American Beverage Ass'n v. City & County of San Francisco - Ninth Circuit

HeadlineThe Ninth Circuit Panel found the San Francisco’s warning requirement, concerning the health effects from consuming certain sugar-sweetened beverages, constituted an undue burden, which may chill protected commercial speech.

Areas of Law: Constitutional Law

Issues Presented: Whether the ordinance enacted by San Francisco mandating the Associations to include the certain adverse health effect warnings in their advertisements constituted an undue burden in violation of the Associations’ protected commercial speech under the First Amendment.

Brief Summary: The Ninth Circuit Panel reversed and remanded the district court’s denial of the Associations’ motion for preliminary injunction against San Francisco’s ordinance and held that the Associations would likely prevail on the merits of their First Amendment’s claim. When the City and County of San Francisco enacted an ordinance requiring advertisers of certain sugar-sweetened beverages to post a health effect warning on their advertisements, plaintiffs, the Associations, immediately brought suit seeking an injunction against the ordinance. Although the district court denied the Associations’ motion upon finding that the Associations would not prevail on the merits of their First Amendment challenge, the court granted the Associations’ motion for an injunction pending appeal.The Panel disagreed with the district court and concluded that the warning’s message was controversial and not purely factual when the warning asserted that consuming certain sugar-sweetened beverages would contribute to obesity, diabetes, and tooth decay. The Panel found that such assertion was misleading since it is contrary to the FDA’s statement, and other researches. Additionally, the Panel found that the ordinance placed undue burden on the Associations’ commercial speech because the warning would overwhelm other visual elements of their advertisements and leave no room to convey their messages. Although the Panel agreed that the ordinance advanced a substantial government interest in promoting public health, the Panel concluded that the Associations would likely prevail on the merits of their First Amendment challenge because the ordinance was not purely factual and unduly burdensome. Additionally, the Panel found that other factors of the preliminary injunction test weighed in the Associations’ favor. Thus, the Panel reversed and remanded the district court’s judgment.

Significance: Applying Zauderer’s analytical framework in reviewing the ordinance at issue, the Ninth Circuit Panel concluded that the ordinance failed the Zauderertest for compelling disclosure of a controversial health effects message and placing undue burden that may chill the Associations’ protected commercial speech.

Extended Summary: In June 2015, the City and County of San Francisco (“San Francisco”) enacted an ordinance requiring the advertisers of certain sugar-sweetened beverages to place a warning about the adverse health effects in their beverage advertisements. The mandatory warning included the following message, “WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.” Failure to include such warning would result in penalties imposed by the San Francisco’s Director of Health.

Pursuant to San Francisco, the ordinance was intended to raise the consumers’ awareness about the existence of added sugars in said beverages, and thus promoted public health and preserved economic resources.

In July 2015, prior to the ordinance’s effective date July 25, 2016, the American Beverage Association, California Retailers Association, and the California State Outdoor Advertising Association (“the Associations”) filed suit seeking a preliminary injunction against the ordinance alleging that the ordinance would place an undue burden that would have a chilling effect on the Associations’ protected commercial speech under the First Amendment.

In May 2016, the district court denied the Associations’ motion on grounds that the Associations would not likely to prevail on the merits of their First Amendment claim because the mandatory warning was not misleading, would not place an undue burden on their commercial speech, and was rationally related to a government interest. However, the court granted the Associations’ motion for an injunction, while the Associations appealed the court’s ruling.

Upon appeal, the Ninth Circuit Panel addressed the issue of whether the ordinance mandating disclosure was purely factual and uncontroversial, and whether it constituted an undue burden on commercial speech and thus violated the Associations’ First Amendment rights.

The Ninth Circuit Panel concluded that the district court has abused its discretion in denying the Associations’ motion because the Associations would likely prevail on the merits of their First Amendment challenge, and the remaining preliminary injunction factors also weighed in their favor.

In absence of a direct ruling from the United States Supreme Court on the alleged issue of this case, the Ninth Circuit Panel applied the Zauderer’s analytical framework in reviewing the Associations’ First Amendment challenge. Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626 (1985). Although Zauderer’s issue involved a government regulation intended to protect consumer from deceptive commercial advertisements, the Ninth Circuit Panel joined other circuits in holding that Zauderer’s standard also applied to government regulation intended to promote public health. Applying Zauderer, the Panel asserted that a disclosure requirement that is “purely factual and uncontroversial” and does not “unduly burdensome” would survive First Amendment scrutiny so long as it is “reasonably related to a substantial government interest.” Id. at 651.

First, the Ninth Circuit Panel examined the character of the alleged ordinance. The Panel provided that a disclosure requirement is not “purely factual” when it is “literally true but nonetheless misleading and, in that sense, untrue.” CTIA-The Wireless Ass’n v. City of Berkeley, 854 F.3d 1105, 1118 (9th Cir. 2017). The Panel concluded that the ordinance’s factual accuracy was questionable because the warning statement asserted that sugar-sweetened beverages contributes to obesity, diabetes, and tooth decay regardless of the quantity consumed and other lifestyle choices. In addition, the Panel held that the statement was contrary to FDA guideline, which provided that added sugars are “generally recognized as safe,” 21 C.F.R. § 184.1866, and “can be part of a healthy dietary pattern when not consumed in excess amounts,” 81 Fed. Reg. 33, 742, 33, 760 (May 27, 2016). While San Francisco’s experts provided that there is a “clear scientific consensus” showing a direct link between excessive consuming of added sugar beverages and obesity and diabetes, the experts failed to negate the Associations’ expert’s assertion that consuming sugar-added beverages does not increase the risk of obesity or diabetes so long as the consumer maintains a  healthy balance between their caloric intake and energy output. The Panel also found that the warning was “misleading” for singling out sugar-sweetened beverages as less heathy than other sources of added sugars and calories, which was contrary to other FDA and the American dental Association’s current researches.

Next, the Ninth Circuit Panel reviewed whether the ordinance placed undue burden on the Associations’ commercial speech. The Panel provided that “[a] required disclosure may be unduly burdensome if it ‘effectively rules out’ advertising in particular media.” Ibanez v. Fla. Dep’t of Bus. & Prof’l Regulation, 512 U.S. 136, 146 (1994). The Panel agreed with the Associations in concluding that the ordinance constituted an undue burden and chilled the Associations’ protected speech. The Panel found that the ordinance unduly burdened the Associations’ commercial speech because the black box warning overwhelmed other visual elements in the advertisements and left no room for advertisers to convey their messages. The Panel found that the ordinance’s requirement was similar to other regulations that were found unduly burdened commercial speech for requiring advertisers to provide detailed disclosure regarding the advertisers’ specialty, Id.; or to devote one-sixth of the advertisement’s broadcast time to convey the government’s message. Tillman v. Miller, 133 F.3d 1402, 1404 n.4 (11th Cir. 1998). The Panel concluded that the ordinance’s burden would have a chilling effect on protected speech causing major manufactures of said beverages to remove their advertising from covered media if the ordinance would go into effect.  

While the Panel agreed that promoting public health was a substantial government interest, the Panel concluded that San Francisco has not met its burden in proving the “legitimacy of its commercial-speech regulations.” Zauderer, 471 U.S. at 659. For those reasons, the Panel held that the Associations have met their burden in showing that they would likely succeed on the merits of their First Amendment challenge.

The Panel also found that the remaining factors of the preliminary injunction test weighed in favor of the Associations because they would likely suffer an irreparable harm if the ordinance became effective, the balance of hardship also tipped in their favor, and protecting a party’s First Amendment rights has always been in the public interest.

The Panel concluded that the district court has abused its discretion in denying the Associations’ motion for preliminary injunction against the ordinance. Therefore, the Panel reversed and remanded the case for further proceeding.  

To read the full opinion, please visit:
http://cdn.ca9.uscourts.gov/datastore/opinions/2017/09/19/16-16072.pdf

Panel:Dorothy W. Nelson, Sandra S. Ikuta, and J. Michael Seabright, Circuit Judges.

Argument Date:April 17, 2017

Date of Issued Opinion:September 19, 2017

Docket Number:3:15-cv-03415-EMC

Decided:Reversed and remanded the district court’s denial of Associations’ motion for preliminary injunction to enjoin the City and County of San Francisco from imposing ordinance requiring advertisers of certain types of sugar-sweetened beverages to include the health effect warnings on their advertisements within San Francisco.

Case Alert Author: Phuong Luong

Counsel:
Richard P. Bress (argued), Melissa Arbus Sherry, and Michael E. Bern, Latham &Watkins LLP, Washington, D.C.; James K. Lynch and MarcyC. Priedeman, Latham & Watkins LLP, San Francisco, California; for Plaintiff-Appellant American Beverage Association.

Thomas S. Knox, Knox Lemmon & Anappolsky LLP, Sacramento, California; for Plaintiff-Appellant California Retailers Association

Theodore B. Olson, Andrew S. Tulumello, and Helgi C. Walker, Gibson Dunn & Crutcher LLP, Washington, D.C.; Charles J. Stevens and Joshua D. Dick, Gibson Dunn & Crutcher LLP, San Francisco, California; for Plaintiff-Appellant California State Outdoor Advertising Association.

Christine Van Aken (argued), Jeremy M. Goldman, and Wayne Snodgrass, Deputy City Attorneys; Dennis J. Herrera, City Attorney; Office of the City Attorney, San Francisco, California; for Defendant-Appellee.

Author of Opinion: Judge Sandra S. Ikuta

Circuit: Ninth Circuit

Case Alert Supervisor: Professor Glenn Koppel

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