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.
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.
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.
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.
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.
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.
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.
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.