Yesterday (while taking a break from the Sustainable Food Summit in San Francisco), I traveled to Modesto, California to speak to the Manufacturer's Council of the Central Valley. I spoke about the new Food Safety Modernization Act (FSMA).
The focus of my talk was how the FSMA changes the status quo for food businesses. And when I mean changes the status quo, I mean not only what a food company needs to do to comply with the FSMA, but also how the FSMA is likely to affect exposure from recalls and product liability. I also discussed in some detail the dilemmas faced by food businesses and the FDA by the Reportable Food Registry (RFR) and its fallout. Here is a link to my slide deck.
I'm willing to tailor this talk to your company or trade association; just let me know.
Please also consider attending the ABA's Food and Supplements CLE at Coke World Headquarters in Atlanta on February 17. I'll be moderating with Ricardo Carvajal a panel of experts on the FSMA including Robert Brackett (formerly head of CFSAN), Art Liang from CDC, Miriam Guggenheim and Fred Degnan.
At the upcoming GMA food litigation conference in Scottsdale, Arizona, I'll be speaking with my law partner Lee Smith about specific strategies and action steps to take to reduce the increased risks from FDA compliance, and recalls and product liability exposures created by the FSMA and the RFR. We'll also touch on strategies to deal with some current trends in marketing and labeling putative class claims.
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.
SAVE THE DATE FOR THE ABA'S FOOD & SUPPLEMENTS FIRST ANNUAL WORKSHOP AT COCA-COLA IN ATLANTA THIS WINTER
Thursday, February 17, 2011 - Hosted by The Coca-Cola Company.
Please save the date for this first annual one-day CLE workshop sponsored by ABA’s Food and Supplements subcommittee that will include panels on the impact of federal statutory and regulatory reform on the food industry, state consumer laws and consumer class actions related to food packaging, labeling, and marketing, the evolving science of food safety and technology, ethical considerations in the labeling of bioactive foods, and in-house counsel's top predictions for the future of food regulation and litigation. Leslie M. Turner, General Counsel for Coca-Cola North America, will speak on "Protecting the Brand in the Food Industry" at our networking luncheon and a networking reception will follow the workshop.
Ricardo Carvajal from Hyman Phelps & McNamara and I will be moderating the panel on the impact of federal statutory and regulatory reform on the food industry.
More information and a full program agenda to come. Stay tuned.
Kristin Choo has written a piece for the ABA Journal tracking the history of food safety regulation, recent outbreaks and current legislation pending in Congress. I am grateful to be mentioned in the piece. The article can be found at this link.
Ms. Choo writes:
Litigation is likely to increase as a pumped-up FDA, an arm of the Department of Health and Human Services, identifies more outbreaks of food-borne illness and collects more evidence about their causes. Meanwhile, many companies are likely to struggle, at least initially, with stricter requirements to develop safety plans, disclose business records when outbreaks occur and improve procedures for tracing products, according to Kenneth M. Odza, a member of Stoel Rives in Seattle, who litigates food safety cases and writes a blog on the subject.
Ms. Choo also includes a summary of information (see below) derived from CDC documented outbreaks (two or more people with the same illness after eating the same contaminated food) from 1990 to 2006 broken down by category of food. Note that nearly 50% of illnesses documented are from produce or "multi-ingredient." Produce and "multi-ingredient" account for about twice the number of illnesses as beef and poultry combined.
|Breads and Bakery||179||4,904|
|Luncheon and Other Meats||196||7,108|
I just got the latest issue of Business Law Today, published by the Business Law Section of the American Bar Association. The cover has an intriguing title: "Food and the Law." The lead article has a title even closer to my heart: "Le Menu: the UCC and Food", written by Steven O. Weise of Proskauer Rose LLP. Steve is, in the interest of full disclosure, a friend, but in the interest of a full introduction, one of the most prolific writers and speakers on commercial law topics on the planet, someone who has been a mentor to many (myself included) and is engaging, witty and unbelievably smart.
Only he left out an item on his menu.
In his discussion of Article 9 of the Uniform Commercial Code, he left out section 9-320(a), which is called the "Farm Products Exception."
I think I know why he left it out: he practices in Los Angeles and California has never had the Farm Products Exception.
After the jump, more on the Farm Products Exception.
For the rest of us, how the Farm Products Exception works is this:
The general rule is that when you buy something in the ordinary course of business, you own it free and clear, even if your seller had granted someone a security interest in what you bought. If you walk into a hardware store and buy a wrench, you don't have to worry who Home Depot's lender is.
The rule is turned around (twice, as we'll see in future entries) for farm products. 9-320(a) provides:
a buyer in ordinary course of business, other than a person buying farm products from a person engaged in farming operations, takes free of a security interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its existence.
Thus, the general rule doesn't apply to a person buying farm products from a farmer. And, as you read it more closely, you see that if it doesn't apply to a person buying farm products from a farmer, it never applies to those farm products at all.
The easiest example is the farm stand. If you buy strawberries at a farm stand, directly from the farmer, and the farmer has a secured lender, you are buying in violation of the rights of that lender. This is just another reason to eat those farm-fresh products before you get back in your car. They taste best that way, too, of course.
But the critical language, when applied to the Farm Products Exception is "created by the buyer's seller." In the wrench example, you can usually assume that everyone in the chain of purchase, from supplier of raw materials to manufacturer to distributor to retailer, has purchased in the ordinary course of business. So when farm products are not involved, you can also assume that you took free from the lenders to each of those persons.
With farm products, your assumption is turned on its head.
Farmers have secured lenders. Essentially all of them. There may be a stray farmer out there who can support operations without borrowing, but I've never encountered one. There may be a lot of lenders who don't take the right steps to perfect their security interests (more on that in subsequent entries) but anyone dealing with farmers knows that you should assume that the farmer has a secured, perfected lender.
Returning then to the critical language, say you are a grocery store. Unless you buy from farmers directly, you are not buying farm products, you are buying inventory from a processor or wholesaler (the definition of farm products makes it clear that only farmers sell them and the moment they leave the farmer's hands, they're not farm products anymore). Since the safe harbor in 9-320(a) only applies to your direct seller ("created by the buyer's seller"), it doesn't cut off the claims of someone for whom the Farm Products Exception would have applied.
The example that is often given is the steak sizzling on your plate. The steak was cut from a cow, and the cow was farm products in the hands of the rancher, a person engaged in farming operations. The rancher sold it to someone, who sold it to a slaughterhouse, who sold it to a meat wholesaler who sold it to your local grocery store, who sold it to you. But the rancher had a secured, perfected lender, and that lender didn't get paid. As a technical matter, the rancher's lender could snatch that steak right off your plate just before you stick your knife and fork into it.
The Farm Products Exception gets tied into the Federal Food Security Act., which is often said to preempt it, but actually only constitutes additional hurdles to its application. There are also practical ways--mainly the issuance of joint checks to farmers and their lenders--by which grain elevators, processors and other buyers of farm products typically avoid complications of the Farm Products Exception. Those will be dealt with at length in subsequent entries. The Farm Products Exception has led to a lot of litigation, and in times of farm bankruptcies it becomes more and more critical for everyone to understand how it affects their rights.
Except in California. Bon appetit, Mr. Weise. As he says in the last line of his piece, "So where would we be without the UCC? Hungry!"
UPDATE - This panel will address emerging issues related to the recalls and investigations related to the Peanut Corporation of America. The panel includes persons intimately involved with these issues. Anybody with an interest in the peanut recall should register and tune-in.
The American Bar Association is presenting its second Hot Topics in Food Law teleconference on February 10, 2009 at 10am Pacific Time (1pm EST). Anybody connected with the food industry and concerned with risks affecting the industry should consider registering. I have been involved with planning this event. No other use of 60 minutes will give you as much insight into the most current issues in food law. The cost begins at $35 for section of litigation members and ranges to $150 for non-ABA members.
Ricardo Carvajal, Of Counsel, Hyman, Phelps, & McNamara, PC, Washington, DC
Sherry A. Marcouiller, Chief Counsel, Food Law, Kraft Foods Global, Inc., Northfield, IL