Last week U.S. Representatives Mike Pompeo (R-KS) and G.K. Butterfield (D-NC) introduced a bipartisan bill that would amend the Federal Food, Drug, and Cosmetic Act with respect to foods produced from, containing, or consisting of a bioengineered organism. The result has been either applause or outrage depending on which side of the GMO labeling debate you find yourself on.
Titled the “Safe and Accurate Food Labeling Act of 2014,” the bill, if passed, would establish a federal labeling standard for foods with genetically modified ingredients and give sole authority to the Food and Drug Administration (FDA) to require mandatory labeling on such foods if they are found to be unsafe or materially different from foods produced without genetically modified ingredients.
Specifically, the bill provides that biotechnology companies developing genetically modified ingredients for use in food products must submit a premarket approval notification to the FDA at least 210 days before the bioengineered organism is first introduced into interstate commerce. The premarket approval process outlined by the bill looks quite similar to the GRAS Notice Program currently in place for food additives.
The bill states that:
[a] bioengineered organism shall not be introduced or delivered for introduction into interstate commerce for a food use or application unless (1) the use or application of the bioengineered organism in food has been addressed by the developer of the bioengineered organism in a premarket biotechnology notification, to which the Secretary has responded…by stating no objections.
Within 30 days of receipt of the premarket notification, the FDA must deliver a preliminary where it will either:
- inform the notifier that the notification is complete and has been filed; or
- inform the notifier of any missing elements that prevents further review of the notification.
Once the notification is complete and filed, the FDA then has an additional 180 days to substantively respond by informing the notifier that the agency has no objections or that the notifier’s safety determination is inadequate.
If the FDA does indeed determine that the notifier’s safety determination does not pass muster there is a material difference between a food produced from, containing, or consisting of a bioengineered organism and its comparable marketed food and that disclosure of such difference is necessary to protect health and safety or to prevent the label or labeling of such food from being false or misleading, the agency may specify labeling that would adequately inform consumers of such material difference. The bill is clear that the use of bioengineering does not, by itself, constitute a material difference.
The part of bill that has caused the biggest uproar can be found in Section 104 on Preemption. The Section states that:
no State or political subdivision of a State may directly or indirectly establish under any authority or continue in effect as to any food in interstate commerce any requirement for the labeling of a food by virtue of its having been developed using bioengineering, including any requirements for claims that a food is or contains an ingredient that was developed using bioengineering.
The bill would block states from implementing their own labeling laws pertaining to food containing genetically engineered ingredients. The rationale behind the ban according to Rep. Pompeo is that this legislation would eliminate a 50-state patchwork of GMO labeling laws that could mislead consumers and raise the price of groceries. According to a recent article by James Andrews at Food Safety News, [e]fforts to label genetically modified organisms (GMOs) have sprouted across more than two dozen states, including two successful bills in Maine and Connecticut, along with measures that came up short at the ballot box in California and Washington.”
It is unclear whether the bill will pass, but Stoel Rives attorneys will be tracking its progress in the legislature and reporting on any developments.
The Nutrition Facts panel found on many food packages, that most of us have been scanning in grocery aisles for the past 20 years, is expected to undergo some significant changes starting this week. According to a recent press release from the U.S. Food and Drug Administration (FDA), the agency is planning to update the Nutrition Facts label based on the latest science-based nutrition recommendations.
Sources indicate that the changes may be announced as soon as this Thursday, when First Lady Michelle Obama is scheduled to speak at the fourth anniversary celebration of the “Let’s Move!” campaign. Bookmark this site for our report once the proposed Nutrition Facts changes are announced.
By way of background, the Nutrition Facts panel has allowed consumers to have consistent nutritional information and to make healthier choices, since passage of the Nutrition Labeling and Education Act of 1990 mandated nutrition labeling. In addition, throughout the years, mandatory nutrition labeling has encouraged many companies to change their ingredients to make the foods more healthful and thus more appealing to many consumers.
However, in light of new knowledge about nutrition and more evidence that people actually consult the labels of food packages, FDA officials believe it is time for an overhaul. Paula Trumbo, Ph.D., acting director of FDA’s nutrition programs staff explains that “updates are currently being assessed to address such factors as current nutrient recommendations, public health concerns based on recent data on food consumption, and the agency’s desire to make this information as clear and useful as possible.”
Following up on our recent post here on the FDA proposing that trans fats no longer be recognized as "generally accepted as safe" and the potential ensuing ban, I had the opportunity last week to speak with Colin O'Keefe of LXBN on the issue. In the brief interview, I share my thoughts on how the FDA arrived at this point and explain why I believe the industry is prepared for a move away from trans fats.
Last week, the U.S. Food and Drug Administration (FDA) announced in a Federal Register notice that it has made a preliminary determination that partially hydrogenated oils (PHOs), a major source of artificial trans fat in processed foods, are not generally recognized as safe (GRAS) for use in food. The November 7, 2013 notice includes the opening of a 60-day public comment period.
Under section 409 of the Federal Food, Drug, and Cosmetic Act, any substance intentionally added to food is a food additive subject to premarket approval and review by FDA, with some exceptions. The exceptions include substances “generally recognized as safe,” or GRAS, because they are generally recognized by experts qualified by scientific training and experience to evaluate its safety, as having been adequately shown through scientific procedures (or, in the case of a substance used in food prior to January 1, 1958, through either scientific procedures or experience based on common use in food) to be safe under the conditions of its intended use. PHOs, which are the primary dietary source of industrially-produced trans fat have a history of use as food ingredients and have long been considered GRAS ingredients by the food industry.
However, according to the FDA, GRAS status of a specific use of a particular substance in food is time-dependent. In its Federal Register notice the agency points out that:
as new scientific data and information develop about a substance or the understanding of the consequences of consumption of a substance evolves, expert opinion regarding the safety of a substance for a particular use may change such that there is no longer a consensus that the specific use is safe. The fact that the status of a substance . . . may evolve over time is the underlying basis for FDA’s regulation at § 170.38, which provides in part that FDA may, on its own initiative, propose to determine that a substance is not GRAS.
. . .
Further, as stated previously, history of the safe use of a substance in food prior to 1958 is not sufficient to support continued GRAS status if new evidence demonstrates that there is no longer expert consensus that an ingredient is safe.
Essentially, this means that the FDA can take action when it believes an ingredient is, in fact, not GRAS. And that is exactly what is happening here.
For some, this announcement may not come as a surprise. More than a decade ago, in 1999, the FDA proposed that manufacturers be required to declare the amount of trans fat on Nutrition Facts labels because of public health concerns. The agency issued a final rule in July 2003 amending nutrition labeling regulations to require declaration of the trans fatty acid content of food in the nutrition label of conventional foods and dietary supplements (21 CFR 101.9(c)(2)(ii)). That requirement became effective in 2006. Since then, trends have shown that U.S. consumers are making a conscious decision to avoid foods with trans fat and companies are responding by reducing the amount of trans fat in their products.
So if the FDA’s preliminary determination is finalized and PHOs are deemed not GRAS, what will this mean for the food industry? If FDA makes a final determination that PHOs are not GRAS, PHOs would become food additives subject to premarket approval by FDA. Foods containing unapproved food additives are considered adulterated under U.S. law, meaning they cannot legally be sold. Accordingly, the agency and food industry would have to figure out a way to phase out the use of PHOs over time.
Interested persons may submit either electronic comments and scientific data and information to http://www.regulations.gov or written comments and scientific data and information to the Division of Dockets Management. Received comments may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday, and will be posted to the docket at http://www.regulations.gov.
California federal courts now appear positioned to lead the way nationally on the issue of whether food products containing genetically modified ingredients, commonly referred to as “GMOs” can be labeled “All Natural.” Just last week a federal judge in Colorado stayed the case of Nicole Van Atta v. General Mills, Inc. (Case No. 12-cv-02815-MSK-MJW) (PDF), pending the Food and Drug Administration’s (FDA) input on this very issue recently sought from the agency by a California judge in the case of Cox v. Gruma Corp. (Case No. 12-CV-6502 YGR) (PDF).
California, a hotbed of consumer litigation activity due to the state’s expansive consumer protection laws, has become a particularly common venue for consumer class actions alleging misbranding and false advertising regarding the use of “All Natural” claims. In particular, many cases have been filed challenging a manufacturer or retailer’s use of “All Natural” labels on products containing GMOs. These lawsuits are typically brought under California’s unfair competition and false advertising laws (referred to as the “UCL” and “FAL” or §§ 17200 and 17500 of the California Business and Professions Code).
Cox v. Gruma Corp. (“Cox”), the case that lead to the Colorado court’s stay, is a class action lawsuit filed in December 2012 in U.S. District Court for the Northern District of California against Gruma Corporation, the manufacturer of Mission® Tortilla chips. The complaint in Cox alleges that the product’s labeling is false and misleading because it claims to be “All Natural” when it is not in fact natural due to the involvement of genetically modified corn seed in the product’s manufacture.
In Cox, U.S. District Judge Yvonne Gonzalez Rogers issued a final order dated July 11, 2013 (PDF) that stayed the class action for six months and referred to the FDA for an administrative determination the precise question of whether a food product containing GMO ingredients may be labeled “All Natural.” In making her decision, Judge Rogers agreed with plaintiffs’ argument that “a gaping hole in the current regulatory landscape for ‘natural’ claims and GMOs” exists. Accordingly, relying on the primary jurisdiction doctrine, Judge Rogers explained that a court may stay proceedings or even dismiss a complaint without prejudice where the claims involve “an issue of first impression or a particularly complicated issue Congress has committed to a regulatory agency.” Clark v. Time Warner Cable, 523 F. 3d 1110, 1114 (9th Cir. 2008). Based on the nature of the claims in this lawsuit, Judge Rogers concluded that “[u]nder these circumstances, deference to the FDA’s regulatory authority is the appropriate course.”
Many, including the plaintiffs, were surprised by this order based on the fact that, more recently, judges handling similar cases in California have refused to apply the primary jurisdiction doctrine to dismiss or stay matters. The plaintiffs object to the stay order. They argue that FDA has repeatedly declined to define the term “natural” when asked to do so, and there is no reason to suspect it should address the issue now differently now. Specifically, in 2010, a New Jersey federal court judge stayed a food-labeling suit against Hornell Brewing Co. Inc. and ordered FDA to address whether products that contain high-fructose corn syrup may be labeled “natural.” In a September 2010 letter responding to the court (PDF), Michael Landa, Acting Director of Center for Food Safety and Applied Nutrition (CFSAN) at the time, wrote that FDA was declining to provide such a determination.
It is unclear how FDA will respond to the recent order issued in Cox v. Gruma Corp., however, it is undeniable that there is mounting pressure on the agency to act. Although the Cox plaintiffs are correct that FDA has declined to issue formal rules concerning what is and is not “natural,” courts appear to recognize that something this time “feels” different. Perhaps this is because FDA and courts are undeniably more cognizant of the need for resolution of this issue in the context of GMO-containing products given voter interest on the issue throughout 2012, recent Congressional pressure in the form of letters to the agency requesting action on GMO labeling, and several court orders now staying litigation specifically on the issue of whether GMO-containing foods can be labeled “All Natural.”
While it is not expected that the FDA will issue a formal rule in response to recent court orders, it is expected that FDA will respond in some form six months from now in a manner that will tell us whether it will, or will not, issue formal rules or updated guidance on this issue in the reasonably near future. For certain, it will be interesting to see how the Court in Cox formally deals with this issue six months from now and how that case impacts litigation throughout the country.
Stoel Rives attorneys will continue to track this case and other similar “All Natural” cases as developments occur. Check back here for updates.
After reviewing the voter petitions filed in support of Initiative 522 (I-522), the Washington Secretary of State’s Election Division announced last Friday that the measure received enough signatures and has been certified. The official certification was signed by Secretary of State Kim Wyman.
I-522, also known as “The People’s Right to Know Genetically Engineered Food Act,” concerns the labeling of genetically engineered foods. Similar to Proposition 37 that was recently rejected by California, I-522 would require most raw agricultural commodities, processed foods, seeds and seed stocks, if produced through genetic engineering, to be labeled as such when offered for retail sale.
Now that initiative has been certified, it will be forwarded to the Legislature. Legislators have three options on an initiative sent their way: (1) pass it into law as is; (2) take no action, resulting in it going to the November ballot for a public vote; or (3) send it and a legislative alternative to the ballot and let voters decide which, if either, they support. Lawmakers commonly take the second approach and pass the initiative along to the public for a vote.
Final updates for I-522 can be seen here.
Last week on January 3, 2013, sponsors of Initiative 522 (I-522), a measure that would require the labeling of certain genetically engineered foods, filed their petitions with the Washington Secretary of State’s Office for review.
The filing of I-522 comes in the wake of Proposition 37, a similar initiative that was ultimately rejected by California voters in November 2012. If enacted, I-522 would require that any food offered for retail sale in Washington that is, or may have been, entirely or partly produced with genetic engineering to be labeled as follows:
- In the case of a raw agricultural commodity, the package offered for retail sale must clearly and conspicuously display the words “genetically engineered” on the front of the package, or where such a commodity is not separately packaged or labeled, the label appearing on the retail store shelf or bin where such a commodity is displayed for sale must display the words “genetically engineered;”
- In the case of any processed food, the front of the package of such food must clearly and conspicuously bear the words “partially produced with genetic engineering” or “may be partially produced with genetic engineering;” and
- In the case of any seed or seed stock, the seed or seed stock container, sales receipt or any other reference to identification, ownership, or possession, must state clearly and conspicuously that the seed is “genetically engineered” or “produced with genetic engineering.”
Like Proposition 37, I-522 exempts certain food from the genetically engineered labeling requirements. Specifically, the following certified organic products, alcoholic beverages, medical foods, food sold for immediate consumption such as in a restaurant, products unintentionally produced with genetically engineered material, food made from animals fed or injected with genetically engineered material but not genetically engineered themselves, food processed with or containing only small amounts of genetically engineered ingredients, and any processed food that would be subject to the labeling requirement solely because one or more processing aids or enzymes were produced or derived with genetic engineering.
Now that the petitions have been filed, they must be reviewed to confirm that the sponsors of the initiative have obtained the necessary 241,153 valid signatures of Washington registered voters. Once the signatures are verified, the initiative will then be turned to the Washington State Legislature for further action:
- The Legislature can adopt the initiative as proposed, in which case it becomes law without a vote of the people;
- The Legislature can reject or refuse to act on the proposed initiative, in which case the initiative must be placed on the ballot at the next state general election; or
- The Legislature can approve an alternative to the proposed initiative, in which case both the original proposal and the Legislature's alternative must be placed on the ballot at the next state general election.
The Washington Legislature will convene on Monday, January 14, 2013 and will be in session until April 28, 2013. Stoel Rives attorneys will report on the status on I-522 as it moves through the Legislature.
In addition to Washington's I-522, a bill that would mandate the labeling of food and commercial feed containing "genetically modified material" has been pre-filed in the New Mexico State Senate. Senate Bill (SB) 18, sponsored by Sen. Peter Wirth (D-Santa Fe), seeks to amend the New Mexico Food Act to require a disclosure label on any product containing more than one percent of a genetically modified material.
On January 4, 2013, exactly two years after the Food Safety Modernization Act (FSMA) was signed into law by President Obama, the Food and Drug Administration (FDA) published two new proposed food safety rules that will be available for public comment for the next 120 days.
The first rule on “Preventive Controls for Human Food” sets safety requirements for facilities that process, package or store food to be sold in the United States, whether produced at a foreign or domestic-based facility, for human consumption. A separate rule will be issued for animal food in the near future. The rule will require that food facilities implement “preventive controls,” a science-based set of measures intended to prevent foodborne illness similar to Hazard Analysis and Critical Control Points (HACCP) systems that are already required by FDA for juice and seafood processors. Each covered facility would be tasked with preparing and implementing a written food safety plan, which would include the following:
- Hazard analysis;
- Risk based preventive controls;
- Monitoring procedures;
- Corrective actions; verification; and
The FDA is also seeking public comment on a second proposed rule, which proposes enforceable safety standards for the production and harvesting of produce on farms.
This proposed “Standards for Produce Safety” rule proposes science- and risk-based standards that would address the major areas of concern for the fruit and vegetable industry including:
- Irrigation and other agricultural water;
- Farm worker hygiene;
- Manure and other additions to the soil;
- Intrusion of animals in the growing fields;
- Sanitation conditions affecting buildings, equipment and tools.
FDA indicated that the effective date of both proposed rules would be 60 days after the final rule is published. However, in order to allow all businesses, particularly small and very small facilities, adequate time to comply with the new requirements of the rule, FDA plans to adjust the compliance dates based on the facility’s size.
Although many in the food industry believe these rules are long overdue, FDA notes that it conducted extensive outreach to the produce industry, the consumer community, other government agencies and the international community. Since January 2011, FDA staff have toured farms and facilities of all sizes nationwide and participated in hundreds of meetings and presentations with global regulatory partners, industry stakeholders, consumer groups, farmers, state and local officials, and the research community. The goal was to develop proposed rules that could be applied to small and large food facilities alike.
FDA intends to release additional proposed rules addressing importer foreign supplier verification, preventive controls for animal food, and accreditation of third party auditors.
The attorneys at Stoel Rives will be providing more details about the proposed rules implementing FSMA here at the Food Liability Law Blog in the coming weeks. Stay tuned.
The Food and Drug Administration (FDA) has extended the deadline for food facilities to submit their registration until January 31, 2013.
Under the FDA Food Safety Modernization Act (FSMA), domestic and foreign facilities that manufacture, process, pack, or hold food for human or animal consumption in the United States are required to renew their facility registration by December 31, 2012, and every two years after that. FSMA directed that the food facility registration portal would be available starting on October 1, 2012.
However, FDA experienced a delay in implementing the biennial registration renewal for the 2012 cycle. As a result, the registration renewal portal did not become available until October 22, 2012. Food industry members requested that FDA extend the time to register in order to allow companies a full three-month window to complete the renewal requirement. In a new guidance document issued on December 12, 2012, FDA noted that it would exercise its enforcement discretion with respect to registration renewals submitted to FDA after December 31, 2012 for a period of 31 days, until January 31, 2013.
Failure to register a facility, renew the facility registration, or update required registration information can have serious consequences. For instance, the U.S. can bring a civil or criminal action in federal court against a company that handles food without a proper facility registration. In addition, if food being imported or offered for import into the U.S. is from a foreign facility for which registration has not been submitted, the food could be held at the port of entry and may not be delivered to the importer, owner, or consignee of the food until the foreign facility is registered with FDA.
Although California’s Right to Know Genetically Engineered Food Act, better known as Proposition 37, failed earlier this month when put to a vote, food companies still remain vulnerable to attacks over the use of genetically engineered ingredients in their products.
Specifically, it appears that marketing a food as “all natural” when it contains a genetically engineered (GE) ingredient continues to generate class action litigation. The latest lawsuit challenging the use of the word “natural” on a product label was filed by plaintiff Sonya Bolerjack on November 6, 2012 in U.S. District Court for the District of Colorado against Pepperidge Farm, Inc. The class action complaint alleges that the company “mistakenly or misleadingly represented that its Cheddar Goldfish crackers are ‘Natural,’ when in fact, they are not, because they contain Genetically Modified Organisms (GMOs) in the form of soy and/or soy derivatives.” In particular, the plaintiff asserts that the product is not natural due to the presence of soybean oil.
The plaintiff claims that Pepperidge Farm violated Colorado’s Consumer Protection Act by engaging in deceptive trade practices; breached express warranties including that the product is natural even though it contains GMOs; and negligently misrepresented to the public through its packaging and labeling that the product is natural even though it contains GMOs.
In bringing this class action suit, the plaintiff is seeking certification on behalf of a class defined in the complaint as “all United States persons who have purchased Pepperidge Farm Cheddar Goldfish crackers containing Soybean Oil, for personal use, during the period extending from November 6, 2008, through and to the filing date of this Complaint.” Currently, a decision as to whether to grant or deny an order certifying that the action may be maintained as a class action is pending.
These class action lawsuits involving challenges to the use of “natural” or “all natural” language on a product label have been both costly and damaging to reputation. It also appears likely that they will continue. In order to avoid litigation, companies should review their products and labeling for synthetic preservatives or artificial ingredients included in or added to the food, so that product labeling is accurate.
The Oregon Public Health Division’s (OPHD) Foodborne Illness Prevention Program announced that it is moving forward with the adoption of the 2009 Food and Drug Administration (FDA) Food Code. The new rules will take effect on September 4, 2012. Oddly, however, the agency noted that it would not be adopting the “No Bare Hand Contact” section of the Food Code.
In creating the “No Bare Hand Contact” rule for food handlers, the FDA pointed out that when hands are heavily contaminated, even effective handwashing practices may not be enough to prevent the transmission of pathogens from the hands to ready-to-eat (RTE) foods, such as sandwiches, salads, and other foods that are eaten without further washing or cooking. Accordingly, the rule requires the use of “suitable utensils such as scoops, spoons, forks, spatulas, tongs, deli tissue, single-use gloves, or dispensing equipment” when handling RTE food items to reduce foodborne illness.
Discussion of implementing the “No Bare Hand Contact” rule in Oregon was met with fierce opposition by restaurateurs who raised concerns over the cost of complying with the rule and whether it would actually increase food safety. In response, OPHD explained that over the next few months it will assemble a workgroup of interested parties (restaurateurs, government inspectors, consumers, etc.) to review and provide recommendations on addressing norovirus and fecal contamination of food, and to identify the best options to reduce illness.
Oregon’s process of adopting the 2009 FDA Food Code began in August 2010 when a Food Code Review Workgroup was established to work with the Oregon Department of Agriculture, food service and retail industry groups and regulators to develop recommendations regarding the new rules. Earlier this year, OPHD also provided training for regulators and industry on the 2009 Food Code in preparation for the September effective date.
The Association of Food and Drug Officials (AFDO), under contract to the FDA, has been gathering data on the progress of FDA Food Code adoptions by States, Territories, Local and Tribal Nation agencies. AFDO reported that 49 of the 50 States adopted codes patterned after the 1993, 1995, 1997, 1999, 2001, 2005, or 2009 versions of the Food Code, representing 96% of the U.S. population. Specifically:
- Four States adopted the 1993, 1995 or 1997 Food Code, representing 4% of the US population.
- Ten States adopted the 1999 Food Code, representing 13%of the US population.
- Eleven States adopted the 2001 Food Code, representing 38% of the US population.
- Twenty one States adopted the 2005 Food Code, representing 39%of the US population.
- Three States adopted the 2009 Food Code, representing2% of the US population.
In September, Oregon will join Mississippi, New Hampshire, and Delaware in adopting the 2009 version of the food code. Until the final rules take effect, food industry members can review the Fact Sheets provided by OPHD to ensure compliance and see what other changes may affect their business in the coming weeks.
AFA Investment Inc. and its affiliates, including AFA Foods, American Foodservice Corporation, United Food Group, LLC, and American Fresh Foods (together "AFA"), one of the largest ground beef processors in the United States, have filed for Chapter 11 bankruptcy protection.
AFA cited growing negative publicity over the use of boneless lean beef trimmings (identified as "lean finely textured beef" or "pink slime" in some articles) as well as lower retail demand for beef products, costly product testing programs, and a change of customer base from foodservice to retail customers as events causing the filing.
Ron Allen, AFA's Interim CEO, stated that the companies have hired an investment banker to market their assets and plan to idle their Los Angles, California processing facility this week. AFA reported consolidated booked asset value of $219 million against $197 million of liabilities. The companies currently have 850 full-time employees and operate facilities in Georgia, New York, Pennsylvania, and Texas, in addition to the California facility.
AFA requested approval of $60 million in "Debtor in Possession Financing" to be advanced by the companies' current first-priority lenders. One lending covenant would require AFA to file a motion to sell all of the companies' assets within the next 14 days. AFA also requested permission to continue to honor customer programs including rebates and returns, to pay certain "critical vendors" immediately, and to institute procedures for receiving and handling priority claims of vendors under the Bankruptcy Code.
Check back at the blog for additional information regarding the AFA bankruptcy as it becomes available.
In follow up to previous articles, we note that a consumer group last week released a report that alleged that caramel colored sodas (Coke,Diet-Coke, Pepsi and Diet Pepsi) contain levels of 4-methylimidazole (4-MEI) that reached a level of 7 in a million cancer risk. The Center for Science in the Public Interest, claims that the carcinogen forms when ammonia or ammonia and sulfites are used to manufacture the caramel coloring that gives those sodas brown colors. In conjunction with their report the group requested that the Food and Drug Administration revoke its authorization for caramel colorings that contain 4-MEI, and in the interim to change the name of the additive to ammonia-sulfite process caramel coloring or chemically modified caramel coloring for labeling purposes.
Although according to industry experts the amount of soda that would trigger these effects is excessive, Coca Cola and Pepsi recently announced that they were changing their formulas, because of California's Prop 65 law that would require labeling if, as alleged, these products exceed the 1 in 100,000 risk that triggers labeling requirements.
As we noted earlier a sixty day notice has already been served on certain grocers with respect to similar products. The sixty day notice is the first step in the Prop 65 private enforcement process.
Bisphenol A (BPA) is an industrial chemical that has been present since the 1960s in plastic used in consumer products, including reusable water bottles, sippy cups, and baby bottles, to prevent cracking. BPA is also used in the protective lining inside metal-based food and beverage cans to avoid corrosion. In recent years BPA has become the focus of a heated debate. Citing an increasing body of scientific evidence, consumer and health advocates argue that there is a link between disruptions in the endocrine system and the consumption of products packaged with materials that include BPA. Certain studies have identified BPA as a risk factor in breast and prostate cancer, early puberty, childhood obesity, autism, and hyperactivity. Accordingly, critics of BPA believe it is a substance unfit for human consumption and have urged a ban on its use in food and beverage containers.
The U.S. Food and Drug Administration (FDA) and the National Toxicology Program of the Department of Health and Human Services maintain that low level exposure to BPA does not pose a serious risk to human health based on studies employing standardized toxicity tests. However, both agencies have noted some concern about the potential effects of BPA on the brain, behavior, and prostate gland in fetuses, infants, and young children. The FDA has since undertaken to do further research into the potential health risks associated with BPA.
In attempt to put pressure on the FDA to clarify its stance on BPA, just over three years ago the National Resources Defense Council (NRDC) filed a petition with the FDA challenging its position that exposure to BPA in low levels is safe. The petition requested that the FDA ban the use of BPA as a food additive or in any substance that may become a component of a food product, as defined by the Federal Food, Drug and Cosmetic Act (FFDCA). For several months, the FDA delayed responding to the NRDC’s petition.
Prompted by the FDA’s failure to respond, NRDC filed suit in 2010 seeking judicial intervention that would require the FDA to decide by a date certain whether the use of BPA, particularly in food packaging and any material likely to come in contact with food, should be banned. In a settlement agreement, the parties agreed FDA would make its decision about the use of BPA by March 31, 2012 - a date that is rapidly approaching. The FDA’s decision will come on the heels of France’s decision in early February 2012 to ban the use of BPA in all food packaging.
What impact would a ban of BPA have on industry if imposed? Almost certainly as companies adapted to the new ban, their costs would increase. The extent of those costs would likely differ based on the size of the company and the extent of required changes to production. The disruption may be dampened a bit because several food companies have anticipated the issue. A recent report issued by the U.S. Department of Agriculture indicates that several major U.S. companies have already begun using alternative packaging methods to comply with BPA bans on both state and international levels, and to meet increasing consumer demand for BPA-free products. Eden Foods, Muir Glen, Edward & Son, Trader Joe’s, Vital Choice, Wild Planet Foods, Oregon’s Choice Gourmet and Eco Fish already use BPA-free containers for some or all of their products. In addition, Heinz, Hain Celestial and ConAgra have begun taking steps toward eliminating the use of BPA in their packaging.
It will be interesting to see what decision the FDA will announce by the end of this month.
The International Food Information Council’s expert panel, organized for the January 26, 2012 press webinar, found that acrylamide cannot be shown to pose any health risks. Acrylamide, which is also listed as a Prop 65 chemical was thought to be a carcinogen based on tests performed on rats at high doses. A study that included approximately 40 human epidemiological studies reviewed levels in food and none of which conclusively associated acrylamide with any increased heath risks.
Most notably, acrylamide is produced by browning or burning foods. It is also thought to be in coffee and many baked goods. Plant-based foods that are rich in carbohydrates may form acrylamide when baked, fried or roasted –French fries, potato chips, other fried and baked snack foods, coffee, roasted grain-based coffee substitutes, roasted asparagus, canned sweet potatoes and pumpkin, canned black olives, roasted nuts, prune juice, breakfast cereals, crackers, cookies, breads, and toast all may contain varying amounts of acrylamide. Foods that have been boiled or steamed do not contain acrylamide.
FDA Creates The Food Safety Preventive Controls Alliance (FSPCA) To Develop Training Courses And Materials For Prevention Of Contamination
The U.S. Food and Drug Administration (FDA) in cooperation with the Illinois Institute of Technology’s Institute for Food Safety and Health (IIT IFSH) created the Food Safety Preventive Controls Alliance (FSPCA) to develop materials to will help the industry comply with the new preventive control rules.
The Alliance is composed of members from the FDA, loca and state food protection agencies, the food industry and academia.
Under the FSMA, facilities are required to develop food safety plans that evaluate food safety hazards and identify the preventive measures to guard against those hazards. Facilities must also monitor preventive measures and manufacturers must also develop a plan of action to correct any problems that are discovered.
The Alliance will develop training modules, to train the trainer, develop industry specific measures, assess the need for future research, and prioritize the need for specific controls.
In its latest step to increase the safety of the American food supply, the U.S. Food and Drug Administration (FDA) announced a Retail Food Safety Action Plan that includes several measures to help assure the safety of food sold in stores, restaurants, schools, and other foodservice operations. In support of the Action Plan, FDA also unveiled a cooperative agreement with the National Association of County and City Health Officials . FDA and the Association will promote the use of best practices by local authorities and attempt to increase retail food safety oversight as well as encourage the implementation of FDA’s Voluntary National Retail Food Regulatory Program Standards for retail food programs.
FDA today also released a Supplement to the 2009 FDA Food Code. The Food Code contains model food-safety regulations for retail and food-service operations including restaurants, schools and food stores. Local, authorities use the Food Code to develop food safety rules consistent with national regulatory policy.
Key changes contained in the new Supplement include:
- Requiring that food establishments have a certified food protection manager with the following additional requirements:
- that all operating procedures required by the Food Code are developed and implemented;
- that it can be verified that all employees are informed about their obligation to report certain health conditions that relate to transmission of food borne illness; and
- that any food the establishment receives after operating hours is delivered in a manner that does not create a food safety hazard;
- Requiring that food establishments have a plan for responding to and properly cleaning-up after an employee or other becomes physically ill in areas where food may be prepared, stored or served;
- Clarifying appropriate exceptions to the prohibition of bare hand contact with ready-to-eat foods prepared in the establishment;
- Clarifying the requirements for the safe storage and display of ground and whole-muscle meat and poultry;
- New requirements for devices used to generate chemical sanitizers on- site in the food establishment;
- Establishing clearer guidelines for the amount time a food establishment should be given to correct violations of different types of provisions in the Food Code.
The FDA confirmed this week that Listeria matching the strain that has caused health effects, was found on equipment and fruit at the Jensen Farms packing facility in Colorado.FDA Link..The recall that was announced on September 14 apparently actually began several days earlier and according to press reports included shutting down operations, the harvest and calling back trucks that were on the road. Four deaths out of 35 reported illnesses have occurred.
This recall brings into focus the new regulations that are to be promulgated by the FDA by January 2012 with respect to produce safety. Under Section 105 of FSMA the FDA is to establish standards for the safe production and harvesting of produce where the FDA has determined that standards would minimize the risk of serious adverse health consequences. FDA is required to publish a proposed rule on the minimum standards and publish updated Good Agricultural Practices by January of 2012. The standards are intended to include science-based minimum standards related to soil amendments, hygiene, packaging, temperature controls, nearby animals, water, and other hazards.
By this month, September 2011, the FDA is also expected to also publish a Notice of Proposed Rule Making which indentifies activities that constitute on -farm packing, holding, manufacturing and processing that will be subject to, or exempt from the Preventive Control Plan requirements under Section 103 of FSMA.
In the wake of recent recalls the progress of implementation of the Food Safety Modernization Act (FSMA) has become more significant. The Pilot Traceability Project was announced as of last week. This project is intended to provide a structure for tracing ingredients back to their source in the event of a recall. Section 204 of FSMA requires the FDA to “establish pilot projects in coordination with the food industry to explore and evaluate methods to rapidly and effectively identify recipients of food to prevent or mitigate a food borne illness outbreak and to address credible threats of serious adverse health consequences or death to humans or animals as a result of such food being adulterated …or misbranded."
The Pilot projects will be carried out by the Institute of Food Technologists (IFT) at the direction of FDA.
A product tracing system involves documenting the production and distribution chain so that a product can be traced back to a common source or forward through distribution channels if there’s evidence of contaminated food. The actions that follow may include removing the product from the marketplace and alerting the public if it has already been distributed.
The FDA indicated that: “What we’re looking for is a system that is practical, feasible, and rapid,” says Sherri McGarry, senior advisor in FDA’s Office of Foods. “Our No. 1 priority is protecting public health.”
McGarry explained that IFT will work with the key groups that have a stake in this endeavor—food industry, state and federal government agencies, and consumers—in developing the pilot programs. The goal is to include industries that represent the food supply chain, including farms, restaurants, and grocery stores.
The pilot programs will evaluate the types of data that are most needed for tracing, ways to connect the points in the food supply chain, and how quickly data can be made available to FDA. A key goal in the pilot projects will be to explore methods to track food and identify a common source or supplier starting at multiple points of sale. “We’re looking for a system that will allow FDA to quickly connect the dots along the food supply chain,” says McGarry.
Business should keep an on eye on this process as the resulting programs may impose similar requirements on FSMA registrants in the future.
On Monday, September 19, 2011, I will be speaking at The DEMATIC Material Handling and Logistics Conference in Salt Lake City , Utah and presenting, "Field to Fork: How the new Food Safety Modernization Act Will Affect You."
I attended the American Cheese Society conference in Montreal earlier in the month. The conference was attended by cheese producers and suppliers from around the world. At the conference I presented a PowerPoint on Food Safety Modernization Act (FSMA) . There were several talks on Food Safety and clearly, the industry is concerned about the new provisions where cheese in particular has been identified as one of the high-risk foods that will be subject to some of the more stringent new regulations.
Because of the conferences’ location, FSMA’s features related to import and export certifications and foreign inspections were of particular interest (see below). It is clear that imported food will garner additional attention under FSMA. This is particularly true given accounts of food safety issues in China involving vinegar, meat and bread.
FSMA IMPORT REQUIREMENTS
1. The FDA has a stepped up their foreign facility inspection program to be carried out in a manner to be negotiated with the relevant foreign authority. If inspections are not allowed within 24 hours of the request, a ban on the importation from that facility is authorized.
2. FSMA contains a new section (sec. 808) that requires the FDA to create a system for the accreditation of third party auditors for certification of eligible foreign facilities. The certification in turn will be used for the Foreign Voluntary Qualified Importer Program (see below) to provide assurance for food imports and to target foreign inspection resources. There are express requirements for auditors and certifications set out in this statute.
3. The Foreign Supplier Verification Program (sec. 805) requires every United States importer to perform risk-based reviews of foreign suppliers to verify that the food they import is produced in compliance with the Food and Drug Administration (FDA) standards (produce and hazard analysis and preventive controls) and is not altered or misbranded. In January 2012, the FDA is required to issue regulations specifying the contents of the specific verification programs. Each importer is required to perform foreign supply verification activities which may include monitoring records, inspections or annual on site inspections. It may also require reviewing the hazard prevention programs for foreign suppliers, periodic sampling and testing of shipments.
4. The law has clarified the definition of inspection to include: An “importer,” for this program, is defined as the United States owner or consignee of the article of food at the time of entry of such articles into the United States, or, if there is no United States owner or consignee, the importer is defined as the United States agent or representative of a foreign owner or consignee of the article of food at the time of entry into the United States. (Note that FDA seafood and juice facilities subject to Hazard Analysis and Critical Control Points (HACCP) or low-acid canned food requirements are exempt.)
5. In January 2012, the FDA is required to issue a guidance document to assist importers in developing their foreign verification program.
6. Each importer is required to maintain records related to the Foreign Supplier Verification program for at least two years.
7. The FDA is required to maintain on its website a current list of the names, locations and other information deemed necessary by the importers in compliance with Section 2805 exemptions.
8. There is also a Foreign Voluntary Qualified Importer Program (FVQIP) (sec. 806) which requires the FDA to establish in consultation with the Department of Homeland Security a “voluntary” program to expedite movement of materials through the process. Under this program, an “importer” is defined as the person that brings food, or causes the food to be brought from a foreign country into the United States. This is an important distinction from the definition under FSVP because it could mean that foreign manufacturers may be allowed to participate in this program. The deciding factors will not be known until the final regulations are issued. FVQIP regulations are not required to be finalized by the U.S. FDA until July 2013. In July 2012, the FDA is required to issue a guidance document regarding participation, revocation, reinstatement compliance of the qualified importer program. To be eligible the importer must be importing food from its facility that has been certified by a third party auditor that year.
9. The FDA is authorized to require as a condition to granting admission to an article of food imported or offered for export to certification or such other assurances FDA deems appropriate.
In short, the following is the relevant time table:
|January 2011||Authority to require import certification.|
|July 2011||Require importers to notify the FDAof any country tot which food was denied access.|
|January 2012||FDA to publish guidance AND regulations for the Foreign Supplier Verification Program.|
|July 2012||Establish program for Voluntary Qualified Importer Program.|
|January 2013||Effective date for Foreign Supplier Verification Program.|
The FDA asserts in its inspection manual its right to photograph in your plant. Yet the FDA does not have statutory authority to photograph. The manual cites the following cases as authority for its right to photograph the inside of a plant: Dow Chem. Co. v. United States, 476 U.S. 227 (1986), and United States v. Acri Wholesale Grocery Co., 409 F. Supp. 529 (S.D. Iowa 1976). But these cases rely on the theory of implied consent or a minimal expectation of privacy. These cases do not hold that FDA has the right to photograph the interior of a food facility when the facility has a strict policy against photography and does not consent to the photography.
So, should you resist FDA's request to photograph?
The first thing you need to do is to ask yourself the following two questions:
- Do you have a policy against photography in your plant?
- If you do, is the policy strictly enforced?
If the answer to either question is no, then you're on shaky footing in resisting the FDA's request. By not having a policy or by not strictly enforcing the policy, FDA's legal authority based on implied consent is that much stronger.
Assuming your plant does have a no-photography policy that is strictly enforced, you need to assess whether the photography is worth the fight. It may be. Resisting the request for photos may be worthwhile to protect potential disclosure of trade secrets and to prevent out-of-context photographs from being used adversely by FDA. The problem is that the harder you push against FDA, the more likely that it will seek more information and the more likely that it will seek enforcement action.
In a future entry, we'll explore what legal remedies might be available to prevent the FDA from photographing the inside of your plant.
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.
Many who track FDA's implementation of the Food Safety Modernization Act (FSMA) believe that a priority for FDA is Section 105, “Standards for Produce Safety” (FDCA section 419), in particular, the leafy greens regulations.
Farms are exempt under FSMA's produce safety rules if:
(A) during the previous 3-year period, the average annual monetary value of the food sold by such farm directly to qualified end-users during such period exceeded the average annual monetary value of the food sold by such farm to all other buyers during such period; and
(B) the average annual monetary value of all food sold during such period was less than $500,000, adjusted for inflation.
"Qualified End User" is defined as:
(i) the consumer of the food; or
(ii) a restaurant or retail food establishment (as those terms are defined by the Secretary for purposes of section 415) that is located—
(I) in the same State as the farm that produced the food; or
(II) not more than 275 miles from such farm.
The fear among many small farm and "ag-in-the-middle" proponents who are not exempt is that FDA will impose standards similar to those adopted by the National Leafy Greens Marketing Agreement (NLGMA) proponent group. Even the proponent group concedes that "the metrics developed by LGMA are not appropriate in every area and must be modified to address unique risks presented in different regions as well as varying production practices across the country."
Those non-exempt farms who cannot logistically or financially possibly comply with NLGMA metrics should consider the following action steps:
1. Be ready for the rule-making process. Marshal your case why your operation is low risk and should be treated differently from larger-scale operations and for those in California and Arizona the standards were developed for.
2. Start now laying the ground work with your state department of agriculture to seek a state variance for the FDA rules. The FSMA allows that:
A State or foreign country from which food is imported into the United States may in writing request a variance from the Secretary. Such request shall describe the variance requested and present information demonstrating that the variance does not increase the likelihood that the food for which the variance is requested will be adulterated under section 402, and that the variance provides the same level of public health protection . . . .
3. Call your congressional delegation. FDA has significant reporting obligations to Congress, which will have a significant role to play (funding, oversite, etc.) in how the FSMA gets implemented. Start educating your Congress people now on the fears that exist by "ag-in-the-middle" about the produce safety rules.
Last week, the FDA issued its first annual report on the Reportable Food Registry (RFR). The report provides statistics on the first year of the RFR (2240 entries, 229 "primary reports," a breakdown of the report by hazards, etc.).
Beyond the statistics, the FDA report should be noted by food companies for two reasons:
- Food Safety Plans
FDA Deputy Commissioner for Foods Michael Taylor says that “[s]everal key U.S. industries are already re-evaluating their hazard and preventive controls, core principles of the Food Safety Modernization Act recently passed by Congress. We also anticipate improved reporting as we continue our vigorous outreach to food facilities through federal, state, local and foreign agencies, to help us expand the positive effect of the RFR on the safety of the U.S. food supply.”
The new hazard analysis and preventative controls requirements in the Food Safety Modernization Act (FSMA) are not effective for 18 months following passage. Deputy Commissioner Taylor's comments suggest that industry standards may already be moving in that direction . To mitigate exposure and risk, FDA enforcement actions, product liability claims, supply chain contract claims and recalls, food manufacturers may want to consider updating and/or creating food safety plans that address the hazard analysis and preventative controls prescribed by the FSMA.
- Allergen Controls
The FDA reports undeclared allergens/intolerances accounted for 34.9 percent of the primary reports. Industry experts assert that the FDA believes that the industry does not in general have good control over the issue of undeclared allergens. These experts believe that the FDA will give special attention to the issue of undeclared allergens/intolerances in promulgating regulations under the FSMA's requirements for hazard analysis and preventative controls (see point 1 above). In anticipation of the FDA's concern, manufacturers should consider now how they can change manufacturing processes to address the undeclared allergen issue.
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.
A recent decision held that Front of Package (”FOP”) labeling claims may not (yet) be subject to federal preemption. The decision in a putative class action, Chacanaca v. The Quaker Oats Company, involves what has become a common fact pattern: The FDA says an issue is complex and subject to industry guidance and possibly rule-making (for example, use of the terms “natural,” “wholesome,” and “smart choices”), while a court says the issue may not be complex and may be perfectly within the expertise of the judiciary and jury system.
Federal District Court Judge Richard Seeborg of the Northern District of California dismissed plaintiffs’ state law claims targeting the “0 grams trans fat,” “good source,” “made with whole grain oats,” and “no high fructose corn syrup” declarations on preemption grounds. Yet, insofar as Quaker Oats "seeks a favorable judgment at this juncture on all state claims that focus on the term 'wholesome'; on images of children, nuts, or oats; or the 'smart choices made easy' language or decal," the court denied the motion to dismiss.
The plaintiffs’ challenges to Quaker Oats’ use of the term ”wholesome” and images of the children seem targeted exactly at the claims that were preempted: the trans-fat issue. The court concedes that the FDA has recently indicated its intent to explore rule-making in the area of FOP labeling claims and that the FDA already “has extensively regulated food labeling in the context of a labyrinthine regulatory scheme.” “Nonetheless,” according to the court, ”plaintiffs advance a relatively straightforward claim: they assert that defendant has violated FDA regulations and marketed a product that could mislead a reasonable consumer. As courts faced with state-law challenges in the food labeling arena have reasoned, this is a question ’courts are well-equipped to handle.’”
Are the plaintiffs’ claims really that straightforward? How is a court "well-equipped" to determine the meaning of ”wholesome,” ”natural,” or other FOP claims? Is a court able to fully consider comments and information from all corners of the food manufacturing world? Isn’t this really in the wheelhouse of the regulators (or possibly the legislators)? Can the food business in the United States function effectively with individual courts and states determining their own common law (or even statutory) rules for product labeling?
Peeled, Inc. (“Peeled”) www.peeledsnacks.com, a company specializing in healthy, natural snack foods including dried fruits and dry roasted nuts, recently filed a trademark infringement suit in the United States District Court for the Southern District of New York against Peeled Fruit LLC (“Peeled Fruit”) www.simplypeeled.com. Peeled Fruit sells frozen soft-serve fruit, with fresh fruit toppings. Peeled alleges that Peeled Fruit is attempting to cash in on the brand awareness and goodwill associated with Peeled’s marks.
Click on the image below to view the slide-deck from the presentation that I recently gave with Scott Rickman from Del Monte at ACI’s summit on Food Safety and Regulatory Compliance in Chicago. The ACI summit was a nice introduction to food regulation byFDA, USDA, FTC, EPA and DHS. Our presentation was intended to start from the premise that the job of a food lawyer (whether inside or outside counsel) does not end at ensuring regulatory compliance. Products that are regulatory-compliant may still be subject to putative class claims.
At its recent annual meeting, the American Medical Association (“AMA”) agreed to urge the Food and Drug Administration (“FDA”) to adopt more accurate labeling standards regarding trans fats and saturated fats used in food products.
Current FDA rules allow nutrition labels to list saturated and trans fats as zero, so long as the product contains less than 0.5 grams of fat per serving. However, the AMA claims that this is misleading to consumers, who could potentially consume more than a quarter of the American Heart Association’s recommended limit of two grams of trans fat per day in a single serving, unaware that the product contains trans fats.
The AMA’s position that consumers are being misled by current FDA rules does have some support in the marketplace. In a consumer survey conducted by market researchers Greenfield Online, 72 percent of U.S. respondents said they read nutrition labels and fact panels in an effort to make healthy purchasing decisions when shopping, and 61 percent said they considered zero grams of trans fat per serving to be the most important heart health related claim for a product.
FDA recently released updates to its Draft Industry Guidance for the Reportable Food Registry (“RFR”). The RFR, not rolled out until the fall of 2009, is still new to many companies. FDA, overwhelmed by the information coming through the RFR, is still trying to determine how to use the information submitted to the RFR and how to advise industry.
Among the more interesting clarifications in the May updates is the importance FDA puts on the possession of reportable food as a trigger for obligations under the RFR. For example, if produce is still in the field (contracted but not owned by a food seller) and tests positive for a pathogen, no reporting obligation accrues.
[F]ood facility that contracted with the farmer and tested the produce in the field is not required to submit a reportable food report, provided that the facility did not manufacture, process, pack, or hold the produce and therefore never became a responsible party with respect to the produce. However, if the field had been harvested and the contaminated produce had been moved to the food facility, the facility would have become a responsible party because it “held” the food and would be required to submit a reportable food report.
On the other hand, if the same contaminated produce is received on a company’s premises, stays in the trailer, tests positive and is rejected, a reporting obligation is triggered (even though the company did not take ownership of the product).
FDA’s description of this scenario in a Q and A format:
Q: Our manufacturing facility receives bulk trailer shipments of ingredients from our suppliers. A truck driver brings a trailer full of bulk ingredients onto our property, drops off the trailer, and drives away. However, as company policy, we do not off-load the trailers that are delivered to our facility or take ownership of the food in the trailers until after we test a sample of the food and determine that the food is acceptable. If we “reject” a shipment, i.e., return the food to the supplier, because the sample results indicate that the food is a reportable food, are we required to submit a reportable food report?
A: Yes, provided that you are a facility required to register with FDA under section 415(a) of the FD&C Act, you must submit a report for the food you determined to be a reportable food, even though you returned the food to your supplier. FDA considers that your facility “held” the reportable food because the trailers were no longer in transit once they were dropped off on your property. Thus, you are a responsible party with regard to the reportable food. Provided that the adulteration did not originate with you, you do not meet the criteria for the exemption from reporting in section 417(d)(2) (see Question E.3).
TAKE AWAY: If a company can set up a system to do its micro-biological testing before the product arrives on its premises or at its warehouse (public or private), it should. If faced with a reportable event, the reporting requires notification to FDA of one step forward and one step back in the supply chain even if the product is never distributed. Once a report is submitted to the RFR, a company should expect that the FDA will notify the company’s customers of the reportable event despite the fact that the customer never received product. FDA notification means the customer will be told that its vendor had contaminated product that rises to the level of class I recall though this may not actually be true. Food sellers and manufacturers, therefore, would be wise to take steps to avoid being “stuck” with RFR obligations for contaminated product it does not own.
Difficult Week for the Food Industry (Good Week for the Plaintiffs' Bar): HVP Salmonella and FDA Warning Letters
The week of March 1 saw a double whammy hit food manufacturers.
I. Open Letter to Industry on Marketing Claims
First, on March 3, FDA sent warning letters to 16 food manufacturers concerning their labeling practices. FDA also issued an Open Letter to Industry warning against certain practices. For example, FDA warned that:
o Nutrient content claims that FDA has authorized for use on foods for adults are not permitted on foods for children under two. Such claims are highly inappropriate when they appear on food for infants and toddlers because it is well known that the nutritional needs of the very young are different than those of adults.
o Claims that a product is free of trans fats, which imply that the product is a better choice than products without the claim, can be misleading when a product is high in saturated fat, and especially so when the claim is not accompanied by the required statement referring consumers to the more complete information on the Nutrition Facts panel.
o Products that claim to treat or mitigate disease are considered to be drugs and must meet the regulatory requirements for drugs, including the requirement to prove that the product is safe and effective for its intended use.
o Misleading “healthy” claims continue to appear on foods that do not meet the long- and well-established definition for use of that term.
o Juice products that mislead consumers into believing they consist entirely of a single juice are still on the market. Despite numerous admonitions from FDA over the years, we continue to see juice blends being inaccurately labeled as single-juice products.
II. HVP Recall
A day later, on March 4, FDA announced a recall of hydrolyzed vegetable protein (HVP). As of noon on March 4, 56 products containing HVP have been recalled. Some have suggested that HVP is the "Next Peanut Butter.”
III. What Food Companies Can Do in the Wake of FDA's Warning Letters and HVP Recall
What do last week's FDA warning letters and HVP recall have in common? The answer is, of course, litigation and exposure of brand value.
The first thing any affected food seller should do is engage its crisis management team. While lawyers and public relations staff are critical in crisis response, management of the crisis should not be left solely in the hands of either. Decisions should be made holistically, examining legal, public relations, business, financial and public health implications.
As discussed previously in this blog, companies faced with putative class claims filed as a result of the FDA warning letters on labeling should develop strategies to challenge the merits of the claims and class certification at the earliest possible stage. The end game for the plaintiffs' class action law firms is to obtain class certification and use that "litigation blackmail" to enter into a settlement with a handsome payout of attorneys’ fees.
For those companies with products that include recalled HVP, the good news is that there are few, if any, reported illnesses. The bad news is that recalls are very expensive and, for some companies without recall coverage or sufficient resources, financially devastating. Many food manufacturers were driven out of business in 2009 after being overwhelmed with the expenses of recalling products that included ingredients manufactured by Peanut Corporation of America (PCA).
For those affected companies with recall coverage or financial means, proactive measures can pay dividends. For example, offering refunds to consumers mitigates against putative class claims. Setting up consumer hotlines and payment of medical expenses for persons with illnesses linked to recalled products mitigates against personal injury suits.
On November 13, the FDA notified nearly 30 manufacturers of caffeinated alcoholic beverages that the agency intends to look into the safety and legality of their products. As the FDA explained in a news release announcing this action, under the Federal Food, Drug, and Cosmetic Act any substance intentionally added to food, in this case caffeine in alcoholic beverages, is deemed unsafe and is unlawful unless its specific use has been approved by an FDA regulation, the substance is subject to a prior sanction, or the substance is Generally Recognized as Safe (GRAS). To date, the FDA has only listed caffeine as GRAS as an ingredient for use in cola-type beverages in concentrations specified by the agency.
The FDA noted in its release that it is not aware of any basis on which manufacturers may have concluded that the use of caffeine in alcoholic beverages is GRAS sanctioned. Consequently, in its letters to notified companies, including City Brewing, Gaamm Imports, Inc., and United Brands Company, Inc., the agency asked that within 30 days the notified companies “produce evidence of their rationale, with supporting data and information” for their conclusion that the use of caffeine in their products is GRAS or prior sanctioned. If the FDA determines that the use of caffeine in the alcoholic beverages is not GRAS or prior sanctioned, the agency stated it would take “appropriate action to ensure that the products are removed from the marketplace.”
This issue has been fermenting (pun intended) for some time. In the past year, alcoholic beverage industry leaders Anheuser-Busch and MillerCoors agreed to discontinue their popular caffeinated alcoholic beverages Tilt, Bud Extra, and Sparks, and further agreed not to produce any caffeinated alcoholic beverages in the future. In late September 2009, the FDA received letters from eighteen attorneys general and one city attorney and five scientists expressing concerns about caffeinated alcoholic beverages. Among the chief policy concerns cited by these stakeholders was the increasing popularity and consumption of caffeinated alcoholic beverages by college students, coupled with general health risks associated with excess consumption of both alcohol and caffeine.
Manufacturers of alcoholic beverages had been operating under the TTB guideline that caffeine was a permitted but restricted ingredient, and had been warned by TTB and FTC about prohibited and/or deceptive advertising practices related to the effects of combining caffeine and alcohol. If the FDA takes the strong position that caffeine is an illegal additive, these advertising concerns related to caffeine and alcohol will disappear. The TTB and FTC will likely continue to focus scrutiny on other less common alcoholic beverage additives that have been treated like caffeine, such as ginseng, guarana and taurine.
And consumers will turn back to the original Red Bull and vodka for their caffeinated alcoholic beverage.
Take-Aways from November 3 Webinar: Making Good Marketing Claims: Product Labeling Pitfalls, Third-Party Certification and "Green Washing"
Tuesday, November 3, we held our second webinar in a three-part series on bringing sustainable food products to market. Thanks again to our presenters and attendees. The recorded webcast was archived and is accessible at this link. Click here to access a PDF copy of the presentation slides.
Take-aways from the second webinar include:
• With the exception of the FDA’s policy on “natural” claims, it has been silent on “green claims.”
• “Natural” could be hottest claim on the market but is becoming controversial. Food companies should continually monitor the marketplace to see which claims are drawing challenges.
• Food companies should pay attention to consumers union findings regarding eco-label credibility.
• While third-party certification may not help every food business, certification is a tool that supports your brand and your marketing/sales strategy.
• Retail leaders in sustainability, such as Burgerville, aspire for continuity of sustainability in each link in its supply chain.
• To understand the FTC green guidelines companies need to appreciate three key points: substantiation, specificity and qualification.
• To avoid “green washing” issues, food companies need to understand the complex matrix of federal, state, local and foreign statutes, regulations and guidelines governing “green” advertising.
I hope you can join me, Steve Marinkovich from Propel Insurance, my colleague at Stoel Rives, Anne Glazer, and Peter Truitt from Truitt Bros., Inc. on November 17, at 9 am PST, noon EST, (live Twitter feed at #sustainlaw) for the last webinar in the series as we discuss the following:
• Preventing and Dealing with Consumer Fraud, Unfair Trade and False Advertising Claims from Consumers and Competitors
• Real-Life Businesses Approaches to Sustainability, Product Labeling and Marketing
• Coping with Increased Risks of Food-Borne Illness from Local or Small Farm Products
• Insurance Coverage You Need, Think You May Have but Don’t Have or Think You May Want but Shouldn’t Get
American Conference Institute (ACI) recently held its latest conference on food-borne illness litigation. The conference has been a fairly intimate gathering of the nation’s lawyers, insurers and experts involved with food-borne illness litigation.
This year, I had the privilege of moderating an in-house counsel “think tank.” The panel was composed of lawyers from a nice cross-section of food businesses: Yum Brands, Hormel, Fresh Express and SUPERVALU (though for each, food-borne illness litigation is a rare event) A slide-deck from the panel can be found here.
Also among the presenters at this year’s conference were Center for Disease Control’s (CDC) Dr. Arthur Liang and USDA/FSIS representative Dr. Dan Engeljohn. Both presentations provided fascinating insight into changes afoot in food safety enforcement and policy at the federal level. Here are some of the take-aways:
• “Outbreaks Waiting to Be Discovered” – Dr. Liang opined that, based on surveilled illnesses, most food-borne illness outbreaks are not presently discovered. He believes that recent data shows that there are perhaps 2-3 times more outbreaks nationally than what’s been uncovered over the last few years.
• Food Safety Progress Being Undone by Retail Deli Operations – FSIS says there has been a “steady increase in risky behavior at the retail level.” According to Dr. Engeljohn, budget authority is being sought to intervene with retailers, particularly smaller supermarket deli operations.
• Negative Tested Product Can Be Considered Adulterated - FSIS will be issuing a policy soon that for the first time will consider a “negative tested product to be determined adulterated” under circumstances where an associated product tested positive for pathogens.
• Non-0157 STECs - FSIS will be finalizing methodology to detect non-0157 Shiga Toxin-Producing Escherichia coli (STEC).
Learn About Who Is Setting Sustainability Standards and How to Make Good Sustainability Claims: Register for the 11/3 Sustainable Foods Webinar
If you haven’t already, register here for the second in a three-part webinar series on environmentally friendly sustainable food products, to be held at 9 am PT, Tuesday, November 3. This installment of the series will focus on sustainability standards, third-party certification and avoidance of “green-washing.”
The webinar will feature:
- FDA regulatory lawyer Ricardo Carvajal from Hyman, Phelps & McNamara;
- Roberta Anderson from Food Alliance, the nation’s leader in setting third-party sustainability standards for food production;
- Alison Dennis from Burgerville, a traditional quick-service restaurant on the cutting edge of sustainability; and
- Advertising lawyer Jere Webb from Stoel Rives.
The webinar is interactive, and those listening live will be able to submit questions. We will strive to answer all questions either during the broadcast or off-line directly with listeners.
If you missed the first installment, you can read about the take-aways and replay the webinar on demand here. The slide deck can be downloaded here.
Environmentally Sustainable Foods: Dispelling Fear and Understanding That Sustainability Must Be Good for Business
Stoel Rives is proud to sponsor an upcoming webinar series on legal and business aspects of bringing sustainable food products to market. Industry representatives will talk among other things about what sustainable food products are, help dispel the fears of traditional food companies, discuss strategies for minimizing business and litigation risks, and underscore the importance of sustainable foods as a profit-making enterprise.
The first session, October 20, will discuss what an environmentally sustainable food product is, how a company may need to rethink research and development and supply chain issues, and financing. Participants include Steve Rowe, Sr. V.P. and General Counsel from Darigold, Inc. and its parent Northwest Dairy Association, food supply chain consultant Monica Gelinas from Karp Resources, and business lawyers Joel Dahlgren and Duff Bryant from Stoel Rives.
The second session, November 3, will look at what the FDA and USDA may do to define sustainability, third-party certification issues and green washing. Participants include Alison Dennis, Director of Supply Chain from Burgerville, Roberta Anderson from third party certifier Food Alliance, FDA lawyer Ricardo Carvajal from Hyman Phelps and trademark lawyer Jere Webb from Stoel Rives.
The third session, November 17, will look at increased risks presented by sustainable food products and strategies to mitigate those risks. This panel will include Peter Truitt, CEO of Truitt Brothers; Steve Marinovich, insurance broker at Propel Insurance; advertising lawyer Anne Glazer from Stoel Rives and me.
Each session will be 60 minutes and feature an interactive, "rapid fire" roundtable format. The panels will also respond in real time to questions submitted by listeners. Registration is free. Contact me if you would like further information.
Off to Minneapolis this week for a lecture at the University of Minnesota’s Department of Food Science. I’ll be talking to professor Francisco Diez’s Food: Safety, Risks and Technology class. My lecture is titled “Consumers vs. Food Companies: Intersection of the Court System and Food Science.”
I plan a wide-ranging talk that touches on:
- The relationship and interaction between the tort system and food regulation;
- Basic principles of products liability law as it affects food;
- Three different types of food products claimants and how we respond to each;
- Why consumer claims matter to food companies;
- The importance of investigating agencies in determining the outcome of claims;
- The relationship between food-borne illness, home food preparation, organic food and locavores; and
- How lawyers use expert witnesses.
I’ll post the slides after the lecture.
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|
U.S. House of Representatives approved HR 2749 moments ago. This action followed some confusion yesterday where it was brought to the floor needing a 2/3 vote and failed. Here’s a link to a report by the Rules Committee including the language of the bill as approved today by the House. Changes to the bill from what was proposed by the Energy and Commerce Committee include amendments aimed at concerns by smaller farmers of the $500 “facility registration fee,” performance standards and record keeping.
The legislation has been the subject of heavy debate inside and outside the beltway. Here’s a link to the Editorial in the New York Times in support of the bill. The Grocery Manufacturer’s Association (GMA) also has expressed support in a June press release for the bill as marked-up by the Energy and Commerce Committee. From some opposed to the bill, here’s a link with an impassioned argument from yesterday.
Note that the registration requirements in the bill as currently written “does not include farms; private residences of individuals, restaurants, other retail food establishments; nonprofit food establishments in which food is prepared for or served directly to the consumer.”
The bill further exempts from registration farms that sell food primarily at farmers markets. Also exempts farms that “manufacturer grains or other feed stuffs” grown on those farms and distributed to other farms for “consumption as food by humans or animals on such farm.”
Also note that traceability provisions remain. Section 107(c)(2) recognizes that work remains on the regulatory level for FDA to collect information, and develop technology and systems, and establish pilot programs before traceability becomes a reality.
Preventing "Piercing of The Veil" - Practical Tips For Food Companies - What to Do and What to Avoid (part III of III)
By guest blogger Jerry Chiang
The following list will help you preserve your liability shield and protect yourself from the liabilities of your corporation or limited liability company (“LLC”). This is not intended to be an exhaustive list but rather an illustrative list of activities that will either preserve one’s liability shield or undermine it.
• Properly capitalize the corporation/LLC, or in the alternative, obtain sufficient insurance to cover potential liabilities.
• Keep personal and business entity funds separate by creating a bank account for business entity funds and transactions.
• Hold oneself out as an officer or employee of the corporation/LLC.
• In transacting with third parties, make it clear that they are transacting with a corporation or LLC and not an individual.
• As a corporation, observe all formalities listed in your state’s corporation statute and the corporation’s bylaws. To learn more about Washington corporate formalities, visit the Washington Business Corporation Act.
• As an LLC, observe all formalities listed in your state’s LLC statute and the LLC’s operating agreement. To learn more about Washington LLC formalities, visit the Washington Limited Liability Company Act.
• Avoid paying excessive dividends or distributions.
• Avoid below-market sale of assets to a shareholder, member or a third party.
• Avoid using business entity assets for personal purposes and vice versa.
Preventing "Piercing of The Veil" - Practical Tips For Food Companies - Introduction (part I of III)
By guest blogger Jerry Chiang
In starting any business enterprise, especially in the food industry, incorporating the business as a corporation or limited liability company is as important as having a good product or solid business plan. Incorporation is essential because it shields owners from the liabilities of their business. A lawsuit against the business will not impact the personal assets of the business owners because the law recognizes the corporation or limited liability company as a distinct and separate entity.
Incorporation by itself, however, is not enough. In order for the liability shield to remain in place, or for the law to continue to recognize the corporation or limited liability company as a separate entity, the entity’s owners need to observe certain formalities. If the owners are not careful, the law may treat the entity and the owners as one and the same and disregard the corporate entity. This is commonly referred to as “piercing the corporate veil.”
Over the next few days, this blog will give you an overview of what the courts look at when they decide whether to disregard a business entity and find its owners liable. We’ll also provide a list of dos and don’ts to help you avoid losing your liability shield.
University of Nebraska has posted video on its website from the entire three days of the 2009 Governor’s Conference on Ensuring Food Safety. You can view my presentation on Defending Liability in Foodborne Illness Outbreaks. More important, you view the presentations of Dr. Andrew Benson and the other scientists who offer fascinating insights into the latest developments driving the science of food safety.
An important study was released this month by the Institute of Food Technologists addressing the challenge of responding to food contamination with limited scientific information. Ricardo Carvajal at Hyman, Phelps & McNamara wrote about this on the FDALawBlog last week. You can read the summary by Rosetta L. Newsome here.
Ms. Newsome summarizes the three main sections of the study as follows:
“details the U.S. legal framework that provides the foundation for U.S. food safety policy,
describes international considerations (e.g., Codex standards) that impact foods in international commerce, and addresses European Union law and standards.”
“briefly addresses structure activity relationships, surrogate compounds and metabolites,
predictions based on physical/chemical data, toxicological evaluation, use of animal studies, statistical considerations, and other aspects of risk assessment.”
“addresses why a new approach is needed to conduct a risk-based evaluation of the potential exposure, hazard, and toxicity of low levels of unwanted chemical substances in foods and how information on risk can be used to make appropriately conservative and balanced decisions[;] . . . also calls attention to the importance of evaluating benefits of the food(s) in which the component is found as well as risks.”
President Obama’s Food Safety Working Group announced its Key Findings on July 7. Three groups of initiatives were announced: 1) Salmonella, 2) National Traceback and Response System, and 3) Improved Organization of Federal Food Safety Responsibilities. All of these represent major shifts in food policy. Coming changes will impact nearly every part of the nation’s food supply.
Despite Obama’s stepped-up food safety agenda, the question of how these changes will affect food-borne illness litigation remains. Bill Marler in a recent blog post reacting to the July 7 Key Findings says, “I really may live to see the government ‘put me out of business.’” No doubt that many of Obama’s initiatives will improve food safety. But will it eliminate food-borne illness and accompanying litigation? Not likely.
Many food companies today follow food safety precautions that exceed anything proposed by the Obama administration or Congress. Yet those same companies continue to experience food-borne illness outbreaks and are targets of the plaintiffs’ bar. E. coli, Salmonella, and other pathogens are persistent in the environment and successful at Darwinian evolution. In some sense, the pathogens that are the source of food-borne illness always seem at least one step ahead of the law.
Crystal ball: Obama’s initiatives will lead to a safer food supply but will also help the government detect more outbreaks that previously went undetected. Undetected outbreaks rarely lead to litigation; detected outbreaks almost always lead to litigation. Growth in food-borne illness litigation, therefore, should continue to accelerate.
The American Conference Institute announced this week its latest food litigation conference. Here’s the conference brochure. The conference will take place in Chicago on October 26-27 at the Sutton Place Hotel.
Plaintiffs’ lawyer Bill Marler and defense lawyer Al Maxwell are co-chairing the conference. This year promises a greater variety of presentations by in-house food personnel, government regulators, and others. As in past years, I expect a stimulating exchange of information and vigorous debate about competing views of food liability issues. Feel free to email me or comment if you are attending or want more information.
By Guest Blogger Jere Webb
It is evident that virtually every business now is trying to position itself as being “green”. For a discussion of restrictions on “green advertising”, particularly the FTC’s green ad guidelines (the “Green Guides”), and similar efforts at the state level, see “Green Claims Advertising – What You Can Say and What You Can’t”. The FTC is reviewing the Green Guides and likely will amend them in the near future. For comments submitted in the review process and additional information, see Green Guides.
The newer arena is green trademarks. The United States Patent and Trademark Office is now routinely rejecting, based on descriptiveness, multiword trademarks, that start with or contain the word GREEN. An example is the mark GREEN JOURNEY for hybrid cars. But in the same application, the applicant sought to register for clothing, and the Trademark Office accepted the mark, but with a disclaimer of the word GREEN. It found that the two word mark was merely “suggestive” of clothing, not “descriptive”. See "Green" Trademarks Face Hostile Climate in USPTO.
For an example of a green mark that passed muster, the Trademark Trial and Appeal Board (TTAB) recently reversed an examining attorney’s descriptiveness refusal for the mark GREEN INDIGO for clothing, finding it to be an “incongruous” term for clothing and therefore merely suggestive and not descriptive. The case is In re Jones Investment, Inc. (TTAB Jan. 21, 2009.)
The lesson is: If you want to include the word “GREEN” in a trademark, some careful review and advice from a trademark lawyer is in order.
For food sellers interested in promoting a “sustainable” brand and inspiring food safety confidence in their consumers, meet Food Alliance. Food Alliance “is a nonprofit organization that certifies farms, ranches and food handlers for sustainable agricultural and facility management practices.” It bills itself as “the most comprehensive certification program for sustainably produced food in North America.”
I’ve recently joined the Food Alliance Board of Directors (in fact, I’m headed to Portland today for a board meeting). My hope is to assist Food Alliance in becoming more widely accepted and mainstream. Credible third-party certification, such as Food Alliance provides, offers a transparent pathway to sustainability of our food supply and consumer confidence in food safety.
Food Alliance takes a holistic approach that is broader and more dynamic than organic certification, which does nothing to address food contamination from pathogens such as Salmonella, E. coli, and Listeria (in fact, many experts believe that organically grown food may be more likely to be contaminated by these pathogens). By way of example, Food Alliance certification standards, among other things, address “soil and water quality,” “ensure the health and humane treatment of animals,” “conserve energy and water,” and “ensure quality control and food handling safety.”
For more on why a holistic, independent third-party certification correlates with food safety (and accompanying consumer confidence), I’d suggest reading this op-ed piece co-authored by Food Alliance Executive Director Scott Exo, which was written earlier this year in the wake of the PCA peanut recall.
We wrote recently about the food safety legislation coming out of Henry Waxman’s House Committee on Energy and Commerce. That legislation, H.R. 2749, has passed out of committee and been reported to the full House for a vote. When the vote will occur is anybody’s guess. Reuters quotes Chairman Waxman as saying, “I am hopeful that before too long, we can have a comprehensive food safety bill on President Obama’s desk.”
We’ve explained previously in this blog why increased surveillance by state and federal agencies will lead to detection of more outbreaks (and, therefore, more legal exposure). Others seem to agree.
Law360 published a nice interview with Jim Neale at McGuire Woods, another lawyer experienced in the food liability arena ( a Law360 subscription is needed to access the full article). Jim is quoted in the article as saying, “when, despite the best efforts of all concerned, outbreaks do occur, improved surveillance allows them to be caught and, most often, quickly tracked to the source.” And, as federal money increases to the state health departments (the front line in detecting most of the nation’s outbreaks), rates of detection will accelerate.
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.
Mediation has become a critical process for resolving large, multi-party consumer claims. Settlement of these claims is often complicated by insurance and third-party recovery. Often a brokered process is the only practical way to get to a meeting of the minds. Yet, in my experience mediations that can succeed fail because of the lawyers and mediators. Having been through a number of multiparty mediations (sometimes with more than 20 separately represented interests) and having been trained as a mediator, here are my top five tips entering into a multiparty mediation:
1. Bargain from Strength—Be Prepared to Try the Case. Go into the mediation with well-developed trial themes, a trial plan, an opening statement, prepared expert witnesses, and, if possible, jury research. Whether the mediation occurs early on in the case or on the eve of trial, your opponents will know whether you are prepared to try the case. If you are not prepared, settlement will be harder and your client will be asked to compromise more. While trial preparation is critical in any case, it is most critical where the liability and damages claims against your client are the strongest and your client is in a difficult position (i.e., those cases your client would least like to try). For these cases, any leverage your client can bring to the table is important. Creating the perception that your client is ready to go to trial will create leverage.
2. Make Sure the Right Players Are Present and Educated. Mediation cannot succeed unless each party includes a client/insurer representative with full settlement authority (or easy access to full settlement authority). For large multiparty claims, having those representatives physically present is critical. Perhaps more important is that those with authority be prepared in advance of mediation to exercise authority. It should go without mention that a lawyer should prepare his or her own client for mediation by providing a complete and honest assessment of the settlement value.
As or more important may be educating the opposing party, though this is easier said than done. Communicating your adversary’s weaknesses to your adversary is tricky. In most situations, a lawyer’s assessment of the opponent’s weaknesses is not considered credible and is written off as “chest-beating.” The only way a lawyer can succeed in communicating with an opponent about the opponent’s weaknesses is if the lawyer has worked in advance at building a relationship and credibility with the adversary.
3. Select the Right Mediator. For difficult multiparty cases, mediator selection is an important, though often overlooked, key to success. Look for a mediator who will work hard in advance of the mediation to understand the barriers to settlement (see number 4 below). Look also for a mediator who (1) has the ability to quickly grasp complex issues impeding settlement; (2) is not afraid to confront parties with difficult questions; and (3) understands the mediation process, possesses good people skills, and is creative. Avoid at all costs a mediator whose primary tool is to brow-beat, make rulings, or intimidate the parties (this never works unless the mediator also happens to be your trial judge).
4. Educate the Mediator (Well in Advance of the Mediation if Possible). If a mediator has waited until the morning of mediation to first meet with the parties, it may be too late. If there are more than a few interests represented, the entire mediation session may be consumed in educating the mediator about the relevant issues. Worse, the mediator may feel a need to take “short-cuts” and end up alienating the parties before negotiations have really begun. At minimum, the mediator should spend time well in advance of the mediation date, preferably in person, talking with counsel from each side. In advance of mediation, parties should also consider setting up a session for the mediator to hear directly from key expert witnesses. On the morning of the mediation, the mediator should have learned enough to understand the major settlement impediments and should come with a plan of action.
5. Diffuse Personality Conflicts and Emotions. If your client’s goal is to settle the case if at all possible, a trial lawyer must do what he or she can to set aside the skirmishes, grudges, or ill will that might have built up during discovery, motion practice, pretrial preparation, etc. While I’m a big proponent of setting aside ego and of building relationships in litigation, this may not always be possible. But mediation/settlement negotiations are the one time in the litigation process where consensus building is the objective. Lawyers should do what they can (swallow pride, move on, etc.) to extricate personality conflicts from the mediation.
Similarly, lawyers should assess during the mediation the degree to which personality conflicts and emotions among the parties are inhibiting consensus. When practical, lawyers should consider counseling their clients on setting aside ego and emotions. If a heart-felt apology or another message can bridge the difference between the parties, the client should be told and given the opportunity to make the apology or to communicate.
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.
Last week, members of the U.S. House of Representatives Committee on Energy and Commerce released a discussion draft of the “Food Safety Enhancement Act of 2009.”
The draft proposes beefing up the FDA registry of “all food facilities serving American consumers” and charging every facility $1,000 per year to fund FDA food safety activities. The new legislation would expand the types of facilities that need to register by eliminating certain exemptions from the 2002 Bioterrorism Act, though for now it appears to maintain exemptions for retailers, restaurants, farmers and nonprofits.
The proposal’s most ambitious and controversial proposal may be traceability.
The draft legislation proposes to require FDA to “by regulation establish a tracing system for food that is located in the United States or is for import into the United States.” The legislation gives the FDA few specifics other than to “maintain the full pedigree of the origin and previous distribution history of food,” “link that history with subsequent history,” “establish and maintain a system for tracing food that is interoperable with the systems established and maintained by other such persons” and “use a unique identifier for each facility.” No doubt the devil will be in the details.
Verbatim, here is the Summary of Discussion Draft of The Food Safety Enhancement Act of 2009:
1. Creates an up-to-date registry of all food facilities serving American consumers: Requires all facilities operating within the U.S. or importing food to the U.S. to register with the FDA annually.
2. Generates resources to support FDA oversight of food safety: Requires registered facilities to pay an annual registration fee of $1,000 in order to generate revenue for food safety activities at the FDA; requires registered facilities to pay for FDA’s costs associated with reinspections and food recalls; allows FDA to charge a fee to domestic firms requesting export certificates for exported food.
3. Prevents food safety problems before they occur: Requires all facilities operating within the U.S. or importing food to the U.S. to implement safety plans that identify and protect against food hazards. FDA would have the authority to specify minimum food safety plan requirements and to audit food safety plans.
4. Requires safety plans for fresh produce: Directs FDA to issue regulations for ensuring the safe production and harvesting of fruits and vegetables.
5. Increases inspections of food facilities: Sets a minimum inspection frequency for all registered facilities. High-risk facilities would be inspected at least once every six to 18 months; low risk facilities would be inspected at least once every 18 months to three years; and warehouses that store food would be inspected at least once every three to four years. Refusing, impeding, or delaying an inspection is prohibited.
6. Improves traceability of food: Enhances FDA’s ability to trace the origin of tainted food in the event of an outbreak of foodborne illness. FDA would be required to issue regulations that require food producers, manufacturers, processors, transporters, or holders to maintain the full pedigree of the origin and previous distribution history of the food and to link that history with the subsequent distribution history of the food; and to establish an interoperable record to ensure fast and efficient traceback (current law permits facilities to hold a record in any format — paper or electronic — making efficient tracing of foods difficult for FDA). Prior to issuing such regulations, FDA would be required to conduct a feasibility study, public meetings, and a pilot project.
7. Enhances the safety of imported food: As an additional layer of protection, FDA can require food to be certified as meeting all U.S. food safety requirements by the government of the country from which the article originated or by certain qualified third parties. Third party certifying entities must meet strict requirements to protect against conflicts of interest with the firm seeking certification.
8. Expands laboratory testing capacity: Requires FDA to establish a program to recognize laboratory accreditation bodies and to accept test results only from duly accredited laboratories. Gives FDA the ability to require laboratories to send test results to FDA.
9. Provides strong, flexible enforcement tools: Provides FDA new authority to issue mandatory recalls of tainted foods. Strengthens criminal penalties and establishes civil monetary penalties that FDA may impose on food facilities that fail to comply with safety requirements.
10. Creates fast-track import process for food meeting security standards: Permits FDA to develop voluntary security guidelines for imported foods. Importers meeting the guidelines would receive expedited processing.
11. Enhances the safety of infant formula: Enhances FDA’s ability to assure the safety of new infant formulas before they go on the market.
12. Advances the science of food safety: Directs the Secretary to include food in an active surveillance system to assess more accurately the frequency and sources of human illness. The Secretary is also directed to identify industry and regulatory approaches to minimize hazards in the food supply.
13. Enhances FDA’s ability to block unsafe food from entering the food supply: Strengthens FDA’s authority to administratively detain unsafe food products. Grants FDA “quarantine” authority under which the agency may restrict or prohibit the movement of unsafe food products from a particular geographic area.
14. Directs FDA to assess the use of carbon monoxide in certain foods: Requires FDA to conduct a safety review of the use of carbon monoxide in meat, poultry, and seafood products.
15. Enhances transparency of GRAS program: Requires posting on FDA’s website of documentation submitted to FDA in support of a “generally recognized as safe” (GRAS) notification.
16. Requires country-of-origin labeling and disclosure: Requires all processed food labels to indicate the country in which final processing occurred. Requires food manufacturers to identify the country of origin for all ingredients on their websites. Requires country-of-origin labeling for all produce.
1. Creates an up-to-date registry of importers: Requires all importers of drugs, devices, and foods to register with the FDA annually and to pay a registration fee.
2. Requires unique identification numbers for facilities and importers: To enhance information about FDA-regulated entities, creates unique identification numbers for all drug, device, and food facilities and importers.
3. Creates a dedicated foreign inspectorate: Requires FDA to establish and maintain a corps of inspectors to monitor foreign facilities producing food, drugs, devices, and cosmetics for American consumers.
4. Grants FDA new authority to subpoena records related to possible violations.
5. Provides protection for whistleblowers that bring attention to important safety information: Prohibits entities regulated by the FDA from discriminating against an employee in retaliation for assisting in any investigation regarding any conduct which the employee reasonably believes constitutes a violation of federal law.
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.
Law 360 has an article up this week titled “Coverage May Be Tricky For Food Recalls.” I am among the lawyers quoted in the article. For me, the takeaway is that any food company should have in place a strong team of insurance coverage counsel and brokers. Food companies need to ensure that they have in place the coverage they intend to have in place.
The article also suggests that the markets for recall insurance may be evolving and becoming more accessible. Recalls can be financially devastating. To the extent that recall insurance is affordable and provides relevant coverage, it should be considered.
More and more, it is becoming true that nothing drives detection and prevention of food-borne illness than technology (and, of course, with advancements in detection come potential increases in exposure to legal liability). No technological advancement may be more significant than Next Generation Sequencing ("Next Gen Sequencing").
I've recently had the opportunity to spend time learning about Next Gen Sequencing with Dr. Andrew Benson, a genetic microbiologist at the University of Nebraska’s Department of Food Science and Technology. Dr. Benson has received large research grants to harness the power of Next Gen sequencing. If you’re interested in the field, take a look at this short video, where Dr. Benson explains the technology, and check out the information on the CAGE (Core for Applied Genomics and Ecology) website.
As described on the CAGE website, this Next Gen technology “allows a single machine to accomplish in 48 hours what used to take an entire room full of machines and an army of
staff a month to achieve.”
Dr. Benson and others at CAGE explain further that:
Having such a powerful diagnostic technique now challenges us to rethink completely how we might go about risk assessment. Instead of looking for a single “indicator organism” in a food sample, we can now look at the entire population of microorganisms in a food sample and ask if the community of organisms present is the expected species that normally occupy that food or if the sample contains numbers of unexpected species, and in particular those species that are unique to fecal or soil environments. Thus, our assessment of “risk” is now based on the entire population, including the most abundant species of fecal and soil communities. Because our assessment is based on the entire composition, multiple species that are unique to feces or soil can be used in the determination, making the assessment much more accurate and robust. Moreover, the assessment is not limited to “risk” as we can also determine if the microbial community in a food sample has shifted toward spoilage (which gives us shelf-life predictions) or is consistent with “good” organoleptic properties of the food. The list of applications goes on and on.
Nobody disputes that consumers have a favorable view of organic certification in foods. Consumers generally believe that organic foods are healthier, and many believe they taste better. Yet, among food scientists, uncertainty prevails as to whether organics are safer, especially raw fruits and vegetables.
Absence of synthetic fertilizers is a primary distinction between organic and non-organic foods. And, from a safety standpoint, the absence of pesticides is the only provable claim that organic foods are healthier. But does the absence of one hazard imply the existence of another?
The prevailing pesticide substitute for organic foods is manure or composted manure. Dangerous pathogens such as E. coli O157 reside in manure. Some guidelines exist for composting manure. Unfortunately, as I learned recently in a presentation by Dr. Francisco Diez-Gonzalez at the University of Minnesota Food Science Department, these guidelines were written a decade ago, before science began to understand the prevalence of E. coli in the environment.
Science now understands that E. coli O157, for example, can persist for years in soil, let alone a more rich environment like manure. In some cases, it may be virtually impossible to rid of an environment of E. coli O157, short of treatment with non-organic substances such as tear gas or asphalt.
Outside of the 2006 spinach outbreak, there have been few food-borne illness outbreaks associated with organic fruits or vegetables. As organic farming continues to grow and detection of food-borne illness increases, the only question is how long it will be until another well-publicized outbreak. When it happens, will consumers continue to believe organic foods are safer? Will the industry be ready with evidence that proves the benefits of organic farming outweigh its risks?
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.
The Food and Drug Administration is seeking to increase its budget for Fiscal Year 2010 by nearly 20 percent more than FY 2009 – to $3.2 billion. The Washington Post reports that the increase is the largest in the agency’s history.
The FDA’s spending request includes $259.3 million to be devoted to the “Protecting America’s Food Supply” initiative. The agency plans to, among other things, strengthen the safety and security of the food supply chain, increase food inspections, and reinspect food facilities that fail to meet FDA’s safety standards. The Associated Press reports that the FDA’s proposed budget would put 222 more food inspectors in the field, for a total of 1,022. A summary of the FDA’s FY 2010 budget is available here.
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.
Together with Bill Marler, I have been invited to speak to agricultural stakeholders about legal issues and ramifications of Shiga toxin-producing E. coli outbreaks. In the past, the emphasis for this conference has ranged from basic science to applied science, and this year's conference will emphasize issues ranging from animal and plant management strategies to regulatory issues. Given the inevitable changes that will be coming in food safety regulation under the Obama administration, this should be a lively conference.
In the next couple of weeks, I have the unique opportunity to travel back to Cornell University, my law school alma mater, to spend time getting acquainted with its world renowned food science program.
While in "gorges" Ithaca, I plan to audit courses such as “Food Safety Assurance” and “Current Topics in Food Science & Technology.” I also plan to speak to graduate students in the program about “life in the trenches.” This should be interesting as the intersection of science and law is never boring.
I expect to have plenty to write about upon my return. In the meantime, if you are shopping for some of the best maple syrup or dairy products available, be sure to visit the Cornell Dairy Store where you can order online to stimulate the upstate New York economy.
By Guest Blogger Per Ramfjord
In my February 3, 2009 blog entry, I briefly discussed the steps a company should take to avoid criminal prosecution under the Federal Food Drug and Cosmetic Act. The FDA’s criminal investigation of Peanut Corporation of America continues to provide lessons on this subject—in particular, on what not to do.
The enormous public harm caused by the company’s actions, coupled with its seemingly cavalier attitude to contamination already created a high risk of prosecution. But that risk was heightened still further on February 5, 2009, when the FDA issued an amended investigatory report indicating that company management did not initially provide complete and accurate information regarding the testing of contaminated products.
This report and other information disclosed by the FDA shows that PCA management initially told the FDA that the company had shipped products that had tested positive for salmonella only after the products had been retested and it did not appear that they were contaminated. But this information was apparently inconsistent with company records, which, according to the report, showed that the company sometimes shipped products before it even received the positive test results and that, when it did so, it did not always even bother to do re-testing to find out if the positive results were false. This type of inconsistency between management statements and company records is precisely the type of misstep that companies should seek to avoid in a criminal investigation.
The Department of Justice has published its Principles of Federal Prosecution of Business Organizations. According to those Principles, one of the key factors that the government looks to in deciding whether to charge a company criminally is the “corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation.” Any statements that are inconsistent with company records or the statements of other company employees are likely to be viewed as a failure to “come clean” under this standard. Indeed, should the government conclude that there was an active effort to conceal negative information, it is likely to go a step further and add charges against company management for false statements or obstruction of justice to the other charges in the underlying case.
Again, this underscores the need to engage in a prompt, thorough and complete investigation as soon as possible when a potential problem arises. Equally important, it shows the need to exercise caution in verifying any statements that are provided to the government, particularly early in an investigation when there is a great deal of pressure—both from the government and the public—to provide an explanation of what happened. Putting too positive a “spin” on the events is virtually certain to backfire, as it appears to have done with PCA management.
Update by Richard Goldfarb
As though to show the truth of what Per wrote, the FBI just announced that it would participate in the investigation of PCA, while the FDA's Office of Criminal Investigations would remain the lead investigative agency.
In the wake of the latest Salmonella recall, Congress is holding well-publicized food safety hearings, and food safety may be rising on the priority list of the Obama administration. One question that arises is whether the perceived crisis in food safety will lead lawmakers and the public to revisit the option of food irradiation. The New York Times recently ran a nice piece on the topic. The article begins:
Before the recent revelation that peanut butter could kill people, even before the spinach scare of three summers ago, the nation’s food industry made a proposal. It asked the government for permission to destroy germs in many processed foods by zapping them with radiation.
That was about nine years ago, in the twilight of the Clinton administration. The government has taken limited action since.
The article quotes Suresh Pillai, director of the National Center for Electron Beam Research at Texas A&M University, as saying “It’s unnecessary for people to be getting sick today with pathogens in spinach or pathogens in peanut butter.” He describes the potential for irradiation of food as “humongous” and says that “[w]e have the technologies to prevent this kind of illness.”
As discussed previously on this blog, irradiation has wide support in the food industry and even has the support of plaintiffs’ lawyers such as Bill Marler, who has written a lengthy three-part series on the topic.
The question may not be whether irradiation is another tool that can prevent food-borne illness, but rather why is irradiation not being used on a wide-scale. Mr. Pillai likened fears of irradiation to “early phobias about the pasteurization of milk.” Aside from lengthy delays in FDA approval, consumer fear may be the problem. The only solutions may lie in (1) a joint effort between industry and lawmakers to educate the public on the benefits and safety of food irradiation, and (2) action by Congress and the FDA to help provide industry with the resources and political cover to begin using irradiation on a wide scale.
By guest blogger Per Ramfjord
The FDA’s recent announcement that it is pursuing a criminal investigation of Peanut Corporation of America, arising out of the Salmonella-driven peanut product recall, is sure to raise concerns with executives in food product companies throughout the country. White House Press Secretary Robert Gibbs’s comment that the Obama administration intends to put in place a “stricter regulatory structure” to prevent breakdowns in food safety only heightens that concern.
And looking at the law, there are reasons to be concerned. The Federal Food, Drug, and Cosmetic Act criminalizes under sections 331 and 333 more than two dozen practices, including a host of activities associated with the manufacture or sale of contaminated food products. The potential punishment for such offenses includes corporate fines and the possible imprisonment of executives for up to one year for misdemeanor offenses or up to three years for felony violations. The burden of proof to establish such crimes against corporate executives is very low. For misdemeanor offenses, the government needs to prove only that the violation occurred under the executive’s watch; it need not show that the executive had any actual criminal intent or personal involvement in the violation. For felony violations, the government can prove the required intent simply by showing that a defendant consciously avoided knowledge of the violation or was involved in a prior violation.
So, the question arises, what should companies do to avoid prosecution if they become aware of potential criminal violations? The obvious first step is to stop the offending practice as quickly as possible and to identify and take any available remedial action, up to and potentially including a recall. Although there may be concern that the remedial action or recall may itself draw attention to the problem, the benefits of acting in a manner that the government deems responsible will pay off down the road. The second step is to investigate the violation immediately, with counsel, to develop facts that can help steer the case away from criminal enforcement. The FDA will almost always hold a “Section 305” meeting to allow a company to tell its side of the story before initiating a criminal prosecution. The decision about whether to prosecute will be based on factors such as the nature and seriousness of the offense, the potential deterrent effects of prosecution, and the company’s or individual’s culpability, criminal history, and willingness to cooperate. Uncovering evidence to show that the event in question was isolated in nature, due to unique and excusable circumstances, and not part of a pattern of misconduct or noncompliance is critical to making such a meeting a success and to the company’s overall defense going forward. Finally, an important third step is avoiding pitfalls during the investigation itself that could contribute to the government’s decision to prosecute. The current enforcement atmosphere is one in which the “cover-up” is often deemed worse (and more likely to spark prosecution) than the “crime.” Avoiding any false statements, document destruction, or other actions that the government could construe as constituting obstruction of justice is therefore of vital importance.
In sum, obviously the best way to avoid prosecution is to avoid violations, particularly through adopting policies and procedures that minimize risk. But once a potential violation has been discovered, it is vital to respond quickly and with the benefit of counsel who know and understand the system. While any enforcement proceedings are unfortunate, the prospect of criminal proceedings, with their potential of adverse publicity to the company and incarceration of executives, poses unique problems that require a rapid and focused response.
Center for Science in the Public Interest (CSPI) recently filed a putative class action in federal court in the Northern District of California claiming that Glacéau’s VitaminWater is mislabeled under California law. This suit comes on the heels of the recent Ninth Circuit decision that remanded the Gerber foods case. We previously discussed the Gerber case on this blog and how it presents “serious questions as to whether there are any clearly defined legal standards as to when a food label is misleading and when it’s not.”
The VitaminWater case appears to raise similar issues. CSPI fails to point to anything directly in VitaminWater’s labeling or advertising that is actually incorrect. Instead, CSPI asserts that “the central message” of VitaminWater’s labeling “is that drinking VitaminWater is good for one’s health.” CSPI asserts this is misleading because “VitaminWater is loaded with sugar” and as a result “may actually harm consumers’ health.” CSPI also faults the product labeling because it fails to disclose that Glacéau, the company that manufactures VitaminWater, was purchased by a soft drink manufacturer.
Supreme Court Asked to Hear Preemption Case Involving Methylmercury; FDA Issues Draft Documents Regarding Consuming Commercial Fish
By Guest Blogger Bryan Anderson
The maker of Chicken of the Sea products has asked the U.S. Supreme Court to grant certiorari in a case we reported on involving preemption of state-law tort claims. In August 2008, the Third Circuit in Fellner v. Tri-Union Seafoods, LLC reversed the district court and held that Food and Drug Administration (FDA) actions regarding methylmercury content in tuna did not preempt the plaintiff’s claims under the New Jersey Product Liability Act. Tri-Union Seafoods’ certiorari petition presents two questions for the Supreme Court’s consideration:
1. Whether state-law tort claims based upon failure to warn of the risks of methylmercury in tuna fish products are preempted by the Federal Food, Drug, and Cosmetics Act and regulatory actions of the FDA, including a written determination that state-law warning requirements concerning methylmercury in tuna products are preempted by federal law and denial of a petition to require such warnings; and
2. Whether a “presumption against preemption” applies in conflict preemption cases.
If the Court grants the petition and hears the case, it certainly will have implications concerning local and state labeling requirements vis-à-vis federal agency action. Stay tuned; we will update you on this case as the plaintiff/respondent submits her brief opposing the petition.
Also related to methylmercury, the FDA yesterday published a notice in the Federal Register announcing the availability of two draft documents assessing the benefits and risks of consuming commercial fish.
The first document attempts to quantify the impact of eating commercial fish on three health endpoints: (i) fetal neurodevelopment, (ii) risk of fatal coronary heart disease, and (iii) risk of fatal stroke. The FDA notes that “[e]ach of these health endpoints has been associated in the scientific literature both with adverse effects of methylmercury exposure (including through fish consumption) and beneficial effects of regular fish consumption.”
The second document provides an overview of published scientific literature regarding beneficial effects of fish consumption and Omega-3 fatty acids for neurodevelopmental and cardiovascular endpoints.
When Is Labeling Misleading and Actionable Under State Law? Is There Any Clearly Understood Standard?
A recent Ninth Circuit case again raises serious questions as to whether there are any clearly defined legal standards as to when a food label is misleading and when it’s not. Manufacturers who are in compliance with federal standards for labeling may still be liable under state law.
In Williams v. Gerber, the Ninth Circuit, reversing the district court, 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.”
Here’s the label in question:
In particular, the appellate court did not approve that the product, made of white grape juice, featured photographs of a variety of fruit on the label. The court also found misleading the statement that the product was made with “fruit juice and other all natural ingredients.” The product contained in addition to all-natural ingredients some ingredients the Ninth Circuit believed may not be “all natural.” The court believed that the statement, though not untruthful, should have disclosed more information.
Troubling in the court’s decision is that full nutritional and ingredient information was printed in similar size print on the same label. Even the court acknowledged that “reasonable consumers expect that the ingredient list contains more detailed information about the product . . . .” As a practical matter, the only way manufacturers can mitigate against these types of putative class actions is to involve lawyers directly in the marketing and labeling process. Under the world imagined in the Williams case, legal training seems to be a prerequisite to understanding which labels may give rise to litigation and which may not.
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.
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|
I was interviewed recently by Food Innovation Weekly on “Melamine, Recalls and Crisis Management.” This question-and-answer article discusses how the waves of melamine issues circling the globe affect the way a company should think about crisis management. I suspect that we’re not done hearing about melamine contamination and that the scope of fraud has yet to be fully uncovered. Some of the more interesting issues are safe dosage levels, product testing and what companies should or should not disclose to consumers.
No food-borne illness induces consumer fear like Bovine Spongiform Encephalopathy (BSE a.k.a. "Mad Cow Disease"). The beef industry in particular has gone to great lengths to take preventative steps against the introduction of BSE into U.S. herds. A big problem in controlling BSE is that it’s difficult to detect. The only detection method currently available involves the slaughter of a suspect animal and a series of not very reliable tests.
Harold Craighead and colleagues at Cornell University have developed nanoscale resonators, which are tiny devices that function like tuning forks by changing pitch with increased mass. When prions bind to the resonator’s silicon sensor, it changes the vibrational resonant frequency of the device. In experimental trials, the sensor detected prions at concentrations as low as two nanograms per milliliter, the smallest levels measured to date.
Though still a while away from practical application, the technology may have dramatic effects on the ability to ensure the safety of the nation’s beef supply. The BSE “tuning fork” is a good example of yet another new technology industry that the government can use to ensure food safety and consumer confidence.
Farming and safe handling practices alone cannot provide the level of assurance that consumers demand in their food supply. Tuning fork, irradiation, and better bacteria detection are all vital tools that industry, government, and consumers need to embrace.
While largely under the radar in the American press due to the compelling election cycle and historical meltdown in the financial markets, the news out of China concerning melamine has gone from bad to worse. Concern about Chinese dairies has morphed into a global crisis affecting what seems like an infinite number of products tainted with melamine.
Melamine has been intentionally introduced into animal feed, dairy products, pet food and other products because it can make diluted or poor-quality products appear to be higher in protein by elevating the total nitrogen content detected by some simple protein tests. Already, the FDA has identified a wide variety of products affected in the first wave of concerns about Chinese dairy products.
How should a food manufacturer or retailer prepare for a melamine issue? Any food company that imports any food ingredient or product from Asian markets should be concerned, and its first steps should be to update its crisis management plan and rehearse a melamine recall.
Food companies should also review with coverage counsel and their brokers whether they have—or can obtain—insurance coverage for financial exposure from melamine tainted products. Financially, a food company will be affected by a melamine issue in at least three ways: recall costs, loss of business and personal injury/consumer fraud claims. Standard comprehensive general liability (“CGL”) insurance may not cover any of these exposures. Most CGL policies do not cover recall costs. While recall and property insurance policies are available, the coverages offered by these policies also may be problematic.
Even personal injury or consumer fraud claims might be denied by CGL insurers. For example, many CGL policies will only provide coverage for occurances that arise out of events that are “accidental.” “Accident” is commonly defined as “a sudden, unforeseen or unintended event.” Even though a food company may have no knowledge of an upstream supplier’s fraudulent acts, some insurers are sure to argue that claims arising from products intentionally tainted by melamine are not covered.
The insurer's argument denying coverage is not a slam dunk and may not prevail. But, the key is to avoid (or minimize) the dispute with the insurer. To the extent possible, when placing insurance, a food company should obtain a representation or endorsement from its insurer that coverage will be extended to claims arising from melamine-tainted food.
There was a nice article in the Canadian legal publication Law Times about the aftermath of the Maple Leaf Foods recall. The article praises Maple Leaf Foods for taking quick steps to salvage consumer confidence in the face of a Listeria outbreak across Canada. Specifically, the article discusses how Maple Leaf Foods CEO Michael McCain “immediately took responsibility for the plant outbreak.”
McCain is quoted as saying that “[g]oing 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.”
Yet the author of the Law Times article interviewed a Canadian corporate communications expert who noted that “McCain likely did listen to legal counsel.” The expert said that McCain’s “statement was an acknowledgment that if limiting legal liability was the main objective of the company’s response, it would be near impossible to restore its reputation.”
“‘The whole reason that Maple Leaf has been successful, and even though the recall has cost them $20 million in product [recalls], [is that] their reputation is intact,’” the expert is quoted as saying.
Finally, the best quote from the article: “[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, says [the expert].”
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.
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.
In the article, appears the following:
"The Canadian Double-Down"
"At a January 2008 products liability symposium, a well-regarded New York City plaintiffs’ attorney stood before a room of lawyers and in-house counsel. The topic of his presentation was, in part, to forecast the next direction of mass tort litigation. His message to those listening was clear. 'Canada is next.' "
The article goes on to explain that the threshold for mass tort class actions in Canada may now be lower than in the U.S.: "in certifying the class, the [Canadian] court was not troubled by the fact that class members could not prove a present physical injury or a 'foreseeable and recognizable psychiatric illness' as a result of the alleged product defect."
The bottom line advice in the Bloomberg article, as it has been in this blog, is that businesses (especially those in the food industry) need to continue to re-double efforts at risk avoidance and crisis management. As courts outside the U.S. become more open to mass tort claims, exposure for businesses selling products internationally only amplifies.
1. The same name.
2. Operating permits from Public Health—Seattle and King County.
3. Fifteen or more locations in King County or nationwide—this legislation does not affect food establishments with 14 or fewer locations.
4. Gross annual revenues of $1 million or more.
5. Standardized menu items that use standard recipes.
The county won’t start imposing fines until January 2009. Yet for small restaurants that just meet the 15-restaurant and $1 million thresholds, or for franchise owners, these requirements can be onerous, especially if the restaurant maintains a large menu or large variety of seasonal foods. Costs for nutritional testing on a variety of products can be prohibitively expensive. Will this law have the perverse effect of limiting consumer choice and use of seasonal, local products on menus?
Even for larger restaurant chains that already provide nutritional information, King County’s law will impose requirements that may increase costs because King County’s rules may be inconsistent with nationwide distribution and marketing.
Restaurants in both New York City and San Francisco faced with similar (though arguably less onerous) local regulations are challenging the laws in those cities. Among other things, there are serious First Amendment issues (though lawyers in New York City are apparently relying on the King County law to show how it could be made to comply with First Amendment speech protections).
Menu laws are also being challenged on grounds of federal preemption (even though the FDA has apparently taken the position that its laws do not preempt local menu regulations). I have written several times on this blog about the need for federal preemption. No area demands federal preemption more than regulation of chain restaurant menus.
For evidence why the federal and not local governments should be regulating nutrition, look at King County’s self-stated reasons for passing its law: “rising health care costs, our growing number of obese, diabetic and chronically ill residents, and a lack of information to inform choices that improve our health.” Are any of these reasons unique to King County? The studies relied on by King County are national and not unique to King County. The restaurants targeted are national and are generally not King County-based restaurant chains.
Only the national government has the resources to investigate the obesity epidemic—something that has baffled scientists and for which there is no proven cause or cure. Before our restaurant industry is impacted and consumer choice is further limited, shouldn’t we devote the full resources of the federal government to the problem? Do we expect the obesity epidemic be solved by an inconsistent patchwork of local county laws?