Kenneth Odza
Ken Odza is a trial partner at Stoel Rives and leads its food liability practice. Ken is a seasoned products, environmental and commercial litigator focused on foodborne illness, consumer fraud, environmental cost recovery, mass tort, insurance recovery and commercial claims. He represents national and regional businesses and has been repeatedly successful recovering multi-million dollar sums from insurers, suppliers and PRPs.
Ken works regularly with regulators and the leading experts in the field. He is a frequent lecturer at food litigation conferences and has unique experience related to non-O157 E. coli and Mad Cow Disease (BSE).
In addition to litigation, Ken counsels clients of all sizes on issues related to recalls, insurance coverage, regulatory compliance, litigation prevention, crisis management, supplier agreements and product labeling.
Ken is a board member of both Food Alliance and TeamChild. He is deeply committed to the Puget Sound community, pro-bono civil rights litigation, child advocacy and sustainable food.
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
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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.
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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.
Denial of Insurance for Consumer Fraud/Lanham Act Claims: Blaming the Product, Not the Advertising?
UPDATE: For those interested in reviewing the Axis policy discussed in the motion, it can be linked here.
I'm often asked in my practice about the availability of insurance coverage for claims by consumers or competitors that products are deceptively labeled, marketed or advertised. Those interested in the topic should follow the litigation between Welch Foods, Inc. and its insurers regarding coverage for the putative consumer fraud and the Lanham Act claims asserted against Welch’s over the marketing of its pomegranate-containing juice products.
No rulings have been issued as of yet. But one of Welch's insurers, AXIS Surplus Insurance Company, has taken the interesting position that the "Media Wrongful Act" coverage in its policy provides no coverage. According to Axis's Motion for Summary Judgment, "[i]n a covered Media Wrongful Act claim, the Loss arises from, and is actionable based on, the creation or dissemination of the advertising."
Axis argues that the underlying claims that Welch's marketing of its product created "confusion, deception and mistake in the pomegranate juice market" are not covered under the Media Wrongful Act coverage because "the POM Complaint does not allege that Welch’s liability results from a media liability — i.e., a harm created by the creation or dissemination of Welch’s advertising — but from a liability resulting from the sale of juice which does not live up to such advertising." Axis explains further that "if the product conformed to the standards set forth in the advertisements, the putative class would not have a claim against Welch’s."
How is Axis's reasoning not circular? Can't Welch's argue the reverse in an equally compelling way: That had the putative class or competition believed that the advertising conformed to the product, there would be no claims against Welch's?
Indeed, isn't the counter to Axis's "blame the product argument" more compelling because claims against the labeling of the product itself are subject to federal preemption, and, therefore, they could not be brought by the putative class or the competition? The putative class and competition can ONLY bring claims related to the advertising and marketing.
Dismissal of "I Can't Believe It's Not Butter" Claims: Another Example of Iqbal/Twombly Succeeding Where Preemption Cannot
Judge James Ware dismissed on an FRCP 12(b)(6) motion putative class claims against Unilever alleging violations of the California Consumers Legal Remedies Act , Unfair Competition Law, and False Advertising Law . Judge Ware's decision can be found here. Plaintiff alleged that Unilever misrepresented the ingredients of its butter-substitute product through its advertising and product labeling.
The heart of plaintiff's complaint was Unilever's marketing of the product as "Made with a Blend of Nutritious Oils." Plaintiff alleged that "[t]his message . . . is misleading and deceptive because Defendant's Product contains a highly unhealthy, non-nutritious oil known as partially hydrogenated oil."
Unilever's preemption argument was rejected. The court followed what's becoming a familiar line of reasoning that while federal law governs the labeling of the product, state advertising and marketing claims are not preempted:
Although the "oils" referred to in the advertisement on the label are the same oils that are subject to the NLEA labeling requirement, the Court finds that there is no inherent conflict in allowing relief under state law with respect to what is said in the advertisement on a label about characteristics of those oils that are not regulated by the NLEA.
Judge Ware dismissed the claims against Unilever on the basis of the plausibility pleading standards articulated by the Supreme Court in the Iqbal and Twombly cases. He ruled that plaintiff's claims concerning the oils were "conclusory" and explained that the "implausibility of Plaintiff's allegations can more readily be seen if the allegations are expressed as a categorical syllogism:"
For the representation "blend of nutritious oils" to be true, all constituent oils
must be nutritious. One of the constituent oils in the product [partially hydrogenated oil] is not nutritious. Therefore, the product representation is false.
The court went on to explain why plaintiff's claims, even if accepted as true, were implausible. The court found faulty the logic underlying plaintiff's complaint about the use of partially hydrogenated oil in the "blend of nutritious oils." The court found that plaintiff's argument suffered from (1) “petitio principii (begging the question)”, (2) the "fallacy of composition" and (3) the "fallacy of division." In short, the Unilever case demonstrates that without a solid scientific and factual basis, consumer fraud claims are frequently vulnerable to attack on an early motion to dismiss (though maybe not for preemption).
Updated RFR Guidance from FDA: Possession Is More Than 9/10ths
FDA recently released updates to its Draft Industry Guidance for the Reportable Food Registry (“RFR”). The RFR, not rolled out until the fall of 2009, is still new to many companies. FDA, overwhelmed by the information coming through the RFR, is still trying to determine how to use the information submitted to the RFR and how to advise industry.
Among the more interesting clarifications in the May updates is the importance FDA puts on the possession of reportable food as a trigger for obligations under the RFR. For example, if produce is still in the field (contracted but not owned by a food seller) and tests positive for a pathogen, no reporting obligation accrues.
FDA’s hypothetical:
[F]ood facility that contracted with the farmer and tested the produce in the field is not required to submit a reportable food report, provided that the facility did not manufacture, process, pack, or hold the produce and therefore never became a responsible party with respect to the produce. However, if the field had been harvested and the contaminated produce had been moved to the food facility, the facility would have become a responsible party because it “held” the food and would be required to submit a reportable food report.
On the other hand, if the same contaminated produce is received on a company’s premises, stays in the trailer, tests positive and is rejected, a reporting obligation is triggered (even though the company did not take ownership of the product).
FDA’s description of this scenario in a Q and A format:
Q: Our manufacturing facility receives bulk trailer shipments of ingredients from our suppliers. A truck driver brings a trailer full of bulk ingredients onto our property, drops off the trailer, and drives away. However, as company policy, we do not off-load the trailers that are delivered to our facility or take ownership of the food in the trailers until after we test a sample of the food and determine that the food is acceptable. If we “reject” a shipment, i.e., return the food to the supplier, because the sample results indicate that the food is a reportable food, are we required to submit a reportable food report?
A: Yes, provided that you are a facility required to register with FDA under section 415(a) of the FD&C Act, you must submit a report for the food you determined to be a reportable food, even though you returned the food to your supplier. FDA considers that your facility “held” the reportable food because the trailers were no longer in transit once they were dropped off on your property. Thus, you are a responsible party with regard to the reportable food. Provided that the adulteration did not originate with you, you do not meet the criteria for the exemption from reporting in section 417(d)(2) (see Question E.3).
TAKE AWAY: If a company can set up a system to do its micro-biological testing before the product arrives on its premises or at its warehouse (public or private), it should. If faced with a reportable event, the reporting requires notification to FDA of one step forward and one step back in the supply chain even if the product is never distributed. Once a report is submitted to the RFR, a company should expect that the FDA will notify the company’s customers of the reportable event despite the fact that the customer never received product. FDA notification means the customer will be told that its vendor had contaminated product that rises to the level of class I recall though this may not actually be true. Food sellers and manufacturers, therefore, would be wise to take steps to avoid being “stuck” with RFR obligations for contaminated product it does not own.
Five Tips for "Green" Advertising
By Guest Blogger David Pacheco
This post also appears on the Essential Nutrition Law Blog
Yesterday, Stoel Rives' Salt Lake City office hosted a seminar on Advertising Law with Catherine Lake, Josh Gigger, and myself presenting. As part of the seminar, I offered some tips on avoiding legal problems when advertising the environmental friendliness of your goods or services. Here is a summary of those tips:
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