SUPREME COURT NOTEBOOK

Inherited IRAs not protected in bankruptcy

WASHINGTON (AP) - A unanimous Supreme Court ruled last Thursday that inherited Individual Retirement Accounts are not shielded from creditors in bankruptcy proceedings, a decision that clears up confusion about the status of unspent IRAs that parents leave to their children.

Bankruptcy law typically protects retirement assets from the reach of creditors. But unlike a typical IRA, money in an account inherited from a parent can be withdrawn without waiting for the new owner to retire.

Writing for the court, Justice Sonia Sotomayor said that crucial change in the status of the account makes it less like retirement savings and more like a pot of money available to pay off creditors. Otherwise, Sotomayor said, nothing would prevent someone who declares bankruptcy from using the entire balance of an inherited IRA "on a vacation home or a sports car immediately after her bankruptcy proceedings are complete."

The case involved a Wisconsin couple - Heidi Heffron-Clark and her husband, Brandon Clark - who declared bankruptcy but wanted to prevent creditors from going after the $300,000 IRA that Heffron-Clark inherited when her mother died.

Heffron-Clark argued that an inherited IRA is still technically a retirement fund because that's the way it was originally set up. She failed to convince a bankruptcy judge, but a federal district court reversed, ruling that bankruptcy law does not distinguish between a regular IRA that is saved for retirement and an inherited IRA that can be spent immediately.

The 7th U.S. Circuit Court of Appeals then ruled against the couple. The Supreme Court took up the case to resolve a split on the issue among federal appeals courts.

The case is Clark v. Rameker, 13-299.

Court rules for Pom Wonderful in dispute with Coke

By Sam Hananel

Associated Press

WASHINGTON (AP) - Coca-Cola's version of pomegranate juice is not quite the real thing, and a competitor has another chance to prove it in court.

The Supreme Court last Thursday sided with juice maker Pom Wonderful in its long-running false advertising dispute with the Coca-Cola Co., a decision that could open the door to more litigation against food makers for deceptive labeling.

The justices ruled 8-0 that Pom can go forward with a lawsuit alleging the label on a "Pomegranate Blueberry" beverage offered by Coke's Minute Maid unit is misleading because 99 percent of the drink is apple and grape juice.

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 last 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 from suing under a different law - the Lanham Act - 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.

In a statement, Pom's parent company Roll Global said the decision "will translate into higher assurance for consumers that the labels on beverage and food are accurate."

Coke released a statement saying it is "committed to clear labeling that fully complies with FDA regulations." The company said it would defend against Pom's lawsuit and show "that our product was not the cause of Pom's poor sales."

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.

Published: Mon, Jun 16, 2014