How Regulatory Changes Affect Litigation Risks
On February 24, 2011, Lee Smith and I presented "How Regulatory Changes Affect Litigation Risks" to the Grocery Manufacturers Association's food litigation conference. A link to the slide-deck can be found here.
We discussed ways that the Reportable Food Registry (RFR) and the Food Safety Modernization Act (FSMA) are affecting litigation now and can be expected to affect litigation in the near term.
In particular, we discussed:
- Ongoing and pending changes to the RFR
- FSMA’s grant of records access to FDA
- Mandatory recall authority and how this may delay certain recalls
- Suspension of FDA registration
- Hazard analysis and preventative controls: What are they? How do they differ from HAACP? How they will be effective with or without FDA rulemaking
- Regulation of chemicals under FSMA (and under proposed changes to TSCA and Proposition 65 in California)
- Specific things that food sellers should consider now to reduce risk
Let me know if your business is interested in an in-house, customized presentation or training on the RFR and FSMA.
Bad Guys Disguised As Good Guys: Labeling and Sourcing Issues at Farmers Markets
One of the first scenes in IFC’s comedy “Portlandia’ involves a couple asking their waitress for the provenance of the chicken they are considering ordering. She comes back with a photograph of “Colin”, the actual chicken, and describes the conditions under which he lived before he died for their meal. Unsatisfied with her answer, they ask her to hold their table while they drive 30 miles to the farm where Colin was raised. Five years later, they reappear (their waitress still holding their table) and decide they’d prefer not to have the chicken.
I thought of that as I read Jim Prevor’s report for The Perishable Pundit on “Farmers Market Fraud”, which included a follow-up as well. Without question, farmers markets are opening rapidly all over, and it is not particularly surprising that some of the participants are not following the rules, leaving the honest participants with a bad name and consumers with legitimate concern that they are not getting what they bargained for in their farmers market experience. Apparently, similar research in Detroit indicated the same pattern as in Los Angeles.
In the spirit of the kind of people parodied on “Portlandia,” weren’t these supposed to be the good guys?
As it happens, I am related (by marriage, but we are far closer friends than the degree of relation) to Jennie Schacht, the author of the award-winning “Farmers Market Desserts.” In researching her book, Jennie visited farmers markets all over the country, and, she tells me, “I never had a producer refuse a visit to their farm and what I saw every place I visited, around the country, appeared authentic. (I didn't verify pesticide levels or other claims.).” For her work, of course, she needed to take the steps that Fred and Carrie parodied on “Portlandia.” What is the ordinary, non-cookbook author, non-obsessed consumer to do?
California is considering steps to deal with this issue, including raising the fees charged to farmers market participants from 60 cents to four dollars per market day, in order to increase the number of inspectors. One critic of the raised fee contends that dollars will not necessarily increase expertise. While Jennie Schacht suggests getting to know your producer can help, one of the letter writers to the Perishable Pundit notes that Bernie Madoff looked all his victims in the eye as well.
In the end, I think the best regulation would occur by self-policing. This is not some free market solution, but rather a recognition that every honest seller in the marketplace has an incentive to weed out the bad apples, in this case sometimes literally. I recognize that farmers who attend farmers markets have a lot to do in the course of a day, and policing their neighbors’ stalls isn’t on their agendas. Market managers have a lot of work to do as well. But it is the honest farmer who will lose most if the reputation of farmers markets in general are diminished.
Other, of course, than someone like me, who is already in mourning because the last of the year’s organic carrots have disappeared from the Ballard Farmers Market.
Preparing for FSMA Produce Safety Rules: What "Ag-in-the Middle" Needs to Do
Many who track FDA's implementation of the Food Safety Modernization Act (FSMA) believe that a priority for FDA is Section 105, “Standards for Produce Safety” (FDCA section 419), in particular, the leafy greens regulations.
Farms are exempt under FSMA's produce safety rules if:
(A) during the previous 3-year period, the average annual monetary value of the food sold by such farm directly to qualified end-users during such period exceeded the average annual monetary value of the food sold by such farm to all other buyers during such period; and
(B) the average annual monetary value of all food sold during such period was less than $500,000, adjusted for inflation.
"Qualified End User" is defined as:
(i) the consumer of the food; or
(ii) a restaurant or retail food establishment (as those terms are defined by the Secretary for purposes of section 415) that is located—
(I) in the same State as the farm that produced the food; or
(II) not more than 275 miles from such farm.
The fear among many small farm and "ag-in-the-middle" proponents who are not exempt is that FDA will impose standards similar to those adopted by the National Leafy Greens Marketing Agreement (NLGMA) proponent group. Even the proponent group concedes that "the metrics developed by LGMA are not appropriate in every area and must be modified to address unique risks presented in different regions as well as varying production practices across the country."
Those non-exempt farms who cannot logistically or financially possibly comply with NLGMA metrics should consider the following action steps:
1. Be ready for the rule-making process. Marshal your case why your operation is low risk and should be treated differently from larger-scale operations and for those in California and Arizona the standards were developed for.
2. Start now laying the ground work with your state department of agriculture to seek a state variance for the FDA rules. The FSMA allows that:
A State or foreign country from which food is imported into the United States may in writing request a variance from the Secretary. Such request shall describe the variance requested and present information demonstrating that the variance does not increase the likelihood that the food for which the variance is requested will be adulterated under section 402, and that the variance provides the same level of public health protection . . . .
3. Call your congressional delegation. FDA has significant reporting obligations to Congress, which will have a significant role to play (funding, oversite, etc.) in how the FSMA gets implemented. Start educating your Congress people now on the fears that exist by "ag-in-the-middle" about the produce safety rules.
Unmitigated Chutzpah: The CSPI's Merchantability Claim Against Safeway
Ken posted about some general issues related to the Center for Science in the Public Interest’s claims against Safeway related to the decision not to use its Club Card data to publicize recalls. Hidden among the claims, however, is a claim for breach of the warranty of merchantability that is so breathtakingly extensive it requires a separate post.
The breadth of this claim is astounding. To see why, you must understand two things. First, this is a class action. CPSI and its lawyers seek to represent “All Customers who bought Recalled Products, and whom Safeway did not advise that they bought Recalled Products, for a period of four years prior to the date this complaint is filed until the date of class certification.” “Recalled Products” are those subject to a Class I recall from the FDA or the USDA. I presume the four years states the applicable statute of limitations. If the class were certified, these lawyers would represent everyone in the class.
Second, the count of the complaint that deals with the warranty of merchantability has nothing to do with the requested relief that has garnered so much publicity. It is unrelated entirely to the use of the Club Card to notify customers about recalls. It is a straight breach of contract action. Put simply, these lawyers purport to represent every single person who had a Safeway Club Card, for the value of their Recalled Products. The complaint expressly makes no claim for any injury other than the economic injury of a breach of contract; no one is alleged to have gotten sick, let alone died. Indeed, one of the named plaintiffs consumed some of the eggs subject to recall, apparently without adverse health effects.
Moreover, and this is important to understand, these are not Safeway’s recalls. They are in nearly every case recalls instituted by someone up the food chain. The class consists of everyone Safeway didn’t notify, but the named plaintiffs in fact became aware of both recalls through other means: news reports, a letter mailed by another retailer who had sold similar products, a “neighborhood listserv.” Upon becoming aware of the recalls, there was nothing stopping either plaintiff, who, according to the very complaint their lawyers have filed on their behalf, “frequently shops at her local Safeway store”, from asking for a refund. I suspect Safeway would have granted it without complaint or hassle.
But no. Instead, we need a class action. Who is in the class? Everyone who never got notice from Safeway of the recalls, even though they may have (like both named class plaintiffs) received notice from other means. The parties actually responsible for these recalls purposely put that information out onto the news channels; blogs like this one tend to spread the word gratis when recalls occur. Anyone concerned about the food they buy can check numerous news sources, including the FDA’s own website, for news about recalls. I often walk into the office in the morning to be asked, “did you hear about the latest recall?” This stuff isn’t hidden under a pillow somewhere.
By being subjected to the class action, though, Safeway may be in a dilemma. It really doesn’t want to pay consumers twice (nor should it have to). But how is Safeway, now that the class action has been filed, to know that it will not be required to pay twice, once when the consumer comes to the customer service desk at his or her local store and again when the class action is settled? The answer is that it can’t. Which may make Safeway less likely to pay the consumer at the customer service desk. Is that really the result that is in the best interests of the purported class?
My guess, however, is that this won’t happen. Both because Safeway doesn’t want to have a few thousand store managers explaining to real live customers that some lawyers in California make it impossible to refund your two dollars, and because Safeway’s lawyers, despite the unmitigated chutzpah of CSPI in claiming the right to represent all Safeway’s customers wherever located in connection with their refund rights, think the chance of class certification on this issue is of vanishingly low probability.
Why CSPI's Loyalty Card Suit Has No Merit and Does Not Promote Food Safety
Following the playbook it has followed in the past with sodium and other issues, the Center for Science in the Public Interest (CSPI) has filed yet another complaint of very questionable legal merit to promote a policy agenda. This time CSPI seeks to compel all retailers to use loyalty cards as a recall alert system.
Some retailers use their loyalty card systems to alert customers of product recalls. Other retailers do not. Retailers who don't use loyalty cards as a recall alert system may have a variety of legitimate reasons why they don't or can't create the technology that CSPI wants a court to order retailers to implement. For example, some may lack the technological ability, have privacy agreements with customers that do not allow loyalty cards to be used as a recall alert system, or have other legitimate privacy concerns.
Like CSPI's sodium litigation, this complaint has serious flaws. It seeks broad certification of a "nationwide class" of customers who bought recalled products and whom the retailer "did not advise that they had bought Recalled Products." Even supposing that the claims had some legal merit, few "common issues of fact and law" are apparent. State law varies on the type of consumer fraud claims asserted. Some putative class members surely did get notice of the recall (through means other than loyalty cards).
On the merits, the claims are problematic because we suspect that many (and perhaps most) jurisdictions do not recognize a retailer’s affirmative duty to create some technology to alert customers of manufacturers’ recalls. The complaint utterly fails to acknowledge that retailers employ mechanisms other than loyalty cards to assure customers are aware of recalls.
On its face, a claim for breach of the warranty of merchantability is completely incongruent with a request that the court order retailers to employ new technologies. And, a loyalty card is not a good subject to the warranty of merchantability.
What might be most shameful about CSPI's complaint is its conflict with the Food Safety Modernization Act (FSMA), which CSPI purports to support. Section 211 of the FSMA modifies the Reportable Food Registry to enhance consumer notification of Class I recalls by grocery stores. FDA is tasked to, "[n]ot more than 1 year after the date of enactment of the [FSMA,] . . . develop and publish a list of acceptable conspicuous locations and manners" for grocery stores to notify customers of Class I recalls. CSPI (as well as anyone else) will have the opportunity to submit comments to FDA as part of the rule-making process.
Even if CSPI were somehow successful in its litigation, the outcome of the litigation may be supplanted or even in direct conflict with the FDA's rulemaking and the FSMA. Litigation is rarely a productive, efficient or useful way to create industry regulation. Litigation in the wake of legislation creating the actual policy that CSPI seeks to promote seems utterly wasteful and counterproductive.
I Have Seen the Future and It Wants Me to Eat Better
One of the few pleasures of my current road trip is the chance to eat at Burgerville, a fast food chain based in Vancouver, WA, but with more stores in Oregon and none north of Centralia. Their motto is Fresh►Local►Sustainable; we’re proud to have them as a client.
Their attitude toward food may be a little different from what is ordinarily thought of as a fast food.
Healthful food choices are a natural for us. We use local, vegetarian-fed and antibiotic-free beef in our burgers, cage-free eggs in our breakfast items and our salads feature mixed greens with sustainable, local ingredients such as smoked salmon and Oregon hazelnuts.
As I entered their Kelso, Washington store last week, after being greeted by literally every member of the staff, I ordered my Rosemary Chicken Sandwich and Cherry Chocolate Shake, paid and was handed my receipt This is quite different “fast” food, as both items were individually prepared, and I had time to look down at my bill (pictured). Because I am wired that way, the bill immediately brought to mind the restaurant food labeling provisions of the Patient Protection and Affordable Care Act, about which I blogged last year.
The PPACA contains a requirement that retail food establishments with 20 or more locations doing business under the same name (even if under different ownership, such as a franchise) post certain basic nutrition information for their “standard menu items.” While the FDA has recently withdrawn guidance on how to conform to the statute, it claims it will propose regulations by the March 23, 2011, statutory deadline.
Burgerville appears to have made a virtue out of necessity. As you examine the bill, you will see two things. First, my food order is compared to two different daily caloric intake amounts, 2000 and 2500 calories. Second, Burgerville notes on the bill that I have the option of ordering my shake with yogurt instead of ice cream, which would cut the calories by about 45% and the fat intake by 90%. With this information, I can make choices, both on this trip to the restaurant and next time. This time, I rode my bike after dinner for eight hard miles. Next time, I’m ordering the yogurt shake.
Note: next time was the very next day, as I stopped at the Centralia, Washington store and indeed asked for my shake to be made with yogurt. Not only did I save the calories and fat, but the extra tang of the yogurt worked really well with the chocolate and cherries.
I suppose that makes me a bit of an anecdotal counterexample to the study published last month in the American Journal of Preventive Medicine, which indicated that ordering patterns were no different at Taco Time restaurants in King County, Washington, where caloric labeling is mandatory, and their stores in other jurisdictions.
