[h]uman relations take place through speech,” and thus “virtually all government regulation affects speech.” Id. at *7 (Breyer, J., concurring in the judgment). Accordingly, “[w]hen the government seeks to regulate those activities, it is often wiser not to try to distinguish between ‘speech’ and ‘conduct.’” Id. Therefore, he concluded, courts should “simply ask whether, or how, a challenged statute, rule, or regulation affects an interest that the First Amendment protects.” Id. In the case at hand, however, he agreed with Justices Sotomayor’s and Alito’s separate concurrence that the actual meaning and effect of the statute at issue was ambiguous, and that the matter should have been remanded with instructions to certify the case to the New York Court of Appeals. Id.; see also id. at *8 (Sotomayor, J., joined by Alito, J., concurring in the judgment).

Chief Justice Robert’s reliance on a “speech vs. conduct” commercial speech analysis dovetails with the Ocheesee court’s interpretation of the Central Hudson test. Moreover, there is a trend of increased scrutiny over FDA regulation of commercial speech in off-label marketing cases such as Amarin Pharma, Case No. 1:15-cv-3588 (S.D.N.Y. 2015), and Pacira Pharmaceuticals, Case No. 1:15-cv-7055 (S.D.N.Y. 2015). With a Circuit Court ruling in this same vein, the time may have come for companies marketing food and pharmaceuticals to more aggressive defend their First Amendment rights.