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Pom Wonderful LLC v. the Federal Trade Commission

September 30, 2012


The opinion of the court was delivered by: Richard W. Roberts United States District Judge


Plaintiff POM Wonderful LLC ("POM"), the largest processor and distributor of pomegranate products in the United States, brings an action against the Federal Trade Commission ("FTC") under the Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a declaratory judgment that the FTC's allegedly new rule governing disease claims in food advertising exceeds the FTC's statutory authority, violates POM's rights under the First and Fifth Amendments of the U.S. Constitution, violates the rulemaking procedures of the FTC and the Administrative Procedure Act ("APA"), and is arbitrary and capricious. The FTC has moved under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) to dismiss the complaint, arguing that the case is moot, POM lacks standing to bring a declaratory judgment action, POM is attempting to preclude an enforcement action, and POM fails to state a claim upon which relief can be granted. The FTC further argues that the court should decline to exercise jurisdiction to hear this declaratory judgment action. Because circumstances weigh in favor of the court declining to exercise its discretionary jurisdiction under the Declaratory Judgment Act, the case will be dismissed.


In July 2010, the FTC entered written agreements with two companies whose advertisements overstated their products' effect on disease prevention, mitigation, and treatment. See Stipulated Final J. and Order for Permanent Inj. and Other Equitable Relief, FTC v. Iovate Health Scis. USA, Inc., et al. ("Iovate"), No. 10-cv-587 (W.D.N.Y. July 29, 2010); Agreement Containing Consent Order, In the Matter of Nestle HealthCare Nutrition, Inc. ("Nestle"), No. 092-3087 (F.T.C. July 14, 2010). Both agreements required the companies to root their future health claims in "competent and reliable scientific evidence . . . consist[ing] of at least two adequate and well-controlled human clinical studies of the [product.]" See Iovate at 7; Nestle at 4. (See also Compl. ¶¶ 6, 28.) The Nestle agreement also provided that all disease-based representations be pre-approved by the Food and Drug Administration ("FDA"). Nestle at 3. (See also Compl. ¶ 27.)

According to POM, these new standards departed from "over twenty . . . years of FTC food advertising rules and regulations[.]" (Compl. ¶¶ 5, 25; see also id. ¶ 28.) POM alleged that the FTC had never before "requir[ed] prior FDA approval" irrespective of whether the claims "are true or supported by competent, reliable scientific evidence[.]" (Id. ¶ 25(2).) Neither had the FTC earlier implemented a heightened standard for scientific studies. (Id. ¶ 25(1).) Rather than codifying the new requirements in formal regulations, the FTC allegedly expressed its intention to "universally apply[]" them against the food and dietary supplement industry as an enforcement mechanism for deceptive advertising. (Compl. ¶¶ 5, 23-24.) POM alleges that the requirements do not merely "interpret[] . . . present standards or rules." (Id. ¶ 25(1).) Instead, they "constitute a final agency action within the meaning of" the APA. (Id. ¶¶ 35, 42, 48, 54.)

POM alleges that by adopting these new rules, the FTC violated statutory and constitutional law. Thus, POM seeks declaratory judgment that the FTC exceeded its statutory authority under Sections 5*fn1 and 12*fn2 of the FTC Act by encroaching upon the FDA's authority, see 15 U.S.C. §§ 45, 52, violated the First and Fifth Amendments of the United States Constitution by chilling free speech without due process, violated the FTC's rulemaking procedures under Section 18 of the FTC Act,*fn3 15 U.S.C. § 57a, violated Section 553 of the APA, and adopted a rule that is arbitrary capricious.*fn4 (Compl. ¶¶ 8, 12, 29, 51-53.)

On September 27, 2010, approximately two weeks after POM filed the instant case, the FTC filed against POM an administrative complaint alleging that "POM's practices in promoting pomegranate juice and pills constitute unfair or deceptive acts or practices and false advertising in violation of sections 5(a) and 12 of the FTC Act[.]" (Def.'s Mem. in Supp. of Mot. to Dismiss by FTC ("Def.'s Mem.") to Dismiss at 5.)*fn5 In the enforcement action, the FTC is seeking an order that would forbid POM from making certain claims about the health benefits of its products unless "the representation is non-misleading" and the FDA has approved the claims. (Compl. at 21--22, In the Matter of POM Wonderful, et al., No. 9344 (F.T.C. Sept. 27, 2010).) The proposed order would also limit the representations that POM can make about its products and establish substantial future oversight by the FTC. (Id. at 22--25.)

In POM's answer to the FTC's complaint, it asserted a number of affirmative defenses. POM argued that "[t]he FTC lacks authority to impose all or part of the relief sought under the FTC Act, the Administrative Procedure Act, and the First and Fifth Amendments of the U.S. Constitution." (Answer at 7, In the Matter of POM Wonderful, et al., No. 9344 (F.T.C. Oct. 18, 2010).) It also alleged that the FTC has taken a new position in the enforcement action against it "without adequate notice to the public." (Id.)

The FTC moves to dismiss this action, in part, because this court should exercise its discretion to decline to entertain POM's declaratory judgment action. (Def.'s Mem. at 10.) Relying on Swish Marketing, Inc. v. FTC, 669 F. Supp. 2d 72 (D.D.C. 2009), the FTC argues that declaratory relief is not proper because a declaratory judgment would not fully resolve the controversy between the parties, POM's claims raised in this complaint can be raised in the pending administrative action, and POM's complaint anticipates defenses. (Id.) POM counters that Swish should be distinguished because the plaintiff in Swish was atypical in that it had "already agreed to stop its allegedly unlawful conduct. Thus, the plaintiff's liability to the defendant as to future damages if any . . . [had] now been frozen, so a prompt and speedy adjudication of [the plaintiff's] rights in order to protect it from acting at its peril or avoiding damages in the future [was] unnecessary," Swish Mktg., 669 F. Supp. 2d at 77 (internal citations and quotation marks omitted). (Pl.'s Mem. of P. & A. in Opp'n to Def. FTC's Mot. to Dismiss at *9.) POM also asserts that its complaint does not attempt to adjudicate anticipatory defenses; instead, it "seeks only to adjudicate whether the FTC is improperly applying a 'new standard.'" (Id.)


The Declaratory Judgment Act allows district courts to "declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201. However, "[i]n the declaratory judgment context, the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration." Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995); see also Hanes Corp. v. Millard, 531 F.2d 585, 591 (D.C. Cir. 1976), superseded by statute on other grounds, 35 U.S.C. 294, as recognized in Nat'l R.R. Passenger Corp. v. Consol. Rail Corp., 892 F.2d 1066, 1072 (D.C. Cir. 1990).

"There are no dispositive factors" a district court should consider in determining whether it should entertain an action brought under the Declaratory Judgment Act. See Comm. on Judiciary v. Miers, 558 F. Supp. 2d 53, 95 (D.D.C. 2008). However, the D.C. Circuit has found to be useful considerations: whether [declaratory relief] would finally settle the controversy between the parties; whether other remedies are available or other proceedings pending; the convenience of the parties; the equity of the conduct of the declaratory judgment plaintiff; prevention of 'procedural fencing'; the state of the record; the degree of adverseness between the parties; and the public importance of the question to be decided.

Hanes, 531 F.2d at 592 n.4; see also Swish Mktg, 669 F. Supp. 2d at 76--77 (D.D.C. 2009).

The balance of the relevant factors counsels against exercising jurisdiction over this action. Generally, in the interest of judicial efficiency, courts decline to hear declaratory judgment actions that would not fully resolve the parties' claims. See Roth v. D.C. Courts, 160 F. Supp. 2d 104, 110 (D.D.C. 2001). Here, if the court resolved the issues POM raised in its declaratory judgment action, the parties would still have to litigate ...

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