Litigation and Insurance Coverage Risks from Swine Flu (H1N1)
For food companies (and other businesses), a dangerous and deadly flu pandemic (e.g., H1N1) can be a business disaster. Adding insult to injury is personal injury litigation and the accompanying insurance coverage nightmares that follow.
What Are the Personal Injury Litigation Risks?
For restaurants, airlines, cruiselines, supermarkets, hospitals, schools, and other institutions, risk comes from exposure if customers can link their illness with employee or staff illnesses. While proof of causation will be a hurdle for these plaintiffs, employers without clear and enforced pandemic policies (e.g., policies aimed at limited transmission and keeping sick workers home) are at risk. Large-scale deaths of healthy children and adults will raise the stakes enough to garner attention from plaintiffs’ lawyers and motivate lawsuits (whether merited or not).
While workers’ compensation statutes generally shield employers from suits by their employees (both alive and deceased), the same bar may not apply to contract employees or customers. Both may have the right to sue if they can link exposure to illness.
Will Personal Injury Claims Be Covered by CGL Coverage?
Generally, third-party claims for bodily injury against a company should be covered by Commercial General Liability (CGL) coverage. Yet coverages, exclusions, and endorsements should be read carefully. With greater frequency, insurers are including relevant (and harsh) language excluding claims related to infectious disease. For example, many policies, especially those issued to food companies, include exclusions for “organic pathogens,” which could be construed by insurers to include flu viruses.
Insureds should also evaluate whether limits and excess coverages are sufficient. Increasing limits of liability are relatively inexpensive and should be considered. It’s not difficult to imagine claims exceeding $100 million if multiple deaths of healthy individuals are involved.
Will Lost Business and/or Lost Profits Be Covered by Business Interruption Coverage?
Possibly. The lawyers at Anderson, Kill and Olick have written a nice piece on this and other swine flu coverage issues. Here’s their summary of business interruption coverage for swine flu:
Depending on the facts, it may be possible for a swine flu pandemic to give rise to business interruption coverage. Such coverage typically is purchased by businesses as part of their property insurance policies, in the form of a rider or endorsement or an optional additional coverage. Business interruption coverage is designed to protect businesses from losses that they may suffer unexpectedly due to unavoidable interruptions in their daily operations.
Business interruption coverage may apply in a variety of circumstances, such as a forced shut-down, or a substantial impairment in access to, a business’ physical plant or warehouses. Recent, infamous examples of events giving rise to such business interruptions are the events of September 11, 2001, and Hurricane Katrina in Florida.
In most property policies, business interruption coverage is only triggered when the site suffers property damage. Physical damage, however, can include contamination of equipment. Moreover, some policies, particularly those written for policyholders in the hospitality industry, do provide coverage for losses stemming from infectious disease without requiring physical damage to premises. Further, civil authority coverage, which is triggered when authorities shut off access to an area in which a business is located, can be triggered without physical damage to the policyholder’s premises.
On the brink of a season during which some predict a possible dangerous pandemic, now is an opportune time for any company to gather its insurance coverage team (lawyers, risk managers, and brokers) to review and mitigate exposures.
Snapple Decision - FDA's Policy Concerning Use of "Natural" Not Entitled to Preemptive Effect
High Fructose Corn Syrup Labeling: Opening the Floodgates For Consumer HFCS Claims?
The Third Circuit ruled this week in Holk v. Snapple Beverage Corp., reversing the district court and reinstating the state law putative class claims for consumer fraud and breach of warranty for use of the term “all natural” despite the inclusion of high fructose corn syrup (HFCS) (though the court noted that the manufacturer no longer uses HFCS in its products).
The case is significant and is getting attention because the Third Circuit concluded that “FDA’s policy statement regarding the term ‘natural’ is not entitled to preemptive effect.” The court was persuaded because “the FDA declined to adopt a formal definition of the term ‘natural’ choosing instead to simply enforce its long standing ‘informal policy’”:
[T]he agency has considered “natural” to mean that nothing artificial or synthetic (including colors regardless of source) is included in, or has been added to, the product that would not normally be expected to be there. For example, the addition of beet juice to lemonade to make it pink would preclude the product being called “natural.”
As expected, the court followed its previous ruling in Fellner v. Tri-Union Seafood, LLC (our blog entry about it is here), ruling that neither the FDA’s “informal policy” nor their enforcement letters were entitled to any preemptive weight.
Practice Tip: For the next HFCS case, preemption may not be a dead issue. The Third Circuit did not rule (though it expressed its skepticism) on the “express preemption” argument based on 21 U.S.C. § 343-1(a)(3). The court ducked the issue by concluding that Snapple waived the argument by not “advancing it” in the district court.
DOJ and DOA Announce Workshops to Evaluate Agricultural Markets and Competition
By Guest Blogger Joel Dahlgren
Last week the Justice Department and U.S. Department of Agriculture announced that the two federal agencies will hold joint public workshops to explore competition issues affecting agriculture in the 21st century, including the appropriate role of the federal government in antitrust and regulatory enforcement. The first workshop will be held in 2010. Some workshops will be held in Washington, D.C., while others will be held regionally around the country.
The public and press are invited to attend these conferences. Written comments may be submitted ahead of time at agriculturalworkshops@usdoj.gov. Paper copies of comments should be submitted in addition to electronic copies, preferably by courier or overnight services. Agendas and schedules for the workshops will be posted at www.usdoj.gov/atr.
The federal government has a long, firmly held interest in agricultural markets, the competition in those markets, and concentration of the firms that compete in those markets. Just since the turn of the century, the General Accounting Office (GAO) has produced 15 reports on these issues. The latest report prepared by the GAO on the subject of concentration and competitive issues in agriculture was released a little over a month ago on June 30, 2009. The GAO summarized its findings to Senators Kohl and Grassley as follows:
In summary, we found the following:
• Concentration generally has increased at all levels of the food marketing chain in all agricultural sectors since the 1980s. At the farm level, less than 2 percent of farms accounted for 50 percent of total sales in 2007. At the food processors’ level, in general, a small number of companies accounted for a large and growing portion of sales in each of the five major agricultural sectors. For example, in the pork sector, the market share of the largest four hog slaughtering firms increased from 36 percent in 1982 to 63 percent in 2006. In addition, at the retail level, the share of grocery store sales held by the largest four firms more than doubled, from 16 percent in 1982 to 36 percent in 2005.
• While real annual per capita food expenditures have increased since 1982, households now spend a smaller share of disposable income on food. Total annual per capita food expenditures rose from $3,358 in 1982 to $3,888 in 2007, in constant 2008 dollars. Meanwhile, household spending on food decreased from 13 percent of disposable incomes in 1982 to 10 percent in 2007. Since 1982, overall food prices and food prices in each of the five major agricultural sectors have increased about as much as prices for consumer goods and services overall. However, from July 2008 through December 2008, food prices increased faster than the prices of other goods and services. Since then, food prices generally have not changed significantly.
• Since 1982, farmers have generally received higher monthly prices for their commodities, but these prices have increased less than food prices and inflation in the broader economy. Specifically, prices farmers received, including for beef, pork, dairy, and grains, increased by 34 percent from January 1982 to April 2009. For the same period, food prices rose by 128 percent, and prices in the general economy rose 102 percent. Commodity prices increased significantly in 2008, reaching a high of 68 percent above their 1982 levels in July 2008, but have declined since then.
• The empirical economic literature has not established that concentration in the processing segment of the beef, pork, or dairy sectors or the retail sector overall has adversely affected commodity or food prices. Most of the studies that we reviewed either found no evidence of market power or found efficiency effects that were larger than the market power effects of concentration. While a few studies found some evidence of market power, it is unclear whether this market power was caused by concentration or some other factor. All of the experts we spoke with said that concentration probably did not cause the 2008 increase in commodity and food prices, which were more likely due to factors such as higher energy costs and growing global demand for grains. Experts generally said that concentration is likely to increase in the future. Some said further increases in concentration may raise greater concerns in the future about the potential for market power and the manipulation of commodity or food prices. One expert said further increases in concentration would continue to generate efficiency gains and be beneficial. Enclosure II provides further information on the views of experts, and enclosure IV lists the studies we reviewed prices in these sectors.
The report (GAO-09-746R, June 30, 2009) is titled U.S. Agriculture: Retail Food Prices Grew Faster Than the Prices Farmers Received for Agricultural Commodities, but Economic Research Has Not Established That Concentration Has Affected These Trends. It can be found at http://www.gao.gov/new.items/d09746r.pdf.
After Second Try, House Passes Food Safety Enhancement Act of 2009 (HR 2749)
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.
Assessing Risks of Chemicals in Foods with Limited Scientific Information
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:
First Section:
“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.”
Second Section:
“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.”
Third Section:
“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.”
Food Safety Legislative Update
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.”
Food Safety Legislation Proposed by House - User Fees and Traceability Are Among Highlights
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.
General Provisions
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.
Defending Liability in Foodborne Illness Outbreaks
I’m asked frequently about the “anatomy of litigation.” I plan to write more in this space on the topic. For now, some may find useful the slides from a presentation I gave recently on “Defending Liability in Foodborne Illness Outbreaks.” I discussed what I see as three prototypes of consumer claims and possible strategies to respond to each.
Next Generation Sequencing for the Food Industry
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.
Discoveries using this technology are happening at astonishing speed. PFGE testing, now considered the "gold standard" and generic E.coli testing may soon seem old fashioned and crude.
PCA Recall - Insurance Lessons for Food Sellers
Bill Marler posted on his blog recently a complaint for declaratory relief filed by an insurer for Peanut Corporation of America (“PCA”). Mr. Marler comments, “Frankly, I read this suit several times and still do not see what the fight is about.” For those who represent commercial insureds in pursuing coverage from their insurers, the suit is no surprise. The suit is likely a function of the fairly limited insurance limits available to PCA, PCA’s tender of both bodily injury and recall expense related claims, possible exclusion for organic pathogens and/or allegations of intentional acts by PCA.
The complaint filed by PCA’s carrier, Hartford Casualty Insurance Company, alleges that PCA had at the time of the outbreak a $1 million primary liability insurance policy and $10 million umbrella insurance policy. Given the high number of probable personal injury claims (some of which will involve wrongful death) and the broad scope of products affected by the recall, claims will far exceed limits available to PCA under the Hartford policies. This outbreak demonstrates why any food manufacturer or seller should carefully consider whether its insurance limits are sufficient. A $10 million policy might have seemed to PCA like a great deal of coverage prior to the outbreak; today, the prevailing perception is that it is totally inadequate.
The complaint also alleges that the Hartford policies included “terms, conditions, exclusions, and limitations including but not limited to those pertaining to . . . coverage for claims arising out of the presence, suspected presence, or exposure to, among other things, bacteria.” The policies are not attached to the complaint. However, the allegation suggests that the Hartford policy might have included an organic pathogens exclusion. If the policy includes such an exclusion, PCA may be without coverage for any claims related to the Salmonella outbreak. The organic pathogens exclusion may exclude any claim for bacterial contamination of food products. As we’ve discussed previously on this blog, every food manufacturer should review its coverage to ensure that its policy does not include an organic pathogens exclusion.
Finally, the quick filing of a declaratory relief complaint by Hartford illustrates why a food seller needs to engage an experienced insurance coverage counsel immediately. Coverage counsel can assist in developing a strategy to pursue and preserve available insurance. Also, in situations such as PCA’s, all communications with insurers should be managed by coverage counsel. From the outset, communications with insurers are critical because they are likely to become relevant to the inevitable coverage disputes with the carriers.
Update on Criminal Risk Management: The Peanut Case
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.
Avoiding Criminal Prosecution Under The FFDCA
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.
Upcoming Hot Topics in Food Law Teleconfernce
UPDATE - This panel will address emerging issues related to the recalls and investigations related to the Peanut Corporation of America. The panel includes persons intimately involved with these issues. Anybody with an interest in the peanut recall should register and tune-in.
The American Bar Association is presenting its second Hot Topics in Food Law teleconference on February 10, 2009 at 10am Pacific Time (1pm EST). Anybody connected with the food industry and concerned with risks affecting the industry should consider registering. I have been involved with planning this event. No other use of 60 minutes will give you as much insight into the most current issues in food law. The cost begins at $35 for section of litigation members and ranges to $150 for non-ABA members.
The panel, moderated by Jessie Ziegler at Bass, Berry & Sims, PLC, Nashville, TN, includes the most diverse voices available:
Robert E. Brackett, Ph.D, Senior Vice President and Chief Science and Regulatory Affairs Officer, Grocery Manufacturers Association, Washington, DC
Ricardo Carvajal, Of Counsel, Hyman, Phelps, & McNamara, PC, Washington, DC
Stephen Gardner, Director of Litigation, Center for Science in the Public Interest, Dallas, TX
Sherry A. Marcouiller, Chief Counsel, Food Law, Kraft Foods Global, Inc., Northfield, IL
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.
