Avoid Unnecessary Labeling Claims - Ensure That Cooking Instructions Are Adequate
Bill Marler funded independent research at the University of Idaho to study the adequacy of cooking instructions found on the packaging on various retail brands of frozen ground beef patties. The research was published this month in Food Protection Trends.
The study found that three of the packages included cooking instructions that “would be inadequate to produce a safely cooked patty.” Most of the issues raised in the article center on the variability in cooking techniques, e.g., pan frying, using a propane grill, or preheating, and variability in cooking temperatures. Suggested solutions for improved cooking instructions are included in the study.
For food sellers trying to minimize or avoid claims, adequate cooking instructions are a good thing. Even if food-borne illness claims cannot be avoided, the scope of the claims and damages can be limited by providing adequate, "bullet-proof", cooking instructions.
Kudos to Bill Marler for “putting skin in the game” and funding this study.
Energy Drink Maker Sued Over Alleged Health Risks
The maker of Redline energy drinks has been sued in federal court in California. The plaintiff, Zack Aaronson, is seeking class action status for his lawsuit against Vital Pharmaceuticals, Inc. (operating under the trademark VPX).
The plaintiff claims that VPX failed to adequately warn consumers of potential side effects and health risks associated with consuming VPX’s Redline energy products. Among other things, the plaintiff alleges that consumers have reported adverse side effects including chills, excessive sweating, vomiting, convulsions, chest pains, and rapid heartbeat.
According to VPX’s website, Redline is available as energy drinks and gel caps. The company touts the products as “the first physique-transforming matrix to coax your body to burn fat through the ‘shivering response.’”
The case is Aaronson v. Vital Pharmacetucals, Inc., S.D. Cal. Case No. 09-1333. A copy of the complaint is available here.
Trademarking Green/Eco-Friendly Food - What You Need To Know
By Guest Blogger Jere Webb
It is evident that virtually every business now is trying to position itself as being “green”. For a discussion of restrictions on “green advertising”, particularly the FTC’s green ad guidelines (the “Green Guides”), and similar efforts at the state level, see “Green Claims Advertising – What You Can Say and What You Can’t”. The FTC is reviewing the Green Guides and likely will amend them in the near future. For comments submitted in the review process and additional information, see Green Guides.
The newer arena is green trademarks. The United States Patent and Trademark Office is now routinely rejecting, based on descriptiveness, multiword trademarks, that start with or contain the word GREEN. An example is the mark GREEN JOURNEY for hybrid cars. But in the same application, the applicant sought to register for clothing, and the Trademark Office accepted the mark, but with a disclaimer of the word GREEN. It found that the two word mark was merely “suggestive” of clothing, not “descriptive”. See "Green" Trademarks Face Hostile Climate in USPTO.
For an example of a green mark that passed muster, the Trademark Trial and Appeal Board (TTAB) recently reversed an examining attorney’s descriptiveness refusal for the mark GREEN INDIGO for clothing, finding it to be an “incongruous” term for clothing and therefore merely suggestive and not descriptive. The case is In re Jones Investment, Inc. (TTAB Jan. 21, 2009.)
The lesson is: If you want to include the word “GREEN” in a trademark, some careful review and advice from a trademark lawyer is in order.
Want to read more? See “Eco-Friendly Claims Go Unchecked” (USA Today June 22, 2009). The FTC’s brochure “Sorting Out Green Advertising Claims” can be found here.
Participate in USDA Governance in Your County
The Stoel Rives Agribusiness Group has sent out an alert reminding farmers and ranchers of the USDA's program that allows you to participate at the county level in discusssions relating to agricultural decisions in your community. The link to the website with materials needed to submit nominations (which opened on June 15) is here.
Ken, Bryan and I are all members of the Agricubusiness Group, along with lawyers experienced in all manner of topics related to agriculture. You can subscribe to its alerts here.
Sustainability and Consumer Confidence in Food Safety
For food sellers interested in promoting a “sustainable” brand and inspiring food safety confidence in their consumers, meet Food Alliance. Food Alliance “is a nonprofit organization that certifies farms, ranches and food handlers for sustainable agricultural and facility management practices.” It bills itself as “the most comprehensive certification program for sustainably produced food in North America.”
I’ve recently joined the Food Alliance Board of Directors (in fact, I’m headed to Portland today for a board meeting). My hope is to assist Food Alliance in becoming more widely accepted and mainstream. Credible third-party certification, such as Food Alliance provides, offers a transparent pathway to sustainability of our food supply and consumer confidence in food safety.
Food Alliance takes a holistic approach that is broader and more dynamic than organic certification, which does nothing to address food contamination from pathogens such as Salmonella, E. coli, and Listeria (in fact, many experts believe that organically grown food may be more likely to be contaminated by these pathogens). By way of example, Food Alliance certification standards, among other things, address “soil and water quality,” “ensure the health and humane treatment of animals,” “conserve energy and water,” and “ensure quality control and food handling safety.”
For more on why a holistic, independent third-party certification correlates with food safety (and accompanying consumer confidence), I’d suggest reading this op-ed piece co-authored by Food Alliance Executive Director Scott Exo, which was written earlier this year in the wake of the PCA peanut recall.
Melamine in Pet Food and the Limits of the Law
Ken's blog post about taking the time to figure out what insurance limits are right for you resonated with me as I was reading about the plea agreement in the melamine pet food debacle. This was the likely last act in a tawdry story of greed and fraud that led to the deaths of thousands of cats and dogs and placed nearly every pet owner in fear. Stephen S. Miller and Sally Qing Miller, owners of ChemNutra, Inc., pled guilty to two misdemeanors in federal district court on June 16, and the prosecutors have recommended two years of probation and fines of $5000 for each of the Millers and a $25,000 fine for the company. The Chinese companies indicted at the same time remain outside the reach of the U.S. justice system.
Pet food companies had previously settled with pet owners for $24 million. That settlement was presumably funded by insurance, and according to one news report, ChemNutra contributed to the settlement in some way (more contemporary news accounts differ). Menu Foods, the pet food supplier in the eye of the storm, sued ChemNutra and acording to a news report at the time:
Menu Foods, which is based in Canada, acknowledged that it has been using wheat gluten from two suppliers in the United States and Europe for many years, but had not experienced any problems until it also started buying the ingredient from ChemNutra.
"Last fall, (Menu Foods) added a third supplier, ChemNutra, and the issues we have experienced date to that time," the spokesman said.
I have been unable to find more about Menu Foods' lawsuit, but it is unlikely Menu Foods was made whole for all of its damages.
What has been alleged is a scheme by the indicted but unpunished Chinese companies, Xuzhou Anying Biologic Technology Development Co. and Suzhou Textiles, Silk, Light Industrial Products Arts and Crafts I/E Co., to use melamine to fraudulently increase the apparent protein level of wheat gluten. This in turn led to pet deaths.
Bryan has previously blogged about EMA,. or economically motivated adulteration. And Ken listed among his five New Year's Resolutions:
- Review and Revise Supply Chain Agreements,
- Reassess Suppliers; and
- Increase Scrutiny Against Fraudulent Imports
This is of course excellent advice. I would simply add another one:
- Recognize the Legal System Can Only Do So Much
By all accounts, the Chinese suppliers were fooling everybody: Chinese authorities, U.S. authorities, the importers and everyone who bought from them. ChemNutra may have had a great contract with them, placing on them the duty to comply with all laws and the duty to indemnify ChemNutra if anything went wrong. Menu Foods, in suing ChemNutra, which was a new supplier for it, indicated it had the same provisions in its contract. The other pet food manufacturers, distributors and retailers in the chain down to the ultimate pet owners--as well as owners of animals raised for food who had to destroy poultry and livestock that may have ingested melamine, to keep it out of the food chain--all may have had great contracts, too.
They were all, however, left holding the bag for the wrongs of people who were beyond the reach of the law. The Millers' guilty plea indicated that they continued to deny any intentional wrongdoing and the government apparently didn't believe it could prove otherwise. The lesson, then, is, as Ken suggested at the end of last year, know your supplier, know their supplier, visit plants, check out food safety programs, and avoid doing business with people you can't check out.
Food Safety Legislative Update
We wrote recently about the food safety legislation coming out of Henry Waxman’s House Committee on Energy and Commerce. That legislation, H.R. 2749, has passed out of committee and been reported to the full House for a vote. When the vote will occur is anybody’s guess. Reuters quotes Chairman Waxman as saying, “I am hopeful that before too long, we can have a comprehensive food safety bill on President Obama’s desk.”
Liability Limits: How Much Should Your Food Company Maintain?
Food business clients frequently want to ensure that they have sufficient liability limits in the event of an outbreak (they also want to make sure they have adequate coverage, but this is a separate discussion). Determining the amount of a business’s limits depends on the business’s possible exposures. No one-size-fits-all formula is available. Every business should have a yearly conversation with its counsel and broker to determine what makes sense.
Disclaimers aside, a few pieces of recent news should help inform the discussion of liability limits:
First, we've learned more about the food-borne illness claims filed in the peanut outbreak earlier this year. Here’s a complete list of the claims (personal injury, commercial, etc.) asserted in the PCA bankruptcy and a newspaper article about them. Most of the claims appear to be filed by Marler Clark, though other food-borne illness claims also appear. So far, I count about 100 claims filed in the PCA bankruptcy (out of a CDC-reported 714 illnesses). Of those claims, at least eight resulted in deaths. The death claims are valued by the plaintiffs' at $10 million each. The nondeath claims are valued at up to $1 million each. Total personal injury claims are approximately $150 million. Plaintiffs have probably overstated their claims, but given the national outrage against PCA, a jury might lend credibility to the bloated values and award larger sums.
The other recent news is that CDC has released some interesting statistics about food-borne illnesses. For 2006, leafy vegetables and fruits/nuts accounted for the largest number of reported cases of food-borne illness (33%). Produce and nut products that might not have been associated in the past with food-borne illness (and, therefore, liability exposure) are now frequently associated with outbreaks. As exemplified by the PCA situation, claims from a national or even a regional outbreak from produce or nuts can easily exceed $100 million.
Improved Surveillance Will Lead to More Food-Borne Illness Claims
We’ve explained previously in this blog why increased surveillance by state and federal agencies will lead to detection of more outbreaks (and, therefore, more legal exposure). Others seem to agree.
Law360 published a nice interview with Jim Neale at McGuire Woods, another lawyer experienced in the food liability arena ( a Law360 subscription is needed to access the full article). Jim is quoted in the article as saying, “when, despite the best efforts of all concerned, outbreaks do occur, improved surveillance allows them to be caught and, most often, quickly tracked to the source.” And, as federal money increases to the state health departments (the front line in detecting most of the nation’s outbreaks), rates of detection will accelerate.
The Perils of Raw Cookie Dough
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Nestlé is voluntarily recalling all its refrigerated and frozen chocolate chip cookie dough. The FDA and CDC warn of the risk of contamination with E. coli O157:H7. In its release, Nestle says the following:
Nestlé Toll House cookies made from refrigerated and frozen dough are perfectly safe for consumption when prepared according to the instructions on the label. These clearly state that the raw dough must be baked before consumption.
The CDC has a podcast telling kids the same thing: don't eat raw cookie dough.
Nestlé is suggesting that consumers return unused cookie dough to their stores for a full refund. We assume that Nestle will be reimbursing the stores.
We have complimented Nestle for its food safety program in the past. As their release says, "The safety and quality of its products is a non-negotiable priority for Nestlé, and the company apologizes for any inconvenience cause by this voluntary recall. "
But there is good news: the recall doesn't affect any chocolate chips, or any baked cookies.
Nolan v. Ocean Spray Verdict: The PACA Angle
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Jim Prevor, the author of the Perishable Pundit blog and a man who has probably forgotten more about the produce industry and its practices than many will learn in a lifetime, has been blogging constantly about the lawsuit brought by Theresa Nolan, her company The Nolan Network and her late husband Jim against Ocean Spray Cranberries, Inc. On May 30, he reported that a jury in Plymouth, Massachusetts, home of Ocean Spray, had brought in a $1 million verdict against Ocean Spray and in favor of the Nolans.
The lawsuit involved marketing practices with fresh cranberries, a minor part of Ocean Spray's business compared to, say, cranberry juice cocktail. The background to the case is discussed at length in an article by Bill Martin in Jim Prevor's other publication, Produce Business. As far as I can tell from the news reports, the actual allegation in the lawsuit was a violation of Chapter 93A of the Massachusetts General Laws, This broadly prohibits unfair or deceptive acts or practices in trade or commerce. I'm not a Massachusetts lawyer, but I did a stint as a law clerk for the Massachusetts Appeals Court and my recollection is that Chapter 93A was considerably stronger in application and interpretation than many other states' mini-FTC Acts, particularly since a private right of action is included essentially without limit.
The core of the allegations related to alleged differential pricing afforded by Ocean Spray to Costco and H.E. Butt in 2000 and 2002, respectively. How this eventually led to the Nolans' claim is too complicated to discuss here. I am more interested, however, in a suggestion Jim Prevor makes in some of his columns on the case, that the alleged differential pricing and the way it was dealt with might have violated PACA, the Perishable Agricultural Commodities Act,.
A key allegation is that C&S Wholesale Grocers, which supplied fresh cranberries to BJ's Wholesale Club, a competitor of Costco, was told by Ocean Spray, upon complaining about the price advantage allegedly given Costco, "to claim some cranberries it would receive from Ocean Spray were of poor quality and to take a discount from the Ocean Spray invoice."
If true, there are ways that such treatment could violate PACA or violate the duties that Ocean Spray owed to its growers.
PACA is best-known for creating a statutory trust in favor of unpaid growers of perishable agricultural commodities. It also, however, requires people who deal in those commodities to account accurately for all transactions in those commodities. Thus, the allegation that a buyer was told, in essence, to make a claim that certain cranberries were of lesser quality than they actually were raises the issue of whether some of Ocean Spray's growers were provided reports on their cranberries that inaccurately represented their quality (if not, one wonders how the auditors would have missed it, since they would have presumably had to match the returns from the pools that included the sales to C&S against the payments from C&S). It's a reasonable question, though nothing that has occurred to date appears to have answered it.
It is conceivable, of course, that the matter was settled internally without publicity, or that the growers involved considered the issue too small to litigate. Anyone handling fruit or vegetables within PACA's ambit, though, must be aware that any form of inaccurate reporting can violate the statute.
More on Reducing the Risk of Failure - Focus on Shifting Liability For Consumer Claims
Food Safety Magazine ran an interesting piece by Aaron Krauss titled “Reducing the Risk of Failure.” The article was part of the magazine’s focus on limiting liability for food companies. Mr. Krauss includes a good discussion of the pros and cons of indemnities and disclaimers of warranty and liability as ways to shift or reduce liability for claims within the supply chain. Yet, the article does not discuss how to shift liability for claims from outside the supply chain, i.e., consumer claims.
For example, Mr. Krauss advocates that if members of the supply chain limited liability between themselves to the purchase price of the product, this might reduce or eliminate litigation. Mr. Krauss points out that “if everyone in the ‘peanut butter food chain’ had limited their liability, a store might not bother suing, since it could only recover its purchase price.”
Limitation of liability clauses, while effective to reduce exposure between members of the supply chain, will have no limiting effect on consumer claims. Unless a food seller can invoke a “passive retailer” defense, each member of the supply chain will be strictly liable for injuries to consumers caused by the food product.
The only ways for a food seller to shift consumer liability is through either supplier indemnity or insurance. Mr. Krauss is correct that indemnities by suppliers may be hard to secure and harder to enforce. And, claims defended by the seller’s own carrier will invariably result in higher premiums.
Because insureds will generally be penalized through premiums for invoking their own insurance, the best insurance is somebody else’s insurance. Even a food seller that might not have the leverage with its supplier to receive indemnification may be able to secure “additional insurance.” Naming a vendor as an additional insured frequently costs the supplier nothing in added premiums. If seller specifies that this insurance is to be “primary and noncontributory,” the supplier’s insurance may be the first line of defense for claims involving the supplier’s products.
If a supplier will provide additional insurance, follow-through is essential. The seller needs to (1) verify that the supplier has, in fact, named the seller as an additional insured and (2) review the operative language of the additional insured endorsement and/or policy language to ensure that it does not include unacceptable conditions or exclusions.
Tips For Successful Multiparty Food Liability Mediation
Mediation has become a critical process for resolving large, multi-party consumer claims. Settlement of these claims is often complicated by insurance and third-party recovery. Often a brokered process is the only practical way to get to a meeting of the minds. Yet, in my experience mediations that can succeed fail because of the lawyers and mediators. Having been through a number of multiparty mediations (sometimes with more than 20 separately represented interests) and having been trained as a mediator, here are my top five tips entering into a multiparty mediation:
1. Bargain from Strength—Be Prepared to Try the Case. Go into the mediation with well-developed trial themes, a trial plan, an opening statement, prepared expert witnesses, and, if possible, jury research. Whether the mediation occurs early on in the case or on the eve of trial, your opponents will know whether you are prepared to try the case. If you are not prepared, settlement will be harder and your client will be asked to compromise more. While trial preparation is critical in any case, it is most critical where the liability and damages claims against your client are the strongest and your client is in a difficult position (i.e., those cases your client would least like to try). For these cases, any leverage your client can bring to the table is important. Creating the perception that your client is ready to go to trial will create leverage.
2. Make Sure the Right Players Are Present and Educated. Mediation cannot succeed unless each party includes a client/insurer representative with full settlement authority (or easy access to full settlement authority). For large multiparty claims, having those representatives physically present is critical. Perhaps more important is that those with authority be prepared in advance of mediation to exercise authority. It should go without mention that a lawyer should prepare his or her own client for mediation by providing a complete and honest assessment of the settlement value.
As or more important may be educating the opposing party, though this is easier said than done. Communicating your adversary’s weaknesses to your adversary is tricky. In most situations, a lawyer’s assessment of the opponent’s weaknesses is not considered credible and is written off as “chest-beating.” The only way a lawyer can succeed in communicating with an opponent about the opponent’s weaknesses is if the lawyer has worked in advance at building a relationship and credibility with the adversary.
3. Select the Right Mediator. For difficult multiparty cases, mediator selection is an important, though often overlooked, key to success. Look for a mediator who will work hard in advance of the mediation to understand the barriers to settlement (see number 4 below). Look also for a mediator who (1) has the ability to quickly grasp complex issues impeding settlement; (2) is not afraid to confront parties with difficult questions; and (3) understands the mediation process, possesses good people skills, and is creative. Avoid at all costs a mediator whose primary tool is to brow-beat, make rulings, or intimidate the parties (this never works unless the mediator also happens to be your trial judge).
4. Educate the Mediator (Well in Advance of the Mediation if Possible). If a mediator has waited until the morning of mediation to first meet with the parties, it may be too late. If there are more than a few interests represented, the entire mediation session may be consumed in educating the mediator about the relevant issues. Worse, the mediator may feel a need to take “short-cuts” and end up alienating the parties before negotiations have really begun. At minimum, the mediator should spend time well in advance of the mediation date, preferably in person, talking with counsel from each side. In advance of mediation, parties should also consider setting up a session for the mediator to hear directly from key expert witnesses. On the morning of the mediation, the mediator should have learned enough to understand the major settlement impediments and should come with a plan of action.
5. Diffuse Personality Conflicts and Emotions. If your client’s goal is to settle the case if at all possible, a trial lawyer must do what he or she can to set aside the skirmishes, grudges, or ill will that might have built up during discovery, motion practice, pretrial preparation, etc. While I’m a big proponent of setting aside ego and of building relationships in litigation, this may not always be possible. But mediation/settlement negotiations are the one time in the litigation process where consensus building is the objective. Lawyers should do what they can (swallow pride, move on, etc.) to extricate personality conflicts from the mediation.
Similarly, lawyers should assess during the mediation the degree to which personality conflicts and emotions among the parties are inhibiting consensus. When practical, lawyers should consider counseling their clients on setting aside ego and emotions. If a heart-felt apology or another message can bridge the difference between the parties, the client should be told and given the opportunity to make the apology or to communicate.
Court Rules That Retailers Have No Duty to Investigate Suppliers Compliance with Organic Regulations
An important ruling was issued last week dismissing claims that milk produced by an organically certified dairy and labeled as organic was not really organic. Plaintiffs in the action asserted violations of various states’ laws because they claimed that they paid more for the milk because it was labeled as "organic.”
A federal judge in the Eastern District of Missouri granted a Rule 12(b)(6) motion to dismiss on a multitude of cases pending against the dairy, various retailers selling the dairy products and others (originally these suits were filed in various federal courts around the country but were consolidated for pretrial purposes by the United States Judicial Panel on Multi-District Litigation or MDL).
The judge ruled that claims against the dairy were preempted because a “conflict exists between federal and state law” (otherwise known as “conflict preemption”). As explained in the opinion, conflict preemption exists where “a party’s compliance with both federal and state law would be impossible or where state law would pose an obstacle to the accomplishment of congressional objectives.” Here, the court found that for “plaintiff’s claims to succeed, the Court would have to invalidate the regulatory scheme established under the OFPA [Organic Foods Production Act] and NOP [National Organic Program].” The court concluded that if plaintiffs were to prevail “producers would be liable even where fully certified and authorized to use these terms and seals.”
For the retailer defendants, the judge ruled that because plaintiffs’ claims against the dairy are preempted, “the retailer Defendants cannot be liable.” But the court went further and dealt explicitly with the plaintiffs’ claims that the retailers “should have investigated” the dairy’s activities to ensure compliance with the OFPA and NOP. The court rejected these arguments:
The Retailer Defendants did not have any duty to inspect [the dairy’s] facilities, or the facilities of any of their other organic producers. Imposing such a requirement “would place an undue burden on the distributor who is least likely to have access to such information.”
This should be good news for organic retailers. Hopefully, this decision will reduce their legal exposure to consumer labeling claims going forward.
Food Safety Legislation Proposed by House - User Fees and Traceability Are Among Highlights
Last week, members of the U.S. House of Representatives Committee on Energy and Commerce released a discussion draft of the “Food Safety Enhancement Act of 2009.”
The draft proposes beefing up the FDA registry of “all food facilities serving American consumers” and charging every facility $1,000 per year to fund FDA food safety activities. The new legislation would expand the types of facilities that need to register by eliminating certain exemptions from the 2002 Bioterrorism Act, though for now it appears to maintain exemptions for retailers, restaurants, farmers and nonprofits.
The proposal’s most ambitious and controversial proposal may be traceability.
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