A few months ago, I wrote about a $1.2 billion defamation lawsuit filed by Beef Products, Inc. (BPI), a South Dakota-based meat processor, against ABC News Inc. found here. The most recent development in the case occurred on October 31 when lawyers for ABC filed a motion to dismiss.
In September, BPI, along with Technology, Inc. and Freezing Machines, Inc., collectively filed suit against American Broadcasting Companies Inc., ABC News Inc., ABC news anchor Diane Sawyer and ABC correspondents Jim Avila and David Kerley in Circuit Court in Union County, South Dakota claiming that ABC’s news coverage of lean finely textured beef (LFTB), or what became infamously known by the nickname “pink slime,” was defamatory and ultimately devastating for the company’s reputation and business. Since being filed, the case has been removed (PDF) to the U.S. District Court for the District of South Dakota. The complaint also named as defendants Gerald Zirnstein, the U.S. Department of Agriculture (USDA) microbiologist who called the product “pink slime,” Carl Custer, former federal food scientist, and Kit Foshee, a former BPI quality assurance manager who was interviewed by ABC.
Earlier this year, on March 7, 2012, ABC began reporting during its World News program that much of the ground beef we buy at the supermarket contains the product that the industry calls LFTB and others call “pink slime.” Over the next month, ABC continued to report on the story, both online and on its television news programs.
In its later complaint, BPI alleged that the news agency, in reporting on LFTB, had knowingly and intentionally published false and disparaging statements regarding BPI and its product and improperly interfered with BPI’s business relationships. BPI argued that the statements made by ABC were not only inconsistent with information provided to them by BPI but were also contradictory to the findings of the USDA’s Food Safety and Inspection Service (FSIS), the Food and Drug Administration (FDA), food safety organizations, and many beef industry experts. BPI claimed that ABC’s news reports constituted common law defamation, product disparagement, and tortious interference. In addition, BPI alleged a cause of action under South Dakota’s statutory Agricultural Food Products Disparagement Act (AFPDA).
Most recently, on October 31, 2012, lawyers for ABC News submitted a motion to dismiss BPI’s lawsuit (PDF). In its memorandum in support of the motion to dismiss, ABC asserts that none of BPI’s claims are viable. Specifically, ABC argues that BPI cannot state a claim under South Dakota’s AFPDA, because that law only authorizes an action for statements that question the safety of a product. ABC claims that it did not question the safety of the product as BPI claims, but instead stated that LFTB is safe to eat.
Secondly, ABC maintains that BPI cannot state a claim for product disparagement because “any such claim is preempted by AFPDA, and because the ABC News reports would not be actionable under traditional common law standards in any event.” For instance, ABC explains:
[R]eporting that critics call LFTB pink slime is not actionable: that term, while unflattering, does not convey false facts about the color or texture of LFTB and is precisely the kind of “imaginative expression” and “rhetorical hyperbole” that is constitutionally protected. And the ABC News reports cannot reasonably be understood to imply that LFTB is “not safe for public consumption” or “not nutritious.” The reports repeatedly state that LFTB is “safe to eat,” though “not as nutritious as ground beef” a viewpoint BPI does not challenge. BPI’s other claims are based on quibbles with specific language that do not affect the “substance” or “gist” of the reports.
Lastly, ABC states that BPI’s claims of libel and of tortious interference with business relationships both fail. A decision on the motion is currently pending.
Recently, the U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS) issued a notice announcing new procedures that it intends to implement when FSIS or other Federal or State agencies find a presumptive positive for Escherichia coli (E. coli) O157:H7 in raw ground beef. The impetus behind these new procedures was to improve the agency’s ability to trace contaminated food products in the supply chain, to act against contaminated foods sooner, and to better protect consumers from foodborne illness in meat and poultry products.
FSIS is proposing to launch traceback investigations sooner and pinpoint additional potentially contaminated product when the agency finds E. coli O157:H7 through its routine sampling program.
In the event that FSIS detects a presumptive positive test result for E. coli, the agency will identify the supplier of the product and any processors who received contaminated product from the supplier, once confirmation is received. According to FSIS representatives, this proposed change in policy gives FSIS the opportunity to better prevent contaminated product from reaching consumers.
Under FSIS’s current traceback policy, the agency does not begin conducting any investigations or follow up activities until positive results based on FSIS testing are identified or until outbreaks occur.
According to USDA Under Secretary for Food Safety Dr. Elisabeth Hagen:
The additional safeguards we are announcing today will improve our ability to prevent foodborne illness by strengthening our food safety infrastructure. Together, these measures will provide us with more tools to protect our food supply, resulting in stronger public health protections for consumers.
She added, “We will be acting at the presumptive stage,” The new procedures are expected to expedite the investigation of E. coli contamination by a day or two. “When we’re talking about traceback, every minute counts,” said Hagen.
The agency is inviting any interested person to submit comments on this notice by mail or electronically at http://www.regulations.gov. FSIS is requesting that comments on the proposed policies and procedures be submitted by July 6, 2012.
AFA Investment Inc., and its affiliates, including AFA Foods, American Foodservice Corporation, United Food Group, LLC, and American Fresh Foods (together “AFA”) have requested that the Bankruptcy Court overseeing their Chapter 11 cases approve procedures for a sale of all of their assets. The sale process was a condition required by AFA’s lenders to continue financing the companies in bankruptcy.
AFA reports that 98 potential buyers have surfaced so far and that 36 have executed nondisclosure agreements. However, none have yet been chosen by AFA as a “stalking horse” bidder, so the sale process is being conducted, at least for now, as an open or “naked” auction.
A hearing on the requested procedures is set for May 8, 2012. AFA’s proposed procedures include:
· AFA will have until May 29, 2012 to obtain one or more letters of intent.
· Potential bidders would have until noon on June 11, 2012 to submit “qualified bids.”
· If more than one qualified bid is received, an auction will be held at 10:00 a.m. on June 12, 2012, at the office of AFA’s counsel in Delaware.
· AFA would have until 24 hours before the auction to choose a stalking horse against which other bidders would compete at the auction. If a stalking horse is chosen, a copy of the proposed asset purchase agreement will be filed with the Bankruptcy Court. A stalking horse may be provided with certain “bid protections” if approved by the Bankruptcy Court, including topping fees, asset mix requirements (to deter piecemeal purchases), and minimum overbids.
· Qualified bids must include, among other things: (a) a list of assets to be purchased, (b) the purchase terms, (c) a form of asset purchase agreement (or a redline against any stalking horse agreement), (d) a waiver of financing and due diligence contingencies, (e) an irrevocable offer until the earlier of July 25, 2012 or two business days following a sale; (f) a commitment to close by June 22, 2012; (g) a commitment to prepare evidence necessary to prove good faith under the Bankruptcy Code; (h) evidence of the buyer’s ability to provide adequate assurance of performance of any contracts to be assumed as part of the sale; and (i) a deposit of 10% of the proposed purchase price.
· Due diligence is available upon execution of an acceptable nondisclosure agreement and proof of financial ability to close.
Parties have until April 30, 2012 to file any objections to the procedures.
If you are interested in participating in the sale process or would like a full copy of the proposed bidding procedures, please contact Brandy Sargent at (503) 294-9888 or David Levant at (206) 386-7601.
Co-Authored By Guest Blogger Scott Hansen
According to its website, last Sunday’s New York Times article on E. coli and beef is among the most widely read pieces published by the newspaper this week. The article tells the story of a 22-year-old Minnesota dance instructor who was left paralyzed after being infected with a strain of E. coli in an “Angus Beef Pattie” she ate in fall of 2007. The article traces the story of her burger, points out the many limitations in the current system, and calls eating beef a “gamble.”
While the article is clearly targeted at meat producers and processors, food retailers selling beef products, such as grocery stores and restaurants, are also at risk. This piece is a reminder of the need for retailers to take steps to ensure proper systems and procedures for tracing food to its source (according to yesterday's statement by Secretary Vilsack, retail traceability of ground beef is soon to be a USDA requirement). The Times lauds Costco, which it says is one of the few big producers that tests trimmings for E. coli before grinding.
Retailers should also be mindful of the utility of supplier agreements sufficiently tailored to limit liability or to procure insurance coverage. The greater protections afforded by well-drafted supplier agreements and carefully placed insurance are the best way to mitigate exposure.
Some may choose strong indemnification provisions and additional insured provisions. Another route, not yet the prevailing trend in the industry but perhaps in the near future, involves wrap-up insurance covering the entire supply chain, accompanied by covenants of cooperation between members of the supply chain.
Wrap-up insurance/covenants of cooperation approach has the advantage of potentially avoiding expensive and reputation-damaging litigation between members of the supply chain. Wrap-up insurance is also more likely to result in sufficient coverage to protect the retailer or restaurant chain.
No matter the path chosen, thoughtful placement of insurance coverage and confidence in supply chain contracts can help a food company weather the storm of a food-borne illness outbreak.
USDA’s Be Food Safe Twitter Feed circulated its Fact Sheet titled “Beef . . . from Farm to Table.” First published a few years ago, this might be of interest to businesses involved in the sale, marketing, labeling, and/or packaging of beef. The article is a helpful primer on the history of beef, current industry practices, USDA’s role in inspection, consumer trends, cooking times, storage times, and food-borne illnesses associated with beef.
Bill Marler funded independent research at the University of Idaho to study the adequacy of cooking instructions found on the packaging on various retail brands of frozen ground beef patties. The research was published this month in Food Protection Trends.
The study found that three of the packages included cooking instructions that “would be inadequate to produce a safely cooked patty.” Most of the issues raised in the article center on the variability in cooking techniques, e.g., pan frying, using a propane grill, or preheating, and variability in cooking temperatures. Suggested solutions for improved cooking instructions are included in the study.
For food sellers trying to minimize or avoid claims, adequate cooking instructions are a good thing. Even if food-borne illness claims cannot be avoided, the scope of the claims and damages can be limited by providing adequate, "bullet-proof", cooking instructions.
Kudos to Bill Marler for “putting skin in the game” and funding this study.
At the recent Nebraska Governor’s Conference on Ensuring Food Safety, Dan Engeljohn from FSIS (USDA) announced a number of significant policy changes. FSIS’s changes in part are consistent with those previously announced under the last administration and in part represent the Obama administration’s new priorities. Those include (among other things):
1. Supermarket Enforcement – FSIS has not emphasized retail (i.e., supermarket) surveillance and enforcement since the early 1990s. FSIS perceives an increase in beef processing (e.g., grinding) at the retail level. As discussed previously on this blog, FSIS also perceives a failure by many retailers to maintain proper production logs. Supermarkets should expect the following:
A. Unannounced FSIS inspectors will be directed to pull samples on the spot if an inspector walks into a supermarket without good recordkeeping or with unsanitary conditions.
B. New regulations will be aimed specifically at retailers.
2. Non-O157 STECS to Become Adulterants – FSIS appears to be moving aggressively toward declaring at least certain non-E. coli O157 Shiga Toxin E. coli (STECs) as adulterants. FSIS is targeting strains known as E. coli O26, 103, 111, 121, 45, and 145. These strains account for 82% of non-O157 strains detected by PulseNet. Dr. Engeljohn explained that FSIS is looking carefully at these strains and is heading toward their regulation. But he commented that so far information collected about those infected with non-O157 STECs shows that these strains may be less virulent than O157.
3. Attention to Primal Cuts – At least two factors are driving FSIS to develop stricter regulation of primal cuts. First, FSIS learned in the last couple of years that needle-tenderizing injections of steaks are now commonplace in the industry. Second, FSIS is concerned about bench trim.
4. More Aggressive Release of Information to the Public – Dr. Engeljohn also indicated that FSIS will be more aggressive in releasing outbreak information sooner. No longer will FSIS await the kind of confirmation it previously required before requesting recalls or going public with outbreak information.
While the Obama administration has yet to announce an appointment for the FSIS’s Under Secretary of the Office of Food Safety, Dr. Engeljohn indicated that these initiatives are only the beginning. FSIS will be more aggressive on perceived issues of food safety.
At a recent presentation, Dr. Alan Melnick, a public health officer in both Oregon and Washington, provided a useful list of alternative causes of symptoms to consider when someone claims a food-borne illness. Other causes of symptoms that might be confused for food-borne illness include (but may not be limited to):
- Irritable bowel syndrome (IBS)
- Inflammatory bowel disease
- Antibiotic use
- Gastro-intestinal surgery or radiation
- Malabsorption syndromes
- Immune deficiency
Another practical piece of advice offered by Dr. Melnick: When assessing a food-borne illness claim, determine whether the incubation period is compatible with the illness. Incubation periods (along with other useful information) were provided by Dr. Melnick (relying upon the CDC) as follows:
1-6 hours (vomiting); 6-24 hours (diarrhea)
|Nausea and vomiting or colic and diarrhea||24 hours (short form); 24-48 hours (long form)||Soil organism found in raw, dry and processed foods, e.d. rice|
|Campylobacter||2-10 days; usually 2-5 days||Diarrhea, cramps, fever and vomiting; diarrhea may be bloody||2-10 days||Raw and undercooked poultry, unpasteurized milk, water|
|Clostridium botulinum (botulism)||2 hours to 8 days; usually 12-48 hours||Vomiting, diarrhea, blurred vision, double vision, difficulty swallowing, descending muscle weakness||Variable (days to months)||Home-canned food, improperly canned commercial foods|
|Clostridium perfringens||6-24 hours||Cramps, diarrhea||24-48 hours||Meats, poultry, gravy; foods kept warm|
|Enterro-hemorrhagic E. coli, including E. coli O157:H7 and other Shiga toxin-producing E. coli (STEC)||1-10 days; usually 3-4 days||Diarrhea, frequently bloody; abdominal cramps (often severe); little or no fever; 5-10% develop Hemolytic-uremic syndrome (HUS) and average of 7 days after onset, when diarrhea is improving (more common in children, elderly and immune-compromised)||5-10 days||Ground beef, unpasteurized milk and juice, raw fruits and vegetables, contaminated water, sprouts, person to person|
|Listeria||9-48 hours for GI symptoms; 2-6 weeks for invasive disease||Fever, muscle aches and nausea or diarrhea; pregnant women may have flu-like illness and stillbirth; elderly, immune-compromised and infants infected from mother can get sepsis and meningitis||Variable||Fresh soft cheeses, unpasteurized or inadequately pasteurized milk, ready-to eat deli meats and hot dogs|
|Salmonella||6 hours to 10 days; usually 5-48 hours||Nausea, diarrhea, cramps, fever||4-7 days||Poultry, eggs, meat, unpasteurized milk or juice, raw fruits and vegetables (e.g., sprouts), person to person|
|Shigella||12 hours to 6 days; usually 2-4 days||Abdominal cramps, fever and diarrhea; stool may contain blood and mucus||4-7 days||Contaminated food or water, raw foods touched by food workers, raw vegetables, egg salads, person to person|
|Staph (toxin)||30 minutes to 8 hours; usually 2-4 hours||Nausea, cramps, vomiting, diarrhea||24-48 hours||Custards, cream fillings, potato or egg salad, sliced meats|
|Vibrio cholerae||1-5 days||Profuse watery diarrhea and vomiting, severe dehydration||3-7 days||Contaminated water and shellfish, street vended food|
|Vibrio parahaemolyticus||4-30 hours||Watery diarrhea, abdominal cramps, nausea, vomiting||2-5 days||Undercooked or raw seafood (fish and shellfish)|
|Vibrio vulnificus||1-7 days||Vomiting, diarrhea, abdominal pain; more severe in patients with liver disease or who are immune-compromised; can cause invasive infection (sepsis)||2-8 days||Raw seafood, particularly oysters, harvested from warm coastal waters|
|Yersinia||1-10 days; usually 4-6 days||Appendicitis-like symptoms (diarrhea and vomiting, abdominal pain)||1-3 weeks||Undercooked pork, unpasteurized milk, contaminated water|