• Rick Goldfarb, one the nation’s foremost commercial lawyers, who has decades of involvement with the food industry;
• Lee Smith, who is focused on the Food Safety Modernization Act, California Proposition 65 and other regulatory compliance issues; and
• Anne Glazer, who is focused on counseling her clients on food labeling and marketing issues.

You can reach me at kmodza@gmail.com or through LinkedIn. If you find yourself in southwest Michigan, please look me up.

It was generally agreed that the FDA, in essence, is not notifying parties when it has decided to close out an investigation or take no further action. But, as another conference attendee pointed out, reinspection fees under FSMA section 107 may provide an opportunity to determine whether FDA has completed its investigation. If a facility is required to pay the FDA reinspection fees, it seems logical that FDA will have to inform the facility when it has closed the file and is no longer assessing fees. Whether this becomes reality has yet to be seen.

So, should you resist FDA's request to photograph?

The first thing you need to do is to ask yourself the following two questions:

1. Do you have a policy against photography in your plant?
2. If you do, is the policy strictly enforced?

If the answer to either question is no, then you're on shaky footing in resisting the FDA's request. By not having a policy or by not strictly enforcing the policy, FDA's legal authority based on implied consent is that much stronger.

Assuming your plant does have a no-photography policy that is strictly enforced, you need to assess whether the photography is worth the fight. It may be. Resisting the request for photos may be worthwhile to protect potential disclosure of trade secrets and to prevent out-of-context photographs from being used adversely by FDA. The problem is that the harder you push against FDA, the more likely that it will seek more information and the more likely that it will seek enforcement action.

In a future entry, we'll explore what legal remedies might be available to prevent the FDA from photographing the inside of  your plant.

• FDA's plan to increase frequency of inspections and how it plans to do it
• How to be prepared for FDA's greatly expanded records access authority
• How to avoid new fees that will be imposed by FDA
• Developing an appropriate strategy to deal with FDA
• Preparing a privileged FDA inspection plan and training

More information about the ACI conference and registration can be found here.

The expanded authority is found in three places in the statute:

1. FSMA § 101 amends 31 USC § 350c(a) and allows the FDA to obtain records related not only to a product that the FDA believes "will cause serious adverse health consequences or death to humans or animals" but also those related to "any other article of food" that the FDA believes is "likely to be affected in a similar manner."

This statute may allow FDA to "access and copy" all records in any format and at any location of products that are not known to be contaminated but that might share similar ingredients or be produced in a shared facility or that could otherwise be affected in a "similar manner" as products thought to be contaminated.

Section 101 was effective immediately on FSMA becoming law in January 2011.

2. FSMA § 103 requires that FDA facilities (with certain exceptions) implement "Hazard Analysis and Risk-Based Preventative Controls." As part of this section, Congress requires the affected FDA facilities to keep "records documenting the monitoring of the preventative controls" and to keep a "written plan that documents and describes the procedures used by the facility to comply with the requirements of this section." Congress requires that these records "be made promptly available" to the FDA upon "oral or written request." The statute also requires that records be kept for at least two years.

Note that unlike in section 101, Congress did not use the term "copy" in section 103. This section instead says that records must "be made promptly available."

The question remains open whether the FDA interprets "be made promptly available" to mean copy and whether such a broad interpretation will be held up by the courts. Section 103 is effective in July 2012.

3. FSMA § 202 requires the FDA by January 2013 to create a "program for the testing of food by accredited laboratories." By July 2013, section 202 will require testing by an "owner or consignee (i) in response to a specific testing requirement under this Act or implementing regulations, when applied to address an identified or suspected food safety problem; and (ii) as required by the Secretary, as the Secretary deems appropriate, to address an identified or suspected food safety problem.“

Test results from the FDA-accredited lab "shall be sent directly to the [FDA]" unless exempted by regulation.

The big questions under section 202 are whether:

a. Routine product and environmental testing accomplished for the purpose of a food safety plan under section 103 will be considered "in response to a specific testing requirement . . . when applied to address an identified or suspected food safety problem" and

b. The FDA will exempt certain testing records under this provision.

So, what should you do to prepare for the FDA's considerable expansion of its ability to access your records?

Here are five things that a food company should consider:

1. Understand what records the FDA does not have the right to access (recipes, financial, pricing, research, personnel or certain sales data), and maintain these separate from records the FDA can access.
2. Create and enforce a document destruction policy that conforms with FSMA.
3. Create a standard FOIA letter to present to the FDA when it requests letters explaining that it considers information provided to be trade secrets, confidential and proprietary.
4. Create and train employees on a confidential FDA inspection policy that involves legal counsel and therefore can be cloaked in the attorney-client privilege.
5. Understand what finished product and environmental testing is needed and not needed for a section 103 food safety plan.

1. Convene your coverage team (brokers, risk management and legal) to reevaluate and audit coverage,
2. Reevaluate your suppliers and food processing procedures,
3. Revise and clarify your supply chain/co-packing agreements, and
4. Rehearse your recall, RFR and crisis management plans.

As the clock ticks on the FDA’s 24-hour deadline to report to the FDA’s Reportable Food Registry, a food retailer, manufacturer or supplier is forced to make snap decisions that can profoundly impact business and litigation.

Once a report is submitted, the FDA promptly alerts customers and suppliers of the "reasonable probability" that the product will result in "adverse health consequences or death." Even if a recall has not yet been issued, an RFR report often has the consequences of a Class I recall. While RFR reports can be amended or withdrawn based on new information, in the world of food products, the bell almost never can be unrung, food companies are now painfully aware.

But some burning questions regarding FDA’s RFR remain for the food industry, including if and how the agency will:

(1) use the RFR as an enforcement tool;
(2) move toward the concept of "control" and away from "possession" in interpreting one of the key exceptions to the RFR;
(3) address what it perceives as "out of control" undeclared allergen problems; and
(4) use the information obtained through the RFR to shape coming regulations on required preventive controls.

Let’s take a stab at answering some of these questions and a few others.

Will FDA Use RFR as an Enforcement Tool?
The RFR was created by Congress as part of the Food and Drug Administration Amendments Act of 2007 and is codified at 21 U.S.C. §350f. The RFR requires that "as soon as practicable, but in no case later than 24 hours after a responsible party determines that an article of food is a reportable food, the responsible party shall [] (A) submit a report to [FDA] ... and (B) investigate the cause of the adulteration if the adulteration of the article of food may have originated with the responsible party." 21 U.S.C. §350f(d)(1).

The reporting includes a "one step up and one step back" requirement. Food companies must identify their suppliers and customers to FDA through the web portal.

The FDA Food Safety Modernization Act (FSMA) tweaks the RFR and requires the FDA to promulgate new regulations requiring submission of "consumer-orientated information," including a description, product ID codes, contact information and anything else FDA deems necessary to enable consumers to accurately identify whether they are in possession of the reportable food.

The congressional intent behind the RFR is to provide the FDA with a mechanism to track patterns of adulterated product, essentially as an information gathering tool. Many in the industry fear that the FDA also will use the RFR as an enforcement tool. Even an unintentional failure to report in compliance with 21 U.S.C. §350f constitutes a criminal violation of the Food, Drug, and Cosmetic Act (FD&C Act).

It’s not clear if the FDA has initiated any enforcement action based on the RFR yet, but this should be monitored closely by the food industry.

Can You Take Advantage of Intra-Company Transfer Exception to Reporting Obligation?
21 U.S.C. § 350f(d)(2) provides an exception to the reporting obligation if:

The challenge with interpreting this exception centers on the term "transfer." The FDA's current draft guidance says: "A transfer to another person occurs when the responsible person releases the food to another person. 'Person' is defined in section 201(e) of the FD&C Act as including individuals, partnerships, corporations and associations. FDA does not consider an intra-company transfer in a vertically integrated company to be a 'transfer to another person,' where the company maintains continuous possession of the article of food."

The rub is that if the product is shipped to a third-party warehouse, but the responsible party maintains ownership and direct control over distribution, the product is reportable. The FDA’s draft guidance rationalizes that "'[p]erson is defined in section 201(e) of the FD&C Act (21 U.S.C. 321(e)) as including individuals, partnerships, corporations, and associations," and a "warehouse operator is a distinct legal person."

Another scenario under the 21 U.S.C. § 350f(d)(2) exception that is not addressed by the FDA's draft guidance arises if the product is subject to an intra-company transfer but the company uses a common carrier to transport the product. Under the FDA's rationale that use of a third-party warehouse takes a company out of the exception, a common carrier also could be considered a "distinct legal person" to which the product is transferred, eliminating the exception and requiring the company to report.

Many believe that the FDA (and the statute) could not intend that an otherwise unreportable food under 21 U.S.C. §350f(d)(2) become reportable for no reason other than that a company uses a third-party trucking company in an intra-company transfer. Many also question whether the FDA's current position on third-party warehouses is correct if the food company retains complete control over the product.

Neither of these policies reflects the reality of how many food companies operate. From a food safety policy perspective, many believe that food companies should not be forced into the business of trucking and warehousing.

Some believe that the FDA might be moving away from interpreting "transfer" through the lens of possession and broadening its view toward an interpretation based on issues of control. Control might reflect more accurately the reality of food production and promote more effectively food safety and the intent of the RFR. Whether the FDA will move toward a notion of control should be revealed in the FDA's expected amendments to its draft guidance and should be monitored closely by the industry.

In January 2011, the FDA issued its first annual report on the RFR, which provides statistics on the first full year of the RFR (2,240 entries, 229 "primary reports," a breakdown by hazards, etc.) (see FCN Jan. 28, Page 8). Beyond the statistics, companies should take particular note of the FDA’s focus on both allergen controls and creation of food safety plans.

The FDA reported that undeclared allergens/intolerances accounted for 34.9% of its primary reports. Industry experts assert that the FDA believes that the industry does not have good control over the issue of undeclared allergens. These experts believe that the FDA will give special attention to this issue in promulgating regulations under the FSMA's requirements for hazard analysis and preventive controls. In anticipation, manufacturers should consider now how they can change manufacturing processes to address the undeclared allergen issue.

Do You Have A Food Safety Plan? If So, Will It Be Sufficient Under FSMA?
In FDA’s report on its RFR results , FDA Deputy Commissioner for Foods Michael Taylor says “[s]everal key U.S. industries are already re-evaluating their hazard and preventive controls, core principles of the Food Safety Modernization Act recently passed by Congress. We also anticipate improved reporting as we continue our vigorous outreach to food facilities through federal, state, local and foreign agencies, to help us expand the positive effect of the RFR on the safety of the U.S. food supply.”

The RFR will be a guide for the FDA in risk assessment and writing regulations for preventive controls and what companies must include in their food safety plans. The new hazard analysis and preventive controls requirements in FSMA are not required to go into effect until July 4, 2012, 18 months from the date of enactment.

Deputy Commissioner Taylor's comments suggest that industry standards already might be moving in the same direction. To mitigate the risk of FDA enforcement actions, product liability claims, supply chain contract claims and recalls, food manufacturers should anticipate the FDA's eventual rule making, and update or create food safety plans that address the hazard analysis and preventive controls prescribed by the FSMA. One way to anticipate FDA's direction is to mine the information FDA has collected (and continues to collect) as part of the RFR.

(A) the adulteration originated with the responsible party;

(B) the responsible party detected the adulteration prior to any transfer to another person of such article of food; and

(C) the responsible party –

(i) corrected such adulteration; or

(ii) destroyed or caused the destruction of such article of food.

Based on the various forms of coverage I've seen, here is a non-exhaustive list of issues to consider discussing with your broker:

o Class II or III Recall: Will the policy cover recalls where the likelihood of bodily injury is remote or non-existent, such as class II or class III recalls? What if the recall is requested (as opposed to ordered) by the FDA or other appropriate governmental agency?

o New Administrative Detention Rules: Will the policy cover loss from an FDA administrative detention? The new food safety laws lower the standard by which the FDA can administratively detain foods. Just last week the FDA released its proposed rule on administrative detention: it no longer needs evidence of serious adverse health consequences or death to detain foods.

o Mistaken Recall: What happens if loss is incurred due to a recall or other event and it turns out that the facts underlying the recall or other event turn out later to be incorrect? For example, a company issues a recall due to information that its product is contaminated and it later turns out that the information was incorrect and the product was not contaminated.

o Exclusion for Competitor's Product: Some policy forms exclude coverage if the recall or other loss was due to a problem with a competitor's product. This exclusion could be particularly problematic for those involved with selling commodities.

o Warranty of Fitness Exclusion: Some policy forms will exclude loss if the product breaches a warranty of fitness. The insurer may be trying to exclude manufacturing defects or other reasons for a product recall or market withdrawal other than accidental contamination. The problem is that the insurer could later argue that loss from a contaminated product or a product with an undeclared allergen is excluded because such a product would also breach a warranty of fitness.

o Third-Party Coverage: Does the policy provide coverage for claims by third parties (e.g., your customers)? If not, do you need that coverage and is it available?

o Lost Profits/Revenue: Does the policy cover your lost profits or lost revenue? If so, how is your loss calculated? Will you have sufficient documentation and evidence to prove loss in the event of a claim?

Two hot-button issues discussed at the ABA CLE (and in the ABA article) were whether the FDA (1) intends to use the RFR as an enforcement as well as an informational tool, and (2) will move toward the concept of "control" and away from "possession" in interpreting one of the key exceptions to the reporting requirement.

Odza said that plaintiff attorneys who have made fortunes out of asbestos and pharmaceutical lawsuits are now turning their attention to the food industry, and predicted that “these kind of [health claims] are going to explode.” He added that the Yo-Plus case was “pretty unusual” in that it wasn’t prompted by an investigation by the FDA (Food and Drug Administration) or the FTC (Federal Trade Commission). “Usually you see a warning letter rapidly followed by a class action piggy-backing off of that.”

“Class Action Lawsuits Set to Explode in Health Claims Arena” was published by NutraIngredients-USA.com, April 1, 2011.

a. May 24 at Parker Smith Feek's offices in Bellevue for a discussion of the new FSMA, the Reportable Food Registry and how to survive a food product recall (event was rescheduled from March 22). Registration is free and coming soon. Contact me if you’re interested and I’ll get a spot reserved.

b. April 29 webinar sponsored by AON on FSMA. Link to the free registration is here.

c. May 12-14 Northwest Food Processors Association’s Executive Business Retreat in Coeur d'Alene, Idaho.

d. June 15-16 ACI Food Safety Regulatory Compliance Summit in Chicago. I'll be speaking specifically on "Curtailing Downstream Liability Arising Out of On-Site Inspections: How to Prepare and What to Do Should the Government Come Knocking." If you register by April 15, I can arrange for a discount. Just let me know.

If you can't make these events or would like a customized in-house presentation on FSMA, the Reportable Food Registry, recalls or other food liability topics, please let me know. Also, stay tuned for new blog entries addressing such topics as the Reportable Food Registry (RFR), restaurant menu labeling, and strategies to defeat food marketing/labeling putative class claims.

The Napa County Farm Bureau held its first water forum in five or six years on March 9, in St. Helena, California. Kicked off by Bureau President Jim Lincoln, the event was well attended, with over 100 concerned stakeholders listening to the most recent updates in California water issues.

Phillip Miller, the Deputy Director of Napa County Public Works, discussed a recent study by the County designed to compile countywide data, establish a framework for reporting, and provide recommendations related to any future groundwater permitting and monitoring program.

Of most interest was the presentation by Paula Whealen, a principal at the engineering firm of Wagner & Bonsignore. Ms. Whealen gave a general overview of new requirements  for surface water users from the California State Water Resources Control Board (“SWRCB”), including:

• All reports of licensees and progress reports by permittees and pre-1914 water right diverters are now due annually by July 1;
• Reports must provide the monthly amount taken from the source;
• They must state the monthly amount beneficially used;
• They must be filed electronically as of this year; and
• Filings will require high-speed internet access.

Because all new reports must be filed electronically, the prior “fudge factor” regarding timelines for reporting will no longer exist. The SWRCB will be able to tell on July 2 who hasn’t filed the necessary reports. Failure to file all necessary reports constitutes non-compliance with the underlying water license/permit and can lead to fines and/or other administrative actions. It was also stated that, given the increase in the number of enforcement officers (25) and the establishment of a water rights enforcement office in Santa Rosa, California, there will be a significant increase in site inspections in the North Coast region.

A bit of sage advice to be taken from the Forum is for all vineyard and winery owners operating under a license/permit to take it out, read it, and understand it. If you don’t understand your water right permit, find someone who does, and most importantly, make sure you are in compliance. In addition, even for those sources that are not required to be reported (i.e., reclaimed water), it behooves vineyards and wineries to keep records of all water that is used on the property.

The Trademark Trial and Appeal Board (“TTAB”) recently affirmed a USPTO refusal to register the following mark for use with beef:



The TTAB said the BRASSTOWN BEEF logo is likely to cause confusion in relation to the word mark RAISED RIGHT, which was already registered for use with poultry, meat and game. It didn’t help that the words “RAISED RIGHT” appear across the top of the BRASSTOWN BEEF logo.

This is yet another case that shows the importance of doing careful trademark clearance work before adopting a new mark or trying to register it.

Thanks to The TTABlog® for reporting this decision. In re Ridgefield Farm LLC, Serial No. 77758560 (February 25, 2011) [not precedential].

The Industry Acrylamide Coalition (Coalition) filed suit against the State of California Office of Environmental Health  Hazard Assessment (OEHHA), the agency that manages and revised the Prop 65 list to include 4-metheylimidazole (4-MEI), as a carcinogen.  4-MEI is often found in cooked foods. The Coalition argues that the third party report on which the listing was based, from the National Toxicity Program (NTP), is insufficient to support a valid Prop 65 listing.  The complaint, which was filed in Sacramento, alleges that OEHHA failed to consider the entire file of evidence before making its decision.  The Coalition’s complaint also indicates that 4-MEI is created during normal cooking of food and ingredients and cannot easily be removed.  The Coalition includes the American Beverage Association, the California League of Food Processors, and the Grocery Manufacturers Association of USA.

Acrylamide – In Your Coffee?

In a similar manner, the National Coffee Association is coordinating the joint defense of a number of coffee roasters and retailers with respect to a 60-day notice served on 40 roasters.  The chemical at issue is acrylamide, which is formed when certain proteins are heated.  Original scrutiny for this chemical concentrated on potato products such as french fries, but apparently the same chemical reaction occurs in coffee when it is roasted.  In addition, other beverages that also contain caffeine, such as soft and energy drinks, have also received 60-day notices.

Dietary Supplements and Prop. 65

A dietary supplement company has been ordered to pay 2.65 million as part of a joint settlement with district attorneys in California.  This is one of the larger suits filed and settled by a public enforcement entity, other than the California Attorney General.  People v. Irwin Naturals, Inc., Orange County Superior Court, Case No. 30-2011-00445453.

Irwin Naturals was alleged to have made false and misleading representations with respect to the marketing and sales of its products.  The products were advertised as having Hoodia Gordonii, an alleged appetite suppressant; however, lab results found that the chemical was not present and triggered a mislabeling suit.  Additionally, the suit alleged that many of the products also exceeded the Prop. 65 level of  proposed Maximum Allowable Dose Level (“MADL”) of .5 micrograms/dA1.  Most of the indicated products were green tea products, sold without the Prop. 65 warning as required.

As part of the settlement, 1.95M in penalties were paid to help enforce state consumer protection laws, $100,000 in restitution, and $600,000 in set aside for investigation costs.  Reportedly, prosecutors felt that this prosecution was necessary in part because the FDA does not regulate dietary supplements.

a. You have average annual sales (over three years) of less than $500,000 (adjusted for inflation); and
b. Your sales to "Qualified End Users" exceed sales to others.

"Qualified End Users" mean consumers or restaurants/retailers located in the same state or within 275 miles from your facility who are selling directly to consumers.

BUT even if you qualify for the exemption to the hazard analysis and risk-based preventative controls, understand that it is not truly an exemption. Even qualified facilities will still have to provide documentation to FDA that either:

a. demonstrates you have “identified potential hazards associated with the food being produced” and “implementing” and “monitoring” preventative controls; or

b. “as specified” by FDA shows compliance with “State, local, county, or other applicable non-Federal food safety law.

A "Qualified Facility" also must provide to FDA “Documentation, as specified by FDA in a guidance document that the facility is a qualified facility.”

Hazard analysis and risk-based preventative controls provision of section 103 of FSMA will become effective in June 2012 irregardless of whether FDA completes its rule-making process.

• 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.