Food & Beverage Litigation Update | October 2017 #4

by Shook, Hardy & Bacon L.L.P.
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LEGISLATION, REGULATIONS & STANDARDS

Furans in Baby Food May Pose Health Risk, EFSA Reports

The European Food Safety Authority (EFSA) has issued an assessment of the risks of furans and related compounds 2- and 3-methylfurans, concluding that they pose a higher risk to infants—the most exposed group—than older children or adults because infants consume jarred or canned foods with high mean concentrations of the materials. Risks associated with furan exposure reportedly include liver damage and liver cancer. According to EFSA, furan exposure might be reduced through preparation methods such as reheating ready-to-eat foods in a hot-water bath without a lid because evaporation can remove some furan content. EFSA also reported that the highest exposure in adults was attributable to coffee; high mean concentrations of furan were found in whole roasted coffee beans, ground roasted coffee, coffee imitates and instant coffee powder.

 

Haribo Reportedly Investigating Slavery Allegations Against Suppliers

German candy manufacturer Haribo is reportedly investigating allegations of human slavery on carnauba wax suppliers’ plantations in Brazil. According to Reuters, a German television documentary showed palm-leaf harvest workers forced to sleep outside, denied access to clean water and paid $12 a day. In June 2017, Haribo’s board posted a “Modern Slavery Statement” on its website, stating it was “absolutely committed to preventing any form of slavery and human trafficking in its corporate activities.” The statement also included a mandate for due diligence reviews of its supply chain to assess “particular product or geographical risks” of slavery.

 

USDA Ends Consideration of Farmer Fair Practices Rules

The U.S. Department of Agriculture (USDA) has announced that it will take no further action to implement the Farmer Fair Practices Rules, which were reportedly created to allow farmers the power to sue corporate entities with whom they had contracted to produce livestock and poultry. In April 2017, USDA announced a delay of the effective date until October 19, 2017, to allow time for further consideration of comments. On October 18, USDA announced that it will not implement the rules because of concerns over potential increases in litigation, vagueness of the draft rules’ language, possible conflicts of law and executive branch directions to use the least burdensome regulations possible.

Following USDA’s announcement, U.S. Sens. Charles Grassley (R-Iowa) and Jon Tester (D-Mont.) sent a letter to Secretary of Agriculture Sonny Perdue stating that they “vehemently disagree with the decision” because their constituents believe that the current practices of multinational agribusiness corporations, who have “extraordinary market power,” exploit farmers and ranchers in livestock and poultry industries.

 

WTO Rules U.S. Can Use Revised “Dolphin-Safe” Labels

The World Trade Organization (WTO) has ruled that the United States can use the “dolphin-safe” tuna labeling regulations revised in 2016, deciding they are part of a “legitimate conservation effort.” Mexico began the dispute in 2008 when it asserted that U.S. regulations governing tuna fishing in the Eastern Tropical Pacific Ocean were more stringent than in other areas of the world and unfairly barred Mexico’s fishing industry from the market. Although WTO has previously ruled in Mexico’s favor, the new opinion stated that the regulations are “calibrated to the levels of risks posed by different fishing methods in different parts of the ocean, [so] we do not see any reason to find that the same measure is applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination.”

In April 2017, WTO awarded Mexico $163 million in trade sanctions over the regulations; that award may now be appealed.

 

NYC Bans Ads for Alcohol Products on Buses, Subways

New York City’s Metropolitan Transit Authority (MTA) board has passed a resolution banning all advertising for alcohol products over concerns that exposure to the ads “influences many young people to start drinking earlier and to drink more,” which “leads to much higher public health and safety costs.” Although the primary purpose for MTA ads is to raise revenue, alcohol ads account for about $2.8 million annually, about 2 percent of the $144.8 million raised in 2016. Other cities that have instituted similar bans reportedly include Los Angeles, San Francisco, Detroit, San Diego and Baltimore; Chicago and Atlanta allow the ads, the board said, but “with restrictions that limit their exposure to young people.” The ban will take effect January 1, 2018, but MTA stopped contracting for additional advertising as of October 25, 2017.

 

Canada Reportedly Bans Soylent Sales

The Canadian Food Inspection Agency (CFIA) has reportedly banned sales and distribution of Soylent meal-replacement drinks because they “do not meet a select few of the CFIA requirements.” In a letter posted on Soylent’s website, Rosa Foods’ CEO Rob Rhinehart said the CFIA informed the company of its decision. Rhinehart said Soylent is working with CFIA regarding regulatory compliance issues and that the company is committed to making the product available to Canadian customers as soon as possible.

“Although we feel strongly that these requirements do not reflect the current understanding of human nutritional needs, we respect the CFIA’s regulations and will fully comply with any regulatory action they deem appropriate,” Rhinehart said in the letter.

 

ASA Upholds Sausage Maker’s Claim as “The Nation’s Favourite”

The U.K. Advertising Standards Authority (ASA) has ruled that Kerry Foods Ltd.’s television advertisements for Richmond Sausages asserting that its products are “the nation’s favourite” are backed by independent third-party market research and did not breach advertising codes. After ASA received three complaints about the ads, Kerry Foods provided research showing the sausages were the highest-ranked for both value and unit sales in the 12 months preceding the dates the ads were aired. ASA found that while the ads did not contain information that would allow consumers to verify the comparison, the market research was sufficient to substantiate the claim.

 

LITIGATION

Court Dismisses Conagra Wesson Oil Lawsuit

A Massachusetts federal court has dismissed a putative class action against Conagra Brands that alleged the company’s Wesson cooking oil was not “100% natural” because it is extracted from grains grown from genetically modified organisms (GMOs), ruling the plaintiff had failed to state a claim upon which relief could be granted. Lee v. Conagra Brands, Inc., No. 17-11042 (D. Mass., entered October 25, 2017). Taking judicial notice of U.S. Food and Drug Administration (FDA) guidance, the court noted that the agency has “not attempted to restrict the use of the term ‘natural’ except for added color, synthetic substances, and flavors.” In addition, the court held that according to FDA guidance, Conagra is not required to disclose on its labels the use of GMO plants.

The plaintiff alleged a single count for deceptive business practices, but the court ruled that because the label conformed to FDA guidelines, it was not “unfair or deceptive as a matter of law.” The court also noted, “For what it is worth, humans have been genetically altering organisms for our use for at least 30,000 years.”

The U.S. Supreme Court previously declined to review a similar case against Conagra regarding Wesson’s “100% natural” label claims.

 

Smoothie Retailer Files Infringement Suit Against Former Employee and Contractor

Green Crush, a retailer selling juice, smoothie and aguas frescas beverages, has filed a lawsuit alleging that a former Green Crush manager and a former contractor engaged in corporate espionage, asserting that they used the chain’s proprietary information and infringed its trademarks and trade dress to start a competing company. Green Crush, LLC v. Paradise Splash 1, Inc., No. 17-1856 (C.D. Cal., filed October 23, 2017).

The complaint alleges that the manager frequently asked senior Green Crush employees about “distribution operations, specific equipment, detailed drink ingredients, the design, placement, setting and layout of drink containers and cups, and the process and recipes used” before leaving to start a competing juice store. Further, Green Crush argues, the manager and contractor solicited Green Crush employees to work for them; allegedly, some of those employees asked “if the store under construction was a [Green Crush] store because it looked just like one.” Seeking disgorgement, restitution, corrective advertising, damages, injunctive relief and attorney’s fees, Green Crush claims trademark and trade dress infringement and false designation of origin under the Lanham Act, misappropriation of trade secrets, tortious interference with contractual relations and prospective economic advantage, civil conspiracy and unjust enrichment.

 

Indiana Court Bars Defective Design Claims Against Diacetyl Manufacturer

An Indiana federal court has granted summary judgment to Givaudan Flavors Corp. on the issue of design defect, ending a lawsuit by 27 popcorn factory workers who alleged they suffered respiratory injuries after being exposed to the company’s diacetyl butter flavoring. Aregood v. Givaudan Flavors Corp., No. 14-0274 (S.D. Ind., entered October 18, 2017). Givaudan had filed a motion in limine directed to the absence of evidence or opinions regarding the alleged defective design or unreasonably dangerous condition of diacetyl, and the court asked for summary judgment briefing on the potentially dispositive issue.

The court said that to show defective design under the Indiana Products Liability Act, a plaintiff “’must compare the costs and benefits of alternative designs and show that another design not only could have prevented the injury but also [is] cost-effective.’” Although the plaintiffs had obtained causation expert testimony and the court said it was “presuming without deciding” that the testimony would be admissible, the plaintiffs had failed to provide any expert testimony as to the costs or benefits of using a diacetyl-free butter flavor or that such flavorings available before 2007 were “cost-effective alternatives.” The fact that a diacetyl-free flavor existed, the court said, is not enough because “the fact that a safer product existed does not mean the accused product is defective.”

 

Plaintiff Files, Withdraws Putative Class Action Against Krispy Kreme

One day after a California resident filed a putative class action complaint against Krispy Kreme, she voluntarily dismissed the suit without prejudice with no explanation for the dismissal. Salem v. Krispy Kreme Doughnut Corp., No. 17-7487 (C.D. Cal., dismissal filed October 13, 2017). The complaint alleged that Krispy Kreme “purposefully, intentionally, and willfully” misled customers as to the sugar content and calorie count of their doughnuts. In addition, the plaintiff stated that she relied on the nutritional information provided in a store pamphlet that misleadingly advertised the chain’s apple fritter as only 210 calories per serving. The plaintiff claimed violations of California’s unfair competition and false advertising laws and the state Consumer Legal Remedies Act.

 

SCIENTIFIC / TECHNICAL ITEMS

Scientists Announce Leaner Bacon from CRISPR-Edited Pigs

Chinese scientists have reported that they successfully created 12 genetically modified pigs with about 24 percent less body fat than average pigs. Qiantao Zheng, et al., “Reconstitution of UCP1 using CRISPR/Cas9 in the white adipose tissue of pigs decreases fat deposition and improves thermogenic capacity,” Proceedings of the National Academy of Sciences, October 17, 2017. According to the researchers, pigs lack a gene called UCP1 that allows animals to regulate body temperature in cold weather. Using gene-editing technique CRISPR-Cas9, the scientists created and implanted modified pig embryos into female pigs. Tests on the piglets reportedly showed they were much better at regulating their body temperatures, which could potentially reduce farmers’ heating and feeding costs and prevent pig deaths in cold weather.

NPR further explored the use of gene editing in food production, discussing the Coalition for Responsible Gene Editing in Agriculture’s campaign to dispel fears associated with food products created using CRISPR. “Those in technology have to be more transparent and be much more engaged in a public conversation and dialogue, in order to answer those questions, address the skepticism and ultimately result in earning consumer trust in what they’re doing in gene editing,” the article quotes the coalition’s leader, Charlie Arnot, as saying. The article also notes that some CRISPR-edited food products will not be regulated like foods produced from genetically modified organisms because the CRISPR process does not necessarily introduce any foreign genetic material.

 

Wansink Study on Children’s School Lunch Choices Retracted

JAMA Pediatrics has retracted a 2012 study authored by Brian Wansink, director of Cornell University’s Food and Brand Lab, because of “inadequate oversight of data collection and pervasive errors in the analyses and reporting.” The study, published in the Archives of Pediatrics and Adolescent Medicine, reported that children ages 8-11 were about 30 percent more likely to choose an apple with a cartoon-character sticker over a unbranded cookie, concluding that “brands and cartoon characters” could increase consumption of healthier foods in school lunchrooms.

A reader reportedly sent Wansink a letter in February 2017 noting several errors and the study data was rechecked. In September, Wansink sent JAMA Pediatrics a notice of retraction and replacement acknowledging that the researchers “inadvertently provided an incorrect description of the study design and sample size, used an inadequate statistical procedure, and presented a mislabeled bar graph.” After that notice was published, Wansink said the Robert Wood Johnson Foundation, which had funded the study, notified him of an additional error: the study was conducted on children ages 3-5, not 8-11.

After the study was retracted on October 20, The New York Times reported that “doubts have been cast about other papers” involving Wansink, including a 2012 study published in Preventive Medicine that claimed children are more likely to eat vegetables if parents give the foods a “cool” name. After more than 150 errors were discovered in four of Wansink’s publications, Cornell University implemented new research review procedures but concluded the errors “did not constitute scientific misconduct.”

 

 

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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