Cleaning Up the Docket - Northern District of California Dismisses Lanham Act Claim Alleging Mislabeling of Personal Care Products
As we have blogged about, litigation regarding product labeling has been a hot topic within the food and beverage industry. A recent decision from the Northern District of California could hold interesting implications for Lanham Act claims centering on the labeling of products as “organic.” While the case, One God Faith, Inc. v. Hain Celestial Group, Inc., involved personal care products rather than agricultural products, the rationale used by the court in reaching its decision to dismiss the claims of the plaintiff is illustrative for the general category of “organic”-labeled products.
In One God Faith, plaintiff, a manufacturer of personal care and cosmetic products, including soap labeled as United States Department of Agriculture (“USDA”) certified “organic” or “Made with Organic” oils in compliance with USDA National Organic Program (“NOP”) standards, sued multiple defendants under § 43(a) of the Lanham Act alleging defendants falsely, misleadingly, and confusingly labeled and advertised similar products as “organic” even though they did not meet NOP standards for the designation, resulting in a loss of sales for plaintiff.
As we blogged about in our discussion of the POM v. Ocean Spray decision, pursuing a false advertising claim under the Lanham Act can be a difficult task for plaintiffs. When Congress enacted the Organic Food Products Act (“OFPA”) in 1990, the legislation that authorized the USDA to implement the NOP, it expressly declined to create a private right of action to enforce the statute or any of its implementing regulations. The plaintiff in One God Faith argued that the OFPA by its statutory language applies only to “agricultural products,” and the USDA has made clear that its comprehensive regulatory scheme governing the use of the term “organic” does not apply to personal care products, the category of products at issue in the case.
However, the court in One God Faith was not persuaded by this argument. While the court did find that it was undisputed that the USDA has declined expressly to impose the NOP standards on personal care products, this was not sufficient to justify the exercise of subject-matter jurisdiction by the Northern District. The court noted that the issue of amending existing regulations to include “organic” claims with respect to personal care products has generated significant recent discussion and that the USDA has asserted its authority over personal care products in other significant ways, including allowing producers and handlers of such products (including the plaintiff) to seek USDA certification under the NOP. As stated by the court, the mere fact that the USDA has not to date expressly imposed the NOP standards does not excuse plaintiff from exhausting available remedies under the USDA’s administrative appeal procedure. Consequently, the court held that granting the plaintiff its requested injunctive relief would negate the legislative bar on private actions and effectively enforce the NOP standards against defendants. As such, plaintiff’s complaint was dismissed for lack of subject-matter jurisdiction.
Food Liability 2010: More of the Same and Landmark Change?
We’re in the “crystal-ball” season—time to look forward and assess what’s coming in 2010 and beyond. The most likely scenario: more of the same and landmark change.
More of the Same
The last few years have seen growth in both the number of food-borne illnesses detected and the variety of foods affected. This is because more resources are being put into detection (though the CDC recently reported an overall decline in epidemiological capacity by the states) and technology is continuing to advance (think Next Generation Sequencing). There’s little reason to believe these trends will abate in 2010. Expect more outbreaks. Expect to hear about recalls of products not previously implicated in food-borne illness.
Landmark Change
Nobody doubts that we’re in the midst of the most significant legislative and regulatory changes in food safety in generations. Most believe that Congress will pass some form of food safety legislation (e.g., S 510 or HR 2749) in the new year. It will likely include the most comprehensive food safety reform in decades. Among other things, this legislation is likely to give FDA mandatory recall power and great authority for risk-based inspections, and require FDA to create a traceability program.
FDA and USDA are already pushing the boundaries of their current authority to become more aggressive on food safety and labeling enforcement. Examples include USDA moving toward classification of Salmonella as an adulterant, more aggressive rules on ground beef safety, and increased retail enforcement. FDA is already studying how traceability could work, being more aggressive in identifying products and retailers in the event of recalls, reexamining the effectiveness of current nutritional labeling requirements, and investigating whether front of pack nutrition labeling (FOP) practices need to be regulated.
And on the heels of legislative reform and increased regulatory enforcement come the lawyers. Action by the government creates new avenues for the plaintiffs’ bar. Food litigation will likely increase in prevalence both in product liability claims (i.e., food contamination) and in putative consumer fraud class claims into 2010 and beyond.
Levine v. Vilsack: The Ninth Circuit Rules the Humane Methods of Slaughter Act Provides No Remedy
When Congress passes a statute and the Secretary of Agriculture issues a notice in the Federal Register interpreting the statute, it might seem self-evident that someone who believes that interpretation is wrong can appeal that interpretation in court and get a judgment on the merits. On November 18, the Ninth Circuit Court of Appeals said "not so fast."
The decision is a valuable reminder that just because you might allege a wrong, you will not necesarily be entitled to a remedy. The Ninth Circuit does a good job of making sure that the threshold question of standing must be answered satisfactorily before any other allegations in a complaint are reached. When, as here, it finds it not satisfied, the case is over.
The case was Levine v. Vilsack, and it involved what seemed at first a straightforward issue of statutory interpretation. The Humane Methods of Slaughter Act of 1958 ("HMSA of 1958") is the bedrock federal statute dealing with the means of slaughter of livestock. The key provision of the act, 7 U.S.C. Section 1902, provides as follows:
No method of slaughtering or handling in connection with slaughtering shall be deemed to comply with the public policy of the United States unless it is humane. Either of the following two methods of slaughtering and handling are hereby found to be humane:
(a) in the case of cattle, calves, horses, mules, sheep, swine, and other livestock, all animals are rendered insensible to pain by a single blow or gunshot or an electrical, chemical or other means that is rapid and effective, before being shackled, hoisted, thrown, cast, or cut; or
(b) by slaughtering in accordance with the ritual requirements of the Jewish faith or any other religious faith . . . .
The simple question presented in Levine was whether the phrase bolded above, "and other livestock", included fowl. Almost from the time the statute was first enacted, and most recently in 2005, the Secretary of Agriculture ruled that it did not. Levine along with a host of other plaintiffs, including The Humane Society of the United States, sued to overturn this interpretation.
The district court dismissed the case, treating it as a relatively straightforward case of statutory interpretation and agency discretion. The Ninth Circuit (perhaps wary of Justice Scalia's well-known dislike of legislative history) took a different tack.
The issue it confronted is in general known as standing. It derives from Article III of the Constitution, which grants the judiciary the power to decide "cases" and "controversies." The Ninth Circuit relied on a U.S. Supreme Court case called Lujan v. Defenders of Wildlife and its own decision in Salmon Spawning & Recovery Alliance v. Gutierrez to apply a three-part test to the standing issue in Levine.
(1) that plaintiffs had suffered an injury in fact that was concrete and particularized, and actual or imminent; (2) that the injury is fairly traceable to the challenged conduct; and (3) that the injury was likely to be redressed by a favorable court decision
It was on the third of these tests, whether the alleged injury was likely to be redressed by a favorable court decision, that plaintiffs' claims fell.
The problem lies in the statutory history of the HMSA of 1958 and a companion statute, the Federal Meat Inspection Act (the "FMIA"). Initially, the HMSA of 1958 had a enforcement provision in that the federal government was prohibited from buying meat that was not slaughtered in accordance with its terms. However, in 1978, Congress passed a new Humane Methods of Slaughter Act ("HMSA of 1978"), which repealed that provision of HMSA of 1958. As part of HMSA of 1978, Congress also amended the FMIA (initially passed in 1907 in reaction to Upton Sinclar's "The Jungle") to provide inspection requirements for slaughtering. Essentially, those inspection requirements became the replacement enforcement mechanism for the HMSA of 1958. But inspection requirements under the FMIA applied only to "cattle, sheep, swine, goats, horses, mules, and other equines." Without the "other livestock" language of HMSA of 1958, there was no argument that the FMIA inspection requirement could conceivably apply to poultry. However, in 2005, the FMIA was amended once again, deleting the specific list of animals and replacing it with the phrase "amenable species." As the court noted,
Amenable species was defined to include “those species subject to the provisions of this chapter on the day before November 10, 2005" as well as "any additional species of livestock that the Secretary considers appropriate."
Plaintiffs ultimate difficulty, the one they could not overcome, was that they sued for an interpretation under HMSA of 1958, and not to require or overturn agency action interpreting the phrase "amenable species" under the FMIA. As a result, regardless of the harms they claimed and regardless of the proper interpretation of "other livestock" under HMSA of 1958, there was no remedy the court could order for them based on the actual claims in their complaint.
The plaintiffs tried a lot of arguments to avoid this result. In a footnote (it's footnote 8 that continues over pages 15456-67 of the case), the court deals with the plaintiffs' argument that "if she prevailed, 'the number of chickens and other birds slaughtered inhumanely will be reduced, thus decreasing her risk of contracting food-borne illness . . . .'” The court points to other statutes that allow federal inspectors to reduce food-borne illness in poultry slaughterhouses. But it returns to the main point, which is that it has no power to order the Secretary to make a ruling under one statute when the complaint asks for relief under a different statute.
In federal court, standing is the gatekeeper of issues. Without standing under Article III, without being a party that has a real case or controversy in accordance with precedent, no case can proceed. In Levine, the plaintiffs tried unsuccessfully to straddle the gap between two statutes, as to one of which it claimed an incorrect agency interpretation, but under the other of which it would have had to look for relief. It was right of the Ninth Circuit not to give it a helping hand out of that gap.
Comment On Recent New York Times E. Coli and Beef Article: How Retailers Can Protect Themselves
Co-Authored By Guest Blogger Scott Hansen
According to its website, last Sunday’s New York Times article on E. coli and beef is among the most widely read pieces published by the newspaper this week. The article tells the story of a 22-year-old Minnesota dance instructor who was left paralyzed after being infected with a strain of E. coli in an “Angus Beef Pattie” she ate in fall of 2007. The article traces the story of her burger, points out the many limitations in the current system, and calls eating beef a “gamble.”
While the article is clearly targeted at meat producers and processors, food retailers selling beef products, such as grocery stores and restaurants, are also at risk. This piece is a reminder of the need for retailers to take steps to ensure proper systems and procedures for tracing food to its source (according to yesterday's statement by Secretary Vilsack, retail traceability of ground beef is soon to be a USDA requirement). The Times lauds Costco, which it says is one of the few big producers that tests trimmings for E. coli before grinding.
Retailers should also be mindful of the utility of supplier agreements sufficiently tailored to limit liability or to procure insurance coverage. The greater protections afforded by well-drafted supplier agreements and carefully placed insurance are the best way to mitigate exposure.
Some may choose strong indemnification provisions and additional insured provisions. Another route, not yet the prevailing trend in the industry but perhaps in the near future, involves wrap-up insurance covering the entire supply chain, accompanied by covenants of cooperation between members of the supply chain.
Wrap-up insurance/covenants of cooperation approach has the advantage of potentially avoiding expensive and reputation-damaging litigation between members of the supply chain. Wrap-up insurance is also more likely to result in sufficient coverage to protect the retailer or restaurant chain.
No matter the path chosen, thoughtful placement of insurance coverage and confidence in supply chain contracts can help a food company weather the storm of a food-borne illness outbreak.
2010 Food Safety Education Conference Announced
The U.S. Department of Agriculture’s Food Safety and Inspection Service has announced the 2010 Food Safety Education Conference. The conference will be held in Atlanta from March 23 through 26, 2010. Although the agenda is still a work in progress, you can expect sessions on foodborne illnesses, outreach to the medical community, food safety education initiatives, social marketing, and emerging industry trends and technologies.
The conference is accepting abstracts on food safety-related topics through August 16, 2009. More information on the conference and the abstract submission process is available through the links on the widget below.
Monty Python and the Food Recalls
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One of Monty Python's most imitated sketches was "The Four Yorkshiremen." Even if you've never seen it, it will be instantly recognizable to you. It's the one where four men sit around talking about how tough they had it as kids, compared to how kids have it today. One starts by complaining about how small his house was, and another exclaims, "You had a house?" Eventually, the last one claims to have been roused from bed half an hour before he went to bed, worked 27 hours a day and paid for the privilege and then was murdered every night when he got home.
I was thinking about this sketch as I was contemplating how different from the last food recall about which I blogged, involving tuna in New England, was from the painfully slow recalls involving the salmonella finding that has led Plainview Milk Products Cooperative to recall the last two years of its products. As you might recall, the last recall involved fresh tuna steaks sold to three New England supermarket chains over four days before the problems were identified. By this time, most of the food subject to the recall had probably been consumed and the recall required only publicity in a limited area for those who might have frozen the steaks rather than eaten them fresh. Without denying the difficulties that North Coast Sea-Foods might have encountered in that recall, or the suffering of anyone who got scombroid poisoning, as a recall goes, they, in the words of Monty Python, had it easy.
The Plainview Milk Products Cooperative and everyone who bought from them, on the other hand, have it anything but easy, and the fact that almost every day new products are added to the recalled list demonstrates this.
It all started with a package of powdered milk shake mix. A USDA test showed there was salmonella in the powder. Plainview was the supplier of a main ingredient in the powder. Although tests of its products have uncovered no salmonella, there was salmonella found on some equipment in Plainview's plant. This triggered the recall. No persons have been found who have been made ill by any of Plainview's products.
Plainview does not sell products to consumers. However, as the recall has unfolded, the number and scope of products that are sold to consumers that incorporate Plainview's products has been shown to be huge. Included are:
- Instant non-fat dry milk
- Instant oatmeal
- Instant gravy
- Popcorn
- Instant cocoa
- Sports drinks
- Instant milk shakes
Products with familiar names like Malt-O-Meal and Land O'Lakes are covered, as are numerous private label products from companies like Meijer, Kroger, Stop and Shop and Piggly Wiggly.
Because the products are the kind that are shelf-stable, and the recall covers two full years, even after all the recalled foods have been identified, getting consumers to search pantries for them will be difficult. Indeed, a lot of these products were incorporated into emergency kits, the kinds of things you don't open until needed.
Another place where the powder can be found is in Meals-Ready-to-Eat, the famed MREs of the miltary. In other words, U.S. soldiers in Iraq and Afghanistan are having to toss out their vanilla, chocolate, strawberry and stawberry-banana milkshakes, according to Stars and Stripes. MREs are also used by FEMA and by campers.
As Ken noted recently, the two highest priorities on the Obama Administration's list for the FDA are Salmonella and a national traceback and response system. What the Plainview situation indicates is that, to be effective, the tracing system may need to go in both directions. It didn't take the FDA long to find that Plainview's products were incorporated into the milk shake mix, but it is taking a very long time to find all the products into which the same set of ingredients--including nonfat dry milk, fruit stabilizers, whey protein, and gum products--have also been incorporated.
The implications of such a system, however, are huge. Here are just a few:
- There is an identity between food safety information and confidential commercial information in terms of the relations between suppliers, manufacturers, distributors and retailers. How will this be kept confidential? Who will be trusted to keep it confidential?
- Who pays for the system, and who controls its expenses?
- What is the end point on the origination side? Does every farmer have to keep track of all the inputs into its produce?
- Manufacturers may use many sources of fungible goods; will they be required to trace these? Who pays the capital cost of changing from one big hopper to four small ones?
Finally, I would be remiss without mentioning the point made by Kimberly Lord Stewart, editorial director of Functional Ingredients Newsletter. As Ms. Stewart points out, there is no proof that the salmonella found in the milkshake powder came from the Plainview ingredients, and there are nine other ingredients in the powder made by others.
As Ms. Stewart says,
The Plainview situation has hints of the salsa recall, which initially implicated tomato growers, then salsa makers, only to find out the source of contamination was jalapeños. Traceability is a complicated and looming issue for processed foods. Looking for a needle in a haystack is easy compared to tracking down 9 lesser ingredients in DairyShake blends or multiple ingredients in salsa.
Or, as the late Graham Chapman would say, "Luxury."
Why Are Food-borne Organisms Associated with Beef?
USDA’s Be Food Safe Twitter Feed circulated its Fact Sheet titled “Beef . . . from Farm to Table.” First published a few years ago, this might be of interest to businesses involved in the sale, marketing, labeling, and/or packaging of beef. The article is a helpful primer on the history of beef, current industry practices, USDA’s role in inspection, consumer trends, cooking times, storage times, and food-borne illnesses associated with beef.
Participate in USDA Governance in Your County
The Stoel Rives Agribusiness Group has sent out an alert reminding farmers and ranchers of the USDA's program that allows you to participate at the county level in discusssions relating to agricultural decisions in your community. The link to the website with materials needed to submit nominations (which opened on June 15) is here.
Ken, Bryan and I are all members of the Agricubusiness Group, along with lawyers experienced in all manner of topics related to agriculture. You can subscribe to its alerts here.
Tracking the Food Safety Working Group - More or Less Legal Exposure For Food Sellers?
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.
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USDA (FSIS) Becoming More Aggressive
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.
Secretary of Agriculture Emphasizes Safety of U.S. Pork
Secretary of Agriculture Tom Vilsack issued a statement today emphasizing that U.S. pork products are safe and that there is no evidence that U.S. swine have been infected with the swine flu virus.
Calling trade restrictions on pork or pork products unnecessary, Vilsack said any such restrictions would be inconsistent with World Organization for Animal Health guidelines. “[I]t is not necessary to introduce specific measures for international trade in swine or their products, nor are consumers of pork products at risk of infection,” Vilsack said. The complete statement is available here.
A report in The New York Times notes that pork producers are questioning whether it is appropriate to call the virus “swine flu” given that there is no evidence of swine infection. The report states that officials in Thailand, one of the world’s largest meat exporters, have started calling the virus “Mexican flu.” An Israeli deputy health minister reportedly said Israel would follow suit to keep Jews from having to say the word “swine.”
Michigan Company Announces Frozen Pasta Recall
A Michigan maker of frozen pasta products has issued a recall for products that were distributed to seven states. Canton, Mich.-based Mucci Food Products is recalling an undetermined amount of frozen meat and poultry pasta products because the food was prepared without federal inspection.
The products were produced from May 1, 2008 to April 24, 2009 and distributed to California, Florida, Georgia, Illinois, Michigan, Missouri, and Ohio. The recalled products bear the establishment number “19177” or “P-19177” inside the USDA mark of inspection and the dates “1218” to “1149” located at the bottom of the product box.
The U.S. Department of Agriculture’s Food Safety and Inspection Service has complete details of the products subject to the recall, including images of the product labels. The USDA has not received any reports of illness as a result of consumption of the products.
What to Do When the Investigators Knock . . .
This week brought news of yet another nationwide Salmonella outbreak from a source not yet identified by government regulators. The last time we had a nationwide Salmonella outbreak for an extended period of time without identification of a definitive source the federal government initially singled out tomatoes imported from Mexico (a huge array of products). In that case, the government was wrong and wreaked financial havoc on many farmers and businesses.
So far, in the current outbreak, nothing more specific than “poultry, eggs and cheese” have been identified as possible sources. Last year’s outbreak involved Salmonella Saintpaul whereas the current outbreak is Salmonella Typhimurium, which is more commonly associated with poultry, eggs and cheese, but could come from almost anything.
That a source has yet to be identified to the media doesn’t mean that state and federal officials aren’t zeroing in on possible sources. Restaurant owners, retailers and food manufacturers should be ready for the regulators when they come knocking.
In the past, I’ve had clients who were worked over aggressively by regulators (especially federal officials) who were investigating a large, nationwide outbreak with an uncertain cause. These officials face enormous pressure from those in Washington and from the public. Federal officials can make demands that threaten an entire business. They can demand credit card receipts, contact information for customers, personal employee information, shutdown of the business and more. Noncompliance might mean the officials will go to the press and advertise that the business is a target of the investigation. Unlike local health officials, who are usually vested in the well-being of local food producers under their jurisdiction, federal officials may care only about the investigation and nothing else.
Any food business should implement its crisis response team the minute it suspects it could be targeted in an investigation like the one that is currently ongoing. Specialists in food safety and foodborne illness investigations, genetic microbiologists, public relations experts, accountants, quality assurance personnel, purchasing personnel and lawyers should be lined up and ready to go. Events may unfold quickly for your business (over the course of a day or even a morning). Everything needs to be done at that moment to assist a business in navigating what may appear to be an impossible crisis.
Court to Rule on Consumers' Expectations For Organic Cosmetics
Dr. Bronner’s Magic Soaps (“Dr. Bronner’s”) received a favorable ruling recently in its suit against competitors that it believes are misleading consumers by labeling cosmetic products as “Organic”. Part of Dr. Bronner’s claim appears to be that “Organic” standards established by the U.S. Department of Agriculture (“USDA”) set the bar for consumer expectations of "Organic" cosmetic products. The USDA’s National Organic Program (“NOP”) standards, according to the USDA, do not apply to “cosmetics, body care, or personal care products”. Dr. Bronner’s argues in its complaint that “[p]ersonal care products labeled as in compliance with ‘Organic’ or ‘Made with Organic [up to three specified ingredients]’ under the NOP criteria reflect basic organic consumer expectations . . . .” (Brackets in original.)
Last week, a California Superior Court in San Francisco overruled the demurrer of Ecocert France (SAS) and Ecocert, Inc. A demurrer is essentially a request made to a court, asking it to dismiss a lawsuit on the grounds that no legal claim is asserted.
According to Dr. Bronner’s, the “Court turned aside the defendants’ arguments that Dr. Bronner’s, in its complaint filed with the Court, had not sufficiently spelled out how actual consumers, the company and competition in the organic personal care industry have been hurt by the defendants’ deceptive practices.” The court’s ruling does not necessarily mean that Dr. Bronner’s is likely to succeed, only that it has articulated colorable claims. The court did not rule on the merits of these claims.
This case should be watched closely by those in cosmetics and food industries. Dr. Bronner’s claims turn, at least in part, on its view of “consumer expectations.” Do consumers have expectations as to what “Organic” means? Does it mean something different for cosmetic products? These are just a few of the significant questions that may be addressed in the litigation.
