American Beverage Association v. City and County of San Francisco
Why It Made the List
Health and safety warnings are a regular part of the consumer protection landscape. For example, consumers are accustomed to the iconic and standardized nutrition facts label—a result of The Nutritional Labeling and Education Act of 1990. And though now normalized, consumers were initially shocked when they were greeted with the calorie count for a hamburger at their favorite fast-food joint.
But what happens if a local city government tries to mandate a specific warning label in hopes of combating America’s growing obesity and diabetes epidemic? In 2015, San Francisco enacted an ordinance requiring that outdoor signs advertising sugar-sweetened beverages include a warning label, covering twenty percent of the sign, that warned potential consumers of the negative health impact of consuming such a product. Trade organizations, including the American Beverage Association (“ABA”) quickly pushed back, alleging a violation of their First Amendment rights. This case is representative of the fine line governments must walk when enacting labeling requirements, no matter how well-intentioned the proposed laws may be.
The ABA convinced a Ninth Circuit panel that the ordinance chills commercial speech by forcing beverage manufacturers to convey a controversial message. In an en banc rehearing, the Ninth Circuit confirmed reversal, with no dissents, but only on the ground that the size of the warning was unduly burdensome. So, how can the en banc decision of the Ninth Circuit be controversial when every active judge of that court agreed with the outcome?
Discussion of the Facts and Procedural History
In 2015, the City and County of San Francisco unanimously voted to mandate a disclosure on print advertisements for sugar-sweetened beverages (SSBs) stating: “WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay” in a black box occupying no less than twenty percent of the advertisement. SSBs were defined as “soda and other non-alcoholic beverages that contain one or more added sweeteners and more than twenty-five calories per twelve fluid ounces of beverage.” Not surprisingly, the ABA, as well as other trade organizations, quickly filed suit in the Northern District of California seeking injunctive relief to prevent the implementation of the ordinance.
The ABA challenged the San Francisco ordinance on First Amendment grounds, claiming the mandate creates a chilling effect on commercial speech by requiring ABA members to bear an unjustified and undue burden of conveying a controversial message hostile to their own products in order to advertise them. In response, San Francisco attempted to justify its mandate by stating there is a substantial government interest in informing the public about the health risks of sugar.
On May 17, 2016, the District Court denied the preliminary injunction motion on the ground that plaintiffs had not established a likelihood of success on the merits. The District Court, convinced by advertising experts who claimed that tobacco product packaging and labeling should bear a health warning of fifty percent to be effective, rejected ABA’s argument. Compared to this precedent, the court found a warning twenty percent the size of the packaging to be permissible.
On appeal, the Ninth Circuit reversed the trial court decision and struck down the San Francisco ordinance. The court held that because the warning was required to take up twenty percent of the space on an advertisement, the black box overwhelms other visual elements in the advertisement, and it requires a conveyance of San Francisco’s disputed policy views; the warning was found to be unduly burdensome and chilled protected commercial speech under the First Amendment.
Decision and Reasoning of the En Banc Panel
The full Ninth Circuit granted en banc rehearing. Because the parties agreed that the San Francisco ordinance constituted compelled commercial speech, this left the en banc court to determine what level of scrutiny to apply to the warning label. Before the rehearing, the Supreme Court of the United States decided National Institute of Family and Life Advocates d/b/a NIFLA et al. v. Becerra, which affirmed Zauderer as an exception to the strict scrutiny requirement for some First Amendment challenges. The Supreme Court, however, left open the circumstances in which Zauderer would apply or how it would apply.
In early 2019, the en banc decision affirmed the Ninth Circuit decision, with all active judges agreeing that the San Francisco ordinance must be preliminarily enjoined as likely violating the First Amendment. The reasoning behind the agreed-upon outcome is where the controversy lies.
Though speech regulations are typically strictly scrutinized under the First Amendment, the majority opinion, written by Judge Graber, concluded that the appropriate scrutiny was established by Zauderer and CTIA—The Wireless Ass’n v. City of Berkeley. The majority determined that these two decisions established that the ordinance would be proper only if San Francisco could show that it is reasonably related to a substantial governmental interest, which it could establish by demonstrating that the compelled speech is (1) purely factual, (2) noncontroversial and (3) not unjustified or unduly burdensome. 
The majority opinion was narrow, holding that, given evidence presented that smaller warnings would be effective, the size of the required warnings imposed an unconstitutional burden on beverage manufacturers, explicitly declining to decide whether the warnings were factually accurate and uncontroversial.
Ikuta’s Dissent in Reasoning and Concurrence in Result
Judge Ikuta disagreed with the majority that Zauderer was the appropriate standard. She regards the Zauderer standard as a rational basis test, not intermediate scrutiny. Though she agreed with the majority’s holding, Judge Ikuta reasoned that heightened scrutiny was the appropriate standard. Such a high standard would be difficult for the government to make. Judge Ikuta wrote that the ordinance as written was “wildly underinclusive” because it did not apply to all sugar-sweetened beverages or all sugar-sweetened products, and it did not apply to all forms of advertising.
Christen Concurrence, Joined by Thomas
Judges Christen and Thomas agreed that Zauderer applies to the ordinance, but they would reverse because San Francisco could not show that the speech it sought to compel was purely factual. Because they found the message to be literally false as to Type 1 diabetes, there was no need to assess whether there is an undue burden and, according to Judges Christen and Thomas, the ordinance fails on this ground alone.
Judge Nguyen disagreed with the majority’s expansion of Zauderer’s rational basis review to commercial speech that is not false, deceptive, or misleading. Judge Nguyen stated that the majority reached the right result under the wrong legal standard. According to Judge Nguyen’s reasoning, because the ordinance is not designed to curb false and misleading speech, it fails intermediate scrutiny.
For years, state and local jurisdictions have been trying to address public health concerns resulting from excess sugar in the American diet through either similar ordinances or, in some cases, through taxes on sugary products. This case reminds us that when the effort at changing behavior is directed through compelled commercial speech, the record must demonstrate that there is a clear public health issue, and the measure must ensure compliance with First Amendment protections. When the science is unquestionable, such as in the case of cigarettes, such compelled commercial speech has held up. If local governments hope to address growing public health concerns through such compelled commercial speech, they must have sufficient scientific support showing more than just that the product contains ingredients that have the potential to be dangerous if used to an excess. But most importantly, it is unclear whether other circuits will apply the Zauderer standard in the same way as the majority, given the split amongst the Ninth Circuit panel of judges.
This case is far from over. In January 2020, San Francisco passed a new ordinance, imposing a similar warning requirement on beverage labels, but modifying the text and reducing the required warning size from twenty percent to ten percent of the sign. Unsurprisingly, the same industry groups promptly sued again. The case is currently before the District Court for the Northern District of California. Time will tell if this new ordinance survives the standard set by the majority in this case.
* Mital Patel is an associate at the firm of Foley Hoag LLP in New York. Her practice primarily focuses on intellectual property litigation matters, including Hatch-Waxman litigation and patent infringement disputes, as well as false advertising and deceptive practices litigation.
 Am. Bev. Ass’n v. City & Cty. of S.F., 916 F.3d 749, 753 (9th Cir. 2019)
 Am. Bev. Ass’n v. City & Cty. of S.F., 187 F. Supp. 3d 1123 (N.D. Cal. 2016)
 Also at issue was whether the San Francisco ordinance imposed an undue burden on beverage manufacturers because non-beverage sugar producers arbitrarily escape the ordinance’s purview. The Northern District dismissed this issue because, given the high caloric count of sugar-sweetened beverages, it was a reasonable to fight the war on obesity first with sugar-sweetened beverage warnings and not all sugar products. Id. at 1140.
 916 F.3d at 753.
 187 F. Supp. 3d at 1130.
 See generally id.
 Id. at 1142.
 Id. at 1123.
 See id. at 1146.
 See id. at 1138.
 Am. Bev. Ass’n v. City & Cty. of S.F., 871 F.3d 884 (9th Cir. 2017).
 See id.
 Am. Bev. Ass’n v. City & Cty. of S.F., 880 F.3d 1019, 1020 (9th Cir. 2018).
 Nat’l Inst. of Family & Life Advocates v. Becerra (NIFLA), 138 S. Ct. 2361 (2018).
 Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985) (holding that a compelled disclosure is required to be purely factual and uncontroversial without being unduly burdensome on the advertiser so as to chill its commercial speech).
 See Am. Bev. Ass’n v. City & Cty. of S.F., 916 F.3d 749 (9th Cir. 2019).
 854 F.3d 1105, 1115 (9th Cir. 2017).
 916 F.3d at 756–57.
 Id. at 757.
 Id. at 758.
 Id. at 762.
 Id. at 766.
 Id. at 769.