Opinion ID: 176237
Heading Depth: 3
Heading Rank: 3

Heading: First Amendment challenge to the disclosure requirement for production claims

Text: In addition to composition claims, the Ohio Rule regulates the use of production claims such as this milk is from cows not supplemented with rbST. When using these claims, processors must include a disclosure on the label stating that [t]he FDA has determined that no significant difference has been shown between milk derived from rbST-supplemented and non-rbST-supplemented cows. Ohio Admin. Code § 901:11-8-01(B)(2). This disclosure must be on the same label panel, in exactly the same font, style, case, and color and at least half the size (but no smaller than seven point font) as the production claim. Id. The district court granted the State partial summary judgment on this issue. First, the court held that the disclosure requirement is subject to a reasonableness standard rather than intermediate scrutiny under the Central Hudson test. The court then found that the claim this milk is from cows not supplemented with rbST implies that processors using rbST have an inferior or unsafe product, and that the State has an interest in preventing the dissemination of this potentially misleading information. Although the court rejected the Processors' argument that the cost of ensuring that their labels comply with the Rule makes the Rule unduly burdensome, it found that there was a factual dispute as to whether the Rule's formatting requirements were unduly burdensome to the extent that the Processors might not be able to include the required disclosure on small containers. The court therefore denied the State summary judgment on this latter issue.
As an initial matter, the Processors argue that the district court failed to employ the appropriate standard of review for evaluating disclosure requirements. The court relied on Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626, 105 S.Ct. 2265, 85 L.Ed.2d 652 (1985), where the Supreme Court articulated a more lenient standard than the Central Hudson test to use when disclosure requirements, as opposed to outright prohibitions on speech, are at issue. In Zauderer, the Supreme Court explained that, because disclosure requirements trench much more narrowly on an advertiser's interests than do flat prohibitions on speech, warnings or disclaimers might be appropriately required in order to dissipate the possibility of consumer confusion or deception. Id. at 651, 105 S.Ct. 2265 (alterations, citation, and ellipsis omitted). It therefore held that disclosure requirements do not violate an advertiser's First Amendment rights where the requirements are reasonably related to the State's interest in preventing deception of consumers. Id. Such requirements, however, cannot be unjustified or unduly burdensome. Id. The Supreme Court recently clarified the standard of review to apply to disclosure requirements in Milavetz, Gallop & Milavetz, P.A. v. United States, ___ U.S. ___, 130 S.Ct. 1324, 176 L.Ed.2d 79 (2010). That case involved challenges to recent revisions of the Bankruptcy Code, including provisions that require certain professionals providing debt-relief assistance to disclose in their advertisements that their help was related to bankruptcy relief and to identify themselves as debt-relief agencies. Id. at 1330. The Court observed that the relevant provisions targeted marketing claims that were inherently deceptive because they promised debt relief without any reference to the possibility of filing for bankruptcy, which has inherent costs. Id. at 1340. Given this, and the fact that the regulation required a disclosure rather than imposing a prohibition on speech, the Court upheld the constitutionality of the provisions under Zauderer. Id. Milavetz thus established that Zauderer applies where a disclosure requirement targets speech that is inherently misleading. We conclude that Zauderer also controls our analysis where, as here, the speech at issue is potentially misleading. Several reasons support this conclusion. First, in Milavetz, the Court did not explicitly limit its application of Zauderer to inherently misleading speech, instead stating that a relaxed standard of review applies to disclosure requirements regulating  misleading commercial speech. Id. at 1339 (emphasis in original). But see id. (Thomas, J., concurring) ([A] disclosure requirement passes constitutional muster only to the extent that it is aimed at advertisements that, by their nature, [are inherently likely to deceive or have in fact been deceptive].). In addition, as the Court recognized in Milavetz, the impetus behind the formation of the Zauderer standard was the fact that First Amendment protection for commercial speech is justified in large part by the information's value to consumers. Id. The speech rights of advertisers, in contrast, are of less value; specifically, their constitutionally protected interest in not providing the required factual information is `minimal.' Id. (citing Zauderer, 471 U.S. at 651, 105 S.Ct. 2265). This justification for the Zauderer standard thus fits regulations that require a disclosure, regardless of whether the speech being targeted is inherently or potentially misleading. Because the Ohio Rule regulates production claims by requiring them to be accompanied by a disclosure, Zauderer controls our review. Our sister circuits have similarly recognized this rationale for employing the Zauderer standard. The Court of Appeals for the Second Circuit, for example, has held that there are material differences between purely factual and uncontroversial disclosure requirements and outright prohibitions on speech. Nat'l Elec. Mfrs. Ass'n v. Sorrell, 272 F.3d 104, 113 (2d Cir.2001) (citing Zauderer ) (brackets and internal quotation marks omitted). Such differential treatment is due to the fact that the mandated disclosure of accurate, factual, commercial information does not offend the core First Amendment values of promoting efficient exchange of information or protecting individual liberty interests. Id. at 114; see also United States v. Wenger, 427 F.3d 840, 849 (10th Cir.2005) (observing that advertisers'constitutionally protected interest in not providing any particular factual information in [their] advertising is minimal (quoting Zauderer )). In arguing to the contrary, the Processors rely on two decisions from the Eleventh Circuit Court of Appeals in which that court applied the Central Hudson factors to disclosure requirements. One of these is Borgner v. Brooks, 284 F.3d 1204, 1210-13 (11th Cir.2002), which applied the Central Hudson test to a statute requiring dentists to include disclaimers when advertising a specialty practice not recognized by the Florida Board of Dentistry and/or membership in an organization affiliated with such a specialty. The other is Mason v. Florida Bar, 208 F.3d 952, 954-55 (11th Cir.2000), where the court analyzed a Florida Bar disclosure requirement for self laudatory statements under the Central Hudson framework. But in neither case did the Eleventh Circuit explain its decision to employ the Central Hudson test instead of Zauderer. Moreover, the Borgner decision acknowledged that [c]ourts have been more tolerant of regulations mandating disclosure requirements than they have been of regulations that impose a total ban on commercial speech. Borgner, 284 F.3d at 1214. We therefore find these two cases unpersuasive in determining the proper standard of review. In sum, we conclude that the Rule's disclosure requirement is reasonably related to the State's interest in preventing consumers from being deceived by production claims. Like composition claims, production claims such as this milk is from cows not supplemented with rbST are potentially misleading because they imply that conventional milk is inferior or unsafe in some way. But neither the FDA nor any study has conclusively shown that to be the case. Furthermore, unlike its regulation of composition claims, the Rule does not prohibit the use of production claims. It instead requires only the disclosure of accompanying information. We therefore conclude that the less-burdensome analytical framework from Zauderer should apply.
Under Zauderer, the Rule's disclosure requirement for production claims must be reasonably related to the State's interest in preventing deception of consumers and cannot be unjustified or unduly burdensome. Zauderer, 471 U.S. at 651, 105 S.Ct. 2265. The district court concluded that the Rule was in compliance with the Zauderer standard because the production claim that this milk is from cows not supplemented with rbST, despite its accuracy, nevertheless implies that those processors that do use rbST have an inferior or unsafe product or that it is compositionally different. Ohio's Rule, the court continued, strikes the right balance between preventing misleading information and providing enough information for consumers to make an informed choice. The Processors first contend that the State failed to show that their production claims are misleading. But the State's burden of providing such evidence is more relaxed where disclosure requirements are at issue (as opposed to a ban on commercial speech) and the possibility of deception is . . . self-evident. See Zauderer, 471 U.S. at 652, 105 S.Ct. 2265 (holding that, to justify the state's imposition of a disclosure requirement for attorney advertising, the state need not conduct a survey of the public before it may determine that the advertisement had a tendency to mislead (alterations, citation, and ellipsis omitted)). The Supreme Court rejected a similar argument made by those challenging the revised Bankruptcy Code in Milavetz, noting Zauderer's holding that a survey of the public was unnecessary. Milavetz, 130 S.Ct. at 1340. It instead determined that [e]vidence in the congressional record demonstrating a pattern of [misleading] advertisements . . . is adequate to establish that the likelihood of deception in this case is hardly a speculative one. Id. (citation and internal quotation marks omitted). Although the FDA's Interim Guidance and the consumer comments relied on by the State constitute weak evidence of deception, they at least demonstrate that the risk of deception in this case is not speculative. At a minimum, the Guidance supports the conclusion that production claims can be misleading and the comments show that there is general confusion among some Ohio consumers regarding what substances are (or are not) in the milk they purchase. The district court accordingly did not err in concluding that the Rule's disclosure requirement is reasonably related to thwarting that risk. Notwithstanding our conclusion that the Rule's disclosure requirement is reasonably related to the State's interest in preventing consumer deception, we find there to be no rational basis between this concern and the contiguous requirement of such a disclosure. The Rule stipulates that disclosures must be in the same label panel, in exactly the same font, style, case, and color and at least half the size (but no smaller than seven point font) as the production claim. Ohio Admin. Code § 901:11-8-01(B)(2). A disclosure also must be contiguous to the production claim. The font, style, case, and color requirements for the disclosure's text have a self-evident rational basis. As Director Boggs testified in his deposition, these provisions are in place to prevent marketers from rendering the disclosure unreadable by using a miniscule font or washing the color out. These provisions thus prevent label designers from hiding the disclosure by manipulating the text. In contrast, we find no rational basis in the record for the Rule's contiguity requirement. The Processors specifically take issue with this provision, noting that it prevents them from linking the production claim to the disclosure through the use of an asterisk. Director Boggs testified in his deposition that the ODA decided against the use of an asterisk based on his anecdotal experience of talking to consumers in grocery stores. According to Director Boggs, these consumers informed him that oftentimes it's hard to understand labels, especially when the print is so small. But these observations reveal nothing about whether the use of an asterisk to link information was effective in conveying a disclosure to consumers. Nor did Director Boggs point to any other basis for his belief. He instead asserted, without any supporting evidence, that he had been aware of [asterisks being a problem in conveying information] for a long time. In light of the paucity of evidence supporting the Rule's contiguity requirement, we conclude that it has no demonstrable connection to ensuring that consumers are not misled. We therefore hold that it lacks a rational basis. See Nat'l Elec. Mfrs. Ass'n v. Sorrell, 272 F.3d 104, 115 (2d Cir.2001) (The [First] Amendment is satisfied . . . by a rational connection between the purpose of a commercial disclosure requirement and the means employed to realize that purpose.). Finally, the Processors challenge the Rule's disclosure requirement as being unduly burdensome. They contend that it hinders their ability to convey their message regarding rbST as well as their ability to operate in interstate commerce. But the Processors' concerns regarding the ability to convey their message stem largely from the Rule's prohibition on asterisks, a concern that we have dealt with above. And they have not pointed to any evidence that the Rule's font, size, and color requirements impair their ability to communicate effectively. Any alleged burden that the Rule imposes on the Processors' ability to participate in interstate commerce has similarly been alleviated. The Processors argue that the Rule's requirements are sufficiently distinct from those of other states so as to necessitate Ohio-specific labels and to cause disruption of the nationwide distribution of dairy products. Without the prophylactic ban on composition claims and the prohibition on asterisk use, however, the Rule will be largely indistinguishable from similar regulations in other states. See, e.g., Alaska Stat. § 17.20.013(a) (requiring production claims to be accompanied by the disclaimer No significant difference has been shown between milk derived from rBST treated and non-rBST treated cows); Vt. Stat. Ann. tit. 6, § 2762(3) (requiring production claims to be followed by a disclaimer such as [T]he U.S. Food and Drug Administration has not found a significant difference to exist between milk derived from rbST-treated and non-rbST-treated cows). The Processors' concerns regarding the allegedly more demanding scope of Ohio's regulation, including the extra costs of compliance, have thus been effectively addressed by our rulings above.