How Virgin is Your Olive Oil?
The Agricultural Marketing Service (AMS) of the U.S. Department of Agriculture is finally revising its standards for olive oil, promulgated way back in 1948, to bring them in line with the International Olive Council (IOC), an organization established under United Nations auspices that represents 98% of the world’s olive oil production, nearly all in the Mediterranean basin (the U.S. is not a member). It is doing so at the behest of the California Olive Oil Council (COOC), which is the trade association of U.S. olive oil producers, essentially all of whom are in California.
The new regulations, which are effective on October 25, can be found here, and here is a release the AMS put out describing them. Pretty clearly, terms like "U.S. Fancy" are quaint and obsolete with respect to how olive oil is marketed, and standards for what the terms "Extra Virgin" and "Virgin" olive oil mean are important for olive oil producers, distributors, retailers and consumers.
COOC was also a funder of a study, which has received much press attention, about the accuracy of olive oils labeled as “extra virgin” in advance of the effectiveness of the new AMS regulations. The study has resulted in headlines like, “Olive Oil Study Questions ‘Extra Virgin’ Claims” and the even more provocative, “Olive Oil Study Questions Claims of Virginity.”
The study showed, among olive oils purchased by the researchers in three parts of California (the Bay Area, Sacramento and Los Angeles County) a difference in the accuracy of “extra virgin” labeling between domestic and imported olive oils. Using tests that are used by IOC and in the AMS regulations, as well as other tests used by the German Fat and Oil Society and Australian Olive Association (neither Germany nor Australia being IOC members), there was a distinct difference in the quality of the oils tested, with the domestic olive oil coming off better.
The study makes no claim to any statistical significance for its findings, which is not surprising considering they only examined 14 imported and five domestic brands, buying one of each imported brand in three different places in California and one of each domestic brand in two. Equally unsurprisingly, the North American Olive Oil Association (NAOOA), which represents olive oil importers, has questioned the study's conclusions, which they say are not in line with the results of their own periodic tests of their members' products. Both groups appear to be supportive, however, of the AMS regulatory action.
One thing in the NAOOA press release about the new regulations struck me, however.
But the practice of labeling lower-quality olive oil as top-end — and charging a premium for it — is technically legal in the U.S.
The reason is simple: There are no federal rules that define what is — or is not — "virgin" or "extra virgin" olive oil, said Vito S. Polito, professor of plant sciences at UC Davis and co-chairman of the school's Olive Center, a research group.
I suppose we can all have our own definition of "technically legal." Something could be thought of as technically legal if doing it does not result in criminal sanctions, or result in the product being forcibly recalled from store shelves. In those senses, I suppose selling something as "extra virgin" olive oil would be, until the AMS regulations come into effect in October, "technically legal." But if one took it to mean there are no adverse legal consequences, may I beg to differ? Readers of this blog will remember the implied warranty of merchantability contained in Section 2-314 of the Uniform Commercial Code. One key provision of that warranty is that the goods "conform to the promise or affirmations of fact made on the container or label if any." It doesn't require federal standards to say what extra virgin olive oil is; any form of evidence of a standard, such as, say, the IOC standards, would presumably be admissible into evidence to show what the common understanding of the term is. If the goods sold do not conform to the standard found by the court or jury, then damages under Article 2 will be available.
For consumers, it should be even easier. If you buy something labeled extra virgin olive oil and the bottle, when opened, smells rancid, take it back to your retailer. If it smells delicious, enjoy one of nature's true wonders.
The Show Goes On: USDC Allows Vitaminwater Lawsuit to Proceed
In an opinion issued on July 21, 2010, Judge John Gleason of the United States District Court for the Eastern District of New York largely denied the defendant’s motion for dismissal and held that 10 of the 13 claims in a class action suit brought against Coca-Cola for alleged unlawful health claims on its Vitaminwater drinks could proceed. The claims that still must be examined in court include allegations of misleading advertising, fraudulent business acts, and unfair methods of competition.
The plaintiffs in the class action, which include the health advocacy group Center for Science in the Public Interest (“CSPI”) as co-counsel, contended that Vitaminwater’s labeling and marketing is misleading because it (1) communicates a number of purported health benefits (including healthy joints, optimal immune function, and reduced risk of chronic disease), drawing consumer attention away from the significant amount of sugar (33 grams per bottle) in the product; (2) portrays Vitaminwater as healthy when it is essentially a snack food that provides nutritional benefits because it has been specifically fortified to do so; and (3) suggests that Vitaminwater contains nothing but vitamins and water.
While the court concluded, citing applicable Food and Drug Administration (“FDA”) rules and commentary, that sugar was not a “disqualifying nutrient” under applicable FDA regulations, the plaintiffs’ latter two claims were found to accurately describe violations of FDA regulations, and accordingly may serve as a non-preempted basis of state law liability.
The FDA regulations restricting health claims or implied claims of healthiness related to foods that meet certain minimum nutrient levels, colloquially termed “the jelly bean rule,” were developed in an effort to prevent food producers from encouraging the consumption by consumers of junk food by fortifying the food in question with nutrients. The “jelly bean rule” is applicable only to (1) health claims, and (2) nutrient content claims that use the word “healthy” to suggest that a food may help consumers maintain healthy dietary practices because of its nutrient content. Finding that Vitaminwater’s labeling contains claims in each of these two categories, the court ruled the plaintiffs could proceed with this claim.
The plaintiffs alleged Vitaminwater’s labeling is misleading because it uses a product name that includes two of the product’s ingredients (vitamins and water), but fails to mention another notable ingredient (sugar). FDA regulations on this subject recognize that such product names have the potential to mislead consumers. Thus, the court held that the plaintiffs were allowed to pursue this claim. In the aftermath of this ruling, Coca-Cola released a statement expressing their confidence that the plaintiffs’ claims are without merit and will ultimately be rejected. Given that the implications this case could carry into the growing functional food and beverage segments of the market, we will continue to track it closely.
Green Chemistry Initiative Regulations Released For Comment
By Guest Blogger Lee Smith
California is on the cusp of approving draft regulations that are proposed for California’s new Green Chemistry Initiative (GCI) .Green chemistry, per the initiative, is the process for reducing or eliminating the use of hazardous materials by transitioning away from managing toxic chemicals at the end of the lifecycle, and instead reducing or eliminating their use from the start. In other words green chemistry seeks to provide incentives to remove hazardous ingredients and chemicals from products sold in California.
The statutory basis for the GCI in California was AB 1879 (2008 Cal. Stat. Chapter 599), which provides statutory authority for the California Department of Toxic Substances Control (DTSC) to adopt regulations for identifying and prioritizing “Chemicals of Concern” within consumer products and for evaluating safer alternatives to toxic chemicals. Another bill, SB 509 (2008 Cal. Stat. Chapter 560), establishes an online Toxics Information Clearinghouse to provide information about the toxicity and hazard traits of chemicals used in California. The bills also create mechanisms to provide guidance and oversight through a newGreen Ribbon Science Panel of experts and by expanding the role of the Environmental Policy Council, made up of heads of the California Environmental Protection Agency boards and departments.
In March 2010, DTSC made public a conceptual process flowchart that established the
framework for the regulatory process. The second step created and made public an outline of
the Draft Regulations for Safer Consumer Products. This outline proposed a framework for scientific and systematic prioritization of chemicals and products of concern, preparation of alternatives assessments and development of DTSC’s regulatory responses. The next step was the development and release of the draft regulations that occurred in June.. The draft regulations specify the processes for DTSC to scientifically and systematically identify and prioritize chemicals and consumer products, for manufacturers to conduct alternatives assessments and for DTSC to impose regulatory responses for alternatives selected by manufacturers. To get a feel for the regulations, the conceptual model can be found here. The conceptual model is complex, as are the regulations, which have resulted in comments, both pro and con. Essentially the regulations apply to “all consumer products made available for use in California;” judging by the litigation that has occurred with respect to Proposition 65, this sentence provides coverage beyond the manufacturer-retailer-consumer relationship that is usually the target of this type of regulation.
“Make available for use in California” means that a person sells, offers for sale, distributes, leases, offers to lease, supplies, or otherwise transfers control overthe disposition of a consumer product directly to a California consumer; or to another person without maintaining sufficient control over the distribution, sale, lease, supply, or other transfer of the consumer product by that person to prevent the use of the consumer product by a California consumer.”
“Sell or offer for sale” means any transfer or offer to transfer for consideration of title or the right to use, by lease or sales contract, including, but not limited to, transactions conducted through sales outlets, catalogs, or the Internet, or any other similar electronic means.” CHAPTER 53 OF DIVISION 4.5 OF TITLE 22, CALIFORNIA CODE OF DRAFT REGULATIONS Sec. 69301.2 Definitions.
Products that are identified as violating the initiative cannot be sold in and must be recalled from the California market. Under the sections concerning identifying products of concern, full disclosure of the chemical makeup of the products is required. Several lists of chemicals are to be compiled including Chemicals of Concern and Chemicals under Consideration. To provide an idea of the complexity, without going into detail, the outline for 61 pages of regulations is 21 pages long.
The list of “Chemicals of Concern,” includes carcinogens, mutagens, neurotoxins and compounds that disrupt hormones, persist in the environment or accumulate in human bodies. DTSC would pick priority products that are heavily used by children, pregnant women, the elderly and other sensitive populations.
Manufacturers, suppliers and importers would have to certify to the state and to retailers that their products on the list are free of chemicals before they would be able to sell them in California. In some cases, they would also perform assessments to find safer alternatives.
There are already comments from the industry that the regulatory process is unworkable and from the environmental camp that the initiative should go farther to protect public. Comments have been submitted by various groups. TheAdministrative Procedures Act process calls for public hearings and a 45-day public comment period. Specific information about the APA process will be announced when the final draft regulation is available for review.
Stoel Rives and ACC Mountain West To Host Nutrition Law Symposium
By Guest Blogger David Pache
We are excited to announce the Sixth Annual Nutrition Law Symposium presented by Stoel Rives LLP and the Association of Corporate Counsel, Mountain West Chapter. The Symposium will be held at the Thanksgiving Point Golf Club in Lehi, Utah from 8 a.m. to 1:30 p.m. on Friday, September 17, 2010. The agenda features panel discussions on the FTC Advertising Guidelines and Better Business Bureau’s National Advertising Division procedures, as well as a Worldwide Regulatory Update. The keynote speaker will be announced soon. The Symposium will be followed by an afternoon golf scramble.
For more information, contact Melanie Williamson, Stoel Rives Business Development Coordinator, at (801) 715-6662 or mwwilliamson@stoel.com.
Introducing The Alcoholic Beverages Law Blog
.jpg)
By Guest Blogger Stephanie Meier
Stoel Rives’ Food, Beverage and Hospitality Group have launched a new blog focused on the alcoholic beverage industry.
The Alcoholic Beverages Law Blog provides wineries, breweries, distilleries, cideries, distributors and importers with articles and information across a broad spectrum of state and federal alcohol beverage law. The authors work on alcohol beverage related projects from our bases in California, Oregon and Washington, throughout the Western United States and beyond. The blog lets them share with you their passion for and experience with key legal, business and regulatory issues, and provides a forum for industry feedback, questions and discussion.
Regulatory Compliance Alone Is Not Enough: Understanding and Mitigating Consumer Fraud Claims
Click on the image below to view the slide-deck from the presentation that I recently gave with Scott Rickman from Del Monte at ACI’s summit on Food Safety and Regulatory Compliance in Chicago. The ACI summit was a nice introduction to food regulation byFDA, USDA, FTC, EPA and DHS. Our presentation was intended to start from the premise that the job of a food lawyer (whether inside or outside counsel) does not end at ensuring regulatory compliance. Products that are regulatory-compliant may still be subject to putative class claims.
.jpg)
Please feel free to contact me if you have any trouble finding the cases or other references in the slide-deck.
Insurer Says Coverage for HVP Recall "Limited or Precluded"
Employers Fire Insurance Company has brought a declaratory relief action against Basic Food Flavors, Inc. in the United States District Court for the District of Nevada. Employers Fire says in its complaint that its policy "contain[s] certain terms, provisions, limits, conditions, exclusions and endorsements that limit or preclude coverage to Basic Food with respect to losses, costs or expenses incurred as result of the HVP Recall." The HVP recall referenced is the many food product recalls issued nationally as the result of hydrolyzed vegetable protein ("HVP") potentially contaminated with Salmonella Tennessee.
Click on the image of the complaint below to read it:
Neither a copy of the policy nor Employer's Fire rationale for "limits or preclusion" of coverage is yet available. However, this action should serve as a reminder for all food companies to review with their broker and insurance coverage teams their recall coverage. The HVP recall (like the PCA recall and other recent recalls) illustrates how big a financial impact a food recall can have. With the recall insurance market evolving rapidly (and with more options than existed a year or two ago), insureds should keep their brokers working hard to find appropriate (and afordable) coverage.
Strategy to Defeat Consumer Class Claims
As we've discussed previously in this blog, the Supreme Court's plausibility pleading standard, as articulated in the Iqbal and Twombly cases often provides a rapid (and relatively inexpensive) pathway to defeat consumer fraud claims.
At the ACI food regulatory conference last week, we discussed a strategy to take advantage of the plausibility pleading standard in jurisdictions that have liberal class certification standards.
In states where individualized reliance or causation is required to make out consumer fraud or unfair trade practices claims, defendants’ first line of attack may be class certification. But where individualized reliance and/or causation is not required, courts will often deny class certification under Rule 23(b) because common issues of law or fact do not predominate over individual issues.
So here's a strategy in jurisdictions where a defeat of class certification may not work:
- In states where plaintiffs need not show individualized reliance/causation, they may still have to demonstrate that an objectively reasonable consumer would have been damaged by the marketing/advertising campaign.
- The Supreme Court in Iqbal/Twombly said that a court must disregard conclusory allegations and scrutinize the complaint's factual allegations to determine whether it nudges the alleged wrong-doing "across the line from conceivable to plausible." The complaint must have meat on its bones. In the case of a consumer fraud class complaint, plaintiffs’ counsel, to survive a motion to dismiss, should need to include references to evidence or other substantiation for the claim such as consumer surveys or perhaps a government finding.
- Without a strong factual basis as to how an "objectively reasonable consumer" might behave, consumer fraud/unfair trade practices putative class claims concerning the marketing of a food product may be in jeopardy. Defendants should take advantage and seek dismissal at the outset of the case.
