Food Liability Law Blog

Monty Python and the Food Recalls

rlgoldfarb@stoel.com (Richard Goldfarb) — Thu, 09 Jul 2009 20:17:25 -0800

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."

Future of Food Litigation and Obama's Food Safety Working Group

KMODZA@stoel.com (Kenneth Odza) — Thu, 09 Jul 2009 08:15:02 -0800

President Obama’s Food Safety Working Group announced its Key Findings on July 7. Three groups of initiatives were announced: 1) Salmonella, 2) National Traceback and Response System, and 3) Improved Organization of Federal Food Safety Responsibilities. All of these represent major shifts in food policy. Coming changes will impact nearly every part of the nation’s food supply.

Despite Obama’s stepped-up food safety agenda, the question of how these changes will affect food-borne illness litigation remains. Bill Marler in a recent blog post reacting to the July 7 Key Findings says, “I really may live to see the government ‘put me out of business.’” No doubt that many of Obama’s initiatives will improve food safety. But will it eliminate food-borne illness and accompanying litigation? Not likely.

Many food companies today follow food safety precautions that exceed anything proposed by the Obama administration or Congress. Yet those same companies continue to experience food-borne illness outbreaks and are targets of the plaintiffs’ bar. E. coli, Salmonella, and other pathogens are persistent in the environment and successful at Darwinian evolution. In some sense, the pathogens that are the source of food-borne illness always seem at least one step ahead of the law.

Crystal ball: Obama’s initiatives will lead to a safer food supply but will also help the government detect more outbreaks that previously went undetected. Undetected outbreaks rarely lead to litigation; detected outbreaks almost always lead to litigation. Growth in food-borne illness litigation, therefore, should continue to accelerate.

ACI Announces 3rd National Forum on Food-Borne Illness Litigation

KMODZA@stoel.com (Kenneth Odza) — Wed, 08 Jul 2009 08:10:52 -0800

The American Conference Institute announced this week its latest food litigation conference. Here’s the conference brochure. The conference will take place in Chicago on October 26-27 at the Sutton Place Hotel.

Plaintiffs’ lawyer Bill Marler and defense lawyer Al Maxwell are co-chairing the conference. This year promises a greater variety of presentations by in-house food personnel, government regulators, and others. As in past years, I expect a stimulating exchange of information and vigorous debate about competing views of food liability issues. Feel free to email me or comment if you are attending or want more information.

HFCS Labeling Case: Opening The Floodgates For New Consumer Claims?

KMODZA@stoel.com (Kenneth Odza) — Tue, 07 Jul 2009 08:10:47 -0800

The Third Circuit may be close to opening the floodgates of claims against food and beverage manufacturers who use high-fructose corn syrup (“HFCS”) in products labeled “all natural.” Shannon Duffy at the Legal Intelligencer reported recently on a “lively hour-long” oral argument in the Third Circuit about reversing a District Court’s dismissal of state consumer claims against Snapple for use of HFSC.

The District Court dismissed the consumer claims in 2007 on the basis of field preemption. The dismissal predated the Third Circuit’s decision in Fellner v. Tri-Union Seafood, LLC. See our previous blog on the Fellner case. Despite the FDA’s position in Fellner that a state law failure-to-warn claim is preempted by federal law, the Third Circuit ruled to the contrary.

In Fellner, a claim by a person who suffered from mercury poisoning after eating canned tuna literally for breakfast, lunch and dinner for five years may have been an outlier. But reversal of the District Court’s decision in the Snapple case will open the floodgates to consumer class action claims against a whole slew of food sellers and manufacturers.

Another Recall From a Company That Does the Right Thing

rlgoldfarb@stoel.com (Richard Goldfarb) — Fri, 03 Jul 2009 15:06:06 -0800

The FDA announced a recall of fresh tuna steaks distributed to Shaw's, Star Market and Big Y grocery stores by North Coast Sea-Foods Corp. of Boston and New Bedford. The alleged problem was increased levels of histamine that might cause scombroid poisoning. The tuna was removed from sale on June 24, but consumers who might have frozen the steaks were told to return them to the stores for a full refund. We again assume that North Coast (and its insurers) will be funding the refunds.

What made me write about this recall was a rather silly poll in DailyKos. The question was whether the increase in recalls was due to the food supply becoming less safe or that the FDA was getting better. Like many online polls, this so oversimplified the situation that I thought I should write about it, and the North Coast tuna recall seemed as good a vehicle as any.

The three reported cases of scombroid poisoning associated with this tuna would presumably have been reported to local public health officials in New England, not the FDA. Or they might have been reported to the markets, which in turn would have easily been able to identify the source of the tuna and reported to North Coast (scombroid poisoning occurs almost immediately, so there isn't the usual problem of figuring out what food might have caused a delayed reaction). Both the markets and North Coast will have significant food safety programs. Some of this will be the result of government action, and some of it the result of simply caring about their customers. There is no indication that this outbreak was the result of anyone's inattention or failure.

It took me awhile to identify that I had the right North Coast Sea-Foods Corp., because their name is spelled differently in the release. In doing my research, I discovered some nice things about them, such as that they had argued strenuously against a Department of Defense initiative to buy cheaper, and potentially more hazardous fish for our troops, on the grounds of food safety. Another thing I learned was that they had installed solar power at their Boston facility, and considered wind power at their New Bedford facility. We at Stoel are not just committed to renewable energy, we literally wrote the book on it. So, similar to the Fat Duck and Nestle, even those committed to doing the right thing can sometimes be the subject of a food recall.

Why Are Food-borne Organisms Associated with Beef?

KMODZA@stoel.com (Kenneth Odza) — Thu, 02 Jul 2009 08:01:20 -0800

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.

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

KMODZA@stoel.com (Kenneth Odza) — Wed, 01 Jul 2009 08:15:54 -0800

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.

Avoid Unnecessary Labeling Claims - Ensure That Cooking Instructions Are Adequate

KMODZA@stoel.com (Kenneth Odza) — Tue, 30 Jun 2009 11:26:03 -0800

Bill Marler funded independent research at the University of Idaho to study the adequacy of cooking instructions found on the packaging on various retail brands of frozen ground beef patties. The research was published this month in Food Protection Trends.

The study found that three of the packages included cooking instructions that “would be inadequate to produce a safely cooked patty.” Most of the issues raised in the article center on the variability in cooking techniques, e.g., pan frying, using a propane grill, or preheating, and variability in cooking temperatures. Suggested solutions for improved cooking instructions are included in the study.

For food sellers trying to minimize or avoid claims, adequate cooking instructions are a good thing. Even if food-borne illness claims cannot be avoided, the scope of the claims and damages can be limited by providing adequate, "bullet-proof", cooking instructions.

Kudos to Bill Marler for “putting skin in the game” and funding this study.

Energy Drink Maker Sued Over Alleged Health Risks

bjanderson@stoel.com (Bryan Anderson) — Mon, 29 Jun 2009 11:41:23 -0800

The maker of Redline energy drinks has been sued in federal court in California. The plaintiff, Zack Aaronson, is seeking class action status for his lawsuit against Vital Pharmaceuticals, Inc. (operating under the trademark VPX).

The plaintiff claims that VPX failed to adequately warn consumers of potential side effects and health risks associated with consuming VPX’s Redline energy products. Among other things, the plaintiff alleges that consumers have reported adverse side effects including chills, excessive sweating, vomiting, convulsions, chest pains, and rapid heartbeat.

According to VPX’s website, Redline is available as energy drinks and gel caps. The company touts the products as “the first physique-transforming matrix to coax your body to burn fat through the ‘shivering response.’”

The case is Aaronson v. Vital Pharmacetucals, Inc., S.D. Cal. Case No. 09-1333. A copy of the complaint is available here.

When A Food Borne Illness Insurance $0 Sublimit Does Not Mean $0 Of Coverage

KMODZA@stoel.com (Kenneth Odza) — Mon, 29 Jun 2009 10:01:12 -0800

Restaurant owners recently scored a victory against an insurer, who was looking to limit its exposure for lost sales from the fallout from a food-borne illness outbreak. Middlesex, New Jersey Superior Court Judge Lewis Paley ruled in favor of restaurant franchise owners suing for coverage under a Trade Name Restoration, Loss of Business Income and Incident Response Insurance for Food Borne Illness (“TNR”) policy to compensate for lost sales from a well-publicized E. coli outbreak associated with their national franchise name.

While a victory, the policy language was problematic for the restaurant owners. The case is a good case study why food sellers need to be vigilant in their review of insurance as it relates to food-borne illness.

The outbreak was associated with lettuce supplied to certain franchises. The TNR insurance policy, issued by Lloyd’s of London and Professional Liability Insurance Services (“PLIS” or “Underwriters”), included a “Sublimit” for “losses . . . from the operations of any product supplier. . . .” The declarations page for the policy listed the sublimit as “$0.”

PLIS denied coverage on the basis of the $0 supplier’s sublimit.

Despite the $0 sublimit, the court still found in favor of the restaurant owners, concluding that “an average, reasonable insured would expect coverage for the outbreak.” The court latched onto the term "product supplier," finding ambiguity. The court reasoned that the lettuce supplier may not have been a “product supplier” because “a reasonable insured would conclude that an ‘ingredient’ is a component of a product, not the product itself.”

The court also appeared disturbed that the franchise owners previously maintained through PLIS Food Borne Illness coverage (“FBI”). Evidently, the FBI policy for which PLIS received similar premiums covered lost profits from food-borne illness caused by suppliers. The court found that the “TNR insurance may differ from FBI insurance, but there is no evidence that the Franchisees were told that earlier coverage was being reduced.”

The New Jersey court expressed sympathy for the restaurant owners' plea in the face of what the court perceived as a harsh policy limitation. My experience is that not every court would "stretch" to protect commercial insureds. More important, a restaurant insured should always prefer clear policy language providing the coverage it wants over litigation and a gamble that a court will find ambiguity in a policy that would otherwise seem to preclude the coverage expected.

Trademarking Green/Eco-Friendly Food - What You Need To Know

KMODZA@stoel.com (Kenneth Odza) — Fri, 26 Jun 2009 10:27:22 -0800

By Guest Blogger Jere Webb

It is evident that virtually every business now is trying to position itself as being “green”. For a discussion of restrictions on “green advertising”, particularly the FTC’s green ad guidelines (the “Green Guides”), and similar efforts at the state level, see “Green Claims Advertising – What You Can Say and What You Can’t”. The FTC is reviewing the Green Guides and likely will amend them in the near future. For comments submitted in the review process and additional information, see Green Guides.

The newer arena is green trademarks. The United States Patent and Trademark Office is now routinely rejecting, based on descriptiveness, multiword trademarks, that start with or contain the word GREEN. An example is the mark GREEN JOURNEY for hybrid cars. But in the same application, the applicant sought to register for clothing, and the Trademark Office accepted the mark, but with a disclaimer of the word GREEN. It found that the two word mark was merely “suggestive” of clothing, not “descriptive”. See "Green" Trademarks Face Hostile Climate in USPTO.

For an example of a green mark that passed muster, the Trademark Trial and Appeal Board (TTAB) recently reversed an examining attorney’s descriptiveness refusal for the mark GREEN INDIGO for clothing, finding it to be an “incongruous” term for clothing and therefore merely suggestive and not descriptive. The case is In re Jones Investment, Inc. (TTAB Jan. 21, 2009.)

The lesson is: If you want to include the word “GREEN” in a trademark, some careful review and advice from a trademark lawyer is in order.

Want to read more? See “Eco-Friendly Claims Go Unchecked” (USA Today June 22, 2009). The FTC’s brochure “Sorting Out Green Advertising Claims” can be found here.

Participate in USDA Governance in Your County

rlgoldfarb@stoel.com (Richard Goldfarb) — Wed, 24 Jun 2009 12:27:52 -0800

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.

Sustainability and Consumer Confidence in Food Safety

KMODZA@stoel.com (Kenneth Odza) — Wed, 24 Jun 2009 08:06:21 -0800

For food sellers interested in promoting a “sustainable” brand and inspiring food safety confidence in their consumers, meet Food Alliance. Food Alliance “is a nonprofit organization that certifies farms, ranches and food handlers for sustainable agricultural and facility management practices.” It bills itself as “the most comprehensive certification program for sustainably produced food in North America.”

I’ve recently joined the Food Alliance Board of Directors (in fact, I’m headed to Portland today for a board meeting). My hope is to assist Food Alliance in becoming more widely accepted and mainstream. Credible third-party certification, such as Food Alliance provides, offers a transparent pathway to sustainability of our food supply and consumer confidence in food safety.

Food Alliance takes a holistic approach that is broader and more dynamic than organic certification, which does nothing to address food contamination from pathogens such as Salmonella, E. coli, and Listeria (in fact, many experts believe that organically grown food may be more likely to be contaminated by these pathogens). By way of example, Food Alliance certification standards, among other things, address “soil and water quality,” “ensure the health and humane treatment of animals,” “conserve energy and water,” and “ensure quality control and food handling safety.”

For more on why a holistic, independent third-party certification correlates with food safety (and accompanying consumer confidence), I’d suggest reading this op-ed piece co-authored by Food Alliance Executive Director Scott Exo, which was written earlier this year in the wake of the PCA peanut recall.

Melamine in Pet Food and the Limits of the Law

rlgoldfarb@stoel.com (Richard Goldfarb) — Tue, 23 Jun 2009 18:47:25 -0800

Ken's blog post about taking the time to figure out what insurance limits are right for you resonated with me as I was reading about the plea agreement in the melamine pet food debacle. This was the likely last act in a tawdry story of greed and fraud that led to the deaths of thousands of cats and dogs and placed nearly every pet owner in fear. Stephen S. Miller and Sally Qing Miller, owners of ChemNutra, Inc., pled guilty to two misdemeanors in federal district court on June 16, and the prosecutors have recommended two years of probation and fines of $5000 for each of the Millers and a $25,000 fine for the company. The Chinese companies indicted at the same time remain outside the reach of the U.S. justice system.

Pet food companies had previously settled with pet owners for $24 million. That settlement was presumably funded by insurance, and according to one news report, ChemNutra contributed to the settlement in some way (more contemporary news accounts differ). Menu Foods, the pet food supplier in the eye of the storm, sued ChemNutra and acording to a news report at the time:

Menu Foods, which is based in Canada, acknowledged that it has been using wheat gluten from two suppliers in the United States and Europe for many years, but had not experienced any problems until it also started buying the ingredient from ChemNutra.

"Last fall, (Menu Foods) added a third supplier, ChemNutra, and the issues we have experienced date to that time," the spokesman said.

I have been unable to find more about Menu Foods' lawsuit, but it is unlikely Menu Foods was made whole for all of its damages.

What has been alleged is a scheme by the indicted but unpunished Chinese companies, Xuzhou Anying Biologic Technology Development Co. and Suzhou Textiles, Silk, Light Industrial Products Arts and Crafts I/E Co., to use melamine to fraudulently increase the apparent protein level of wheat gluten. This in turn led to pet deaths.

Bryan has previously blogged about EMA,. or economically motivated adulteration. And Ken listed among his five New Year's Resolutions:

Review and Revise Supply Chain Agreements,
Reassess Suppliers; and
Increase Scrutiny Against Fraudulent Imports

This is of course excellent advice. I would simply add another one:

Recognize the Legal System Can Only Do So Much

By all accounts, the Chinese suppliers were fooling everybody: Chinese authorities, U.S. authorities, the importers and everyone who bought from them. ChemNutra may have had a great contract with them, placing on them the duty to comply with all laws and the duty to indemnify ChemNutra if anything went wrong. Menu Foods, in suing ChemNutra, which was a new supplier for it, indicated it had the same provisions in its contract. The other pet food manufacturers, distributors and retailers in the chain down to the ultimate pet owners--as well as owners of animals raised for food who had to destroy poultry and livestock that may have ingested melamine, to keep it out of the food chain--all may have had great contracts, too.

They were all, however, left holding the bag for the wrongs of people who were beyond the reach of the law. The Millers' guilty plea indicated that they continued to deny any intentional wrongdoing and the government apparently didn't believe it could prove otherwise. The lesson, then, is, as Ken suggested at the end of last year, know your supplier, know their supplier, visit plants, check out food safety programs, and avoid doing business with people you can't check out.

Food Safety Legislative Update

KMODZA@stoel.com (Kenneth Odza) — Tue, 23 Jun 2009 13:19:13 -0800

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.”

Liability Limits: How Much Should Your Food Company Maintain?

KMODZA@stoel.com (Kenneth Odza) — Tue, 23 Jun 2009 08:18:35 -0800

Food business clients frequently want to ensure that they have sufficient liability limits in the event of an outbreak (they also want to make sure they have adequate coverage, but this is a separate discussion). Determining the amount of a business’s limits depends on the business’s possible exposures. No one-size-fits-all formula is available. Every business should have a yearly conversation with its counsel and broker to determine what makes sense.

Disclaimers aside, a few pieces of recent news should help inform the discussion of liability limits:

First, we've learned more about the food-borne illness claims filed in the peanut outbreak earlier this year. Here’s a complete list of the claims (personal injury, commercial, etc.) asserted in the PCA bankruptcy and a newspaper article about them. Most of the claims appear to be filed by Marler Clark, though other food-borne illness claims also appear. So far, I count about 100 claims filed in the PCA bankruptcy (out of a CDC-reported 714 illnesses). Of those claims, at least eight resulted in deaths. The death claims are valued by the plaintiffs' at $10 million each. The nondeath claims are valued at up to $1 million each. Total personal injury claims are approximately $150 million. Plaintiffs have probably overstated their claims, but given the national outrage against PCA, a jury might lend credibility to the bloated values and award larger sums.

The other recent news is that CDC has released some interesting statistics about food-borne illnesses. For 2006, leafy vegetables and fruits/nuts accounted for the largest number of reported cases of food-borne illness (33%). Produce and nut products that might not have been associated in the past with food-borne illness (and, therefore, liability exposure) are now frequently associated with outbreaks. As exemplified by the PCA situation, claims from a national or even a regional outbreak from produce or nuts can easily exceed $100 million.

Improved Surveillance Will Lead to More Food-Borne Illness Claims

KMODZA@stoel.com (Kenneth Odza) — Mon, 22 Jun 2009 10:43:57 -0800

We’ve explained previously in this blog why increased surveillance by state and federal agencies will lead to detection of more outbreaks (and, therefore, more legal exposure). Others seem to agree.

Law360 published a nice interview with Jim Neale at McGuire Woods, another lawyer experienced in the food liability arena ( a Law360 subscription is needed to access the full article). Jim is quoted in the article as saying, “when, despite the best efforts of all concerned, outbreaks do occur, improved surveillance allows them to be caught and, most often, quickly tracked to the source.” And, as federal money increases to the state health departments (the front line in detecting most of the nation’s outbreaks), rates of detection will accelerate.

The Perils of Raw Cookie Dough

rlgoldfarb@stoel.com (Richard Goldfarb) — Fri, 19 Jun 2009 14:21:17 -0800

Nestlé is voluntarily recalling all its refrigerated and frozen chocolate chip cookie dough. The FDA and CDC warn of the risk of contamination with E. coli O157:H7. In its release, Nestle says the following:

Nestlé Toll House cookies made from refrigerated and frozen dough are perfectly safe for consumption when prepared according to the instructions on the label. These clearly state that the raw dough must be baked before consumption.

The CDC has a podcast telling kids the same thing: don't eat raw cookie dough.

Nestlé is suggesting that consumers return unused cookie dough to their stores for a full refund. We assume that Nestle will be reimbursing the stores.

We have complimented Nestle for its food safety program in the past. As their release says, "The safety and quality of its products is a non-negotiable priority for Nestlé, and the company apologizes for any inconvenience cause by this voluntary recall. "

But there is good news: the recall doesn't affect any chocolate chips, or any baked cookies.

Nolan v. Ocean Spray Verdict: The PACA Angle

rlgoldfarb@stoel.com (Richard Goldfarb) — Tue, 16 Jun 2009 10:00:00 -0800

Jim Prevor, the author of the Perishable Pundit blog and a man who has probably forgotten more about the produce industry and its practices than many will learn in a lifetime, has been blogging constantly about the lawsuit brought by Theresa Nolan, her company The Nolan Network and her late husband Jim against Ocean Spray Cranberries, Inc. On May 30, he reported that a jury in Plymouth, Massachusetts, home of Ocean Spray, had brought in a $1 million verdict against Ocean Spray and in favor of the Nolans.

The lawsuit involved marketing practices with fresh cranberries, a minor part of Ocean Spray's business compared to, say, cranberry juice cocktail. The background to the case is discussed at length in an article by Bill Martin in Jim Prevor's other publication, Produce Business. As far as I can tell from the news reports, the actual allegation in the lawsuit was a violation of Chapter 93A of the Massachusetts General Laws, This broadly prohibits unfair or deceptive acts or practices in trade or commerce. I'm not a Massachusetts lawyer, but I did a stint as a law clerk for the Massachusetts Appeals Court and my recollection is that Chapter 93A was considerably stronger in application and interpretation than many other states' mini-FTC Acts, particularly since a private right of action is included essentially without limit.

The core of the allegations related to alleged differential pricing afforded by Ocean Spray to Costco and H.E. Butt in 2000 and 2002, respectively. How this eventually led to the Nolans' claim is too complicated to discuss here. I am more interested, however, in a suggestion Jim Prevor makes in some of his columns on the case, that the alleged differential pricing and the way it was dealt with might have violated PACA, the Perishable Agricultural Commodities Act,.

A key allegation is that C&S Wholesale Grocers, which supplied fresh cranberries to BJ's Wholesale Club, a competitor of Costco, was told by Ocean Spray, upon complaining about the price advantage allegedly given Costco, "to claim some cranberries it would receive from Ocean Spray were of poor quality and to take a discount from the Ocean Spray invoice."

If true, there are ways that such treatment could violate PACA or violate the duties that Ocean Spray owed to its growers.

PACA is best-known for creating a statutory trust in favor of unpaid growers of perishable agricultural commodities. It also, however, requires people who deal in those commodities to account accurately for all transactions in those commodities. Thus, the allegation that a buyer was told, in essence, to make a claim that certain cranberries were of lesser quality than they actually were raises the issue of whether some of Ocean Spray's growers were provided reports on their cranberries that inaccurately represented their quality (if not, one wonders how the auditors would have missed it, since they would have presumably had to match the returns from the pools that included the sales to C&S against the payments from C&S). It's a reasonable question, though nothing that has occurred to date appears to have answered it.

It is conceivable, of course, that the matter was settled internally without publicity, or that the growers involved considered the issue too small to litigate. Anyone handling fruit or vegetables within PACA's ambit, though, must be aware that any form of inaccurate reporting can violate the statute.

More on Reducing the Risk of Failure - Focus on Shifting Liability For Consumer Claims

KMODZA@stoel.com (Kenneth Odza) — Tue, 16 Jun 2009 07:46:10 -0800

Food Safety Magazine ran an interesting piece by Aaron Krauss titled “Reducing the Risk of Failure.” The article was part of the magazine’s focus on limiting liability for food companies. Mr. Krauss includes a good discussion of the pros and cons of indemnities and disclaimers of warranty and liability as ways to shift or reduce liability for claims within the supply chain. Yet, the article does not discuss how to shift liability for claims from outside the supply chain, i.e., consumer claims.

For example, Mr. Krauss advocates that if members of the supply chain limited liability between themselves to the purchase price of the product, this might reduce or eliminate litigation. Mr. Krauss points out that “if everyone in the ‘peanut butter food chain’ had limited their liability, a store might not bother suing, since it could only recover its purchase price.”

Limitation of liability clauses, while effective to reduce exposure between members of the supply chain, will have no limiting effect on consumer claims. Unless a food seller can invoke a “passive retailer” defense, each member of the supply chain will be strictly liable for injuries to consumers caused by the food product.

The only ways for a food seller to shift consumer liability is through either supplier indemnity or insurance. Mr. Krauss is correct that indemnities by suppliers may be hard to secure and harder to enforce. And, claims defended by the seller’s own carrier will invariably result in higher premiums.

Because insureds will generally be penalized through premiums for invoking their own insurance, the best insurance is somebody else’s insurance. Even a food seller that might not have the leverage with its supplier to receive indemnification may be able to secure “additional insurance.” Naming a vendor as an additional insured frequently costs the supplier nothing in added premiums. If seller specifies that this insurance is to be “primary and noncontributory,” the supplier’s insurance may be the first line of defense for claims involving the supplier’s products.

If a supplier will provide additional insurance, follow-through is essential. The seller needs to (1) verify that the supplier has, in fact, named the seller as an additional insured and (2) review the operative language of the additional insured endorsement and/or policy language to ensure that it does not include unacceptable conditions or exclusions.