Our distinguished alumnus, founder and former fearless leader, Ken Odza, has sent out an invitation to a FREE ABA Roundtable this coming Thursday, December 12.
The topic is criminal prosecutions of food companies and their officers.
Contemplaying how one might become the subject of a prosecution may not exactly something that will fill you with comfort and joy this holiday season, but the topic is obviously both timely and important.
You can sign up HERE.
Did I mention it is free?
Of particular interest were the mix of goods, the markup. the volume he buys each week and that he dropped the "P" from Pirate Joe's when he was first sued.
My real question is what would happen if I walked into my local Trader Joe's (and I'm a big fan) wearing one of his "I'm Shopping for Pirate Joe's" t-shirts.
Following up on our recent post here on the FDA proposing that trans fats no longer be recognized as "generally accepted as safe" and the potential ensuing ban, I had the opportunity last week to speak with Colin O'Keefe of LXBN on the issue. In the brief interview, I share my thoughts on how the FDA arrived at this point and explain why I believe the industry is prepared for a move away from trans fats.
Sad news out of Oregon.
Much of the work of detecting the cause of outbreaks is art, not science, and by all accounts he was an artist.
Recently, there have been both positive and negative developments in California regarding "All Natural" consumer class action litigation. By way of background, these cases are typically brought under California's Unfair Competition Law (Bus. & Prof. Code §17200), False Advertising Law (Bus. & Prof. Code § 17500) and Consumer Legal Remedies Act (Civ. Code §1750) regarding alleged false and misleading labels on food and beverage products.
Plaintiffs have begun to expand the focus of this litigation into new industries, including cosmetics, personal care products, and home cleaning supplies. The list of challenged ingredients also continues to expand. Additionally, some plaintiffs are pursuing claims simply where the product label contains the term "natural," even if it did not state "100% Natural” or "All Natural.”
On the other hand, there have been a handful of recent court decisions demonstrating that a motion to dismiss these consumer class actions can succeed, including under the “reasonable consumer” test, the primary jurisdiction doctrine and standing. This is a positive trend in California, given that in many earlier cases courts routinely denied motions to dismiss, leaving defendants with two bad options—further litigation or costly settlement.
For more information on this topic, including a list of the ingredients often challenged in these lawsuits, see my article, "All Natural: Label Making: Are You a Class Action Target in California."
Last week, the U.S. Food and Drug Administration (FDA) announced in a Federal Register notice that it has made a preliminary determination that partially hydrogenated oils (PHOs), a major source of artificial trans fat in processed foods, are not generally recognized as safe (GRAS) for use in food. The November 7, 2013 notice includes the opening of a 60-day public comment period.
Under section 409 of the Federal Food, Drug, and Cosmetic Act, any substance intentionally added to food is a food additive subject to premarket approval and review by FDA, with some exceptions. The exceptions include substances “generally recognized as safe,” or GRAS, because they are generally recognized by experts qualified by scientific training and experience to evaluate its safety, as having been adequately shown through scientific procedures (or, in the case of a substance used in food prior to January 1, 1958, through either scientific procedures or experience based on common use in food) to be safe under the conditions of its intended use. PHOs, which are the primary dietary source of industrially-produced trans fat have a history of use as food ingredients and have long been considered GRAS ingredients by the food industry.Continue Reading...
Based on preliminary results from Tuesday’s election, it appears that Washington State’s hotly debated Initiative 522 (I-522) concerning the labeling of genetically-engineered foods has gone the way of California’s Proposition 37. Washington officials reported on Wednesday, November 6, 2013 that voters had rejected the measure, 54% to 46%. California’s similar labeling measure, Proposition 37, was rejected by California voters in November 2012.
County by county results show that certain counties in Washington including, King, Whatcom, and Jefferson, were largely in favor of passing I-522. However, the measure lost heavily in the southwest, central and eastern regions of the state.
If it had passed, I-522 would have required that any food offered for retail sale in Washington that was or may have been entirely or partly produced with genetic engineering to be labeled as follows:Continue Reading...
Our firm is really excited to send a team of women food law lawyers to participate in the Women in Agribusiness Summit taking place in Minneapolis this year. We're currently on day 2 of the program, with great presentations on the schedule from representatives of Land O'Lakes, General Mills, Dow AgroScience, Zoetis, Monsanto, Cargill, Syngenta and many more.
Our Nicole Hancock presented yesterday along with Jacque Palmer, general counsel at Syngenta, on the topic of agribusiness litigation trends and best practices. The program concludes this evening with an executive roundtable moderated by Carol Kitchen, Senior Vice President/General Manager of Global Ingredients at Land O'Lakes, Inc.
Stay tuned to this blog for a follow-up report on the key food law issues discussed at the conference.
When innovation meets the law, the results are often surprising.
Now consider Pirate Joe's, a business located in the upscale Kitsilano neighborhood of Vancouver, B.C.. I will let them describe their business model in their own words:
Pirate Joe's is an unaffiliated unauthorized re-seller of Trader Joe's products (we are being sued). We stock what we are asked to stock by Trader Joe's lovers who don't always have the time (or a car or a passport) to head south to Bellingham (the nearest Trader Joe's). We buy retail from Trader Joe's then import everything legally and add Canadian compliant ingredient and nutrition facts labels. We have to pay the rent and the help (and the label supplier) so prices are higher than at Trader Joe's. We have no set markup - every product we carry has different import and transport issues so we kinda just wing it until it seems fair to you and also makes business sense to us. If something seems overpriced, please tell us - we're sensitive about it. ;-)
Trader Joe's has no locations in Canada. Canadians who live in British Columbia's Lower Mainland can access the store at 2410 James Street, Bellingham, Washington or the many located further south in the Seattle metropolitan area. But this requires them to travel, to have a passport, to brave the line at customs, to use American money, etc. Pirate Joe's will do all that for them, and allow them to buy in comfort using Canadian money in Kitsilano.
One way Trader Joe's could look at this is they were getting a free ride into the Canadian market. Pirate Joe's paid them exactly what they would have been paid had the same customers all driven down to Bellingham and bought the products there. If Trader Joe's wanted to enter Canada, it would have to deal with export and import issues, Canadian labeling issues, Canadian taxes, Canadian employment law, the foreign exchange issue, and the price of Vancouver real estate, to name just a few. Instead, they just make sales at retail to Pirate Joe's, owe him nothing for the service of advertising their products in Canada in the best possible way, or for affixing Canadian labels to the goods, handling the taxes, leasing space, putting up a website or anything else.
Instead, Trader Joe's sued Pirate Joe's in federal court in Seattle.
And, so far, has lost.
Pirate Joe's is actually just an assumed name of Michael Norman Hallatt, who is a Canadian citizen with permanent residency in the United States. Thus, Trader Joe's could sue him in the United States and in federal court.
The basic claim was a Lanham Act claim. This is the main trademark act in the United States, but the question that Judge Marsha Pechman had to answer was whether it has extraterritorial impact. In other words, in these circumstances, did the purchase of these goods in the United States at full retail price and importation, legally according to Canadian customs, into Canada violate American law?
Under Ninth Circuit precedent, a Lanham Act claim can have extraterritorial effect under a three prong test:
- The defendant's action creates some effect on American foreign commerce
- The effect is sufficiently great to present a cognizable injury to plaintiff under the Lanham Act
The interests of and links to American foreign commerce are sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.
The court determined, on a motion to dismiss, that Trader Joe's could not meet these tests. The court relied on a Ninth Circuit decision involving a fight between Mike Love and Brian Wilson, both former Beach Boys. Wilson had had a CD that included covers of old Beach Boys hits distributed with the Daily Mail in England to promote his "Smile" album and concerts. Love, who had the right to the Beach Boys trademarks, sued. But the Ninth Circuit found that any injury to him was not in the American market. Similarly, Trader Joe's could not show that it was injured at all in the American market, since it had received literally as much money as it would have if Pirate Joe's customers had crossed the border and bought the goods in Bellingham.
A far more interesting question would be what would happen if Trader Joe's wanted to open stores in Canada. But that would represent issues of Canadian law that should be decided by Canadian courts. Here, Judge Pechman's decision that Pirate Joe's is not damaging Trader Joe's in the United States seems correct.
How can Pirate Joe's survive, given that it obviously has to mark up Trader Joe's prices significantly to cover its costs and some profit? The answer lies in the price differential between the United States and Canada. A decade ago, I spent a month in Canada when the Canadian dollar was at about 62 cents U.S. Now it is essentially par, but Canadian prices have risen, not fallen, as the value of their dollar has increased. So Canadians are just used to paying one-third or more higher prices for the same goods in the U.S. Add in the convenience and cachet of the Trader Joe's goods available on a store shelf in Kitsilano, and the business model makes some sense.
Detecting fraud is art, not science. Harry Markopolos, the man who figured out Bernie Madoff's fraud well in advance of the regulators, was a competitor of Madoff's, obsessed with figuring out why Madoff's results were so stable in all markets. Because of his obsession, and his instinctive knowledge of those markets, he knew that there weren't enough options in the world for Madoff to trade if he was telling the truth about his strategy. So it had to be fraud.
What does this have to do with honey?
Consider the case of two young German businsspeople, sent on their first mission abroad on behalf of food conglomerate Albert L. Wolff GmbH. One ends up in prison and the other under house arrest before they both left the United States for good. Why? They were involved in bringing in honey from China without paying the stiff tariffs on such honey. One way in which they were found out is quite similar to how Markopolos figured out Madoff: there wasn't enough honey available from the places they claimed it was imported.
The raid on the ALW office on North Wabash Avenue occurred seven months later, after U.S. honey producers had warned Commerce and Homeland Security that companies might be smuggling in cheap Chinese honey. Low prices made them suspicious. So did the large amount of honey suddenly coming from Indonesia, Malaysia, and India—more, in total, than those countries historically produced.
Just as Bernie Madoff could not have made the trades he claimed he was making, so too it was simply impossible that more than 100% of the annual production of honey in three large countries could have been sent to the United States for export, let alone to a single company. In this case, the complaints to the government (which, after all, had a fiscal stake in the matter) were heeded and at least some investigations launched and people jailed.
Honey is a major issue today, both because of the issues with regard to disappearance of honeybees and because of illegal and adulterated imports. What can one do?
One organization that has the right idea is True Source Honey. They will certify the origin of honey on products, authorizing the placement of a trademark on honey that meets their standards.
Of course, if you can, you can just know where your honey comes from. My honey comes from pretty much my own backyard. Our local Seattle Urban Honey, sold at farmers' markets, will show you exactly where the hives are for each jar of honey, which is designated by zip code. You can taste the difference between zip codes, too. One of the hives is close enough to our house that when I see a bee in my yard I can expect where it's heading to make honey.
The FDA's final rule on gluten-free labeling was published in the Federal Register on August 5, 2013, with a mandatory date for compliance of one year thereafter, or August 5, 2014. But the FDA makes clear that this is an outside date. "However, as stated, FDA anticipates that manufacturers are likely to follow the requirements of the final rule as soon as possible." (emphasis supplied).
Imagine you're a consumer who suffers from the travails of celiac disease. Indeed, let's not imagine one, let's take a real one, a paralegal in my office who always orders the gluten-free option at our monthly lunches. Here's what she says is important about the rule:
As a celiac grocery shopper for the last three years, I was limited to the outside aisles. But now that food manufacturers are producing more gluten free products, I can once again shop in the once barren inner aisles. Clear, uniform rules on gluten free labeling are important. It means less time spent reading labels and less risk of a gluten reaction (usually lasting about 10 days). I can spend more time with family and friends and don’t have to worry about my reading glasses.
When she talks about "outside aisles", she means the meat, dairy and produce departments. The inner aisles are prepared and packaged foods. She's looking forward to shopping in the inner aisles again like everyone else.
Here's the deal: as the FDA knows, most of the goods that comply with the new rule (i.e., do not have wheat, rye or barley as an ingredient and contain less than 20 parts per million of gluten) are already known to be gluten-free to manufacturers. But right now, a "gluten-free" label does not need to be one that complies with the rule, yet a consumer like my paralegal has no way of knowing this until next August.
Why make her wait?
And wouldn't a manufacturer get serious bang for the buck by putting out, as soon as it can, a label that says, in essence, "Gluten-Free: Complies with new FDA Rule"?
And do it in big type, so she doesn't need her reading glasses. To quote a very wise man, "Make It So".
There is a concept in the law called puffery and it’s great.
I cannot prove that to you that it’s great, however, because a legal concept’s greatness or lack of greatness is something entirely personal. And that is an excellent introduction to the concept.
The case that brings up “puffery” is Viggiano v. Hansen Natural Corp., decided by the U.S. District Court for the Central District of California, which is in Los Angeles. Although the case covers a number of important issues, the one I want to focus on is the claim that labeling the soda at issue with the word “premium” breached an express warranty under Section 2-313 of the Uniform Commercial Code. The court described the claim as follows:
Viggiano also alleges that Hansen’s statement that the beverage is a “premium soda” is a warranty that has been breached because the soda has “less than premium ingredients [due to the] presence of sucralose and acesulfame potassium.”
The court would have none of it.
The term “premium,” however, is mere puffery; it has no concrete, discernable [sic] meaning in the diet soda context, and thus cannot give rise to a breach of warranty claim.
The court was almost entirely right. “Premium” clearly cannot give rise to a breach of warranty claim; it is not, as Section 2-313 requires, “An affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain . . . .” But it does have a “discernible” meaning and anyone reading this blog knows what that meaning is, instinctively. It means you’re going to pay a higher price. Why? Because the retailer, wholesaler and manufacturer all believe they can get you to pay a higher price. If they are right, you will pay the higher price whether there is any inherent extra value in the goods or not. If they are wrong, the price will be lowered. That is the unbending law of economics.
(Parenthetically, I think it's quite likely that Hansen's called its diet soda, and also its club soda, which is pictured here, "premium" is be because its main line of sodas is marketed as "Natural Cane Soda" because it uses cane sugar instead of HFCS and they needed a word to fit in the same position on the logo of the sodas that don't use sugar.)
But why do I think puffery is great? Because it helps leaven the conversation. It allows us to use poetry in advertising, not bureaucratic double-speak. And it stops unworthy lawsuits in their tracks.
Consider the world without puffery. I said we could never know that “puffery’ was “great”, but imagine if Kellogg’s could not have Tony the Tiger tell us that Frosted Flakes were "gr-r-reat!”
Or imagine the lawsuit when a flex-fuel train, running out of coal or diesel crossing the mountains, sues Good ‘n’ Plenty because their engine would not run on candy-coated licorice. I don’t want to live in that world.
We'll have plenty more about the FDA gluten-free labeling rule that came out Friday.
While I'm still digesting the 95 pages of the release, I wanted to point out something in the FDA's update that echoed what was in my last entry. In describing why the FDA chose 20 ppm as the level below which an item would be deemed "gluten-free", the FDA said,
This is the lowest level that can be consistently detected in foods using valid scientific analytical tools.
Well, exactly. We can't measure what we can't measure.
California federal courts now appear positioned to lead the way nationally on the issue of whether food products containing genetically modified ingredients, commonly referred to as “GMOs” can be labeled “All Natural.” Just last week a federal judge in Colorado stayed the case of Nicole Van Atta v. General Mills, Inc. (Case No. 12-cv-02815-MSK-MJW) (PDF), pending the Food and Drug Administration’s (FDA) input on this very issue recently sought from the agency by a California judge in the case of Cox v. Gruma Corp. (Case No. 12-CV-6502 YGR) (PDF).
California, a hotbed of consumer litigation activity due to the state’s expansive consumer protection laws, has become a particularly common venue for consumer class actions alleging misbranding and false advertising regarding the use of “All Natural” claims. In particular, many cases have been filed challenging a manufacturer or retailer’s use of “All Natural” labels on products containing GMOs. These lawsuits are typically brought under California’s unfair competition and false advertising laws (referred to as the “UCL” and “FAL” or §§ 17200 and 17500 of the California Business and Professions Code).
Cox v. Gruma Corp. (“Cox”), the case that lead to the Colorado court’s stay, is a class action lawsuit filed in December 2012 in U.S. District Court for the Northern District of California against Gruma Corporation, the manufacturer of Mission® Tortilla chips. The complaint in Cox alleges that the product’s labeling is false and misleading because it claims to be “All Natural” when it is not in fact natural due to the involvement of genetically modified corn seed in the product’s manufacture.Continue Reading...
* But then again, I'm a lawyer.
In the fifth episode of "The Hitchhiker's Guide to the Galaxy", by Douglas Adams, Peter Jones played The Book. At one point, The Book gives some "helpful" information about the universe. First, that it is infinite. Next, it goes on to prove, through comical science and mathematics pulled out of Douglas Adams' unique brain, that the number of imports, exports, rainfall, population and monetary units in the universe is, in each case, "none."
My favorite is the explanation of why there is no population.
It is known that there is an infinite number of worlds, but that not every one is inhabited. Therefore, there must be a finite number of inhabited worlds. Any finite number divided by infinity is as near to nothing as makes no odds, so if every planet in the Universe had a population of zero then the population of the Universe must also be zero, and any people you may actually meet from time to time are merely the products of a deranged imagination.
Douglas Adams died in 2001, eons too early at the age of 49, but I am fairly certain he would have given a rueful chuckle to the case of Pardini v. Unilever US, Inc., decided by the United States District Court for the Northern District of California on July 9.
The case involved "I Can't Believe It's Not Butter! Spray". This is a product, as the court takes judicial notice, that is "dispensed via manual pump, with each pump delivering a squirt of oil."
According to the complaint, the first three listed ingredients are water, liquid soybean oil and sweet cream buttermilk, the latter of two presumably including fat. The plaintiff claimed that each bottle contains 771 calories and 82 grams of fat, making fat 24% of the product by weight. Nonetheless, both the packaging and the "Nutrition Facts" claim "0 Calories" and "0 Fat". Which plaintiff then claimed violated the Federal Food, Drug and Cosmetic Act, 21 USC § 301 et seq. So can a product that is nearly one-quarter fat legally claim no fat?
The key to this is serving size. The plaintiff claimed "that Defendant used unlawful serving sizes so that it could round down to zero ICBINBS's fat and calories per serving." The court, however, held that the serving sizes were lawful under FDA regulations, even though their effect is exactly what the plaintiff claimed. The plaintiff argued that the FDA recommended serving size for a spray is 0.25 grams but the serving size for this product is 0.20 grams. But one pump of the spray is in fact 0.20 grams. As the court said, "it would not make any sense for Defendant to list a serving size of 1.25 sprays (0.25 grams), since a consumer could not dispense a quarter of a spray." But even if 0.25 grams were used, "so long as the basic laws of physics apply, there is no possible way that 0.25 grams of any substance could have more than 0.5 grams of fat." (emphasis supplied)
The half a gram issue derives from the remarkably clear statement in 21 CFR § 101.9.(c)(2) defining what is to be disclosed on a label as to fat:
(2) "Fat, total" or "Total fat": A statement of the number of grams of total fat in a serving defined as total lipid fatty acids and expressed as triglycerides. Amounts shall be expressed to the nearest 0.5 (1/2) gram increment below 5 grams and to the nearest gram increment above 5 grams. If the serving contains less than 0.5 gram, the content shall be expressed as zero.
(emphasis, again, supplied)
In other words, Unilever not only was entitled to claim that its spray had zero grams of fat per serving, it was required to. As you contemplate the idea that a product that is nearly 25% fat by weight must, by law, make the claim that it has no fat, consider whether Douglas Adams had a gift for understatement.