Egg Carton Labeling Petitions Fail to Hatch

Egg cartons in the United States are not required by federal regulations to bear labels which identify the living conditions of the hens.  Two animal rights non-profit organizations and six individuals sought to change that by filing petitions with four different federal agencies under the apparent strategy of not putting all their eggs in one basket.   Each petition sought the promulgation of regulations that would require egg cartons to identify the hens’ living conditions during the production process.  After each agency denied these scattershot efforts, petitioners filed suit in the Northern District of California under the Administrative Procedure Act.  However, this seemingly favorable jurisdiction (often referred to as the “Food Court”) proved to be a tough egg to crack as the district court judge granted summary judgment in favor of each agency.

On February 27, 2017, the U.S. Court of Appeals for the Ninth Circuit affirmed, holding that each agency properly declined to promulgate the egg carton labeling regulations requested by petitioners.   First, the panel’s decision in Compassion for Animals v. FDA held that Food Safety Inspection Service, a USDA agency, properly denied the petition because it only had authority to regulate the labeling of “egg products,” not shell eggs under the Egg Products Inspection Act.  Similarly, the Agricultural Marketing Service, another USDA agency, did not have power to issue mandatory shell egg labeling regulations under the Agricultural Marketing Act of 1946.  Instead, it only had authority to develop and recommend the use of voluntary programs related to food labels.

Petitioners’ efforts fared no better before the Federal Trade Commission (“FTC”).  Although the FTC Act authorized the agency to promulgate rules design to prevent “unfair or deceptive” practices, that agency only may do so when it has reason to believe that such acts or practices are “prevalent.”  Under the FTC Act, an act or practice is “prevalent” only if the agency has previously issued cease-and-desist orders or if it has other information indicating that a “widespread pattern of unfair or deceptive acts or practices” exists.  FTC’s response to the petition noted that it had not issued any such cease-and-desist letters and that Petitioners did not submit sufficient evidence to demonstrate that unfair or deceptive egg-labeling practices were “widespread.”  FTC also advised that it had been successful in pursuing individual enforcement efforts regarding misleading shell egg labeling on an ad-hoc basis.  The Ninth Circuit concluded that FTC’s explanations were neither arbitrary nor capricious; rather, they constituted a proper exercise of agency discretion in determining how to utilize “limited resources and personnel to carry out its delegated responsibilities.”   It is important to note that the panel’s decision pointed out that FDA’s explanation barely met the low threshold for denying the petition before it.  The agency could also have better demonstrated that it fully appreciated the claim that information concerning hens’ living conditions is necessary to correct the allegedly misleading information conveyed on egg labels. 

In proper theatrical fashion, the Court of Appeals left the best for last.  With respect to the plaintiffs’ petition to the U.S. Food and Drug Administration (“FDA”), the panel took a hard (boiled) look at the claim that the labels of shell egg cartons affirmatively misrepresented the nature of hens’ living conditions and that FDA ignored scientific evidence that those conditions increased both the likelihood of Salmonella contamination and adversely affected the nutritional value of the eggs.  The Ninth Circuit declined to “second guess” the agency’s conclusion that the scientific evidence submitted by the Petitioners was “insufficiently reliable.”  It also found that FDA did not abuse its broad discretion in taking enforcement action against misbranded egg carton manufacturers on a case-by-case basis, rather than via rulemaking.

In sum, the court of appeals held that each agency “acted reasonably in denying Plaintiffs’ rulemaking petitions.”  Although the terms “Free-Range Eggs,” “Cage-Free Eggs,” and “Eggs from Caged Hens” remain unregulated under federal law, it is important to note that federal law does not preclude such egg cartons labeling.  Aside from disposing of these scrambled petitions, the Ninth Circuit also make clear that its use of “broad discretion” should not be construed as providing a “blanket exception to APA review in any matter involving the allocation of agency resources.”  Whether this dicta provides a vehicle for successfully challenging failed petitions against federal agencies in lawsuits brought in one of nine Western states remains to be seen.  But animal rights groups would be well-advised to craft their petitions carefully or they will surely end up with egg on the face yet again.

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