Supreme Court Creates New Food Labeling Battleground, plus GMO Labeling Primer

My colleague Anne Glazer recently co-authored an article with Connie Kirby of Northwest Food Processors Association titled “Summary of Regulatory Intersection between the Federal Trade Commission and the Food and Drug Administration over the Labeling and Advertising of Food Products: Implication for Genetically Engineered Foods.”

Prepared for Oregon Governor Kitzhaber’s Task Force on Genetically-Engineered Agriculture, of which Connie is a member, the article provides a helpful summary of the jurisdictional arrangements and regulatory approach to GMO labeling by the federal agencies charged with regulating food product manufacturing. It also provides an excellent breakdown of the recent U.S. Supreme Court decision in POM Wonderful, LLC v. The Coca-Cola Company, which paved the way for a new battleground in food and beverage labeling litigation: competitor-to-competitor lawsuits.

Readers can download a PDF copy of the article here.

Also a quick shout-out to Connie Kirby and her fellow bloggers on their new “NWFPA Issues Blog.” NWFPA members can follow their commentary on the recent decision in POM Wonderful and other current topics relevant to the food industry at http://www.nwfpa.org/resources/issues-blog.

FDA Issues Gluten Free Labeling Compliance Guide

Nearly a year ago on August 5, 2013, we reported on the blog that the Food and Drug Administration (FDA) had published a final rule establishing a regulatory definition of the term “gluten-free” for voluntary use in the labeling of foods. The final rule is intended to provide a uniform definition of the term “gluten-free” so that consumers, particularly those who have celiac disease, will know what it means when they see it on the labeling of food.

The rule became binding and effective on September 4, 2013, but August 5, 2014 is the date when FDA-regulated foods labeled “gluten-free” must comply with all requirements established by the final rule. In preparation of the upcoming compliance date, FDA prepared a Small Entity Compliance Guide which restates in plain language the requirements concerning use of the term “gluten-free” in the labeling of foods.

Specifically, the guidance states that any label claiming that a food is “gluten-free” must not contain any of the following ingredients:

  • An ingredient that is a gluten-containing grain (such as wheat, rye, or barley or any of their crossbreeds); or
  • An ingredient that is made from a gluten-containing grain and that has not been processed to remove gluten. For example, “wheat flour” is an ingredient made from wheat that has not been processed to remove the naturally occurring gluten in wheat. Therefore, wheat flour cannot be used as an ingredient to make a food labeled “gluten-free;” or
  • An ingredient that is made from a gluten-containing grain and that has been processed to remove gluten, if the use of that ingredient contains 20 parts per million (ppm) or more gluten.

The claim can also appear on the labels of foods that inherently do not contain gluten, such as fresh vegetables or juices.

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"Tanning Salons" Versus "Edible Art": What is Artisan Bread?

This is a follow-up on the entry on VPN Pizza.  It results from this interview by a blogger with Eli Colvin, head baker of the MODEL Bakery in California, and Don Sadowsky, whom the interviewer identifies as a "bread pal."  Don happens to be my bread pal, too, which is how I found the interview.

A lot of the interview has to do with the question of whether there is a definitive standard for what constitutes "artisan bread".  As I argued in the prior article, in the end these are two words in the English language you're not going to get complete agreement on.  Don sums it up nicely:

Artisan bread has a cachet that is well deserved, and lots of big boys want in on it. Should we care that a lot of factory bread has the label “Artisan”? “Natural”, “Gourmet” and similar designations have been so debased that they mean nothing (if they ever had any real meaning), though people may react subliminally. Same thing with artisan?

Australia has an Artisan Baker Association, which, much like VPN for pizza, sets standards for bread.  While its name is obviously generic, it has a whimsical logo that most likely gives it a strong trademark in Australia, or anywhere else.  Indeed, it has members in Georgia, Massachusetts, New York and even Alaska.  It's a mark that could mean something to consumers, but of course there is a lot of excellent bread in the marketplace that doesn't have that mark. 

In Britain, there is the Real Bread Campaign, which has a comprehensive FAQ about its goals.  It coined the term "tanning salons" to apply to bakeries in large grocery stores that simply bake pre-prepared loaves.  Sadowsky asks,

Are the people who shop at grocery store “tanning salons” people who might otherwise shop at an independent bakery, or are they merely moving from the prepackaged bread aisle to the “artisan” aisle? I read over and over again about the decline of small bakeries, but I don’t know if it’s just that people won’t spend the money for handmade bread period, regardless of what kind of bread they find in the supermarkets.

That's not a question that will have the same answer for everyone who buys bread in a supermarket bakery.  Like it or not, the availability of bread that meets these standards is not, and is unlikely ever to be, universal.  The families you can see doing their grocery shopping, sleepy kids in tow, after midnight (the only time the parents working two jobs have time to shop), is not going to have a chance to sample Eli Colvin's bread.  Even those who might shop when the MODEL or its peers is open don't all live in what he calls a "progressive food area".  And even he has taken to using machinery for some of his production, just to keep up with demand. 

As a lifelong home baker I entirely agree with Eli that "bread is edible art."  I grew up in a home where the paintings on the wall were by my dad and my son grew up in a house where the bread in the kitchen was made by his dad.  But not everyone is going to get there. 

New York "Big Gulp" Ban Bites It For Good

The New York Court of Appeals has ruled in the case of Statewide Coalition of Hispanic Chambers of Commerce v. New York City Department of Health & Mental Hygiene to strike down, permanently, New York City's attempted ban on sugar-based beverages in containers larger than 16 ounces. 

As we suggested when the case was just before the Supreme Court (confusingly, the trial court in New York), the case really had to do with the powers of the New York Health Department, an administrative agency beholden basically to the mayor, and not to any question of the merits of its rule. 

Yet, the New York Times, as seems to be required in all reporting of legal decisions in mainstream publications, overstates the effect of the decision:

 

The Court of Appeals ruling will most likely be seen as a significant defeat for public health advocates who have urged state and local governments to discourage the consumption of high-calorie beverages, saying the drinks are prime drivers of a nationwide epidemic of obesity.

 

Not really.  It should be seen as a proper corrective to an admininstrative agency that overstepped its bounds.  The New York City Council and the New York Legislature, the Court of Appeals made clear as had the lower courts, remain perfectly empowered to enact laws to accomplish exactly what the Health Department was not empowered to do.  Whether they do it or not, of course, is up to them. 

The court decided the case 4-2, with one concurrence and one judge recused (The Times of course called the dissent "blistering", as though they are dissents that are not).  And at least one media outlet copied my prior headline (I have no idea if it was original then, of course).

As I prepare for another trip to New York, I'm glad to know that the 24-hour McDonald's up the street from my hotel will continue to serve Diet Dr Pepper in the larger size, so I don't have to walk to the 7-11 (which wasn't covered by the regulation in the first place), which is several blocks further.

POM Also Thinks Justice Kennedy Wonderful (Indeed, his colleagues, too)

In its much-anticipated decision, the United States Supreme Court last week declared that the Federal Food, Drug and Cosmetic Act and the federal Lanham Act can coexist side-by-side.  In other words, even if you comply perfectly with the FDA's labeling rules on something, you can still be sued by a competitor for a misleading label under the Lanham Act.

The facts of the case are better explained by John Oliver than by me. 

And the decision itself is remarkable for being unanimous (Justice Breyer recused himself; either he owns Coca-Cola stock or he drinks POM Wonderful every morning) and stating a relatively clear rule (and one that Congress could override if it chose; the Constitution is not present in this case). 

Note finally that the case simply gives POM Wonderful the right to continue to sue to vindicate its claim that the label was misleading. 

Constitutionality of Vermont's Recently Enacted GMO Labeling Law Challenged

In a lawsuit filed yesterday, June 12, 2014, in United States District Court for the District of Vermont, four national trade associations representing food producers and manufacturers sued the state of Vermont claiming that the state’s recently passed Act 120, which would require certain food containing ingredients derived from genetically engineered crops to be labeled as such, violates the United States Constitution.

Enacted on May 8, 2014, Act 120 amends Title 9 of the Vermont Statutes to include a new chapter 82A, “Labeling of Food Produced with Genetic Engineering.” The new law requires food that is intended for human consumption and that is offered for sale on or after July 1, 2016 to be labeled as produced from genetic engineering if the food was entirely or partially produced with genetic engineering.

The act also prohibits a manufacturer of a food produced entirely or in part from genetic engineering from labeling the product on the package, in signage, or in advertising as “natural,” “naturally made,” “naturally grown,” “all natural,” or any other similar words. Most importantly, though, unlike other recently passed GMO labeling laws in Connecticut and Maine, Vermont’s law does not require passage of similar laws by other states in order to take effect. It is the first “no-strings-attached” GMO labeling bill to pass in any state.

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Astiana's End: "All Natural" Case Against Ben & Jerry's Dismissed

The Astiana case against Ben & Jerry's, about which we've written here and here, has been voluntarily dismissed.  Since the case was no longer a class action, the parties are not required to announce whether any money changed hands and one suspects that there is an ironclad confidentiality agreement around those terms. 

 

VPN and Pizza: The Right Way To Deal with Food Claims

An article in Thursday's Wall Street Journal reminded me of a point I’ve been trying to make for years but didn’t have a good hook to do so.  Now that this idea is in print, I do, so here goes.

 

The article concerns a group called Associazione Verace Pizza Napoletana, which gives pizzerias certificates called VPN or Vera Pizza Napoletana.  Tutta Bella, a pizzeria located just a few blocks from my house, has one. 

 

The WSJ article goes into great depth about the process by which the VPN certification is awarded.  It requires one to pay a fee, attend a class and use equipment and ingredients that meet a certain standard.  The Tutta Bella website has an excellent list. 

 

But there are two characteristics of VPN designation that make complete sense to me: 

 

·         It is a purely voluntary designation awarded by a private organization--you either qualify or you can’t get it.

·         It uses a relatively strong trademark that does not try to arrogate to itself words that others should be free to use--VPN does not stop someone from saying “we serve Neapolitan Pizza”, but if you don’t qualify for VPN, you can’t say you are VPN.

 

The difference between VPN certification, and many other certifications in the food industry and elsewhere, and all the litigation that ensues over terms like “natural”, is huge.  In fact, the original title for the story I wanted to write was “Don’t Make Artisan the New Natural”.  It was suggested by this article in the Seattle WeeklyArtisan, like natural, is just a word in the language that no one should be able to appropriate to their own product, but which should not have sufficient meaning that someone can claim they were deceived to discover that, say, Dunkin Donuts is claiming its bagels are “Artisan.”  Some people decided to make complaints about this, which is all well and good, but in the end that’s a lot of work for the legal profession and doesn’t really help consumers much.

 

The guy who made that bagel complaint listed the things he did that made his bagels, in his opinion, “artisan.”  I happen to do all of them for my own bagels except I don’t turn over the bagels in the oven, just as my pizza would meet VPN standards, as described by Tutta Bella, if I had a wood oven and used fresh yeast.  And they still taste just fine without those amenities.  The difference between VPN and something like the “Good Food Merchants Guild” is the difference between a valid trademark and something that really can’t be a trademark.  You simply can’t trademark the phrase “Good Food” any more than you can trademark “Artisan”.  They’re just English words. 

 

Create standards and enforce them.  Create a novel mark and enforce it.  Publicize your mark and make people associate it with a standard of quality and a valuable experience.  That’s the recipe for getting the issues of what food meets a particular standard out of the courts and onto consumers’ tables.

 

A Cereal. A Rabbi. A Peppercorn.

What can you say about an internet contracting strategy that died?

I’m referring, of course, to General Mills’ abortive attempt to include new terms of service on all its internet and social media products, including an agreement to arbitrate and to waive any right to a class action, that came and went so fast I couldn’t blog about it until it was over. If you’re on Facebook or Twitter, you probably had a friend, like I did, who tried to turn the tables on General Mills and posted some snarky “terms of service” for themselves. As you might guess, those aren’t enforceable.

 

What about what General Mills did? Putting aside the market, especially the PR market, speaking quite loudly about it, to what extent might it have worked? That’s a critical question that involves not just contract law, but the Federal Arbitration Act and the Supremacy Clause of the U.S. Constitution, and it’s something on which the U.S. Supreme Court has a view that’s not too hard to discern. What I’ve tried to do is to analyze it in a more systematic way than simply piling on with conventional wisdom.

 

Some analysis of the case has been pretty good, in that it has pointed out the U.S. Supreme Court’s quite solicitous view of arbitration. Essentially, if the question is “is it arbitrable?” the Supreme Court has recently pretty much said, “yes.” The Federal Arbitration Act is a deceptively short and simple statute, the connection to interstate commerce that is all that is needed to come under the act isn’t hard to find in most cases and enforcing the act has a way of cutting down the workloads of courts, something the Supreme Court likes. 

 

But I wanted to focus on another recent case, a case that passed under the radar somewhat since it was decided the same day as the McCutcheon case on campaign finance, which, to mix metaphors, sucked up all the oxygen of Supreme Court coverage. In this case, Northwest, Inc. v. Ginsberg, which was decided unanimously, the Supreme Court walked a fine line between different ways in which a common law doctrine, which is technically “state law”, can apply to a contract that is governed by federal law under the Supremacy Clause. 

 

The case involved a rabbi who had the highest possible status in Northwest Airlines’ World Perks Club, its frequent flyer club. According to Northwest, he had made so many complaints, particularly about luggage, that they had kicked him out of the club. He claimed that they had done so because of an ulterior motive: to lower the cost of their club upon Northwest’s merger into Delta Airlines. Under Minnesota law, which applied, this was considered a violation of the “covenant of good faith and fair dealing”, which is implied into every contract under most jurisdictions’ common law. Northwest countered that to incorporate this provision of Minnesota common law into its contract would violate a provision of the Airline Deregulation Act that gave airlines the right to set all contract terms. 

 

The Supreme Court agreed and would not enforce Minnesota’s version of the covenant. In doing so, the court distinguished between application of the covenant to situations where the covenant was used “to effectuate the intentions of parties or to protect their reasonable expectations”, which it found not preempted, contrasted with cases where it is used “to ensure that a party does not violate community standards of decency, fairness, or reasonableness.” (internal quotations and cites omitted) The first of these are issues that go toward enforcing a contract the parties have clearly made. The second, in the Supreme Court’s view, were preempted by the express language of the federal legislation.

 

How does this apply to what General Mills sought, for a short time, to do? A good way to look at it is to break a contract down into basic constituent parts.

 

First, we have the issue of contract formation. This comes down to three things:

 

1.      Capacity to contract

2.      Offer and acceptance

3.      Consideration

 

The first issue takes care of anyone’s concerns about denying a ten-year old the right to sue because he or she clicked that they “Like” Cheerios®. Minors are among the group of people who can’t form contracts under the law; the Supreme Court is not going to enforce the Federal Arbitration Act against them.

 

Offer and acceptance goes to the question of whether clicking “I Accept” can be enough to bind you to terms you haven’t read or understood. The answer is “yes” in general. We’ll revisit that in a moment.

 

Third is the “peppercorn” in the title. There must be an exchange of value or of promises in order to have an enforceable contract. A coupon or a prize can certainly be enough; the classic definition of the consideration necessary to enforce a simple contract is indeed a peppercorn. Can it be an electronic photo of a peppercorn? That might be a close question, but the indications are again the Supreme Court might defer to a non-discriminatory state law.

 

Once you have a contract under state law, what we learn from the arbitration cases and the case of the flying Rabbi is that you won’t be able to use state laws to save you from enforcement of an arbitration clause. You won’t be able to have it declared “unconscionable” or “unfair or deceptive”, because Congress has declared that arbitration clauses are the opposite. And you won’t be able to apply a broader definition of the covenant of good faith and fair dealing, one that might have the effect of invalidating the clause in any way. 

 

Similarly, you won’t be able to use any of those doctrines to invalidate the effect of clicking “I Accept”, at least so long as you had the theoretical opportunity, whether you exercised it or not, to read the terms before you did so. 

 

If no one has told you to be careful when you click on things on the internet, consider yourself warned (and wonder how you’ve missed that message so far). 

Locavore To the Max

Health economist Jane Sarasohn-Kahn has an interesting take in a new article on her Health Populi blog about "km zero", a food movement she describes as "the future of food."  Basically, it takes locavore standards to the max, seeking to source food as close to you as possible, for the freshest and the best ingredients, including home grown food and CSAs. 

I'm super prejudiced here, as Jane has been my friend for well over 40 years (we performed James Thurber's "The Macbeth Murder Mystery" together in high school), but sourcing fresh food and local food and good food are all on the same scale to better nutrition as well as better taste.  Of course, it works better in somewhere like Florence, which she writes about, or California, than it might in areas where most agriculture is large-scale monoculture, but it's possible to put in an herb garden or a kitchen garden almost anywhere. 

My favorite local agriculture is actually done at an Italian restaurant near us, Perche No, where the herbs and the tomatoes are grown on the roof.  Since it's walking distance from home, there's not much of a carbon footprint in going there.  The food is beyond spectacular, too.  As, apparently, is the food at Tastevere Kmzero, a Rome restaurant that prides itself on using local ingredients and is a takeoff on its neighborhood, Trastavere.  Of course, it might take a bit more carbon to get there. 

New Bipartisan Bill Introduced Regarding GMO Labeling

Last week U.S. Representatives Mike Pompeo (R-KS) and G.K. Butterfield (D-NC) introduced a bipartisan bill that would amend the Federal Food, Drug, and Cosmetic Act with respect to foods produced from, containing, or consisting of a bioengineered organism. The result has been either applause or outrage depending on which side of the GMO labeling debate you find yourself on.

Titled the “Safe and Accurate Food Labeling Act of 2014,” the bill, if passed, would establish a federal labeling standard for foods with genetically modified ingredients and give sole authority to the Food and Drug Administration (FDA) to require mandatory labeling on such foods if they are found to be unsafe or materially different from foods produced without genetically modified ingredients.

Specifically, the bill provides that biotechnology companies developing genetically modified ingredients for use in food products must submit a premarket approval notification to the FDA at least 210 days before the bioengineered organism is first introduced into interstate commerce. The premarket approval process outlined by the bill looks quite similar to the GRAS Notice Program currently in place for food additives.

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The 2014 Farm Bill: "Almost a Miracle" and "Like a Swiss Army Knife"

Some helpful information about the new Farm Bill.  

First, the summary material from the Ag & Food Law Blog, which quotes Rep. Collin Peterson (D-Minn)as saying that getting it passed was "almost a miracle." 

Then, two tools mentioned in their blog post, both from the Department of Agriculture.  First, a summary that is headed with a picture of a Swiss Army knife, accompanied by President Obama's quote that that was what the bill was like.  Second, a webpage from the Economic Research Service, also summarizing the bill and, as their name implies, doing some work on its economic implications.  The first one provides the administration's own take on the bill, what it means and how they interpret it.  The second one includes some more objective infomation, particularly comparing it to the last bill. 

POM Finds Class Decertification Wonderful

In a recent decision, Judge Dean Pregerson of the U.S. District Court for the Central District of California decertified the class in an action against POM Wonderful over health claims about its pomegranate juice. You know the juice, it’s the one in the cooler section of the grocery store in the glass jar that looks like a purple snowman. Judge Pregerson had previously certified the class, but after discovery, particularly after plaintiffs’ expert’s testimony on damages, POM Wonderful had moved to decertify and, as the headline tells you, the court agreed. 

The decision to decertify was rooted in a recent U.S. Supreme Court case, Comcast Corp. v. Behrend, which dealt with the relationship between class certification and claimed damages. The court followed the Ninth Circuit’s interpretation of Comcast, which held that, in determining whether class certification was appropriate, “Plaintiffs must be able to show that their damages stemmed from the defendant’s actions that created the legal liability.” When applied to something that costs only a few bucks, this proposition is not easy to demonstrate.

 

Plaintiffs here offered two different theories, neither of which came close to persuading Judge Pregerson. First, the “Full Refund Model”: as plaintiffs’ expert testified: “[I]f the health benefits were what caused the purchase, at least predominantly, then a [full] refund would be appropriate”.   As the Church Lady might say, isn’t that special? And under the Full Refund Model, damages would be $450 million, an amount that would support some really nice legal fees for class counsel. POM argued, and that court agreed, that that model took no account of the benefits class plaintiffs would have received, such as hydration, calories and vitamins, even if the allegations about the untrue health benefits were proven. Heck, someone might simply want the bottle to use to make a snowman for a school project. There is no damages model that gets a plaintiff class those benefits for free.

 

More after the jump . . .

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A "Vibe" is Not Enough: Ben & Jerry's "All Natural" Case Loses Class Certification

You'll remember the scene from "Casablanca." Ilse (Ingrid Bergman) comes in and Rick (Humphrey Bogart) says, "Your unexpected visit isn't connected by any chance with the letters of transit. It seems as long as I have those letters, I'll never be lonely." That's sort of how I feel about "all natural" product labeling litigation. So long as those cases exist, perhaps I'll never be lonely. But will they always exist? The latest decision in our old friend, Astiana v. Ben & Jerry's Homemade, Inc., provides me with some optimism I might be lonely again.

As you'll recall from our post when this case was first filed, the plaintiff was upset because, she claimed, dutched cocoa was somehow an artificial product. We pooh-poohed that notion, but, presumably for reasons of judicial economy, Ben & Jerry's chose to settle the case.

In the meantime, though, the Ninth Circuit Court of Appeals decided Dennis v. Kellogg Co., which greatly restricted the terms under which settlements of similar cases could be approved. In particular, the case limited the use of the cy pres doctrine, which would dispose of unexpended settlement funds, to charities that benefit the same goals as the unrepresented and unfound members of the plaintiff class. The court said,

Thus, appropriate cy pres recipients are not charities that feed the needy, but organizations dedicated to protecting consumers from, or redressing injuries caused by, false advertising. On the face of the settlement's language, "charities that provide food for the indigent" may not serve a single person within the plaintiff class of purchasers of [the allegedly offending product].

Dennis was decided by the Ninth Circuit literally between the time the court in Astiana had preliminarily approved the class settlement and the date of the hearing on final approval. The court, cognizant of the decision, asked the parties to go back and revise their settlement to one that could be approved in light of Dennis. This they were unable to do, and the settlement collapsed. The plaintiffs then moved to certify the class. And got pounded by the court.  After the jump, you'll see how.

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Food Package Nutritional Labels Set for an Overhaul

The Nutrition Facts panel found on many food packages, that most of us have been scanning in grocery aisles for the past 20 years, is expected to undergo some significant changes starting this week. According to a recent press release from the U.S. Food and Drug Administration (FDA), the agency is planning to update the Nutrition Facts label based on the latest science-based nutrition recommendations. 

Sources indicate that the changes may be announced as soon as this Thursday, when First Lady Michelle Obama is scheduled to speak at the fourth anniversary celebration of the “Let’s Move!” campaign. Bookmark this site for our report once the proposed Nutrition Facts changes are announced.

By way of background,  the Nutrition Facts panel has allowed consumers to have consistent nutritional information and to make healthier choices, since passage of the Nutrition Labeling and Education Act of 1990 mandated nutrition labeling. In addition, throughout the years, mandatory nutrition labeling has encouraged many companies to change their ingredients to make the foods more healthful and thus more appealing to many consumers.

However, in light of new knowledge about nutrition and more evidence that people actually consult the labels of food packages, FDA officials believe it is time for an overhaul. Paula Trumbo, Ph.D., acting director of FDA’s nutrition programs staff explains that “updates are currently being assessed to address such factors as current nutrient recommendations, public health concerns based on recent data on food consumption, and the agency’s desire to make this information as clear and useful as possible.”