Trading Places, the 2010 Edition: OJ Way Up, Bellies Down and Out?

We here at the Food Liability Law Blog like to end the year on a positive, or at least humorous, note, so two items in Tuesday's Wall Street Journal caught our eye. 

Everyone, of course, has been barraged with Christmas movies the last month, but I am a big fan of New Year's movies.  "The Apartment" is probably the best film that culminates on New Year's, but the 1983 Dan Aykroyd/Eddie Murphy classic "Trading Places" is set up so that New Year's Eve is a huge part of the plot.  For those of you who haven't seen it (and if you haven't, it will be on Comedy Central on January 2), Aykroyd is Louis Winthorpe III, a smug Philaelphia commodities broker whose bosses contrive to have him trade places with street person Billy Ray Valentine (Murphy) to settle a wager the stakes of wihch are one crisp dollar bill.  When the boys learn they've been taken for a ride, they team up and try to steal a key market report from the bosses' operative during a New Year's Eve train ride from Washington to Philadelphia.  Hilarity ensues, unless you're the guy who ends up in the gorilla suit. 

In one scene, Valentine uses his street smarts to explain to the Duke Brothers (played by Don Ameche and Ralph Bellamy) why the price of pork bellies will drop:

Okay, pork belly prices have been dropping all morning, which means that everybody is waiting for it to hit rock bottom, so they can buy low. Which means that the people who own the pork belly contracts are saying, "Hey, we're losing all our damn money, and Christmas is around the corner, and I ain't gonna have no money to buy my son the G.I. Joe with the kung-fu grip!

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Green Chemistry Regulations Delayed

Apparently, according to the San Francisco Chronicle, due to opposition from both the industry and environmental and health groups defending green-chemistry regulations, the state of California failed to meet a deadline to approve the new regulations. Earlier in December, environmentalists and health lobbyists had complained that the rules were watered down and accused Gov. Schwarzenegger of caving into pressure from business and industry (see here and here).

The rules were initially designed to regulate harmful ingredients in hundreds of thousands of products. The regulations were released in June of 2010, and the revisions were extensive, causing the negative comments noted above. The agency has indicated it was striving to concentrate on the biggest impact products, and if it had to postpone approving the final version of the regulations to get it right, it would do so. "We thought it would be better to get it right, rather than just getting it done," said Maziar Movassaghi, the department's acting director. Read more here.

The FDA's Own 30,000 Foot Take on the Food Safety Bill

For what it's worth, this is the link to the FDA's own interpretation of what the new food safety bill means. 

The Sally Jackson Cheese Recall: the Last Purely Voluntary Recall?

There are few places in the United States that have less in common than Oroville, Washington and Washington, D.C. Tucked against the Canadian border in the peaceful and beautiful Okanagan Valley, Oroville is easier to reach from Kelowna, B.C. than from Seattle. Yet events in Oroville last Friday combined with the unusual events in the other Washington beginning last Sunday to give an Oroville business an historical significance it undoubtedly would have preferred not to have.

Last Friday, the FDA Food Safety Modernization Act, then known as S. 510, was as dead as Don Van Vliet, a/k/a Captain Beefheart, the legendary musician who passed away that day. Thus, the FDA had no more than the same power it has always had: publicity and the right to shut down a facility, but no power to force a recall. That day, Sally Jackson Cheeses of Oroville, provided evidence that linked its artisanal cheeses to outbreaks of E. Coli O157:H7, agreed to a recall of all of its products

As we know, on Sunday, the food safety bill was resurrected in an unusual weekend session of the Senate and was passed today by the House and heads to President Obama’s desk for a certain signature. The new act contains a section, effective immediately upon the President’s signature, which gives the FDA mandatory recall authority for the first time in its history. While that section includes a provision (which will become Section 423(a) of the Federal Food, Drug & Cosmetic Act) calling on the FDA to give companies a chance to effect a voluntary recall before using its mandatory powers, the difference between wielding a velvet glove and a velvet fist is significant. 

Thus, a tiny cheese manufacturer in an isolated Washington town, through an unexpected chain of events occurring nearly 2700 miles away, may have become the last food manufacturer ever to agree to a voluntary recall without the FDA’s power to order it to do so looming in the background.

Food Safety Modernization Act Will Become Law and Some Provisions Effective Immediately

This entry has been corrected to reflect that some of the provisions in the Food Safety Modernization Act, most significantly the preventative controls section, will be phased in over time.

Today the House passed and sent to the President for his signature a bill to overhaul the current regulations on food safety, which were established over 70 years ago. Among other things, the bill will impose new record-keeping requirements on companies, require most FDA-regulating entities to maintain food safety plans, require the FDA to develop a traceability pilot project, and give the FDA broad authority to mandate recalls, regulate food and ingredients that are imported, conduct regular inspections of facilities that produce food and impose new fees on the industry.

Some of the provisions of the new law will be effective immediately. If you are an FDA-regulated food grower, processor or seller, compliance with the new law will be critical going forward. You should consult now with your food safety and food regulatory team to determine what your business needs to do to come in compliance.

Food Safety Legislation Back from the Dead

On Friday, S. 510, the food safety bill, was declared dead. Last nite (Sunday), the Associated Press reported the bill may finally pass in the final hours of the 111th Congress. The New York Times report can be linked here. The text of what I understand will be headed to a final vote in the House on Tuesday and signed into law by the President can be linked here.

We'll have more analysis in the days to come. Here's a preview of how the FDA's new mandatory recall power may play out.

Dannon Forced to Open Wallet and Change Advertising (Again)

Note: The following is posted by David Pacheco from the Essential Nutrition Law Blog.

The multinational food company Dannon agreed to a 45 million dollar class action settlement earlier this year based on consumer complaints about advertising claims regarding the health benefits of its probiotic line of dairy products. Now the company has entered into a $21 million dollar settlement with the attorneys general from 39 states. The L.A. Times reports that this is the largest-ever multistate attorney general consumer protection settlement with a food producer. The attorneys general alleged that Dannon made deceptive and unlawful claims in advertising which were not substantiated by competent and reliable scientific evidence at the time the claims were made. According to the allegations, the majority of scientific studies showed improvement in intestinal transit time when an individual consumed three servings of the probiotic products per day for two weeks, and did not support Dannon's advertised claims that one serving per day for two weeks improved digestive health. In addition, the attorneys general alleged that Dannon could not substantiate claims regarding improved immunity against the flu and common cold.

Dannon also agreed with the FTC to drop claims that the probiotic foods help prevent irregularity and offer protection against the flu and common cold. The FTC found no substantiation of these claims. This isn’t the first time Dannon has had to alter its advertising; the March settlement required Dannon to remove specific language about the health benefits of the products from labels and advertising.

 

Between this and the March settlement, Dannon has now agreed to pay $66 million as restitution for the misleading health claims, which comes out to about 1.3% of Dannon reported $5 billion in worldwide net sales of the probiotic line in 2009. This latest settlement should remind companies to keep state governments on the list of watchful eyes monitoring health claims related to food and supplement products.

What Happens if Food Safety Bill Becomes Law (or Doesn't)?

We're nearly down to the wire on whether the 111th Congress will send S.510, the food safety bill, to the President for signature into law. I'm told it could happen by the weekend.

No matter what happens in Congress, food law is changing and changing faster than it ever has.  The ABA Food Supplements Subcommittee and Products Liability Committee of the Section of Litigation is organizing a day-long CLE February 17 at Coke world headquarters in Atlanta. I'll be co-moderating a panel titled, "What’s New? The Impact of Federal Statutory and Regulatory Reforms on the Food Industry and in Upcoming Litigation."  If you want to know what will happen at the FDA (and other agencies) when food safety legislation passes (or doesn’t), you should be at this CLE. 

Aside from statutory and regulatory reform, other panel discussions will discuss consumer class actions against food companies, the evolving science of food safety, labeling of biologic active foods, and predictions from top in-house counsel.

For those in the industry and serving the industry the conference is a great value (registration as low as $120). Register here. Hope to see you there.

Unintended Consequences of FDA Mandatory Recall Authority?

For years, a debate has raged on the merits of vesting the FDA with mandatory recall powers. Mandatory recall is part of the food safety legislation that may or may not pass in this Congress, so it’s worth discussing. At present, the FDA lacks any power to order a recall. Its only legal authority is administrative detention and seizure.

Many, including some regulators, have argued against mandatory recall because it will result in less and less timely recalls. The argument that mandatory recalls may result in less timely recalls goes as follows:

  1. Under the current system (where FDA lacks mandatory recall authority), the onus is on the food seller to initiate the recall. If it doesn't issue a recall in the face of an FDA request to issue a recall, the food seller faces the dire consequences of FDA's bully pulpit  (press releases from FDA explaining why the food is unsafe) and possibly a seizure order. In the event of foodborne illnesses, ignoring an FDA request may also be grounds for punitive damages under the laws of some states;
  2. Because the onus under the current system is on the food seller (and not the FDA), the FDA frequently defers to the food seller's judgment when the facts surrounding a potential recall remain murky and uncertain. The FDA is not required to make a judgment about a recall and, for political reasons, often refrains from or delays making a decision as to whether to request a recall;
  3. Mandatory recall may reverse the dynamic and remove much of the onus from the food seller and put it on FDA. Mandatory recall may give the food seller cover if it chooses to delay or not issue a recall. If a food seller believes that its product is unlikely to be a threat to human or animal health, it might choose to wait until the FDA orders a recall. Under the current system, most food sellers will err on the side of caution when deciding whether or not to issue a recall. If the facts surrounding a recall are murky or uncertain, a mandatory recall regime may make it more prudent for a seller to wait for the FDA to decide. If the FDA is worried about being too trigger happy or quick to order recalls, a recall that may have been issued routinely under the current system may (ironically) never happen if FDA is vested with mandatory recall authority.


Mandatory recall authority, as its currently written in S. 510, may also change the threshold of when recalls are initiated. The threshold for a recall under sec. 206 of S.510 is described as when "there is a reasonable probability that an article of food . . . is adulterated . . . or misbranded . . . and the use of or exposure to such article will cause serious adverse health consequences or death to humans or animals."

The language of the statute closely follows what the FDA currently defines as a class I recall. But what about situations defined under the current scheme as class II or class III recalls? FDA's definition of a Class II recall is "a situation in which use of or exposure to a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote." A Class III recall is "a situation in which use of or exposure to a violative product is not likely to cause adverse health consequences." Query whether the statute lets foodd sellers off the hook for issuing recalls in Class II or Class III situations?

Note that FDA appears to retain some power even if there is not "reasonable probability" that the product will "cause serious adverse health consequences or death." S. 510 appears to lower the threshold for administrative detention by FDA by removing the condition that the food presents a risk of serious adverse health consequences. And, under S. 510, FDA would continue to have seizure power. The standard for seizure is simply if the food is adulterated or misbranded. One has to wonder whether FDA would use its limited resources on a seizure action in a class II or class III food recall where the chances of serious adverse health consequences are remote or not likely.