A San Francisco ordinance requiring health warnings on advertisements for some sugar-sweetened beverages has suffered an early defeat.  On January 31, the Ninth Circuit ruled, en banc, that the district court should have granted plaintiff American Beverage Association’s request for a preliminary injunction to prevent the ordinance’s enforcement.

At issue was the ordinance’s required rectangular warning label—similar to such labels for cigarettes—occupying 20% of any advertisement for many sugar-sweetened beverages.  The text of the warning was to read as follow: “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.”  Arguing that the ordinance impermissibly compelled commercial speech, the American Beverage Association sued and sought a preliminary injunction against its enforcement.

After the district court denied the requested preliminary injunction, the Ninth Circuit reversed.  The court concluded that, despite some recent uncertainty regarding the appropriate test, the Supreme Court’s decision in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985), required an inquiry into whether San Francisco’s warning label was (1) purely factual, (2) non-controversial, and (3) not unjustified or unduly burdensome.

In the court’s view, the ordinance was likely to fail the Zauderer test’s third prong because the warning label was unduly burdensome.  The record indicated that a warning label half the size (i.e., 10% of the advertising area) would adequately accomplish the city’s primary objectives of warning consumers about the harms of sugar-sweetened beverages and reducing their consumption.  Moreover, San Francisco failed to show that the sizeable, contrasting label would not “drown out” the rest of the advertisement and would not effectively rule out the possibility of having an advertisement in the first place.  The panel cautioned, however, that it did not intend to set a per se rule that 10% warning labels were acceptable while 20% labels were not.

Three judges concurred in the judgment but departed from the majority’s reason.  Judge Ikuta would have instead applied the framework from the Supreme Court’s 2018 decision in National Institute of Family & Life Advocates v. Becerra,  ___U.S. ___, 138 S.Ct. 2361 (2018).  Chief Judge Thomas would have concluded that the warning was not “purely factual.” And Judge Nguyen disagreed with the majority’s application of Zauderer to speech that was not false, deceptive, or misleading but still concluded that a preliminary injunction was appropriate.

Full opinion available here: https://law.justia.com/cases/federal/appellate-courts/ca9/16-16072/16-16072-2019-01-31.html