Initiative 522 Defeated in Washington

Based on preliminary results from Tuesday’s election, it appears that Washington State’s hotly debated Initiative 522 (I-522) concerning the labeling of genetically-engineered foods has gone the way of California’s Proposition 37. Washington officials reported on Wednesday, November 6, 2013 that voters had rejected the measure, 54% to 46%. California’s similar labeling measure, Proposition 37, was rejected by California voters in November 2012.

County by county results show that certain counties in Washington including, King, Whatcom, and Jefferson, were largely in favor of passing I-522. However, the measure lost heavily in the southwest, central and eastern regions of the state.

If it had passed, I-522 would have required that any food offered for retail sale in Washington that was 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.”

In addition to the labeling requirements, I-522 would have also created a new private right of action for consumers to sue food companies alleging that they are not meeting the labeling standards set forth in the measure. Throughout the I-522 campaign, opponents argued that these so-called “bounty-hunter” lawsuits would impose significant defense costs and force settlements on food processors that may have inadvertently violated the measure’s requirements.

Despite I-522’s failure, the issue of GMO labeling appears to be here to stay. Earlier this year, Connecticut became the first state to enact legislation requiring the labeling of genetically engineered foods. According to Connecticut’s law, however, the labeling requirement will not take effect until four other states, including one state sharing a border with Connecticut, enact similar legislation. In addition, the requirements of the law will not take effect until a combination of Northeastern states with a cumulative population of over 20 million residents enacts similar legislation. Maine enacted similar legislation this summer, but the law also requires other states to enact GMO food labeling laws before the mandate takes effect.

Several other states currently have pending GMO labeling legislation that will be addressed during the next legislative session for those respective states. Stoel Rives attorneys will continue to track these state GMO labeling measure as developments occur. Check back here for updates.

Federal Judge Orders FDA to Address "All Natural" Labeling on GMO Foods

Coauthored by Claire Mitchell and Thomas Woods:

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.

Genetically Engineered Wheat Found in Oregon

Yesterday, the U.S. Department of Agriculture’s (USDA) Animal and Plant Health Inspection Service (APHIS) issued a news release (PDF) announcing that a genetically engineered (GE) variety of wheat was found growing on an Oregon farm. APHIS was first notified of the issue by an Oregon State University (OSU) scientist who reported that initial tests of wheat samples from an Oregon farm indicated the possible presence of GE glyphosate-resistant wheat plants.

Here’s what you need to know:

Earlier in April 2013, an Oregon farmer noticed wheat plants that had germinated and developed in a place where they had not been intentionally planted, so-called “volunteer” plants. The farmer also found that these wheat plants were resistant to glyphosate, a systemic herbicide used to kill weeds known to compete with commercial crops. The farmer then sent the samples to OSU for analysis, which later tested positive for the glyphosate trait.

The OSU scientist contacted APHIS on May 3, 2013 to inform the agency of her findings. After immediately launching an investigation and conducting further sampling and testing, APHIS officials announced that the samples taken showed the presence of the same GE glyphosate-resistant wheat variety that Monsanto was authorized to field test in 16 states from 1998 to 2005. Specifically, over this seven year period, APHIS authorized over 100 field tests with this specific glyphosate-resistant wheat variety in Arizona, California, Colorado, Florida, Hawaii, Idaho, Illinois, Kansas, Minnesota, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming.

This news has come as a surprise to many since there are no GE wheat varieties for sale or in commercial production in the U.S. The reason being that, unlike some other commercial crops such as GE sugar beets and corn that have been deregulated by APHIS, there are currently no GE wheat varieties that have obtained deregulated status from APHIS. In addition, to date, GE wheat varieties are not authorized for commercial sale or planting in any country.

However, despite the fact that GE wheat is not approved for planting in the U.S., government officials have confirmed that detection of this wheat variety does not pose a food safety concern. According to an investigation report (PDF) issued by APHIS in connection with the GE glyphosate-resistant wheat found in Oregon, the Food and Drug Administration (FDA) completed a voluntary consultation on the safety of food and feed derived from this GE glyphosate-resistant wheat variety in 2004. FDA ultimately determined that the GE glyphosate-resistant wheat variety is as safe as non-GE wheat currently on the market. FDA’s consultation summary, which includes the developer’s conclusion that “this wheat variety is not materially different in composition, safety, or any other relevant parameter from wheat now grown, marketed, and consumed,” can be found here.

Michael Firko, Acting Deputy Administrator for APHIS’ Biotechnology Regulatory Services, explained that the agency is taking the situation and the continuing investigation very seriously. APHIS is collaborating with state, industry, and trading partners to understand how the situation might have arisen and whether there are any more affected areas.

What is yet to be seen is how this event may influence Washington state voters come November. Initiative 522, also known as the “Mandatory Labeling of Genetically Engineered Food Measure,” is an initiative to the legislature on the ballot in Washington that will be decided in the general election on November 5, 2013. Similar to California’s Proposition 37 that failed with voters last year, Initiative 522 would require GMO labeling on raw or processed food offered for sale to consumers if the food is made from plants or animals produced through genetic engineering.

If Initiative 522 passes in November, this particular event would likely not trigger in liability for a producer or retailer’s failure to label the GE wheat. Initiative 522 specifically exempts from labeling any “raw agricultural commodity or food that has been grown, raised, produced, or derived without the knowing and intentional use of genetically engineered seed or food.” (emphasis added). However, there could be other legal ramifications if officials determine that the cause of the incident amounts to a violation of the Plant Protection Act (PPA). Under the PPA, if a violation is found, APHIS has the authority to seek penalties for such a violation including civil penalties up to $1,000,000 and potential criminal prosecution.

Another GMO Labeling Iniative on the Horizon, This Time in Washington

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:

  1. The Legislature can adopt the initiative as proposed, in which case it becomes law without a vote of the people;
  2. 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
  3. 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.

Arm Me with Knowledge: A Response to Ken Odza

Ken posted an entry with the title: “Can Business Lawyers Afford to Practice ‘Defensively.’” I’ve been a business lawyer for almost 30 years, so I think I have at least some perspective on that issue and I thought I’d contribute to the discussion with some historical observations. I apologize in advance if I sound like I’m suggesting that someone get off my lawn.

There are significant differences between legal practice today and when I began. You know longer hear the clack of typewriters at the secretaries' desks and I can communicate with a client in a foreign country as easily and quickly as I can one next door. We see our clients in the office less frequently and are less frequently physically on their premises. Yet we can watch a webcam of the construction of a project we’ve worked on, even though it’s thousands of miles away, 24/7 in real time. 

 

But the difference I’d like to highlight is the slicing and dicing of legal work among firms. To be clear, I am not complaining about this. I get my share of clients who hire me for exactly my kind of expertise, whether in banking, agricultural, food law, Native American law or commercial law.   I appreciate their business and would not recommend they use someone with less expertise somewhere else.

 

But there is a cost, and the cost can show up in exactly the situations Ken was describing in his blog entry. 

 

When I first started out, the firm did all the legal work for four major clients, and everyone in the firm was indoctrinated into the ins and outs of dealing with these clients, from the CEO to the general counsel’s office and managers we would work with all the time. You quickly learned their risk profiles, which one wanted no stone left unturned and which ones didn’t want you to sweat the small stuff. It did not take long before it was second nature to translate for one client the question of “should we do this?” to “should we do this where we might have no risk of loss?” and for another as “should we do this so long as our chances of success are better than 50/50?”

 

All four of those clients are gone, one way or another: merged or retreated from the market or having chosen to send their legal business elsewhere. We still do have clients like that, although the firm is so large and diverse it is less certain that everyone will work for those clients. And it is hard to overstate how much easier it is to answer the kind of questions Ken is talking about for such clients. 

 

When I do get hired on a one-time basis, I try as best I can to determine what the company’s risk profile is before I ever give any advice. There are many obstacles to this: my initial contact might be another outside counsel who is barely more clued in than I am, or it might be an inside counsel who hasn’t been with the company long, or the real decision maker is three steps up from my contact, and isn’t telling. 

 

In terms of today’s jargon, the more transparency, the better the legal advice will match the client’s risk profile. The more opacity, the more likely I am to practice defensively. 

Can Business Lawyers Afford to Practice "Defensively"?

I appreciate why lawyers practice defensively. We are risk adverse as a profession. But is this what our clients want from us? After all, our clients are usually in a risk-taking position when they seek our advice in the first place. In today's business climate, competition in almost ever sector is fierce to say the least. Our business clients are often in the position where they need to innovate, stay ahead of the competition or go extinct. For them, a "blue ocean" strategy is often the only pathway for survival.

Here's a common scenario in the practice of business law: client asks a question or poses a problem to his lawyer. Lawyer responds with a menu of options to solve problem. Lawyer goes through pros and cons of each but backs away from making a strong recommendation (or recommends the most risk-adverse solution). Lawyer feels that it’s the client's choice (which it is) and also wants to avoid blame if the recommendation is wrong (lawyer will be blamed anyway). Client feels dissatisfied because:

a. Client may not share the expertise/experience of his lawyer and wants a stronger recommendation; or
b. Client feels that lawyer may not be interested in really understanding the problem and/or the client's business; or
c. Client feels that lawyer is unwilling to put "skin in the game" and share the risk with the client; or
d. All of the above.

In litigation, defensive practice of law often comes in the form of "scorched earth" discovery and unnecessary motion practice. Attorneys tell their clients that they can't leave a stone unturned to prepare the case for trial (though they might not have a clue as to their trial strategy). Lawyers tell their clients that they can forgo the deposition but it's "risky." Although the lawyer advises the client that failure to conduct expensive discovery practice is "risky," the lawyer may be reluctant to help quantify the risk for the client. And if the lawyer is paid hourly, little incentive exists for the lawyer to make hard decisions in litigation as to what's necessary to try the case and what may not be. So the end result may be bloated fees and a disgruntled client (and often a bad result).

As outside counsel, we need to ask why clients hire us. Do they hire us to prescribe multiple choice solutions without a real recommendation or a path of scorched-earth litigation? Or do our clients hire us because (1) we have expertise, creativity and time that the client may not have in house and (2) the client expects us to solve its problem? With the legal monopoly threatened (look no further than the dramatic changes in professional rules in Great Britain), don't we have to provide clients the service they want? Your comments and thoughts are most welcome.

Regulatory Compliance Alone Is Not Enough: Understanding and Mitigating Consumer Fraud Claims

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.



Please feel free to contact me if you have any trouble finding the cases or other references in the slide-deck.

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

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

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

Judge England distinguished Sugawara from Williams, writing that

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

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

A Reminder To Review Insurance

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.

Obama Administration Focuses on Food Safety

The Obama administration placed food safety front and center over the weekend. In his weekly radio address, President Obama on Saturday announced new leadership at the Food and Drug Administration and the creation of a panel to toughen food safety laws.

Characterizing outdated food safety laws and the lack of resources at the FDA as “a hazard to public health,” Mr. Obama announced the appointment of Dr. Margaret Hamburg, a former New York City health commissioner, as FDA commissioner, and Baltimore Health Commissioner Dr. Joshua Sharfstein as the FDA principal deputy commissioner. The president also unveiled the Food Safety Working Group – a group that will consist of cabinet secretaries and senior officials to advise the president on how to update and enforce food safety laws.

President Obama also announced two additional food-safety steps on Saturday: closing a loophole in federal regulation that allows some diseased cows to be slaughtered for food, and a billion-dollar investment to modernize labs and increase the number of food inspectors.

Read a transcript of the president’s weekly radio address, download the .mp3 audio, or view the video below.

 

Alaska Unfair Trade Practices and Consumer Protection Statute

As discussed previously on this blog, the ABA Section of Litigation, Products Liability Committee will soon publish its 50-state survey on consumer protection statutes. In addition to the chapter on Washington, Bryan Anderson and I also coauthored the Alaska chapter.  

As with Washington, the Alaska statute is quite broad. See AS § 45.50.471-.561. A recent development in Alaska law extends the act to permit claims between commercial entities. See W. Star Trucks v. Big Iron Equip. Serv., Inc., 101 P.3d 1047 (Alaska 2004).  

A unique aspect of Alaska law is that it follows the English Rule awarding attorneys’ fees to the prevailing party. An interesting issue arises in the class context when a defendant “prevails” in a class suit. Who is responsible for paying prevailing party fees under Alaska Civil Rule 82 or AS § 45.50.537? The Alaska Supreme Court has resolved this issue by deciding that “named” class members may be liable for a prevailing defendant’s attorneys’ fees but that “absent” class members who are passive and have “relatively small claims” may not. See Turner v. Alaska Commc’ns Sys. Long Distance, Inc., 78 P.3d 264, 266-70 (Alaska 2003).

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.