A 60-minute webinar broadcast on April 29 on the Food Safety Modernization Act (and a short discussion of implications of the Japanese earthquake, tsunami and resulting nuclear disaster on food safety) is available for replay at this link. The webinar was sponsored by AON. My gratitude to AON for inviting me to participate. As always, I'm interested in your feedback and questions.
On Friday, S. 510, the food safety bill, was declared dead. Last nite (Sunday), the Associated Press reported the bill may finally pass in the final hours of the 111th Congress. The New York Times report can be linked here. The text of what I understand will be headed to a final vote in the House on Tuesday and signed into law by the President can be linked here.
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.
Today, the United States Senate passed the food safety bill, S. 510. If this were to become law (and according to the New York Times , this is a big if), the legislation would impose the most sweeping changes to food regulation in decades.
Among many other things, the bill would allow the FDA to order mandatory recalls, impose new record keeping requirements on businesses and establish stricter import standards. As a consequence, virtually every FDA regulated food manufacturer would have to adjust its approach to food safety, record keeping, supply-chain contracting and government relations. If this legislation becomes law, stay tuned here for in-depth analysis.
I'll be moderating and speaking on a panel at the upcoming ACI's Advanced Summit on Food Safety Regulatory Compliance in Chicago, June 28-29. Scott Rickman from Del Monte, public relations professionals and I will be presenting on "Effectively Responding to Negative Media Coverage: How to Avoid the Backlash" (If you plan to attend, register soon and contact me for a conference discount).
In my practice, I abide by two principles when involved with a case that has potential for negative media coverage:
1. Preservation of the Brand May Trump the Litigation: Even the most serious food-borne illness or consumer fraud claims may not be as significant as preservation of the client's brand. And what may seem like a smart litigation strategy may not be in the best interest of the brand.
For example, ownership of a crisis may be the best way out for a company faced with a widespread food-borne illness outbreak. The 2008 Maple Leaf foods outbreak is a prime example. Maple Leaf foods is one of the largest food companies in Canada and was faced with a deadly nationwide listeria outbreak linked to deli meat processed at one of its plants. Its CEO, Michael McCain, famously took immediate ownership of the crisis, which lead to restoration of both the brand's name and its stock value. Mr. McCain was quoted post mortem as saying:
“Going through the crisis there are two advisors I’ve paid no attention to. The first are the lawyers, and the second are the accountants . . . . It’s not about money or legal liability, this is about being accountable for providing consumers with safe food.”
In other cases, a strategy that "sacrifices" a single product line or a single restaurant for the good of the chain or other product lines may be the right strategy.
Though right for the client, either strategy might be uncomfortable for the litigation team as it constitutes something close to an admission of liability. As one communications expert has said:
“[L]awyers need to understand that legal liability isn’t the only factor to consider in a crisis. But that’s not an easy pill for many lawyers to swallow. They believe future litigation is prejudiced if a CEO makes an apology . . . .”
Which leads me to my second principle:
2. Call the Communications/Public Relations Experts: Lawyers are multi-talented. However, lawyers are not experts in public relations. As illustrated above, the right strategy for a branded food business may prioritize a public relations strategy. The only way to formulate the best strategy for the client is to involve and listen to the entire crisis response team, including the communications/public relations experts.
As we have discussed in recent postings (here and here), issues regarding the certification of food ingredients as generally recognized as safe (“GRAS”) by the Food and Drug Administration (the “FDA”) have been a hot topic in industry circles. Now, the Government Accountability Office (the “GAO”) has released a report encouraging the FDA to improve its oversight of GRAS food ingredients. Our colleagues from Hyman, Phelps & McNamara’s FDA Law Blog released an excellent post on this subject, so we will discuss the general findings and recommendations of the report here.
The GAO report includes findings that (1) the FDA’s oversight process does not help ensure the safety of all new GRAS determinations, (2) the FDA is not systematically ensuring the continued safety of current GRAS substances, and (3) the FDA’s regulatory approach allows engineered nanomaterials to enter the food supply without its knowledge. The report contains six specific recommendations for FDA action, encouraging the FDA to develop a strategy to:
- require any company that conducts a GRAS determination to provide the FDA with basic information about that determination;
- minimize the potential for conflicts of interest in companies’ GRAS determinations;
- monitor the appropriateness of companies’ GRAS determinations through random audits or some other means;
- finalize the rule that governs the voluntary notification program;
- conduct reconsiderations of the safety of GRAS substances in a more systematic manner; and
- help ensure the safety of engineered nanomaterials that companies market as GRAS substances without its knowledge.
Further, the report contains a general directive that if the FDA determines it does not have the authority to implement one or more of these recommendations, the agency should seek the authority from Congress. In its response to the report, the FDA, while not indicating any definitive posture on the GAO’s recommendations, was generally receptive to the findings and recommendations of the GAO. Given the prominence of the issue of GRAS certification as it pertains to a number of food and beverage products in the marketplace, we will continue to closely monitor this subject.
Stoel Rives was a sponsor of this year's GMA food litigation conference in Austin from February 22 to 25. The slide deck from Ken Odza's presentation on consumer fraud class claims can be viewed by clicking on the image to the left.
Some of the takeaways from my presentation and those by others at the conference include:
- Assure Marketing Is in Sync with R&D (to Avoid Exposure from Consumer Fraud Class Claims) (Ken Odza, Paul Benson, Richard Fama)
The point was underscored in several presentations that exposure on consumer fraud class claims often comes from unsupported marketing claims (health claims in particular). Marketing departments should make sure not only that claims are supported but that the supporting research is not contradicted by other credible internal or external research.
Iqbal/Twombly Makes FRCP 12(b)(6) Motions More Attractive (Ken Odza, Richard Famas)
The Supreme Court has overruled the Conley standard on Rule 8 notice pleading. "Plausibility" is the new pleading standard on a Rule 12(b)(6) motion to dismiss. If the operative allegations are not factually specific and the complained-of-conduct can be explained by another obvious reason, the complaint may be dismissed.
Class Certification in Consumer Fraud Cases Not Likely If Individualized Reliance/Causation Need to Be Proven (Ken Odza)
A court should deny class certification in a consumer fraud case under the FRCP 23(b) "predominance" standard (1) when the proposed class includes multiple states with materially different statutes or (2) where the applicable state law requires an individualized showing of reliance/causation for each class member.
- Inexorable Pursuit of Zero, and the EPA Asserting Itself in Food Safety (Scott Rickman, Bob Brackett)
As technology improves and chemicals can be detected at lower and lower levels, regulators are looking at stricter standards and lower thresholds. EPA, for example, has a renewed emphasis on risk assessments that will inevitably affect food regulation.
- FALCPA Does Not Apply to Restaurants, but "Allergen-Free" and "Gluten-Free" Claims Must Be Supported (Joseph Bottiglieri)
- Pros and Cons Of MDLs (Paul LaScala)
Paul La Scala provided a thorough and thoughtful analysis of the pros and cons of Multi-District Litigation (MDL) from a defendant's perspective.
- FDA Recall Procedures Manual Is a Great Resource and Can Be Found Online (Tom Mazziotti)
The FDA's regulatory procedures manual (or at least the chapters related to recalls) should be mandatory reading as part of any company’s recall preparedness program.
- Class Actions and Mass Torts on the Rise Internationally with More Countries Passing Plaintiff-Friendly Laws (Greg Fowler)
American companies selling products abroad need to be aware of and prepared for litigation abroad with rules that are increasingly unfriendly to business.
We’re in the “crystal-ball” season—time to look forward and assess what’s coming in 2010 and beyond. The most likely scenario: more of the same and landmark change.
More of the Same
The last few years have seen growth in both the number of food-borne illnesses detected and the variety of foods affected. This is because more resources are being put into detection (though the CDC recently reported an overall decline in epidemiological capacity by the states) and technology is continuing to advance (think Next Generation Sequencing). There’s little reason to believe these trends will abate in 2010. Expect more outbreaks. Expect to hear about recalls of products not previously implicated in food-borne illness.
Nobody doubts that we’re in the midst of the most significant legislative and regulatory changes in food safety in generations. Most believe that Congress will pass some form of food safety legislation (e.g., S 510 or HR 2749) in the new year. It will likely include the most comprehensive food safety reform in decades. Among other things, this legislation is likely to give FDA mandatory recall power and great authority for risk-based inspections, and require FDA to create a traceability program.
FDA and USDA are already pushing the boundaries of their current authority to become more aggressive on food safety and labeling enforcement. Examples include USDA moving toward classification of Salmonella as an adulterant, more aggressive rules on ground beef safety, and increased retail enforcement. FDA is already studying how traceability could work, being more aggressive in identifying products and retailers in the event of recalls, reexamining the effectiveness of current nutritional labeling requirements, and investigating whether front of pack nutrition labeling (FOP) practices need to be regulated.
And on the heels of legislative reform and increased regulatory enforcement come the lawyers. Action by the government creates new avenues for the plaintiffs’ bar. Food litigation will likely increase in prevalence both in product liability claims (i.e., food contamination) and in putative consumer fraud class claims into 2010 and beyond.
The U.S. Department of Agriculture’s Food Safety and Inspection Service has announced the 2010 Food Safety Education Conference. The conference will be held in Atlanta from March 23 through 26, 2010. Although the agenda is still a work in progress, you can expect sessions on foodborne illnesses, outreach to the medical community, food safety education initiatives, social marketing, and emerging industry trends and technologies.
The conference is accepting abstracts on food safety-related topics through August 16, 2009. More information on the conference and the abstract submission process is available through the links on the widget below.
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.
Dr. Margaret Hamburg, President Barack Obama’s nominee to oversee the Food and Drug Administration, is appearing before a U.S. Senate committee this afternoon regarding her nomination. The confirmation hearing before the Senate Health, Education, Labor and Pensions Committee began at 2:00 p.m. ET. Streaming video is available here.
The Associated Press is reporting that, if confirmed, one of Hamburg’s first tasks will be overseeing development of a vaccine for the H1N1 influenza virus. In Hamburg’s opening remarks to the Senate committee that were made available to reporters earlier today, she also noted that food safety will be among her top priorities. “Important steps must be taken to better protect the nation’s food supply from farm to form,” Hamburg said.
Senator Charles Schumer (D-NY) is expected to introduce legislation today to strengthen U.S. food safety. Newsday.com is reporting that Sen. Schumer’s bill will call for a director of food safety oversight who would be a senior-level director at the Department of Commerce. The proposed director would focus exclusively on food safety.
As pistachio recalls continue to be announced in the wake of salmonella-tainted pistachios from Setton Farms, two California lawmakers this week announced legislation that is expected to strengthen food-safety standards in that state.
The bill to be introduced in the California State Assembly by Assembly Speaker Karen Bass and Assemblyman Mike Feuer is expected to require detailed safety plans from food processors, periodic testing of food at California food processing facilities, and requirements for food processors to report to state authorities any positive tests for a dangerous contaminant within 24 hours.
A video of Assemblyman Mike Feuer’s announcement is available below. Meanwhile, the FDA continues to update its list of recalled products.
Update to today’s earlier post: the Georgia House of Representatives unanimously passed a bill today that would strengthen food safety laws in Georgia. The Georgia House and Senate now will resolve minor differences in the proposed legislation and send a final version to Georgia Gov. Sonny Perdue for his signature.
Also today, the AP reports that the chief executive of Kellogg Co. is urging food safety reforms, including written safety plans for all food companies and annual inspections of facilities that make “high-risk foods.” The AP article notes Kellogg lost $70 million worth of peanut products in the recent salmonella outbreak linked to Peanut Corporation of America.
The Georgia House of Representatives today considers proposed legislation to strengthen food safety rules in that state. Among other things, Senate Bill 80 includes a provision that would require food makers to alert state inspectors within 24 hours if a plant’s internal tests show products are tainted. Experts say no other state has such a rule.
The bill already has passed the Georgia Senate. House approval would mean Georgia Gov. Sonny Perdue soon could sign the bill into law.
The bill was introduced following the salmonella outbreak linked to Peanut Corporation of America. Investigators say the company knowingly shipped salmonella-laced products even after PCA's internal tests showed the products were tainted. State law did not require the company to share those test results.
The Obama administration placed food safety front and center over the weekend. In his weekly radio address, President Obama on Saturday announced new leadership at the Food and Drug Administration and the creation of a panel to toughen food safety laws.
Characterizing outdated food safety laws and the lack of resources at the FDA as “a hazard to public health,” Mr. Obama announced the appointment of Dr. Margaret Hamburg, a former New York City health commissioner, as FDA commissioner, and Baltimore Health Commissioner Dr. Joshua Sharfstein as the FDA principal deputy commissioner. The president also unveiled the Food Safety Working Group – a group that will consist of cabinet secretaries and senior officials to advise the president on how to update and enforce food safety laws.
President Obama also announced two additional food-safety steps on Saturday: closing a loophole in federal regulation that allows some diseased cows to be slaughtered for food, and a billion-dollar investment to modernize labs and increase the number of food inspectors.
Read a transcript of the president’s weekly radio address, download the .mp3 audio, or view the video below.
The National Grain and Feed Association has reported to its members that Senator Richard Durbin (D-IL), is likely to reintroduce food safety legislation next week. Senator Durbin has introduced similar bills in prior Congresses. Likely, co-sponsors include Senator Edward M. Kennedy, chairman of the Senate Health, Education, Labor & Pensions (HELP) committee, and Republican Sens. Richard Burr of North Carolina, Lamar Alexander of Tennessee and Judd Gregg of New Hampshire. According to NGFA, the bill would require participants in the food chain to develop food safety plans to identify hazards that could adversely affect human or animal health.
Because of the peanut butter recall, there may be an attempt to take the bill straight to the Senate floor, bypassing committee hearings.
Happy New Year. Thank you for your support, readership and feedback for this site. Since we launched the blog in late February of 2008, the growth in readership has been extraordinary. I'm overwhelmed at the response. My hope is that the blog has provided some measure of assistance to those in the food industry. As always, I welcome your feedback, suggestions and critiques.
In the coming year, I hope to spend more time on the blog exploring trends in liability, insurance coverage and consumer claims related to the food industry. I also hope to discuss more deeply the anatomy of consumer-based food borne illness and labeling litigation.
You may notice a drop-off in the frequency of postings between February and April as I will be spending more time on the road. I apologize in advance. One of the things I will be doing (and posting about) is visiting with students and faculty at the Cornell Food Science program in Ithaca, New York. I hope to learn more about emerging technologies related to food production and safety.
The Obama administration has promised sweeping changes in all corners of the federal government. We can expect the new President to push an ambitious legislative and administrative law agenda in 2009. What does this mean for food regulation? A partial answer may be gleaned by looking at the Improving Food-borne Illness Surveillance and Response Act of 2008, a bill Obama introduced last summer after he become the presumptive Democratic nominee.
Some things of note:
1. The bill appears targeted in large part on increasing the government’s “capacity” for detection of food-borne illness—both by increasing cooperation between local, state and federal agencies and by enhancing detection capability through proliferation of cutting-edge technology. The bill proposes $25 million in block grants to state and local agencies. As we've said before in this space, better detection capacity correlates to more detected outbreaks. More detected outbreaks translates to more food-borne illness claims and affects everyone in the food industry (especially restaurants and those selling fresh produce).
2. One of the five goals of the bill is to “Strengthen oversight of food safety at the retail level.” I’m unclear on exactly what is meant by this goal. Does this mean, for example, that Obama might be interested in granting FSIS the jurisdiction to inspect supermarket delis or butchers?
3. Also of interest is what does not seem to be included in the bill. Specifically, the two most talked about (and controversial) federal food safety reform ideas: (1) mandatory recall authority and (2) merger of FSIS and FDA food safety programs. Should we read into the bill that President-Elect Obama does not support these reforms? Time will tell. All that is certain is that change is coming . . .
Food Safety Magazine’s latest issue focuses on “Industry in Crisis Mode.” The issue includes an article by Shaun Kennedy, director of the National Center for Food Protection and Defense (NCFPD). Mr. Kennedy provides a good overview of the elements of a supply chain verification program that any food seller should consider.
Mr. Kennedy acknowledges that costs for third-party audits, fixing supply chain problems, and establishing traceability can be high. To justify costs, he points to the recent experience of Maple Leaf Foods. According to Mr. Kennedy, Maple Leaf Foods incurred “direct costs to the company of over $20 million. The shareholder costs are even greater with its stock price having dropped by over 20% by the end of August since the announcement of the recall, a shift of over $200 million.” These costs do not include anything to compensate possible tort victims or to respond to inevitable products liability litigation (whether merited or not).
An upcoming panel discussion at the Nutritional Law Symposium in Utah and a call from a reporter about the Maple Leaf Foods issue in Canada have me thinking a lot about crisis management. How a business responds at the outset of an alleged food-borne outbreak determines its fate in many ways.
Implementing a strategy from the start is a must to minimize the impact of a crisis. Yet the million- or billion-dollar question is, how do you develop the right save-the-business strategy when events are overwhelming and occurring at light speed? You need to bring together quality assurance, legal and food safety personnel (epidemiologists, microbiologists and other food safety experts) who can respond immediately to find the source of the outbreak and work with public health officials. A business must ascertain at the earliest possible moment the source and scope of the crisis. Once a business understands whether an outbreak is limited to a particular outlet or product line, and how many people might be affected, it can formulate a public relations, recall and legal strategy to limit exposure.
The key is execution. Everyone on the crisis management team must work in sync and understand their roles. And the secret to execution is preparation. Long before a crisis, a team (usually a combination of personnel from outside and inside the business) should be in place, rehearsed and ready. History is full of lessons: Some businesses executed crisis management well and emerged from dire crises stronger than before; others were unprepared, and their brands have long been forgotten.