Keeping Tabs on the Ninth Circuit
July 16, 2021 - This Week at the Ninth

This Week at the Ninth: Manuka Honey and Waterslides

Manuka Honey and Waterslides

This week, we take a look at a decision addressing what a “reasonable” consumer will know in purchasing a product (and distinguishing the Seventh Circuit in the process), and at another assessing the legality of Washington’s pandemic-related shutdown of a waterpark.

The Court holds that, given other information available to consumers, a potentially ambiguous label for “100% Manuka Honey” that is not 100% derived from Manuka nectar is not misleading as a matter of law.

The panel: Judges Wardlaw, Collins, and Eaton (Court of International Trade), with Judge Wardlaw writing the opinion.

Key highlight: “[R]easonable consumers would necessarily require more information before they could reasonably conclude Trader Joe’s label promised a honey that was 100% derived from a single, floral source. And, although Trader Joe’s ingredient label listed ‘Manuka Honey’ as the only ingredient, which Plaintiffs argue ‘reinforc[es] the deception created by the front label,’ information available to a consumer is not limited to the physical label and may involve contextual inferences regarding the product itself and its packaging.”

Background: Trader Joe’s sells honey marketed as “100% New Zealand Manuka Honey,” the sole listed ingredient of which is “Manuka Honey.” The Manuka is a New Zealand flower, and the honey that bees make from its nectar is reputed to have health benefits. Because bees often drink nectar from multiple different types of flowers, FDA guidelines allow honey to be labeled according to its “chief floral source.”

Plaintiffs claimed that Trader Joe’s labeling was misleading because only 60% of its Manuka Honey is derived from Manuka nectar. The district court granted Trader Joe’s motion to dismiss, concluding both that Trader Joe’s labels were not misleading as a matter of law, and that in any event plaintiffs’ claims were preempted.

Result: The Ninth Circuit affirmed on the ground that Trader Joe’s labels were not misleading to a reasonable consumer. The Court began by explaining that Trader Joe’s Manuka Honey met the FDA’s labeling guidelines, as its “chief floral source” was Manuka nectar. The Court then rejected plaintiffs’ argument that the labels—and particularly the use of “100%”—might nevertheless mislead a reasonable consumer. The Court noted that “100%” was somewhat ambiguous, as it could suggest either that the honey was 100% derived from the Manuka flower, that it was 100% Manuka honey, or that it was 100% from New Zealand. But, the Court concluded, “other available information about Trader Joe’s Manuka Honey would quickly dissuade a reasonable consumer from the belief that Trader Joe’s Manuka Honey was derived from 100% Manuka flower nectar.”

In reaching that that conclusion, the Ninth Circuit distinguished the Seventh Circuit’s recent decision in Bell v. Publix Super Markets Inc., 982 F.3d 468 (7th Cir. 2020), which had reached the opposite conclusion about a product labeled “100% Parmesan Cheese.” The Ninth Circuit explained that the concern in Bell was that some manufacturers “claim (in an arguably ambiguous fashion) that the product is 100% cheese, despite their knowledge of the fact that they had added non-cheese ingredients to produce the product,” then “try to retain some ‘level of deniability’ by clarifying the front-label claim with back-label disclosures.” Here, by contrast, “[b]ees make the Manuka honey, without input from Trader Joe’s or any other manufacturer,” and “Trader Joe’s does not insert any additional ingredients to produce the product or mix Manuka honey with other, non-Manuka honeys to dilute it.” The Court also noted that, unlike the cheese in Bell, Manuka Honey has an “effete reputation,” and thus consumers specifically searching it out would likely know more about the product. Moreover, the Court continued, given (1) the impossibility of having honey derived completely from one floral source, (2) Trader Joe’s low price for its honey ($14, as opposed to $266 for 92% Manuka-derived honey), and (3) the label’s mention of “10+” (a grade indicating the purity of the Manuka Honey), a reasonable consumer would not be misled. For much the same reasons, the Court concluded that listing “Manuka Honey” as the product’s sole ingredient was not misleading, either.

The Court holds that Washington State acted within its authority and did not violate the U.S. Constitution by restricting a waterpark from operating during the COVID-19 pandemic.

Panel: Judges Gould, Clifton, and Miller, with Judge Clifton writing the opinion.

Key Highlight: “In large part, Slidewaters’ objection to its treatment . . . amounts simply to a disagreement with the judgment of Defendants. Slidewaters is confident, as it states in its opening brief, that it ‘could and can operate safely.’ But government regulation does not constitute a violation of constitutional substantive due process rights simply because the businesses or persons to whom the regulation is applied do not agree with the regulation or its application.”

Background: Slidewaters LLC operates a waterpark in Chelan County, Washington. The state’s COVID rules prohibited Slidewaters from operating until its part of the state reached certain public health goals. Slidewaters was unable to operate legally in the summer of 2020, and has been restricted to 50% capacity for summer 2021. It brought state and federal claims against the state, seeking an injunction against the COVID restrictions. The state removed to federal court and counterclaimed for declaratory relief stating that Slidewaters violated the COVID rules, and an injunction prohibiting further violations. The district court denied all injunctive relief, dismissed Slidewaters’ complaint with prejudice, and remanded Washington’s counterclaim to state court.

Result: The Ninth Circuit affirmed. First, the Court addressed the waterpark’s state-law arguments. It rejected the contention that the COVID-19 pandemic is not “a public disorder, disaster, energy emergency, or riot,” over which the governor had authority to declare a state of emergency. Noting that the Washington Supreme Court has not addressed this issue, the Ninth Circuit read the plain meaning of the words “disorder” and “disaster” to both encompass the pandemic. Next, the Court held that Washington’s Labor and Industries Department acted within its authority to make rules “governing safety and health standards for conditions of employment” when it promulgated its COVID restrictions. And the Court did not see any separation of powers problem. The defendants, various executive branch actors, neither usurped the state legislature’s power to pass laws, nor the judicial branch’s power to adjudicate, by making emergency COVID rules and enforcing them. Such administrative rulemaking and adjudication is nothing new. The Court also rejected the argument that any public health enforcement must be conducted at the county level, noting that “[w]hen there is a direct conflict between state and county health regulations, the state prevails.”

Moving on to Slidewaters’ federal constitutional claims, the Court rejected the argument that the COVID restrictions infringed Slidewaters’ substantive due process rights to operate a business. Noting that “[t]he right to pursue a common calling” and “the right to use property as one wishes” are not fundamental rights, but economic ones, the Court applied deferential rational basis review. Washington’s COVID restrictions were rationally related to the state’s interest in preventing the spread of a deadly disease, and the state was “not required to draw a perfect line in determining which individual businesses can safely open and which cannot.” The Supreme Court’s decision in Roman Catholic Diocese was inapposite, the Ninth Circuit explained, because religious practice, unlike operating a waterpark, is a fundamental right.

Finally, the Court affirmed the district court’s consolidation of Slidewaters’ preliminary and permanent injunction motions, and its decision to rule on Slidewaters’ state-law claims. The district court gave clear and unambiguous notice of its intent to consolidate, as required by FRCP Rule 65(a)(2), Slidewaters did not object at the time, and it offered no reason on appeal to suggest it did not have a full opportunity to present its case in the district court. Likewise, Slidewaters never objected to the district court’s consideration of its state-law claims, and it never explained how the case could be remanded to state court after it was properly removed. Pullman abstention did not apply, nor was certification to the Washington Supreme Court appropriate, because “[t]his case does not present a close question of state law.” And there was nothing improper about remanding Washington’s state-law counterclaim, which was never briefed, while dismissing Sliderwaters’ claim.