Food & Beverage Litigation Update l May 2020

Shook, Hardy & Bacon L.L.P.

SPOTLIGHT

Examining Price-Gouging Allegations During COVID-19 Pandemic

Shook Partner Katie Gates Calderon and Associate Elizabeth Fessler have authored “Best Practices for Food and Beverage Pricing Right Now” for Law360, which discusses how food and beverage companies may face regulatory actions and reputational damage if they are perceived to have raised their prices too much during the COVID-19 pandemic. “With increased demand and potentially increasing production costs due to supply chain disruptions, many in the food and beverage industry may be wondering how to deal with the economic pressures without running afoul of price-gouging statutes,” Fessler and Gates Calderon write.

Many states have different laws governing price-gouging, and those laws often differ on what an acceptable price differential may be. Understanding which state laws apply and documenting all aspects of the reasoning for any price increase are key, they explain, concluding, “If you are contacted about pricing issues, it may be best to contact outside counsel before providing any records or documents to government agents because the laws, and potential defenses, vary by state.”

Price-gouging allegations have already begun to be filed, including a lawsuit brought by the Texas attorney general arguing that Cal-Maine Foods Inc. raised prices for its eggs by 300% and a consumer putative class action seeking “to hold Amazon accountable for its unlawful price increases during the COVID-19 pandemic.” Texas v. Cal-Maine Foods Inc., No. 20205427 (Tex. Dist. Ct., filed April 23, 2020); McQueen v. Amazon.com Inc., No. 20-2782 (N.D. Cal., filed April 21, 2020).

LEGISLATION, REGULATIONS & STANDARDS

President, Agencies Act To Maintain Food Supply

President Trump has issued an executive order directing Secretary of Agriculture Sonny Perdue to “ensure the continued supply of meat and poultry” consistent with guidance issued by the Centers for Disease Control and Prevention (CDC) and the Occupational Safety and Health Administration. CDC also issued a report on COVID-19 at meat and poultry processing facilities for the month of April 2020 that found 4,913 cases and 20 deaths among 130,000 workers and cited, among other risks, “crowded, multigenerational” residences and carpooling as relevant factors increasing the likelihood of transmission among employees. The government actions coincide with lawsuits seeking to hold meat and poultry processing plants liable for injury or death caused by COVID-19, including a wrongful death lawsuit brought against Quality Sausage Co. following the death of a forklift driver who allegedly contracted the coronavirus from coworkers. Parra v. Quality Sausage Co., No. DC-20-06406 (Tex. Dist. Ct., filed April 30, 2020).

Trump also issued an executive order aiming to “improve the competitiveness of American industry” by increasing aquaculture to boost the production of seafood. The order allows Secretary of Commerce Wilbur Ross to request “each Regional Fishery Management Council to submit, within 180 days of the date of this order, a prioritized list of recommended actions to reduce burdens on domestic fishing and to increase production within sustainable fisheries, including a proposal for initiating each recommended action within 1 year of the date of this order.”

Chipotle To Pay $25 Million For Foodborne Illness Outbreaks

The Department of Justice (DOJ) has announced that Chipotle Mexican Grill Inc. will pay $25 million and enter a deferred prosecution agreement to resolve criminal charges related to foodborne illness outbreaks that occurred between 2015 and 2018. The deferred prosecution agreement will require Chipotle to comply with an improved food safety program for three years to avoid conviction.

“This case highlights why it is important for restaurants and members of the food services industry to ensure that managers and employees consistently follow food safety policies,” a DOJ attorney stated in a press release. “The Department of Justice will vigorously enforce food safety laws in order to protect public health.”

FDA, USDA Could Improve Cell-Cultured Meat Cooperation, GAO Finds

The U.S. Government Accountability Office (GAO) has publicly released its April 2020 report on the partnership between the Food and Drug Administration (FDA) and Department of Agriculture (USDA) on the development of cell-cultured meat. GAO indicated that it began the inquiry after some stakeholders “expressed concern about the agencies’ oversight of cell-cultured meat amidst a fragmented federal food safety oversight system.” GAO recommended that “FDA and USDA more fully incorporate leading practices for effective collaboration in the agencies’ interagency agreement,” and the agencies “partially concurred and indicated a willingness to incorporate these practices in a more detailed agreement, which would also meet the intent of the recommendations.”

LITIGATION

Court Orders Restaurant Group To Allow Employee To Wear A Face Mask

A Texas state court has reportedly ordered Hillstone Restaurant Group to allow an employee returning to work to wear a face mask to avoid the transmission of COVID-19. The complaint initially sought to lift the restaurant group’s mask ban for all employees, but the plaintiff amended the complaint to only apply to her after the company attempted to remove the case to federal court, according to the Dallas Morning News. The employee asserted that she was denied four shifts, or 40 hours, because she refused to work without a mask, and the court’s temporary order will allow her to wear a mask for two weeks.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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