Turtle Island Foods SPC d/b/a Tofurky Company v. Soman

Jacqueline J. Chan*

Why It Made the List

Plant-based eating has grown significantly, with U.S. plant-based food dollar sales having grown by 11.4% in the past year and 29% over the past two years, and an estimated total plant-based market value of $5 billion.[1] Unsurprisingly, to meet consumer demand, companies are quickly crowding the marketplace, introducing new plant-based food options directly into the mainstream.

Many of these products serve as alternatives to traditional meat or dairy products. To convey the plant-based food product’s form, function, and flavor, companies will often refer to the name of the traditional meat or dairy counterpart in their plant-based food product names. Multiple states, however, have enacted or propose to enact laws that prohibit the use of such traditional terms for foods that are not derived from the named meat or dairy product. Such states generally assert that the purpose of such laws is to protect consumers from being misled or confused by false or misleading labeling.

Turtle Island Foods, SPC, doing business as The Tofurky Company v. Nikhil Soman, in his official capacity as Director of the Arkansas Bureau of Standards (E.D. Ark.) is one of the recent lawsuits to challenge such a state law. In this lawsuit, Turtle Island Foods, which does business as The Tofurky Company (“Tofurky”), successfully secured a preliminary injunction of Arkansas’s Act 501 on First Amendment constitutional grounds.[2] Although the court’s order granting the preliminary injunction focused specifically on Act 501 as it applied to Tofurky, it offers plant-based food companies some guidance on challenging similar laws in other states and, more broadly, on how to label similar food products in a truthful and non-misleading manner. The court’s opinion aligns with prior case precedent supporting the following general principle: consumers are unlikely to be misled where traditional meat and dairy terms are appropriately qualified to clearly distinguish the food from its traditional counterparts.[3]

As demand for plant-based foods grows and the marketplace becomes more competitive, the stakes for plant-based food companies related to the labeling of their foods likely will similarly rise. This lawsuit, along with Tofurky’s lawsuit challenging the constitutionality of a similar Missouri law,[4] will be one for food manufacturers to watch closely this year.

Discussion

Arkansas’s Act 501

In March 2019, the Arkansas State Legislature enacted Act 501, titled “An Act to Require Truth in Labeling of Agricultural Products that are Edible by Humans; and for Other Purposes” (“Act 501”).[5] The stated purpose of Act 501 is “to protect consumers from being misled or confused by false or misleading labeling of agricultural products that are edible by humans.” Among other provisions, Act 501 essentially prohibits foods from being labeled with meat terms where the product is not derived from the named meat. [6] For example, it prohibits representing the food as “beef or a beef product when the agricultural product is not derived from a domesticated bovine.”[7] Further, although Act 501 does not specifically refer to dairy or dairy-derived products, certain provisions can be interpreted as prohibiting the use of traditional dairy terms as well for foods that do not include the named dairy product. For example, Act 501 explicitly prohibits “[u]tilizing a term that is the same as or similar to a term that has been used or defined historically in reference to a specific agricultural product.”[8] The Act imposes civil penalties for violation of its provisions with each individual violation of Act 501 punishable by a civil penalty of up to $1,000.[9]

Tofurky Sues Arkansas Over Constitutionality of Act 501

Two days before Act 501 was to take effect, plaintiff Tofurky filed a complaint against defendant Nikhil Soman, in his official capacity as the Director of the Arkansas Bureau of Standards (“State”), on July 22, 2019, challenging the constitutionality of Act 501.

Tofurky is a company that develops, produces, markets, and sells plant-based food products, including plant-based meats. Its plant-based meats are made with vegan ingredients, such as soy, tempeh, wheat, and jackfruit. Tofurky’s names for these plant-based products include traditional meat-based terms, like “chorizo,” “ham roast,” and “hot dogs,” qualified by terms like “all vegan,” “vegetarian,” and “plant-based.” Tofurky markets and sells its products nationwide, including in Arkansas.

Tofurky specifically challenged the constitutionality of the following six provisions of Act 501 under the First Amendment, the Fourteenth Amendment, and the Dormant Commerce Clause:

2-1-305. Prohibited activities. A person shall not misbrand or misrepresent an agricultural product that is edible by humans, including without limitation by:

(2) Selling the agricultural product under the name of another food;

***

(5) Representing the agricultural product as a food for which a definition and standard of identity has been provided by regulations under § 20-56-219, or by the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., as it existed on January 1, 2019, unless: (A) The agricultural product conforms to the definition and standard; and (B) The label of the agricultural product bears the name of the food specified in the definition and standard and includes the common names of optional ingredients other than spices, flavoring, and coloring present in the food as regulations require;

(6) Representing the agricultural product as meat or a meat product when the agricultural product is not derived from harvested livestock, poultry, or cervids;

***

(8) Representing the agricultural product as beef or a beef product when the agricultural product is not derived from a domesticated bovine;

(9) Representing the agricultural product as pork or a pork product when the agricultural product is not derived from a domesticated swine;

(10) Utilizing a term that is the same as or similar to a term that has been used or defined historically in reference to a specific agricultural product.

Tofurky contended that these provisions prohibit truthful and non-misleading speech while exposing Tofurky to substantial risk of ruinous civil penalties. It asserted that its labels do not mislead consumers, and, in fact, they emphasize by using commonly understood terms that the products are plant-based alternatives to meat from live animals. According to Tofurky, Act 501 would actually create consumer confusion if companies could not use clear terms that accurately describe the taste, appearance, and texture of their products and, instead, were required to use less descriptive terms like “plant-based protein” or “veggie tube.” Tofurky concluded that compliance with Act 501 would put Tofurky at a significant commercial disadvantage where the company must choose (1) to continue to sell its products as packaged at risk of ruinous civil liability; (2) to design and distribute Arkansas-specific packaging; (3) to change its packaging entirely nationwide; or (4) to refrain from marketing or selling its products in Arkansas.

The Decision

On August 14, 2019, Tofurky moved for a preliminary injunction prohibiting the State from enforcing the challenged provisions of Act 501. Tofurky’s challenge of the six provisions of Act 501 focused on violations of the Free Speech Clause of the First Amendment and the Due Process Clause of the Fourteenth Amendment.

On December 11, 2019, the Court granted Tofurky’s motion on First Amendment grounds. Because the Court granted the preliminary injunction on First Amendment grounds, it did not reach Tofurky’s Fourteenth Amendment arguments. Notably, the Court confined its analysis to an “as applied” challenge brought by Tofurky, examining only whether Act 501 was constitutional as it applied to Tofurky’s advertisements.[10] Accordingly, the preliminary injunction applies only to Tofurky and not to other similarly situated companies.

In determining whether a preliminary injunction would be appropriate, the Court considered the following four factors: (1) the threat of irreparable harm to Tofurky; (2) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that Tofurky will succeed on the merits; and (4) the public interest. Because Act 501 was passed through the “democratic process,” the Court found that the State was entitled to a higher degree of deference, requiring that Tofurky was “likely to prevail on the merits” (as opposed to having a “fair chance” of success).

Likelihood of Success on the Merits

In evaluating Tofurky’s likelihood of success on the merits of its First Amendment claim, the Court applied the four-part commercial speech test as articulated by the U.S. Supreme Court in Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557 (1980). Where commercial speech is neither false nor inherently misleading, factors two through four must be answered affirmatively for the law to be found constitutional:

(1) Whether the commercial speech at issue concerns lawful activity or is misleading;

(2) Whether the governmental interest is substantial;

(3) Whether the challenged regulation directly advances the government’s asserted interest; and

(4) Whether the regulation is not more extensive than necessary to further the government’s interest.

This case primarily turns on the first Central Hudson factor, namely: does the commercial speech concern unlawful activity or is misleading and thus may be prohibited entirely by the government? The Court explained that “misleading” speech includes speech that is “inherently misleading,” meaning speech that “inevitably will be misleading” to consumers.[11] This may be inferred from reviewing the “particular content or method of the advertising” as well as “experience [that] has proved that in fact such advertising is subject to abuse.”[12]

Unsurprisingly, the parties disagreed on this point. Tofurky argued that Act 501 unconstitutionally restricted its commercially protected speech, whereas the State contended that Tofurky’s speech was inherently misleading and thus not subject to First Amendment protection. In reviewing each of Tofurky’s seven labels as a whole, the Court agreed with Tofurky, finding the speech not to be inherently misleading:

It is true, as the State contends, that these labels use some words traditionally associated with animal-based meat. However, the simple use of a word frequently used in relation to animal-based meats does not make use of that word in a different context inherently misleading. This understanding rings particularly true since the labels also make disclosures to inform consumers as to the plant-based nature of the products contained therein.[13]

The Court determined that any consumer confusion was “dispel[ed]” by the repeated use of terms indicating that the packages contained no animal-based meat. For all products, the Court pointed to the use of terms like “all vegan” or “plant-based,” and use of a symbol depicting the letter “V” in a circle on the front of the packaging (i.e., “a common indicator that a food product is vegan or vegetarian”). The Court also discussed each label, for example, highlighting that the “Veggie Burger” label (1) modified the word “burger” with “veggie;” (2) stated “all vegan” in the middle of the label; and (3) featured the words “white quinoa” next to the image of the burger.

The Court also found untenable the State’s argument that use of a meat-based term would leave a typical consumer confused because such an argument would work only if a reasonable consumer would disregard the “ample terminology to indicate the vegan or vegetarian nature of the products” appearing on the labels.[14] The Court further commented that there was no contention that any consumer or potential consumer was actually misled or deceived by Tofurky’s packaging, labeling, or marketing. As such, the Court found that, when considering the label as a whole, an ordinary consumer was unlikely to be deceived about whether Tofurky’s products contained animal-based meat.

Accordingly, the Court concluded that Tofurky was likely to prevail on its arguments that its labeling was not unlawful or inherently misleading and, thus, Tofurky’s commercial speech warranted First Amendment protection.

Given Tofurky’s likelihood of success, the Court reviewed the State’s speech restriction using an “intermediate scrutiny” standard for the remaining Central Hudson factors, and found as follows:

• Is the governmental interest substantial? Based on Supreme Court and Eighth Circuit precedent recognizing that “combatting deceptive, misleading, or false advertising” was a “legitimate and substantial interest,” the Court assumed that the State had a substantial interest in protecting consumers from being misled or confused by false or misleading labeling.
• Does the challenged regulation directly advance the government’s asserted interest? Given that the Court concluded that Tofurky was likely to prevail on its argument that its speech was not false or misleading, the Court determined that Act 501 is unlikely to “directly and materially” advance the State’s interest as stated in Act 501.
• Is the regulation not more extensive than necessary to further the government’s interest? The Court found that Tofurky was likely to prevail on its argument that Act 501 was more extensive than necessary to serve the State’s interest. According to the Court, Act 501’s “outright ban” of Tofurky’s arguably non-misleading commercial speech is unlikely to be a “reasonable fit” and was “far more extensive than necessary.” The Court stated that Tofurky was likely to succeed in demonstrating that the State disregarded far less restrictive and precise means for accomplishing the same purpose. The Court pointed to several alternative approaches the State could have taken, which would include the State (1) requiring “prominent disclosures of the vegan nature of plant-based products;” (2) creating a “vegan” symbol for plant-based product labeling and packaging; or (3) requiring a disclaimer that the products do not contain meat.

Threat of Irreparable Harm

The Court determined that Tofurky demonstrated a threat of irreparable harm based on two primary reasons. First, relying on Supreme Court precedent, the Court found that the loss of First Amendment freedoms is “unquestionably” irreparable harm. Given that the Court concluded that Tofurky was likely to prevail on its claim that Act 501 violates its First Amendment right, that violation constitutes irreparable injury. Second, Tofurky could be subject to Act 501’s civil penalties at any time, and “likely faces ruinous civil liability, enormous operational costs, or a cessation of in-state operations were Act 501 enforced against it.” The Court further pointed to the fact that the State had made no assurances that it will not levy retroactive penalties against Tofurky that may have accumulated during the litigation.

Balance of the Equities

In evaluating equities, the Court considered the balance between the harm to Tofurky and the injury that granting the injunction will inflict on other interested parties. The Court determined that Tofurky would face “substantial detrimental impact” in complying with Act 501 where Tofurky has already invested significant funds into the labeling and packaging of its products. To comply with Act 501, Tofurky likely would be required to: “(1) risk civil penalties by continuing its current marketing and packaging practices; (2) create specialized marketing and packaging practices for Arkansas, including attempting to police spillover from marketing in nearby states; (3) change its marketing and packaging practices nationwide; or (4) refrain from marketing or selling its products in Arkansas at all.”[15] The Court concluded that each option was a potential burden that created a corresponding chilling effect on Tofurky’s commercial speech rights. According to the Court, the State offered no “compelling equities of its own” resulting from a denial of a preliminary injunction. As such, the Court found that Tofurky established the balance of equities in its favor.

Public Interest

The Court found that the grant of an injunction was in the public interest because the case revolved around constitutional rights and Tofurky had demonstrated its likelihood of prevailing on the merits. Absent the entry of a preliminary injunction, the risk of State enforcement action existed, which may in turn chill Tofurky’s commercial speech and inhibit such speech from reaching Arkansas consumers. Tofurky argued that Arkansas consumers benefitted from the “free flow of truthful and non-misleading commercial information allowing them to identify plant-based options for their favorite meals.” Ultimately, the Court concluded that “[t]he status quo [wa]s represented by that speech being available to consumers in the marketplace.”

Accordingly, the Court granted Tofurky a preliminary injunction, which is the first—and a major—step in this case. Although much may happen between now and then, a bench trial has been set for February 2021.

Impact

Many states have or are proposing laws similar to Act 501 that place restrictions on the naming of foods using traditional meat or dairy terms. Although the aim of these laws may be similar, not all state laws are the same, with differing levels of restrictions and legal nuances. Thus, as one may expect, not all challenges to these state laws will necessarily provide the same end result as in the present case.

For example, earlier in 2019, Tofurky challenged Missouri’s law restricting the use of meat terms for food products and moved for a preliminary injunction on similar First Amendment grounds.[16] Missouri’s statute prohibits advertising, offering for sale, or selling all or part of a food using “misleading or deceptive practices,” which include, in relevant part, “misrepresenting a product as meat that is not derived from harvested production livestock or poultry.”[17] Unlike in Arkansas, Missouri took the position that the statute “only prohibits labels that suggest that plant-based or lab-grown meat is conventional meat from an animal carcass.”[18] In other words, “[t]he use of the word ‘meat’ on a plant-based or lab-grown product would only violate the statute if it lacked an appropriate qualifier ‘plant-based,’ ‘veggie,’ ‘lab-grown,’ ‘lab-created.”[19] Because Tofurky’s labels described plant-based meat as “plant-based meat,” the court found that Tofurky was not likely to succeed on its First Amendment claim because the statute did not prohibit its truthful and non-misleading speech. The court determined that the statute prohibited only speech that would be misleading, which is a permissible government restriction, and denied Tofurky’s motion for preliminary injunction.[20]

With this patchwork of state laws, companies similarly situated to Tofurky face a business and legal quandary of how to proceed in labeling and marketing their plant-based food products. As Tofurky asserted, it had four options: (1) continue selling its products as is and risk significant civil penalties; (2) create labeling and advertising specific to each state with risk of non-compliant “spillover” from neighboring states; (3) stop selling products in the specific state altogether; or (4) revamp its labeling and advertising nationally. Although this issue is likely to remain murky for the near future, the Court’s opinion from the Arkansas Turtle Island case provides useful considerations.

Starting narrowly, Arkansas Act 501 continues to be “good law” as Turtle Island moves forward and, further, the preliminary injunction order is specific only to Tofurky. However, the same arguments that were successful for Tofurky also may be successful for companies that label and market their products similar to Tofurky. Likewise, although Tofurky focused primarily on the meat-related provisions, Tofurky’s constitutional arguments could similarly apply to other products (e.g., plant-based alternatives to dairy products) where three of the challenged Act 501 provisions relate more broadly to “agricultural products” and not just meat-based products.

More broadly, the Arkansas and Missouri Turtle Island cases highlight a primary factor for truthful and not misleading labeling of plant-based foods: clear and prominent qualification of traditional meat or dairy terms in a manner that distinguishes the food from its traditional counterpart. Qualifiers should clearly communicate that the food is not made of meat or dairy, such as “plant-based,” “vegan,” “dairy-free,” or “meat-free.” Other label statements related to the actual ingredients that substitute for the “meat” or “dairy” or “Vegan” certification symbols may further support non-misleading labeling. As noted above, this approach is further supported by earlier case law related to the naming of plant-based milks with the standardized term, “milk.” As explained by the court in Ang v. WhiteWave Foods Co. et al.:

The crux of the claims is that a reasonable consumer might confuse plant-based beverages such as soymilk or almond milk for dairy milk, because of the use of the word “milk.” The Court finds such confusion highly improbable because of the use of the words “soy” and “almond.” Plaintiffs essentially allege that a reasonable consumer would view the terms “soymilk” and “almond milk,” disregard the first words in the names, and assume that the beverages came from cows. The claim stretches the bounds of credulity. Under Plaintiffs’ logic, a reasonable consumer might also believe that veggie bacon contains pork, that flourless chocolate cake contains flour, or that e-books are made out of paper.[21]

Nevertheless, the Turtle Island case is only at a preliminary stage. It is possible, for example, that the state might be able to successfully defend its position with a combination of compelling data (for example, a need to protect in-state meat industry jobs from being lost due to competition from plant-based counterparts) and a reasonable enforcement posture (for example, not enforcing Act 501 if the product is labeled in large letters “This is Not Meat!”). Whether the state will come up with such a defense remains to be seen.

Further, the Turtle Island case is likely only the beginning of a series of state law challenges. Beyond state law considerations, food companies should also carefully monitor Federal activity that may impact such food labels. In the past few years, FDA has reinitiated its effort to modernize food standards of identity while concurrently considering stakeholder comments related to the use of dairy terms in the names of plant-based foods. U.S. congressional leaders also have called on FDA to enforce its standards of identity more vigorously and have even proposed legislation to encourage such enforcement, such as the DAIRY PRIDE Act (Defending Against Imitations and Replacements of Yogurt, Milk, and Cheese to Promote Regular Intake of Dairy Everyday Act) and the Real MEAT Act of 2019 (Real Marketing Edible Artificials Truthfully Act of 2019). This will be certainly a space to watch for years to come.

 

* Jacqueline J. Chan is a partner at Kleinfeld, Kaplan & Becker, LLP. She advises FDA-regulated companies throughout the product lifecycle, including labeling, advertising/promotion, enforcement risk assessment, post-marketing obligations, and regulatory strategy and compliance. Using her knowledge of today’s litigation trends, Ms. Chan helps develop new products, label claims, promotional campaigns, and advertising materials.

[1]    See Kate Good, U.S. Plant-Based Retail Market Worth $5 Billion, Growing at 5X Total Food Sales, Plant Based Foods Association (PBFA) (Mar. 3, 2020), https://plantbasedfoods.org/plant-based-foods-retail-sales-data-2020/.

[2]    Turtle Island Foods SPC d/b/a Tofurky Co. v. Soman, No. 4:19-cv-00514, 2019 WL 7546141 (E.D. Ark. Dec. 11, 2019) [hereinafter Preliminary Injunction Order].

[3]    See, e.g., Ang v. WhiteWave Foods Co. et al., No. 13-cv-1953, 2013 WL 6492353 (N.D. Cal. Dec. 10, 2013); Gitson v. Trader Joe’s Co., No. 13-cv-01333, 2015 WL 9121232 (N.D. Cal. Dec. 1, 2015).

[4]    Turtle Island Foods, SPC, doing business as The Tofurky Company, and The Good Food Institute, Inc. v. Mark Richardson, Case No. 18-cv-4173 (W.D. Mo.). This case is discussed further below under “Impact.”

[5]    Ark. Code Ann. § 2-1-301 et seq.

[6]    Act 501 also prohibits “[r]epresenting the agricultural product as rice when the agricultural product is not rice” and “[a]ffixing a label that uses a variation of rice in the name of the agricultural product when the agricultural product is not rice or derived from rice.” Ark. Code Ann. § 2-1-305(7) & (11).

[7]    Ark. Code Ann. § 2-1-305(8).

[8]    Ark. Code Ann. § 2-1-305(10).

[9]    Ark. Code Ann. § 2-1-306.

[10]  Preliminary Injunction Order, supra note 2, at *7–8.

[11]  Id. at *10.

[12]  Id.

[13]  Id. at *11.

[14]  Id. at *12.

[15]  Id. at *15.

[16]  Turtle Island Foods, SPC, doing business as The Tofurky Company, and The Good Food Institute, Inc. v. Mark Richardson, Case No. 18-cv-4173 (W.D. Mo.).

[17]  See Mo. Rev. Stat. § 265.494(7).

[18]  See Turtle Island Foods, et al. v. Richardson, No. 2:18-cv-0417, 2019 WL 7546586, at *4 (Sept. 30, 2019).

[19]  Id.

[20]  Subsequently, plaintiffs Tofurky and The Good Food Institute appealed the court’s denial of their motion for preliminary injunction to the United States Court of Appeals for the Eighth Circuit. As of the date of this writing, the interlocutory appeal was still pending.

[21]  Ang v. WhiteWave Foods Co. et al., No. 13-cv-1953, 2013 WL 6492353, at *4.