FDA Issues Gluten Free Labeling Compliance Guide

Nearly a year ago on August 5, 2013, we reported on the blog that the Food and Drug Administration (FDA) had published a final rule establishing a regulatory definition of the term “gluten-free” for voluntary use in the labeling of foods. The final rule is intended to provide a uniform definition of the term “gluten-free” so that consumers, particularly those who have celiac disease, will know what it means when they see it on the labeling of food.

The rule became binding and effective on September 4, 2013, but August 5, 2014 is the date when FDA-regulated foods labeled “gluten-free” must comply with all requirements established by the final rule. In preparation of the upcoming compliance date, FDA prepared a Small Entity Compliance Guide which restates in plain language the requirements concerning use of the term “gluten-free” in the labeling of foods.

Specifically, the guidance states that any label claiming that a food is “gluten-free” must not contain any of the following ingredients:

  • An ingredient that is a gluten-containing grain (such as wheat, rye, or barley or any of their crossbreeds); or
  • An ingredient that is made from a gluten-containing grain and that has not been processed to remove gluten. For example, “wheat flour” is an ingredient made from wheat that has not been processed to remove the naturally occurring gluten in wheat. Therefore, wheat flour cannot be used as an ingredient to make a food labeled “gluten-free;” or
  • An ingredient that is made from a gluten-containing grain and that has been processed to remove gluten, if the use of that ingredient contains 20 parts per million (ppm) or more gluten.

The claim can also appear on the labels of foods that inherently do not contain gluten, such as fresh vegetables or juices.

Another important bit of information is that, unlike other required label components, there are no requirements for color, type size or placement of the “gluten- free” claim.

Although the rule does not expressly require manufacturers to test for the presence of gluten in the raw ingredients or finished foods labeled “gluten-free,” it might be wise to do so. Failing to ensure that the food item bearing a “gluten-free” claim meets the requirements of the rule could cause the product to be deemed misbranded and thus subject to FDA regulatory action. In its guidance, the agency encourages companies to use effective measures to ensure that any foods labeled as “gluten-free” comply with the requirements including:

  • testing the ingredients to determine their gluten content;
  • requesting certificates of gluten analysis from ingredient suppliers; or
  • participating in a third-party gluten-free certification program.

However, as with all agency guidance, FDA’s compliance guidance for gluten-free labeling does not establish legally enforceable responsibilities. Instead, this guidance describes the agency’s current thinking on a topic and should be viewed only as a recommendation. If you have any questions about gluten-free labeling or other food label claims, contact Stoel Rives label compliance experts Claire Mitchell and Anne Glazer.

USDA Approves Non-GMO Label Claim for Meat and Egg Products

Coauthored by Andrea Canfield and Claire Mitchell:

The Food Safety and Inspection Service (FSIS),  the division of the U.S. Department of Agriculture (USDA) charged with regulating the safety and proper labeling of meat, poultry, and egg products, recently approved the Non-GMO Project Verified label claim for meat and liquid egg products. The label, certified by the Non-GMO Project, is intended to inform consumers that the animal was not raised on a diet that consists of genetically engineered ingredients, like corn, soy and alfalfa.

In October 2012, representatives from the Non-GMO Project, a third-party certifying organization, approached FSIS about potentially indicating on product labels under FSIS jurisdiction that the animals were fed diets without genetically engineered ingredients. USDA spokeswoman Cathy Cochran noted that FSIS “worked with the Non-GMO Project, three food companies, the Food and Drug Administration, and the Agricultural Marketing Service to be sure that the potential [non-GMO] label claims are truthful and not misleading to consumers.” According to Cochran, the agency took great care in vetting the Non-GMO Project’s standards, requirements and auditing processes before giving its approval.

Importantly, the approval of the Non-GMO Project Verified label does not necessarily signal a USDA policy shift with regard to non-GMO products. Cochran explained that FSIS allows companies to, “demonstrate on their labels that they meet a third-party certifying organization’s standards, provided that the third-party organization and the company can show that the claims are truthful, accurate and not misleading.” Cochran added that “[t]he agency…is not certifying that the labeled products are free of genetic engineering or genetic modifications.” Instead, the labels simply indicate that the products meet the standards of a third-party certifier regarding the use of non-GMO feed.

In order for a product to bear the Non-GMO Project’s verification seal, the product must have been produced according to consensus-based best practices for GMO avoidance. As described in the Non-GMO Project’s Standard, those practices require farmers, processors, and manufacturers to:

  • Perform ongoing testing of all at-risk ingredients.
  • Ensure that the product contains less than 0.9% GMO ingredients.
  • Abide by rigorous traceability and segregation practices to be followed in order to ensure ingredient integrity through to the finished product.
  • Verify compliance through an annual audit.
  • Allow for onsite inspections for high-risk products.

Representatives at the Non-GMO Project emphasize the fact that the non-GMO verification seal is not duplicative of the USDA certified organic label. Though genetic modification is an excluded method by the National Organic Program, GMOs are not prohibited substances and no GMO testing is required of organic products. This means that GMO ingredients can still be found in certified organic products as a result of accidental contamination. The Non-GMO Project requires product testing as a component of its Standard to ensure the level of GMO ingredients in a product falls below the action threshold. Yet even with the Non-GMO Project’s rigorous testing requirements, the high risk of contamination to seeds, crops, ingredients and products makes a claim that a product is entirely “GMO free” legally and scientifically indefensible.

Currently, there is no federal labeling requirement to indicate whether a food product was, or was not, developed using genetic engineering and only two states have passed GMO labeling laws; however, according to the Non-GMO Project’s Executive Director, Megan Westgate, “non-GMO” is the fastest growing label claim in the industry appearing on over 800 brands and 10,000 products. For those interested in learning more about the Non-GMO Project Verified mark, contact the Non-GMO Project’s Product Verification Program team at 877-358-9420 x102.

FDA Cracks Down on Company's Facebook "Likes"

Social media has become a critical component of a company’s product marketing and promotion. However, based on FDA’s increased enforcement action around social media activity, it is a risk to be carefully considered.

The Food and Drug Administration (FDA) recently published a December 11, 2012 warning letter on its website that cited a dietary supplement company for its improper social media activity, among other things. Specifically, the warning letter explained that the supplement company’s “liking” of a consumer testimonial posted to its product Facebook page was a violative claim in that it established the product as a drug intended to cure, mitigate, treat, or prevent a disease. The FDA noted in its warning letter that the liking of the following March 10, 2011 Facebook post by the company constituted an impermissible disease claim:

“[Product]has done wonders for me. I take it intravenously 2x a week and it has helped me tremendously. It enabled me to keep cancer at bay without the use of chemo and radiation.”

The company has since removed this content from its Facebook page.

This is not the first time that FDA has scrutinized a company’s use of social media. In the past two years, over a dozen companies have been cited by FDA for making improper claims on the company or product Facebook page or Twitter account. However, this is the first time FDA has interpreted that a “like” implies endorsement of an unapproved claim.

There is some speculation that a crackdown on similar social media activities, such as “retweeting” a post on Twitter or “+1” on Google+, might be next on FDA’s agenda. In light of this regulatory risk, companies should ensure consider drafting formal social media policies and thoroughly vetting all social media marketing strategies to avoid enforcement action.

Dannon Forced to Open Wallet and Change Advertising (Again)

Note: The following is posted by David Pacheco from the Essential Nutrition Law Blog.

The multinational food company Dannon agreed to a 45 million dollar class action settlement earlier this year based on consumer complaints about advertising claims regarding the health benefits of its probiotic line of dairy products. Now the company has entered into a $21 million dollar settlement with the attorneys general from 39 states. The L.A. Times reports that this is the largest-ever multistate attorney general consumer protection settlement with a food producer. The attorneys general alleged that Dannon made deceptive and unlawful claims in advertising which were not substantiated by competent and reliable scientific evidence at the time the claims were made. According to the allegations, the majority of scientific studies showed improvement in intestinal transit time when an individual consumed three servings of the probiotic products per day for two weeks, and did not support Dannon's advertised claims that one serving per day for two weeks improved digestive health. In addition, the attorneys general alleged that Dannon could not substantiate claims regarding improved immunity against the flu and common cold.

Dannon also agreed with the FTC to drop claims that the probiotic foods help prevent irregularity and offer protection against the flu and common cold. The FTC found no substantiation of these claims. This isn’t the first time Dannon has had to alter its advertising; the March settlement required Dannon to remove specific language about the health benefits of the products from labels and advertising.

 

Between this and the March settlement, Dannon has now agreed to pay $66 million as restitution for the misleading health claims, which comes out to about 1.3% of Dannon reported $5 billion in worldwide net sales of the probiotic line in 2009. This latest settlement should remind companies to keep state governments on the list of watchful eyes monitoring health claims related to food and supplement products.

Sodium Putative Class Action Suits to Become Epidemic?

Following the putative class suit filed last month in New Jersey by the Center for Science in the Public Interest (CSPI) against Denny’s, a similar suit was filed in Illinois (apparently CSPI is not directly involved in this action). The Illinois complaint can be found here.

Like the New Jersey complaint, the Illinois action alleges claims of consumer fraud and breach of implied warranty of merchantability. Previous posts on this site have explained why both consumer fraud and implied warranty of merchantability claims should fail on their face.

The Illinois action adds claims for unjust enrichment, accounting and ”breach of contract implied in fact.” Claims for unjust enrichment and accounting seem intertwined and not all that different from consumer fraud and breach of implied warranty claims.

Breach of contract implied in fact is more creative. Instead of directly attacking Denny's representations (which as discussed in previous posts are not really alleged to be inaccurate), this claim asserts something that looks more like a products liability claim. The claim turns not so much on “fraud” but on whether the meals sold “contained excessive amounts of sodium, such that it was not fit for human consumption.” This cause of action alleges that the “bargained for” contract between class members and Denny’s required Denny’s to provide “a meal fit for human consumption.”

While creative, the breach of contract implied in fact claim may be more problematic than the fraud and implied warranty of merchantability claims. First, as discussed previously, Denny’s discloses on its website (and according to CSPI, at its restaurants) sodium content of menu items. Like the fraud claims, proof that plaintiffs could have reasonably bargained for something different seems problematic.

Second, plaintiffs are asking the court to use its equitable powers and step into the shoes of local, state and federal health departments and regulatory agencies to pass on appropriate sodium levels in restaurant food. As a rule, courts use their equitable powers only in extraordinary circumstances (e.g., a building falls down, assets leave the country, an individual’s life or liberties at stake, etc.). If regulators and legislators have not reached consensus on regulating sodium, odds are that most judges will avoid weighing in on the issue.

Despite their problems (and probable lack of merit), best guess is that the plaintiffs' class action bar will continue copy-catting these suits across the country.  Doubtful that Denny's will be the only victim.

HFCS Labeling Case: Opening The Floodgates For New Consumer Claims?

The Third Circuit may be close to opening the floodgates of claims against food and beverage manufacturers who use high-fructose corn syrup (“HFCS”) in products labeled “all natural.” Shannon Duffy at the Legal Intelligencer reported recently on a “lively hour-long” oral argument in the Third Circuit about reversing a District Court’s dismissal of state consumer claims against Snapple for use of HFSC.

The District Court dismissed the consumer claims in 2007 on the basis of field preemption. The dismissal predated the Third Circuit’s decision in Fellner v. Tri-Union Seafood, LLC. See our previous blog on the Fellner case. Despite the FDA’s position in Fellner that a state law failure-to-warn claim is preempted by federal law, the Third Circuit ruled to the contrary.

In Fellner, a claim by a person who suffered from mercury poisoning after eating canned tuna literally for breakfast, lunch and dinner for five years may have been an outlier. But reversal of the District Court’s decision in the Snapple case will open the floodgates to consumer class action claims against a whole slew of food sellers and manufacturers.

Captain Crunch Suit Dismissed: Court Finds No "Actual Fruit Referred to as Crunchberry"

Yes, someone has actually filed a putative class action on the basis that she was “mislead by the packaging and marketing, which she argues convey the message that the Product contains real, nutritious fruit.” U.S. District Judge England in the Eastern District of California dismissed the complaint captioned as Sugawara v. Pepsico, Inc.

Though Sugawara seems purely frivolous, the claim follows predictably from the Ninth Circuit’s decision in Williams v. Gerber discussed previously on this blog. In Williams, the Ninth Circuit reinstated a putative class action that alleged labeling on “fruit juice snacks” (1) constituted misrepresentation and breach of warranty under California common law and (2) violated California’s statutes on unfair competition and consumer law. The district court had granted a motion to dismiss under Rule 12(b)(6), finding that statements on the label “were not likely to deceive a reasonable consumer, particularly given that the ingredient list was printed on the side of the box.”

Judge England distinguished Sugawara from Williams, writing that

while the challenged packaging contains the word “berries” it does so only in
conjunction with the descriptive term “crunch.” This Court is not aware of, nor has Plaintiff alleged the existence of, any actual fruit referred to as a “crunchberry.” Furthermore, the “Crunchberries” depicted on the PDP are round, crunchy, brightly- colored cereal balls, and the PDP clearly states both that the Product contains “sweetened corn & oat cereal” and that the cereal is “enlarged to show texture.” Thus, a reasonable consumer would not be deceived into believing that the Product in the instant case contained a fruit that does not exist.

Even lawsuits as unmerited as alleging that consumers believe Crunchberries grow on trees are expensive to deal with. As we said following the Williams decision, the sad state of affairs is that the only way manufacturers can mitigate against these types of putative class actions is to directly involve lawyers in the marketing and labeling process.

Avoid Unnecessary Labeling Claims - Ensure That Cooking Instructions Are Adequate

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.

More on Reducing the Risk of Failure - Focus on Shifting Liability For Consumer Claims

Food Safety Magazine ran an interesting piece by Aaron Krauss titled “Reducing the Risk of Failure.”  The article was part of the magazine’s focus on limiting liability for food companies.  Mr. Krauss includes a good discussion of the pros and cons of indemnities and disclaimers of warranty and liability as ways to shift or reduce liability for claims within the supply chain.  Yet, the article does not discuss how to shift liability for claims from outside the supply chain, i.e., consumer claims.

For example, Mr. Krauss advocates that if members of the supply chain limited liability between themselves to the purchase price of the product, this might reduce or eliminate litigation.  Mr. Krauss points out that “if everyone in the ‘peanut butter food chain’ had limited their liability, a store might not bother suing, since it could only recover its purchase price.”

Limitation of liability clauses, while effective to reduce exposure between members of the supply chain, will have no limiting effect on consumer claims.  Unless a food seller can invoke a “passive retailer” defense,  each member of the supply chain will be strictly liable for injuries to consumers caused by the food product.

The only ways for a food seller to shift consumer liability is through either supplier indemnity or insurance.  Mr. Krauss is correct that indemnities by suppliers may be hard to secure and harder to enforce. And, claims defended by the seller’s own carrier will invariably result in higher premiums.

Because insureds will generally be penalized through premiums for invoking their own insurance, the best insurance is somebody else’s insurance.  Even a food seller that might not have the leverage with its supplier to receive indemnification may be able to secure “additional insurance.”  Naming a vendor as an additional insured frequently costs the supplier nothing in added premiums.  If seller specifies that this insurance is to be “primary and noncontributory,” the supplier’s insurance may be the first line of defense for claims involving the supplier’s products. 

If a supplier will provide additional insurance, follow-through is essential. The seller needs to (1) verify that the supplier has, in fact, named the seller as an additional insured and (2) review the operative language of the additional insured endorsement and/or policy language to ensure that it does not include unacceptable conditions or exclusions.

 

Court Rules That Retailers Have No Duty to Investigate Suppliers Compliance with Organic Regulations

An important ruling was issued last week dismissing claims that milk produced by an organically certified dairy and labeled as organic was not really organic. Plaintiffs in the action asserted violations of various states’ laws because they claimed that they paid more for the milk because it was labeled as "organic.”

A federal judge in the Eastern District of Missouri granted a Rule 12(b)(6) motion to dismiss on a multitude of cases pending against the dairy, various retailers selling the dairy products and others (originally these suits were filed in various federal courts around the country but were consolidated for pretrial purposes by the United States Judicial Panel on Multi-District Litigation or MDL).

The judge ruled that claims against the dairy were preempted because a “conflict exists between federal and state law” (otherwise known as “conflict preemption”). As explained in the opinion, conflict preemption exists where “a party’s compliance with both federal and state law would be impossible or where state law would pose an obstacle to the accomplishment of congressional objectives.” Here, the court found that for “plaintiff’s claims to succeed, the Court would have to invalidate the regulatory scheme established under the OFPA [Organic Foods Production Act] and NOP [National Organic Program].” The court concluded that if plaintiffs were to prevail “producers would be liable even where fully certified and authorized to use these terms and seals.”

For the retailer defendants, the judge ruled that because plaintiffs’ claims against the dairy are preempted, “the retailer Defendants cannot be liable.” But the court went further and dealt explicitly with the plaintiffs’ claims that the retailers “should have investigated” the dairy’s activities to ensure compliance with the OFPA and NOP. The court rejected these arguments:

The Retailer Defendants did not have any duty to inspect [the dairy’s] facilities, or the facilities of any of their other organic producers. Imposing such a requirement “would place an undue burden on the distributor who is least likely to have access to such information.”

This should be good news for organic retailers. Hopefully, this decision will reduce their legal exposure to consumer labeling claims going forward.

Tracking the Food Safety Working Group - More or Less Legal Exposure For Food Sellers?

This week the Obama administration announced the launch of a new website for the recently formed food safety working group. Obama announced the formation of this group in March in the wake of the high-profile food safety issues surrounding PCA peanut products

This website will assist in tracking the efforts of the working group. As discussed previously on this blog, this group is expected to make recommendations aimed at detection, awareness and government reorganization. Possible examples include increasing funding to states to monitor food-borne illness, combining FDA and USDA food safety efforts, reexamining mandatory recall authority, increasing retail enforcement and implementing more aggressive consumer warnings.

What is not clear is whether the working group will look beyond just detection, awareness and reorganization to bolder initiatives that may result in less consumer illness and less legal exposure for food sellers. Bolder initiatives could include funding for irradiation, consumer food safety education, and fast-track development and implementation of technology that can sample food products for whole colonies of microorganisms

 

Defending Liability in Foodborne Illness Outbreaks

I’m asked frequently about the “anatomy of litigation.” I plan to write more in this space on the topic. For now, some may find useful the slides from a presentation I gave recently on “Defending Liability in Foodborne Illness Outbreaks.” I discussed what I see as three prototypes of consumer claims and possible strategies to respond to each.

Five New Year's Resolutions

Unfortunately, 2009 does not promise to be any easier than 2008 in protecting your business against food liability claims. Many argue that threats will only increase in the new year. Here are five things you can do to reduce exposure in the coming year:

1. Review Insurance Coverage and Limits Carefully – Both the variety and size of claims are escalating fast. For example, just a couple of years ago consumer claims from non-O157 E. coli, melamine, diacetyl or organic labeling seemed far-fetched, but all are now a grave reality. Federal, state and local governments will continue improving detection techniques since the rash of large, national food-borne illness outbreaks in 2006-08. The Obama administration will likely make increased funding in this area a priority. The odds that your company will be targeted in a nationwide outbreak resulting in claims in the hundreds of millions of dollars are increasing. Because of the exposure, insurance companies now more than ever will be looking for ways to reduce their coverage.

2. Review and Revise Supply Chain Agreements – Aside from insurance, one of the most effective ways to reduce, spread and mitigate risk is to ensure that those in your supply chain provide adequate insurance and indemnity for problems related to their products. But just because your supply agreement happens to mention insurance and indemnity does not necessarily mean those clauses will help when you need them. The only way to ensure that they will be honored and enforced is to ensure that your legal team (experienced in litigating these clauses) drafts these carefully.

3. Reassess Suppliers – Your choice of suppliers may be key to avoiding or reducing risk. Even if you demand sufficient insurance and indemnity from a supplier, a supplier of sufficient size may not be able to access insurance or have assets available to satisfy indemnity obligations. As important as your food safety, HAACP and other programs may be, they are really only as strong as your suppliers’ programs. Careful audit and assessment of your suppliers’ food safety programs is important.

4. Increase Scrutiny Against Fraudulent Imports – Melamine, tainted rice and now “laundered honey” are all good examples of how fraud in the global food chain can dramatically affect unsuspecting U.S. food sellers. [add more advice here?]

5. Review, Update and Rehearse Crisis Management Plans – How your company is prepared to respond to a crisis is a good predictor of how your company will weather the crisis. With the stakes increasing, you need to be prepared to face the worst. Continual review, updating and rehearsal of your crisis management plan is key. Everybody on the crisis management team needs to understand his or her role and be ready for different scenarios.
 

Practical Advice for Litigating the Food Case

Click here for the slides from a presentation I gave recently with Shawn Stevens entitled "Practical Advice for Litigating the Case: Retaining Experts, Assessing Damages and Planing Trial Strategy." Two threads of my part of the presentation were organization and relationships (I believe that these were also central to Obama's campaign hence the campaign log).

In the coming months, I intend to use this blog to continue my series on the anatomy of complex, multi-party consumer based claims. Building organization and relationships will be discussed heavily as central to positioning a case succussfully for trial (and settlement).

Court to Rule on Consumers' Expectations For Organic Cosmetics

Dr. Bronner’s Magic Soaps (“Dr. Bronner’s”) received a favorable ruling recently in its suit against competitors that it believes are misleading consumers by labeling cosmetic products as “Organic”. Part of Dr. Bronner’s claim appears to be that “Organic” standards established by the U.S. Department of Agriculture (“USDA”) set the bar for consumer expectations of "Organic" cosmetic products. The USDA’s National Organic Program (“NOP”) standards, according to the USDA, do not apply to “cosmetics, body care, or personal care products”.  Dr. Bronner’s argues in its complaint that “[p]ersonal care products labeled as in compliance with ‘Organic’ or ‘Made with Organic [up to three specified ingredients]’ under the NOP criteria reflect basic organic consumer expectations . . . .” (Brackets in original.)

Last week, a California Superior Court in San Francisco overruled the demurrer of Ecocert France (SAS) and Ecocert, Inc. A demurrer is essentially a request made to a court, asking it to dismiss a lawsuit on the grounds that no legal claim is asserted.

According to Dr. Bronner’s, the “Court turned aside the defendants’ arguments that Dr. Bronner’s, in its complaint filed with the Court, had not sufficiently spelled out how actual consumers, the company and competition in the organic personal care industry have been hurt by the defendants’ deceptive practices.” The court’s ruling does not necessarily mean that Dr. Bronner’s is likely to succeed, only that it has articulated colorable claims. The court did not rule on the merits of these claims.

This case should be watched closely by those in cosmetics and food industries. Dr. Bronner’s claims turn, at least in part, on its view of “consumer expectations.” Do consumers have expectations as to what “Organic” means? Does it mean something different for cosmetic products? These are just a few of the significant questions that may be addressed in the litigation.

Anatomy of a Food-Borne Illness Claim - Part I

Recently, I’ve received several requests for resources explaining the anatomy of a food-borne illness claim. In other words, what events can be expected, and when? What can or should a company (in particular the legal department) do in response to a claim?

Part I – Notice of an Outbreak (and Possible Claims)

 

First off, don’t panic. Your company’s crisis management team (which has been well-rehearsed for this scenario) should convene action upon the first notice of a possible outbreak—even before verification and before claims are apparent. Food safety experts should contact the health departments that may have identified the outbreak. Together with the legal, sales and quality assurance departments, your food safety experts should be involved in a full investigation of the possible outbreak. The earlier the intervention, the greater the possibility of collecting key information that may be useful in determining whether your company is linked to the outbreak and pinpointing other possible sources of the outbreak. Public relations experts should also be consulted at the first possible moment.

 

Checklist for the legal department:

 

  • Log events, actions and communications. This is critical for responding to government agencies and to claims.
  • Record all reported injuries. Collecting information about potential claims early is a key to mitigating those claims and future legal costs.
  • Notify insurers. Insurance companies require prompt notice; insurers may also have assets available for crisis response.
  • Document the investigation. Litigation may be protracted, and a well-documented investigation may be key to the company’s defense.
  • Institute a litigation “hold” on the destruction of any company documents or emails. Don’t turn a bad situation into a nightmare; spoliation claims can take on a life of their own.
  • Retain product samples for future testing. This may be critical to support experts’ opinions at trial and to preserve claims against suppliers.
  • Review and retain vendor/supplier documents. Recovery against suppliers could be as important as or more important than insurance recovery.
  • Assess the merits of a consumer hotline. It could be helpful in disseminating accurate information to consumers (inaccurate or conflicting information can lead to litigation) and in collecting information about the pool of potential plaintiffs.
  • Assess the merits of a consumer/vendor reimbursement program. Like having a consumer hotline, providing immediate reimbursement could help dampen the volume of future plaintiffs.

Stay tuned for Part II – Receipt of the Demand Letter.

New York Times on Nutraceuticals

The New York Times has a piece on nutraceuticals that caught my eye as an example of the news media’s skepticism about fortified food. The article begins:

“O[ff] the coast of Peru swim billions of sardines and anchovies: oily, smelly little fish, rich in nutritious omega-3 fatty acids. Their spot on the food chain is low; many will be caught, ground up, and fed as fishmeal to bigger animals.

“But a few have a more exalted destiny: to be transported, purified and served at North American breakfast tables in the form of Tropicana Healthy Heart orange juice and Wonder Headstart bread. These new products promise to deliver the health benefits of fish oil without the smell and the taste — without, in fact, the fish.”

But the article’s author, Julia Moskin, without citation or attribution, poses these loaded questions:Are we really that close to a world in which food functions as a nutrient delivery system, made possible by microencapsulation and fine-spray coating? And what would this mean for food and human nutrition?”

In the end, Ms. Moskin’s piece appears full of cynicism and doubt about the industry. She writes off nutraceuticals as a cheap marketing ploy: 

“[W]ith recent rising costs in raw materials, flavorings and transport, many food companies are refocusing their research and development; instead of adding expensive ingredients like sun-dried tomatoes or honey-roasted almonds to existing products, the search is on for inexpensive ‘value-added’ products that customers will pay extra for.”

Ms. Moskin does quote claims made by the industry but notes that university scientists disagree with the claims—implying that these scientists must be right because they are not employed by industry.

To me, the article demonstrates the need for the industry to invest in more independent research and verification. As the nutraceuticals industry matures and grows, claims by industry will be met with growing suspicion and, inevitably, assertions of “consumer fraud.” Consumers may believe health claims by small health food companies that they “trust.” But once those same companies (and their industries) grower larger, people by their nature become more skeptical.

"Organic Pathogens Exclusion"

Insurers are making efforts to exclude food-borne illness claims from coverage under comprehensive general liability (“CGL”) policies. The "Organic Pathogens Exclusion" is a good example.

While a claim for food-borne illness may normally be covered by a CGL policy, if you have an organic pathogens exclusion, your insurer will not provide a defense and will not cover your losses if your business is sued as a result of a food-borne illness.

Organic pathogens exclusions can take multiple forms. Some policies include an endorsement that excludes any “loss” for “any actual, alleged or threatened exposure to, existence of, presence of, ingestion of, inhalation of or contact with any biological agents.” “Biological agents” are usually defined to include things like bacteria, viruses or other pathogens (whether or not a microorganism).

Other policies simply include an endorsement providing that “this policy does not insure any loss, damage, claim, cost, expense, fine, penalty or other sum either directly or indirectly arising out of, relating to or caused by an “organic pathogen.” These policies generally define “organic pathogen” to mean “any organic irritant or contaminant, including but not limited to fungus, bacteria, virus, or other microorganism of any type, including but not limited to their byproducts such as spores or mycotoxin, or any hazardous substance as classified by the EPA.”

Any business involved in food production should take notice. Insurers are actively marketing policies with organic pathogen exclusions to food businesses whose greatest liability exposure may be food-borne illness. Careful and regular review of insurance policies and coverages is essential.