Hunton Retail Law Resource

Recently, in a case that should remind retailers and their suppliers to consider their First Amendment rights as they relate to the regulation of product labeling, the Eleventh Circuit Court of Appeals held in Ocheesee Creamery LLC v. Putnam, 851 F.3d 1228, that the actions of the Florida Commissioner of Agriculture and the Chief of the Florida Bureau of Dairy Industry (the “State”) violated the dairy company’s First Amendment rights relating to use of the term “skim milk.”

The challenge before the Court involved the interpretation as-applied to Ocheesee Creamery LLC (“Creamery”) of Fla. Stat. §§ 502.091, 502.165 and 502.181. Specifically, Florida law restricts the sale of milk and milk products that are not classified as Grade “A.” In order to receive this designation, vitamin A that is lost and/or removed through the skimming process must be replaced. In the instant case, Creamery created an all-natural, additive free skim milk that only contained skimmed milk, and labeled its product as “skim milk.” However, the State notified Creamery that its skim milk did not fall within the definition of milk, and advised Creamery that it could continue to sell its all-natural skim milk as long as it was labeled as “imitation milk product.” Creamery did not agree to label its product as “imitation” because skimmed milk was the only ingredient in the product, and it refused to add vitamin A back into the product.

Because the Eleventh Circuit was reviewing a restriction on commercial speech, it relied on the three-prong test set forth in Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557, 100 S. Ct. 2343 (1980). Central Hudson requires the Court to initially determine “whether the expression is protected by the First Amendment” since not all commercial speech is protected. Commercial speech is not protected if “the speech concerns unlawful activity” or if “the speech is false or inherently misleading.” The Eleventh Circuit found that Creamery’s conduct was not unlawful because the State was willing to permit the sale of the “skim milk” as long as it was labeled as “imitation.” Additionally, the Eleventh Circuit found that the term “skim milk” as used by Creamery was not inherently misleading or merely potentially misleading because it was a statement of objective fact. Thus, the speech is protected by the First Amendment. Accordingly, the restriction was subject to intermediate scrutiny, and must satisfy Central Hudson’s three-prong test:

• whether the asserted governmental interest is substantial;
• whether the regulation directly advances the governmental interest asserted; and
• whether it is not more extensive than is necessary to serve that interest.

The State and Creamery agreed that there is substantial government interest to regulate milk and milk products. The Eleventh Circuit did not address the second prong because it found that the restriction was more extensive than necessary to achieve its goal, and the State failed to provide evidence to the contrary. In light of the extensive negotiations between the State and Creamery to compromise on language to place on the milk label, the Eleventh Circuit found that the “State’s mandate was clearly more extensive than necessary to serve its interest in preventing deception and ensuring adequate nutritional standards.” Consequently, the restraint violated the First Amendment.

The outcome of this case is significant for retailers because it provides more guidance in protecting commercial speech and challenging regulations as they apply specifically to producers and retailers. It is important for retailers to have knowledgeable attorneys and legal advisors assisting them in defending against private and governmental claims associated with their advertising practices and policies.