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December 9, 1986

NABISCO BRANDS, INC., River Road & DeForest Avenue East Hanover, N.J. 07936, Plaintiff,
JOSEPH GERACE, Commissioner, New York Department of Agriculture and Markets, 1 Winners Circile, Capital Plaza, Albany, New York 12235, -and- THE NEW YORK DEPARTMENT OF AGRICULTURE AND MARKETS, 1 Winners Circle, Capital Plaza, Albany, New York 12235, Defendants

The opinion of the court was delivered by: LASKER


This suit concerns the question whether Nabisco Brands Inc. ("Nabisco" or "plaintiff") product called "Blue Bonnet Butter Blend" ("Butter Blend") is mislabeled under Sections 201(1) and 202-b of the New York Agriculture and Markets Law ("the statute") as well as whether the seizure of the inventory of Butter Blend from wholesale and retail sites throughout the state pending a determination of that question by the New York State courts has deprived Nabisco of property without due process of law under the Fourteenth Amendment of the United States Constitution.

Four causes of action are asserted by Nabisco in its complaint against the New York Department of Agriculture and Markets and its Commissioner (hereinafter "the State" or "defendants"). The first alleges that the determination by the State that Butter Blend is misbranded is without statutory authority, is arbitrary and capricious, and is without factual support. The second claims that the lack of any effective means by which to test the lawfulness of defendants' action in guarantining Butter Blend deprives Nabisco of its property without due process of law. The third asserts that because the labeling is not false and misleading the State's action violates plaintiff's right to commercial free speech. The fourth contends that the defendants' actions have served no legitimate or compelling state interest and, therefore, constitute an unreasonable burden on interstate commerce. Nabisco seeks various forms of declaratory relief and a permanent injunction barring the State from taking any action to interfere with the marketing or distribution of Butter Blend in New York State.

 Presently before the court are the State's motion to dismiss the complaint and Nabisco's motion for preliminary relief barring the State from interfering with its "right to continue to sell product while the labeling question is litigated."

 In February 1986 the State quarantined a token quantity of product at a single location and instituted proceedings under the statute against Nabisco, asserting that its then-label for Butter Blend violated the statute. In accordance with the requirements of the statute, a hearing was held before an administrative hearing officer with the result that the product was found to be "misbranded" within the meaning of the statute. The hearing officer's report was confirmed by the Commissioner on July 14, 1986 in a "Final Determination" in which he held that "the labelling of the quarantined spread is misleading since the name, 'Butter Blend,' suggests the spread is either a blend of butters or that butter is the primary ingredient when, butter is only 15% of the product." Thereafter, Nabisco was ordered within forty-five days to remove from sale at wholesale and retail the product so labeled. Nabisco then sought judicial review of the Commissioner's ruling in state court proceedings under the provisions of Article 78, N.Y.C.P.L.R., where the matter is still pending.

 Meanwhile, Nabisco continued to sell its product under a revised label which is the subject of the present litigation. The State apparently regarded the revised label as so inconsequentially changed from the original label as to be its practical equivalent. Whether as a result of that reaction or for independent reasons, the State then exercised the authority granted by the statute to quarantine Nabisco's goods, and 46 seizures were made at various locations throughout New York on September 30, 1986. After a request by Nabisco for a release of the product and a further hearing was rejected by the State, Nabisco, with the State's consent, removed the quarantined goods from New York. This suit followed.

 On November 7th, Judge Palmieri, of this court granted a temporary restraining order which barred the State and its officials, pending a hearing on plaintiff's motion for preliminary injunction, from quarantining or threatening to quarantine Butter Blend as then and now labeled and ordering the State defendants to conduct a hearing in the matter expeditiously. That hearing, with regard to the current, revised label, was held on November 26, 1986.


 The Motion To Dismiss

 The State moves to dismiss the complaint on four grounds: that venue is improper in this district, that under classic rulings of the Supreme Court of the United States this court should abstain from deciding the issues presented, that under Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 79 L. Ed. 2d 67, 104 S. Ct. 900 (1984), the Eleventh Amendment bars action against the State because, according to the defendants, the plaintiff is asking this court to entertain state law claims against state defendants and, finally, that the due process claim of the complaint is without merit.

 A. Venue

 The State argues that venue in this district is improper under 28 U.S.C. § 1391(b) because, according to the State, the claims in this action did not arise in this district and all defendants do not reside in this district. Nabisco answers that the defendants have an official residence not only in the state capital, which is in the Northern District of New York, but in New York City as well. It is not disputed that the Department has offices and conducts business in this district and that some of the seizures actually occurred in this district. In the circumstances, I conclude that, under the factors set forth in Cheeseman v. Carey, 485 F. Supp. 203, 207 (S.D.N.Y.), remanded on other grounds, 623 F.2d 1387 (2d Cir. 1980), where Judge Sofaer determined that venue could properly be laid in two districts for state officials who have dual residences, venue is proper in this district.

 B. Abstention

 The State argues that under the doctrine variously set forth in Younger v. Harris, 401 U.S. 37, 27 L. Ed. 2d 669, 91 S. Ct. 746 (1971); Burford v. Sun Oil Co., 319 U.S. 315, 87 L. Ed. 1424, 63 S. Ct. 1098 (1943) and Railroad Comm'n v. Pullman Co., 312 U.S. 496, 85 L. Ed. 971, 61 S. Ct. 643 (1941), the court should abstain from determining the issues before it. It contends that, as for example in Burford, a comprehensive state regulatory scheme exists with which, under policies of commity and federalism, this court should not interfere and that, as for example in Pullman, there are presented in this case federal constitutional issues which might be mooted by a state court determination of pertinent state law. In response, Nabisco asserts that the abstention decisions relied on by the State are inapplicable in this situation in which the plaintiff has not requested the federal court to interfere with ongoing State proceedings except to the extent of asking preliminary protection against the quarantining of its goods.

 I conclude that the State's argument has merit. Nabisco's first cause of action alleges the State's action to be without statutory authority or factual basis and to be arbitrary and capricious; the third cause of action, although based on the plaintiff's right of free speech, would require this court to determine that the Butter Blend label was not false or misleading; and the fourth cause of action, although alleging an unreasonable burden on interstate commerce, also depends on this court's determining that the label is accurate. All these claims present state law questions which under the doctrine of abstention are more appropriately determined by administrative and judicial tribunals of New York than by a federal court sitting in this state.

 Abstention is not required, however, or appropriate, with regard to the allegation of the second cause of action that the plaintiff has been deprived of its property without due process of law by the September 1986 state-wide quarantine.

 C. Pennhurst: Eleventh Amendment

 In view of the determination reached above, it is unnecessary to decide whether the ruling in Pennhurst would bar the court from acting on Counts One, Three and Four of Nabisco's complaint. The State does not argue that Pennhurst's construction of the Eleventh Amendment bars the court's action with regard to Count Two and, indeed, it does not, since Nabisco seeks to enjoin state officials in this regard not on the basis of state law, but solely on the basis of the federal Constitution.

 D. Merits of the Due Process Claim

 It remains only to consider the State's contention that Nabisco's challenge to the State's action under the due process clause of the Fourteenth Amendment fails to state a claim for which relief can be granted. This question is considered in connection with the discussion of Nabisco's motion for a preliminary injunction.


 The Motion for a Preliminary Injunction

 To prevail on its motion for preliminary relief, Nabisco must establish irreparable injury and either 1) a likelihood of success on the merits or 2) sufficiently serious questions going to the merits to make them a fair ground for litigation and the balance of hardship tipping decidedly in its favor. Although, as indicated below, I conclude that Nabisco has not demonstrated a probability of success or raised questions sufficiently serious going to the merits to justify granting preliminary relief, I do conclude that Nabisco has established that the quarantining of its product causes it irreparable injury. Affidavits in support of Nabisco's motion demonstrate rather solidly that quarantining its goods will cause it monetary losses as a result of lost sales as well as its inability to salvage all of the confiscated product. Moreover, the evidence strongly supports the likelihood of its loss of business good will and market share as a result of not being able to market its product for a significant period of time. Monetary relief is not available to it in this proceeding because of the Eleventh Amendment bar and, under the ruling of the Court of Appeals for this circuit in United States v. State of New York, 708 F.2d 92 (2d Cir. 1983), cert. denied, 466 U.S. 936, 80 L. Ed. 2d 456, 104 S. Ct. 1907 (1984), the fact that Nabisco may file a damage suit against the State in the New York Court of Claims does not render the pecuniary injury it suffers remediable at law for the purpose of determining whether injunctive relief is available in a federal court.

 I come, then, to consider the merits of the plaintiff's due process claim. Nabisco contends that the September 1986 state-wide seizure of its product, which occurred without any opportunity to contest the quarantine in a pre-deprivation hearing, violated its federal constitutional right to procedural due process under Fuentes v. Shevin, 407 U.S. 67, 32 L. Ed. 2d 556, 92 S. Ct. 1983 (1972), and related cases. In answer, the State asserts first, that prior to the seizure at issue in this proceeding Nabisco had a full, pre-deprivation opportunity to be heard on the labeling question when both an administrative hearing officer and the Commissioner considered a Butter Blend label which differed only insignificantly from the present one, and second, that the decision of the United States Supreme Court in Ewing v. Mytinger & Casselberry, Inc., 339 U.S. 594, 70 S. Ct. 870, 94 L. Ed. 1088 (1950), cited with approval by the Fuentes Court, is fatal to Nabisco's claim. I do not reach the State's first argument, both because it would seem to require a finding as to the equivalence of the two Butter Blend labels -- a task which cannot be undertaken effectively without expert testimony and more evidence than is at present in the record -- and because I find the State's second argument dispositive.

 In Ewing, as here, a manufacturer whose goods had been seized by law enforcement authorities (there under the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 334(a) ("the federal act")) argued that a pre-hearing multiple seizure violated his Fifth Amendment right to due process. IN rejecting the claim, the Supreme Court ruled that:

 Discretion of any official may be abused. Yet it is not a requirement of due process that there be judicial inquiry before discretion can be exercised. It is sufficient, where only property rights are concerned, that there is at some stage an opportunity for a hearing and a judicial determination.

 Ewing, 339 U.S. at 599. The State contends that the instant case, like Ewing, presents an instance in which the Supreme Court would permit

 outright seizure without opportunity for a prior hearing. First, in each case, the seizure has been directly necessary to secure an important governmental or general public interest. Second, there has been a special need for very prompt action. Third, the State has kept strict control over its monopoly of legitimate force: the person initiating the seizure has been a government official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular instance.

 Fuentes, 407 U.S. at 91 (footnote omitted).

 Responding to the State's argument, Nabisco contends that Ewing is not dispositive because of the differences between the federal act, which was the subject of the Ewing decision, and the state statute with which we are dealing in the case at hand. According to Nabisco, there is a significant difference based on the fact that the State statute on its face authorizes a mass quarantine of goods "Whenever the commissioner finds, or has probable cause to believe, that any . . . food product . . . is . . . misbranded," N.Y. Agric. & Mkts. Law § 202-b, whereas the federal act permits such multiple seizures only in cases where "the Secretary has probable cause to believe from facts found, without hearing . . . that the labeling of the misbranded article . . . would be in a material respect misleading to the injury or damage of the purchaser or consumer," 21 U.S.C. § 334(a). Nabisco also presses the argument that Ewing was a case of apparent gross misrepresentation with regard to an alleged medicinal remedy, whereas in this case it is not disputed nor does the State allege that Butter Blend has any adverse health effects.

 I am unpersuaded by Nabisco's arguments. My study and comparison of the federal and state provisions leads me to conclude that they are functionally equivalent and that the Ewing ruling is applicable to the present case. Nor does the fact that the Ewing product was luridly advertised or was an unfortunate substitute for true medicine render Ewing inapplicable, since the Supreme Court in Ewing considered this very argument:

 One of the oldest examples [of prehearing deprivation] is the summary destruction of property without prior notice or hearing for the protection of public health. There is no constitutional reason why Congress in the interests of consumer protection may not extend that area of control.

 It is not enough to say that the vitamin preparation in the present case is not dangerous to health. This preparation may be relatively innocuous. But the statutory scheme treats every "misbranded article" the same in this respect -- whether it is "dangerous to health," or its labeling is "fraudulent," or materially "misleading to the injury or damage of the purchaser or consumer." . . . Congress weighed the potential injury to the public from misbranded articles against the injury to the purveyor of the article from a temporary interference with its distribution and decided in favor of the speedy, preventive device of multiple seizures.

 339 U.S. at 599-600, 601 (footnote omitted).

 There remain for discussion Nabisco's subsidiary arguments that the New York statute is constitutionally defective because 1) it permits quarantining of goods at the sole discretion of a non-judicial state officer; 2) it permits a post-deprivation determination of misbranding in the first instance by a state administrative official alone; and 3) it specifies no time within which a hearing shall be held.

 As to these arguments, Ewing is again dispositive. There the Supreme Court held constitutional the federal procedure for seizing of goods which authorizes a single non-judicial official -- the Attorney General -- to quarantine such goods on the recommendation of a federal agency in accordance with admiralty procedure. While it is true that, as Nabisco argues, the federal procedure requires that the validity of the seizure be determined by a federal court, whereas the state procedure does not require an initial judicial determination, the difference between the two statutory schemes is not of constitutional magnitude because, under New York law, a party whose goods have been quarantined has a right to review of the Commissioner's decision in a state court Article 78 proceeding.

 Nor does the state statute's lack of a fixed time requirement for the holding of the hearing render it constitutionally defective. There is no indication that procedures under the New York statute do not enable claimants to obtain a prompt post-deprivation hearing under normal circumstances. Moreover, in the instant case Nabisco has now had its post-deprivation hearing, and any delay in the holding of such hearing was apparently attributable to Nabisco's refusal to participate in a hearing unless the State agreed to life the seizure order pending a final determination by the Commissioner on the revised label. Nabisco cannot contend that it did not obtain a prompt hearing when it chose not to avail itself of an opportunity to present its claim.

 For the reasons stated above, the State's motion to dismiss is granted as to the First, Third and Fourth causes of action, and Nabisco's motion for a preliminary injunction is denied. There are no factual disputes relating to the second cause of action and the allegations of the complaint are assumed to be true for the purposes of the motion to dismiss. Since the decision to deny the motion for a preliminary injunction rests on a determination that Nabisco has not been deprived of due process of law, it follows that the second cause of action should also be dismissed. The rulings dismissing the second cause of action and denying the motion for a preliminary injunction are stayed for a period of one week to enable Nabisco to seek relief from the Court of Appeals.

 It is so ordered.

 Dated: New York, New York, December 9, 1986



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