Lower courts had ruled in favor of Coke because the label conforms to the law and to Food and Drug Administration rules. But the Supreme Court reversed, finding that the juice label may technically comply with FDA rules but may still mislead consumers for different reasons.
Justice Anthony Kennedy, who wrote the court's opinion, appeared to have telegraphed his position back in April when he said at oral argument that the label even misled him into thinking the drink was mostly pomegranate juice. His opinion Thursday focused on the juice's details, noting that the product contained only 0.3 percent pomegranate juice, 0.2 percent blueberry juice and 0.1 percent raspberry juice.
Kennedy said the law governing regulation of food and drug labels does not preclude a competitor to sue under a different law for unfair competition based on false or misleading claims. He said federal food and trademark laws complement each other in the regulation of misleading labels.
Justice Stephen Breyer took no part in the case.
The court also rejected Coke's argument that allowing a deceptive labeling claim would interfere with national uniformity under FDA laws. Kennedy said Congress chose to allow challenges under trademark law "to enforce a national policy to ensure fair competition."
Pom, which faces deceptive advertising claims of its own, filed its lawsuit against Coke in 2008 after it began losing market share to Minute Maid's "Pomegranate Blueberry Flavored Blend of 5 Juices" drink. The drink's label shows the words "Pomegranate Blueberry" in much larger type than the rest of the phrase and includes a prominent picture of large pomegranate set among other fruits.
The 9th U.S. Circuit Court of Appeals ruled in favor of Coke, finding that food labeling laws preclude private lawsuits under trademark law.
The food and beverage industry had expressed concerns that a ruling for Pom would lead to greater uncertainty about labeling requirements and lead to a flurry of new lawsuits.
Coke's lawyer claimed during oral arguments that it would be a "logistical nightmare" for food companies to have to change labels in response to every private lawsuit. The beverage giant says the federal government, not competitors, should be enforcing uniform label requirements.
Kennedy acknowledged that allowing trademark claims to be decided by judges and juries in courts around the country "may give rise to some variation in outcome." But he said "this is the means Congress chose to enforce a national policy to ensure fair competition."
Claudia Vetesi, a San Francisco attorney specializing in false advertising class action lawsuits, said the decision could lead to an increase in "business to business litigation" over food labeling.
"Now a company could make sure its label complies with FDA regulation, but that doesn't mean they won't get sued," said Vetesi, who is not involved in the case. "This chips away at the primacy of the FDA."
In a separate case, the federal government has filed a deceptive advertising case against Pom for claiming that its pomegranate juice can treat or prevent heart disease, prostate cancer and other illnesses. The Federal Trade Commission's action is pending at the U.S. Court of Appeals for the D.C. Circuit.