A1a Burrito Works, Inc. v. Sysco Jacksonville, Inc.

87 F.4th 1280

A1A BURRITO WORKS, INC., a Florida corporation,A1A Burrito Works Taco Shop 2, Inc.,a Florida corporation, Juniper Beach Enterprises, Inc., a Florida corporation,on behalf of themselves and those similarly situated, Plaintiffs-Appellants, v. SYSCO JACKSONVILLE, INC., a Delaware corporation, Defendant-Appellee.

No. 22-11330

United States Court of Appeals, Eleventh Circuit

Filed: December 6, 2023

Appeal from the United States District Court for the Middle District of Florida, D.C. Docket No. 3:21-cv-00041-TJC-JBT

Brian K. Herrington, Chhabra Gibbs & Herrington, PLLC, Jackson, MS, Janet R. Varnell, Matthew Peterson, Brian W. Warwick, Erika Roxanne Willis, Varnell & Warwick, PA, Tampa, FL, Ryan McGee, John Yanchunis, Morgan & Morgan, Tampa, FL, Brian R. Morrison, Tadler Law LLP, New York, NY, for Plaintiff-Appellant.

Samuel Felker, Eve A. Cann, Desislava Docheva, Baker Donelson Bearman Caldwell & Berkowitz, PC, Fort Lauderdale, FL, Kyle Allen Diamantas, Baker Donelson Bearman Caldwell & Berkowitz, PC, Orlando, FL, Michael Glick, Kirkland & Ellis, LLP, Washington, DC, for Defendant-Appellee.

Leah Marie Nicholls, Public Justice, PC, Washington, DC, for Amicus Curiae Public Justice Foundation.

Before Grant, Tjoflat, Circuit Judges, and Huffaker,^* District Judge.

Huffaker, District Judge:

Plaintiffs A1A Burrito Works, Inc.; A1A Burrito Works Taco Shop 2, Inc.; and Juniper Beach Enterprises, Inc. (the Restaurants) purchase packaged poultry products from Defendant Sysco Jacksonville, Inc., for eventual resale to consumers. The Restaurants brought a putative class action alleging that Sysco violated the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) and breached its contracts with the Restaurants when Sysco regularly delivered underweight boxes of poultry. The district court dismissed the Restaurants' claims with prejudice on the grounds that the Poultry Products Inspection Act (PPIA or the Act) preempted their state law claims. According to the district court, the Restaurants' claims impermissibly sought to impose on Sysco labeling requirements that are "in addition to, or different than" the requirements prescribed by federal law. The question for this Court is whether the Restaurants plausibly pleaded state law claims premised on Sysco's allegedly misleading labels on its poultry packages that are not preempted by federal law.

After careful review, and with the benefit of oral argument, we affirm in part, reverse in part, and remand for further proceedings. On this record, the Restaurants have not shown that the district court erred in dismissing their FDUTPA claim as preempted. But the district court did err in dismissing the Restaurants' breach of contract claim to the extent the Restaurants allege that they did not receive the amount of poultry for which they paid in accordance with their contracts with Sysco. Such a claim is not preempted because it merely seeks to enforce the parties' private agreements regarding the cost and weight of poultry packages and does not amount to a state imposing a labeling requirement inconsistent with federal regulations.

I.

A.

Several federal statutes regulate food products. The United States Department of Agriculture regulates egg products under the Egg Products Inspection Act, see generally 21 U.S.C. §§ 1031-56; meat products under the Federal Meat Inspection Act, see generally 21 U.S.C. §§ 601-95 (FMIA); and poultry products under the PPIA, see generally 21 U.S.C. §§ 451-73.¹ The Food and Drug Administration regulates all other food products under the Federal Food, Drug, and Cosmetic Act, see generally 21 U.S.C. §§ 301-399i (FDCA or FDC Act).

As relevant here, the PPIA regulates the weighing and labeling of poultry products. See generally 21 U.S.C. §§ 451-73. The Act prohibits the sale or transport of "misbranded" poultry products. Id. § 458(a)(2)(A). In turn, the term "misbranded" applies to a poultry product "if its labeling is false or misleading in any particular" or "unless it bears a label showing . . . an accurate statement of the quantity of the product in terms of weight, measure, or numerical count," with allowances for "reasonable variations" established by regulation. Id. § 453(h)(1), (h)(5)(B). The Act also contains an express preemption clause prohibiting states from imposing "[m]arking, labeling, packaging, or ingredient requirements . . . in addition to, or different than, those made under this chapter." Id. § 467e. However, the Act allows states to exercise "concurrent jurisdiction," consistent with the Act's requirements, over the inspection of poultry products for the purpose of preventing the distribution of misbranded products. Id.

The Act's implementing regulations require labels to "bear a statement of the quantity of contents in terms of weights or measures." 9 C.F.R. § 381.121(a). Like the statute, the regulations prohibit false or misleading labeling. Id. § 381.129(a) ("No poultry product subject to the Act shall have any false or misleading labeling or any container that is so made, formed, or filled as to be misleading.").

Additionally, the regulations incorporate weighing procedures contained in the National Institute of Standards and Technology (NIST) Handbook 133, Fourth Edition, January 2005 (Handbook), which is published by the United States Department of Commerce. Id. § 442.2. The Handbook was "developed primarily for the use of government officials" but "should also be useful to commercial and industrial establishments in the areas of packaging, distribution, and sale of commodities." U.S. Dep't of Com., Nat'l Inst. of Standards & Tech., NIST Handbook 133, Checking the Net Contents of Packaged Goods iii (4th ed., Jan. 2005).

The Handbook sets forth six basic test procedures for weighing products:

1. Identify and define the inspection lot.

2. Select the sampling plan.

3. Select the random sample.

4. Measure the net contents of the packages in the sample.

5. Evaluate compliance with the Maximum Allowable Variation (MAV) requirement.

6. Evaluate compliance with the average requirement.

NIST Handbook 133, supra, at Ch. 2.3, page 10 (emphasis omitted).

The Handbook explains the pros and cons of testing packages among different levels of the supply chain: retail, wholesale, and point-of-pack. The Handbook explains that retail testing is "an easily accessible, practical means for State, county and city jurisdictions to monitor packaging procedures and to detect present or potential problems." Id. at Ch. 1.1, page 1. It cautions that retail testing generally "is not conducive to checking large quantities of individual products of any single production lot," and "[t]herefore, follow-up inspections of a particular brand or lot code number at a number of retail and wholesale outlets, and ultimately at the point-of-pack are extremely important aspects in any package-checking scheme." Id. at Ch. 1.1, page 1. The Handbook further notes that "[a]t the point-of-sale, a large number of processes may affect the quality or quantity of the product. Therefore, there may be many reasons for any inspection lot being out of compliance." Id. Examples include mishandling the product in the store, the retailer's failure to rotate stock, mishandling by a distributor, failure of some part of the packaging process, and moisture loss. Id. at Ch. 1.1, pages 1-2.

The Handbook also explains the purpose of random sampling and the procedures for implementing it. Random sampling "is necessary to ensure statistical validity and reliable data," and improper sampling "can lead to bias and unreliable results." Id. at Ch. 1.3, page 4. Random sampling "is accomplished by using random numbers to determine which packages are chosen for inspection." Id.²

But the Handbook also states that "shortcuts" and "audit tests" may be used "to speed the process of detecting possible net content violations." NIST Handbook 133, supra, at Ch. 1.3, page 4. These shortcuts include "using smaller sample sizes" and "selecting samples without collecting a random sample." Id. The shortcuts cannot be used to take enforcement action, however.

The Handbook explains that food package content labels must meet two separate requirements to be considered "accurate." Id. at Ch. 1.2, page 2. First, accuracy must be "applied to the average net contents of the packages in the lot." Id. "The second requirement is applied to negative errors in individual packages." Id. Concerning the individual package requirement, the Handbook states: "[P]ackages that are underfilled by more than the Maximum Allowable Variation specified for the package are considered unreasonable errors. Unreasonable shortages are not generally permitted, even when overages in other packages in the same lot, shipment or delivery compensate for such shortage." Id. at 2-3.

B.

The Restaurants routinely order packaged food products, including poultry products, from Sysco pursuant to contracts called Distribution Agreements. A copy of A1A Burrito Works' Distribution Agreement with Sysco is attached to the second amended complaint (Distribution Agreement). The Distribution Agreement sets forth, among other things, pricing and delivery terms. As relevant here, it provides that pricing is determined based on a fee per pound.³ The Distribution Agreement also contains Sysco's warranty that its products will "not be adulterated or misbranded within the meaning of the FDC Act" (i.e., not falsely or misleadingly labeled).

In their second amended complaint (the operative complaint), the Restaurants allege that their contracts with Sysco call for pricing to be determined based on a fee per pound. They also allege that on thirteen separate occasions over an approximately one-year period, they ordered and paid for 40-pound boxes of poultry but received less than 40 pounds. Each package was labeled, and the Restaurants were charged for, 40 pounds, but each package weighed less, ranging from 34.7 pounds (resulting in an overcharge of 5.3 pounds) to 37.3...