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Food Safety Product Liability Claims

Mastering the Standards for Fault, Causation and Damages in Foodborne Illness Litigation

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific THURS DAY, JUNE 13, 2013

Today’s faculty features:

Lee N. S mith, S hareholder, Weintraub Tobin, S acramento, Calif. Felicity A. McGrath, Partner, Bonner Kiernan Trebach & Crociata, Washington, D.C. Jonathan M. Cohen, Partner, Gilbert, Washington, D.C. Jonathan M. Cohen, Partner, Gilbert, Washington, D.C.

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Food Safety Management Act Rolls On and How It May Affect Food Liability Cases

L E E N S M I T H

Liability Cases

L E E N . S M I T H W E I N T R A U B | T O B I N 4 0 0 C A P I T O L M A L L , S U I T E 110 0 S A CR A M E N T O , CA L I F O R N I A 9 5 8 14 S A CR A M E N T O , CA L I F O R N I A 9 5 8 14 9 16 - 5 5 8 - 6 0 0 0 L N S M I T H @ W E I N T R A U B . CO M

Abstract

In January 2011 President Obama signed the Food Safety Modernization Act to provide greater security safety and Modernization Act to provide greater security, safety and accountability of food products in our supply chain. The new law involved many new requirements for industries that handle, k d di t ib t f d d t Si 2011 process, package, and distribute food products. Since 2011, a number of the more significant the rules have been promulgated, the two most significant for food processors, the Preventive C l f F d F ili i d h P d S f R l Controls for Food Facilities and the Produce Safety Rule were circulated for comment in early 2013 with an extended comment date of September 16, 2013. Many of these rules could impact Food Liability Law by changing industry standards and driving new contract requirements.

6

Agenda

 Food Safety Modernization Act (“FSMA”)  Food Safety Modernization Act ( FSMA )

changed the status quo with respect to:

 FSMA Statute  Effect on Food Liability  What You Can Do to Manage Your

Operations Better Under the Act

7

Food Safety Modernization Act (H R 2751) (H.R. 2751)

 Most expansive changes in food safety since  Most expansive changes in food safety since

the 1938 Act S i f t th iti

 Sweeping new enforcement authorities  Exacting new food import requirements

g

 Major new program activities for FDA/with

corresponding budgetary issues corresponding budgetary issues

8

Significant FSMA Provisions

 Stronger Records Access Authority (FSMA § 101)

g y ( § )

 Mandatory Recall Authority (FSMA § 206)

Increased Frequency of Inspections (FSMA § 201)

 Increased Frequency of Inspections (FSMA § 201)  Whistleblower Protection (FSMA § 402)  Foreign Facilities and Refusal of Inspection

(FSMA § 306)

 Changes to Administrative Detention Standard

(FSMA § 207)

9

Additional Changes

 Amendments to the Reportable Food Registry

p g y (requiring more information and additional disclosure) (FSMA § 211) S i f R i i (FSMA § 102)

 Suspension of Registration (FSMA § 102)  Preventative Controls (FSMA § 103)

P d S f t R l (FSMA § 105)

 Produce Safety Rules (FSMA § 105)  FDA Lab Accreditation (FSMA § 202)

Traceability (FSMA § 204)

 Traceability (FSMA § 204)  Major Changes to Regulation of Imports

(FSMA §§ 301 302) (FSMA §§ 301,302)

10

Stronger Records Access Authority

(FSMA § 101) (FSMA § 101)

 When “reasonable

probability” of “serious adverse health consequences” consequences

 Now, includes records of

• ther food affected in
• ther food affected in

similar manner

 Proper credentials and

Proper credentials and written notice

11

RECALLS Prior to FSMA Prior to FSMA Prior to FSMA, recalls were l t d ll d t voluntary and usually done at the discretion of the parties; although the FDA could file for injunctive relief. j

12

What Was the Status Quo Before the New Act? Before the New Act?

 Recalls

 Class I Recalls:

A situation in which there is a reasonable probability that A situation in which there is a reasonable probability that

the use of or exposure to a volatile product will cause serious adverse health consequences or death.

 Class II Recalls:

A situation in which use of or exposure to a volatile

d t t di ll ibl product may cause temporary or medically reversible adverse health consequences or where the probably of serious adverse health consequences is remote.

13

What Was the Status Quo Before the New Act? (cont ) Before the New Act? (cont.)

 Recalls (cont.)

( )

 Class III Recalls:

A situation in which use of or exposure to a volatile A situation in which use of or exposure to a volatile

product is not likely to cause adverse health consequences.

14

Mandatory Recall Authority (FSMA § 206) (FSMA § 206)

 Mandatory recall can be ordered by the FDA if there is

a “reasonable probability” that an article of food is:

 Adulterated under section 402 or misbranded under

section 403(w) and;

 Use of or exposure to such article will cause serious

adverse health consequences or death to humans or adverse health consequences or death to humans or animals.

 Opportunity for voluntary recall within FDA appropriate

pp y y pp p timing

 Hearing within two days of the order’s issuance

15

Increased Frequency of Inspections (FSMA § 201) (FSMA § 201)

 Immediate increased frequency of inspections

Immediate increased frequency of inspections

 Once every 7, 5, 3 years

 Risk-based high-risk facilities first  Risk-based, high-risk facilities first

 The higher the risk, the more inspections  The higher the risk, the more inspections

16

Whistleblower Protection (FSMA § 402) (FSMA § 402)

 Protects employees from discharge, discrimination in

p y g , compensation or conditions of employment with respect to: P idi i f ti i l ti f FDA A t

 Providing information re: violation of FDA Act  Testifying, assisting or participating in a proceeding

re: a violation re: a violation

 Objecting to an “activity, policy, practice or

assigned task” they “reasonably believe to be a violation” violation

 Remember to update Employee Handbooks to reflect this

policy policy

17

Foreign Facilities and Refusal of Inspection (FSMA § 306) Inspection (FSMA § 306)

 If the FDA requests that it be

q allowed to inspect a foreign facility, it must allow entry to U.S. inspector within 24 hours of requesting entry

 Or imported food from

that facility will be refused that facility will be refused admission

18

Broader Authority to Detain Foods (FSMA § 207) (FSMA § 207)

 Administratively detain foods  Administratively detain foods  Lowers standard for FDA to detain foods

Lowers standard for FDA to detain foods

 FDA only needs “a reason to believe” food

is “adulterated or misbranded.”

 Class I recall situation not required

19

Reportable Food Registry (RFR)

 “Reportable Food”  Reportable Food

 “Reasonable probability” of “serious adverse

health consequences to humans or animals” health consequences to humans or animals

 “Responsible Party”

FDA i t d f ilit h d t i

 FDA-registered facility where product is

“manufactured, processed, packed or held”

“R i t”

 “Requirement”

 Report to FDA portal within 24 hours

20

Amendments to RFR (FSMA § 211)

 New “critical information” required  FDA require “consumer-oriented

information” including

D i i

 Description  Product ID codes  Contact information  Contact information  Anything else FDA deems

necessary to enable a consumer y to accurately identify whether such consumer is in possession

• f the reportable food
• f the reportable food

21

Suspension of Registration

If FDA d t i “ bl b bilit ” f f d

 If FDA determines “reasonable probability” of food

causing “serious adverse health consequences,” it may suspend registration may suspend registration

 Facilities that are “responsible” and those that

knew or had reason to know are in jeopardy knew or had reason to know are in jeopardy

 Informal hearing within two days  FDA to consider corrective plans within 14 days

22

Preventative Controls (FSMA § 103) Draft Regs Issued in 2013 Draft Regs Issued in 2013

 Regulations require

 Allergen controls

 Regulations require

that

 Hazards be identified

g

 A recall contingency

plan GMP

 Hazards be identified  Preventative controls

be enacted for

 GMPs  Supplier verification

activities

 Sanitation  Training

E i l l

 Monitor controls  Correction actions

 Environmental controls

23

Issues with the Rules

These rules were almost two years late and have raised a number of issues with industry, mostly with relation to the attempt to impose similar the attempt to impose similar regulations across numerous i d i industries.

24

Produce Safety Rule FSMA Section 105

 Section 105 of the Food Safety

Section 105 of the Food Safety Modernization Act (FSMA) directs FDA to set science based standards FDA to set science-based standards for the safe production and harvesting f f it d t bl th t th A

• f fruits and vegetables that the Agency

determines minimize the risk of serious adverse health consequences or death.

25

Produce Safety Rules y

 Proposed rule to establish science-based standards for

growing, harvesting, packing and holding produce on domestic and foreign farms FDA proposes to set standards associated with identified

 FDA proposes to set standards associated with identified

routes of microbial contamination of produce, including:

 (1) agricultural water

(1) agricultural water

 (2) biological soil amendments of animal origin  (3) health and hygiene

( ) yg

 (4) animals in the growing area, and  (5) equipment, tools, and buildings

26

Comments to the Produce Safety Rules

 The comments on these broad reaching rules were

g so extensive the dates to respond has been rescheduled to September of 2013.

 Major issues relate to :

 Confusion over the application to certain industries

C t th ti

 Controversy over the exemption  Entry of the FDA into the regulation of environmental

areas such as soil and water

 Practicality Cost  Additional regulatory/financial burdens

27

Routine Environmental/ Product Test Results Submitted to FDA (FSMA § 202) Results Submitted to FDA (FSMA § 202)

 FDA accredited labs

FDA accredited labs W/30 months

 Testing by FDA

accredited labs mandated R lt t di tl t

 Results sent directly to

FDA – makes developing a strategy or re-testing a strategy or re testing more difficult

28

Traceability (FSMA § 204)

 Traceability – Pilot studies are ongoing

Traceability Pilot studies are ongoing

 Statute states that the FDA cannot require:

 A full pedigree or a record of the complete previous  A full pedigree or a record of the complete previous

distribution history of the food from the point of origin of such food R d f i i t f f d b d th i di t

 Records of recipients of a food beyond the immediate

subsequent recipient of such food

 Product tracking to the case level by persons subject to  Product tracking to the case level by persons subject to

such requirements

29

Foreign Supplier Verification Program (FSMA § 301) Program (FSMA § 301)

 Importers required to perform “risk-based foreign supplier

verification activities”

 FDA required to determine content of program within 1

year

 Importer: U.S. owner or consignee of food at the time of

entry into U.S. or U.S. agent or representative of foreign

• wner or consignee

30

Voluntary Qualified Importer Program

(FSMA § 302) (FSMA § 302)

 FDA shall “provide for the expedited review and

p p importation of food” for importers who participate voluntarily

 Will require third-party certification  Importer: “the person that brings food, or causes

food to be brought, from a foreign country into the customs territory of the United States” customs territory of the United States

31

Import Certifications

(FSMA § 302) (FSMA § 302)

 FDA may require third-party  FDA may require third-party

certification as a condition of import p

 FDA can create system of

dit ti f dit accreditation for auditors

 Program may be funded

Program may be funded through fees imposed on auditors

32

FSMA Summary

 In summary, the FSMA statute contains

significant changes to the Food Safety Law and required the FDA to promulgate numerous regulations and policies, many g p y

• f which have yet to be finalized, as

indicated the Produce Safety Rule and y the Preventative Control Rules

33

How do these Issues Effect Food Liability

 New statutory Standard of Care

New statutory Standard of Care

 Increased reporting standards  More information in the public record

I l di ll d t ti lt

 Including recalls and testing results

 Heightened public awareness  Increased Contractual/Indemnity Requirements

Increased Contractual/Indemnity Requirements

 Increased Scrutiny of Insurance  Lower Thresholds for

 Recall  Reporting to the Registry  Detentions

34

When to Involve Legal Counsel?

 Before inspection/investigation

Before inspection/investigation

 Earliest possible juncture  Good lawyer will not escalate situation  Good lawyer will not escalate situation  Attorney-client communication may be protected

35

Appropriate Strategy & Relationship with FDA Relationship with FDA

 Cooperative but firm

p

 Understand

i ti i communication is

• ne-way

 Understand and assert

rights

 Role-play during recall

rehearsal rehearsal

36

FDA Inspection Plan

 Who will be involved?

 Involve your attorney

 Documents to be released and signed

 If documents are going to be released, have a standard

“FOIA Letter.” (No right to disclose trade documents)

 Test results  Test results  Photographs

Interviews (who and review of legal counsel)

 Interviews (who and review of legal counsel)  Plan protected by privilege?

37

Recalls Happen

O f i i i l d f ll i d Our manufacturing process is cautiously and carefully monitored at all times to ensure a safe, clean, bacteria-controlled environment

• from the selection of the finest source products, throughout

production to testing of the finished product. We take quality and safety very seriously. Topps has steadily and attentively developed standards and procedures to make certain we manufacture a safe product. We are fully compliant with all USDA Good Manufacturing Practices, and we have fully adopted and closely follow a HACCP (Hazard Analysis and Critical Control Point) program. y ) p g Topps Meat Company consistently employs technologically advanced equipment and our own safety innovations to create great tasting, quality products. 38

Recall Alone Can Be a Death Sentence Death Sentence

After Extensive Beef Recall, Topps Goes Out of Business In a statement, Anthony D’Urso, the chief operating

• fficer at Topps, in Elizabeth, N.J., said that the

company “cannot overcome the reality of a recall this large.” He added “This has been a shocking and sobering

Workers leaving the Topps Meat plant in Elizabeth, N.J., on Friday. The company which opened in 1940 went out of business shortly

He added, This has been a shocking and sobering experience for everyone.” Executives at Topps, which made frozen hamburgers and other meat products for supermarkets and mass merchandisers, declined to discuss how and why the company collapsed so quickly or whether they could

The company, which opened in 1940, went out of business shortly after it issued a recall that expanded to 21.7 million pounds of ground beef. Source: http:/ / www.nytimes.com/ 2007/ 10/ 06/ us/ 06topps.html?_r=2

company collapsed so quickly, or whether they could have taken steps earlier to protect consumers or to head

• ff the plant’s closure.

39

Potential Recall Event: What to Do What to Do

 Follow recall plan that is in place

p p

 Log events, actions, and communications  Record all reported injuries

Record all reported injuries

 Document investigation  Institute litigation “hold” / retain

Institute litigation hold / retain all documents including electronic emails

 Cooperate and communicate with

government officials

40

More on How to Reduce Risk

 Separate ownership of farm / retail / wholesale  Separate ownership of farm / retail / wholesale  Supplier agreements

 To warrant FSMA compliance

be specific

 To warrant, FSMA compliance - be specific  Make sure you have access to their records and

audits audits

 Indemnification – unambiguous  Insurance – product, CGL, recall, AI, audit, cyber-

p , , , , , y insurance, class action, chain insurance

41

Careful Review of Supplier/ Vendor Agreement Agreement

[Make sure they reflect your insurance coverage]

Seller agrees to defend, indem nify and hold harm less Buyer … for the recovery of dam ages…

[Indemnity only as strong as indemnitor]

… for the recovery of dam ages… arising out of or alleged to have arisen out of (a) the delivery, sale, resale, labeling, use or consum ption of any Product…

42

Careful Review of Supplier/ Vendor Agreement (cont.)

Seller’s insurance described herein h ll b i d

Agreement (cont.)

shall be prim ary and not contributory with Buyer’s insurance. Buyer shall be nam ed as an additional insured… waivers of waivers of subrogation

43

Insurance

 Sufficient coverage

Sufficient coverage

 Products  Recall

 Sufficient limits  Involve legal counsel and

g trusted broker who understands the industry and your business

44

Action Steps

 Review and amend S li (i d ifi i i li

 Supplier agreements (indemnification, insurance, compliance

with FSMA)

 Insurance coverage (re-examine recall coverage)

 Prepare for import compliance  Work with state/local officials on “friendly” food safety

compliance compliance

 Recall plan and rehearsal  FDA inspection plan

FDA inspection plan

 Comment on rulemaking

45

Contact Information

L E E N S M I T H

Contact Information

L E E N . S M I T H W E I N T R A U B | T O B I N 4 0 0 CA P I T O L M A L L , S U I T E 110 0 S A CR A M E N T O CA L I F O R N I A 8 S A CR A M E N T O , CA L I F O R N I A 9 5 8 14 9 16 - 5 5 8 - 6 0 0 0 L N S M I T H @ W E I N T R A U B . CO M

46

Food Safety Claims: Food Safety Claims: P d t Li bilit I P d t Li bilit I Products Liability Issues Products Liability Issues

Mastering the Standards for Fault, Causation, and Damages in Foodborne Illness Litigation

By Felicity A McGrath By Felicity A McGrath By Felicity A. McGrath By Felicity A. McGrath fmcgrath@bonnerkiernan.com

Bonner Kiernan Trebach & Crociata LLP Bonner Kiernan Trebach & Crociata LLP Bonner Kiernan Trebach & Crociata, LLP Bonner Kiernan Trebach & Crociata, LLP 1233 20 1233 20th

th Street, N.W., 8

Street, N.W., 8th

th Floor

Floor Washington, DC 20036 Washington, DC 20036 (202) 712 (202) 712-

• 7000 Phone

7000 Phone (202) 712 (202) 712-

• 7100 Fax

7100 Fax

The Food Safety Products Liability Claim The Food Safety Products Liability Claim

 Each year, roughly 1 in 6 people in the United States becomes ill from eating contaminated food

MOST COMMON PATHOGENS

• E. Coli O157:H7

Campylobacter Salmonella

48

Number of E. Coli O157:H7 Illnesses by Vehicle

(2005-2009)

TOTAL ILL: 3,319

Unkown 32% Ground Beef 19%

Chicken Tenders Cookie Dough

Chicken Tenders 2%

Fruit/Vegitable Other Beef Products

2% Cookie Dough 3% Fruit/Vegitable 1% Other Foods

Guacamole Lettuce/Salad/Spinach

Other Beef Products 8% Milk Products 6% Other Foods 3%

Milk Products Other Foods

Guacamole 4% Lettuce/Salad/Spinach 22%

Unkown Ground Beef

22%

*Foodborne Outbreak Online Database (FOOD); Center for Disease Control and Prevention http://wwwn.cdc.gov/foodborneoutbreaks/

49

Number of E.Coli Illnesses by Vehicle Excluding O157:H7 (2005-2009)

TOTAL ILL: 897

Guacamole 6%

Unkown Salad

Unkown Sprouts 2% Milk

Fruit

65% Milk (unpasturized) 2%

Cheese (pasturized)

Cheese (pasturized) 15%

Milk (unpasturized) Sprouts

Fruit 1% Salad 9%

Sprouts Guacamole

9%

*Foodborne Outbreak Online Database (FOOD); Center for Disease Control and Prevention http://wwwn.cdc.gov/foodborneoutbreaks/

50

TOTAL ILL: 3,809

Number of Campylobacter Illnesses by Vehicle (2005-2009)

U k Unpasturized Cheese 6%

Fruit/Vegitables

Unkown 12% Shellfish

Other Foods Meat

Unpasturized Milk Shellfish 7%

Shellfish

Milk 60% Meat 9%

Unkown Unpasturized Cheese

Other Foods 2% Fruit/Vegitables 4%

Cheese Unpasturized Milk

*Foodborne Outbreak Online Database (FOOD); Center for Disease Control and Prevention http://wwwn.cdc.gov/foodborneoutbreaks/

4%

51

TOTAL ILL ANNUALLY: 1,000,000

Number of Salmonella Illnesses by Vehicle

2004-2008

Other 20% Vine Vegitables Fruits and Nuts 13%

Poultry

Beef 8%

Eggs Pork Beef

Pork 12%

Vegitables, Fruits, and Nuts

Eggs Poultry 29%

Other

*Foodborne Outbreak Online Database (FOOD); Center for Disease Control and Prevention http://wwwn.cdc.gov/foodborneoutbreaks/

Eggs 18%

52

Number of Listeria Illnesses by Vehicle

(2005-2009)

Unkown 14%

TOTAL ILL: 98

Cheese 35% Tuna Salad

Cheese

Taco/ Nacho Salad 2% 35% 5%

Chicken/Ham/Turkey Milk Sprouts Taco/Nacho Salad

Sprouts 20%

Tuna Salad Unkown

Chicken/Ham/Turkey 19% Milk 5%

Unkown

5%

*Foodborne Outbreak Online Database (FOOD); Center for Disease Control and Prevention http://wwwn.cdc.gov/foodborneoutbreaks/

53

Recent Significant Outbreaks Recent Significant Outbreaks

E COLI O104 H4 (2011)

• E. COLI O104:H4 (2011)

Sprouts (German farm – Lower Saxony; French farm – Bordeaux)  International Outbreak resulting in 852 people with HUS  International Outbreak resulting in 852 people with HUS

 32 deaths associated with HUS, 6 U.S. cases with one related death  Seeds originating from Egypt likely cause of contamination

SALMONELLA (2012)

Cantaloupe (Chamberlain Farms) Cantaloupe (Chamberlain Farms)  Outbreak in 24 states affecting 261 people

LISTERIA (2011) LISTERIA (2011)

Cantaloupe (Jensen Farms of Colorado) 

Outbreak in 28 States affecting 143 people



Outbreak in 28 States affecting 143 people  33 reported deaths

54

Enterohemorrhagic E. coli Enterohemorrhagic E. coli

• E. coli 0157: H7

Definition

One of over 180 types of E. coli. Causes Diarrhea, and Hemolytic Uremic Syndrome Hemolytic Uremic Syndrome

Common Route of Transmission

Foodborne/waterborne Person to person

Symptoms

Mild Diarrhea to severe stomach cramping, watery stool

y p

p g y followed by bloody diarrhea

Incubation Period

1-9 days

Communicability Period

While culture positive

Transmission

Cattle, undercooked contaminated ground beef, apple cider, recreational water supply, raw milk, mayonnaise, person-to- person transmission (i.e. day care centers or nursing homes), soil, chickens, lamb, pork, lettuce, salami, beef ) p jerky, radish sprouts, alfalfa sprouts, cantaloupe, and fresh potatoes

Diagnosis in People

Stool culture

55

Campylobacter Campylobacter

Campylobacteriosis

Definition

A bacteria best known for causing diarrhea

Definition

A bacteria best known for causing diarrhea

Common Route of Transmission

Foodborne/waterborne person to person

Symptoms

Most common symptoms: nausea and vomiting Only 1/3 with diarrhea Of those with Diarrhea only, 1/3 experience iti d bd i l vomiting and abdominal cramps

Incubation Period

1-10 days

Communicability Period

While culture positive

y

p

Transmission

Food (chicken, beef), milk, water, person-to- person, contact with dogs

Diagnosis in People

Stool culture

Diagnosis in People

Stool culture

56

Salmonella Salmonella

Salmonellosis (Bacteria)

Definition

Common bacterial cause of diarrhea. May lead to sepsis,

e

• y

p , and arthritis

Common Route of Transmission

Foodborne/waterborne Person to person

Symptoms

Nausea, vomiting, fatigue, cramps, loss of appetite, diarrhea (may be bloody), chills, fever

Incubation Period

6 72 hours

Incubation Period

6-72 hours

Communicability Period

Days to months while stool positive

Transmission

Beef pork poultry eggs dairy products fish potato

Transmission

Beef, pork, poultry, eggs, dairy products, fish, potato salad, water, tomatoes, sprouts, cantaloupe, dogs, cats, pet turtles, lizards, and orange juice

Diagnosis in People

Stool culture

Diagnosis in People

Stool culture

57

Listeria Listeria

Listeriosis

Definition

An invasive bacterial infection spreading beyond t i t ti l t t ith i d t gastrointestinal tract with varied symptoms

Common Route of Transmission

Foodborne, waterborne; Person to person Multiplies in refrigerated contaminated foods

S

F l h di h iti

Symptoms

Fever, muscle aches, diarrhea, nausea, vomiting, meningeal irritation, lesions at infection site Host dependent manifestations affected by age, immune system, pregnancy, etc.

Incubation Period

Extremely variable period ranging from 3-70 days, but averages 21 days

Communicability Period

Several months in positive stool; 7-10 days in post-

y

delivery mother’s urine and discharge

Transmission

Raw or unpasteurized milk products, cantaloupe, raw vegetables, raw deli meats, hot dogs, bologna, fish, etc.

Diagnosis in People

Stool culture

58

FoodNet FoodNet

 Foodborne Disease Active Surveillance Network (Foodnet)  Multi-state/agency collaborative project involving the CDC, 10 g y p j g states, the USDA, and the FDA  Conducts surveillance on Campylobacter, E. Coli O157:H7, Listeria, Salmonella, Shigella, and Yersinia Pestis  Performs studies for infection risk reduction, disease prevention, disease response  Enhance scope of knowledge available to officials and the l bli f db ill general public on foodborne illness  Publishes data on laboratory confirmed infections, illness tb k ti t d i ill t hi l f

• utbreaks, comparative trends in illness rates, vehicle of

contraction, and other pertinent information

59

PulseNet PulseNet

 Detects foodborne illness by using pulsed-field gel electrophoresis (PFGE)  Developed in the wake of the 1993 E coli O157:H7 outbreak originating from  Developed in the wake of the 1993 E. coli O157:H7 outbreak originating from the Jack in the Box restaurant chain  Compares PFGE patterns of bacteria isolated from afflicted persons to  Compares PFGE patterns of bacteria isolated from afflicted persons to determine similarities and to rapidly identify outbreaks  Stores collected local data in a shared national database to determine  Stores collected local data in a shared national database to determine geographical patterns of illness and identify cause and source of illness much faster than previous methods of detection  Reduces misclassification and error at each level of reporting (local, regional, national)  Provides surveillance of foodborne illness data

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USDA USDA’s s “Big Six Big Six” Regulation Regulation

 Establishes illegality of selling raw beef products contaminated with E.Coli strains 026, O45; O103; O111; O121; and O145 (O104:H4, responsible for the German outbreak not included) the German outbreak not included)  Rule applies to ground beef, beef trims and scraps, machine and needle tenderized steaks and others  USDA food inspection to launch program that tests for and detects the 6 strains in products entering commerce; designed as a preventive, not reactive, machine and needle tenderized steaks, and others p g ; g p , , program.  Industry groups anticipate new regulations will cost tens of millions in federal and industry dollars that will likely be passed onto the consumer and industry dollars that will likely be passed onto the consumer  In 2010, the Big Six were responsible for more infections in the U.S. than O157:H7 O157:H7  Effective March 5, 2012

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Food Safety Modernization Act

 Signed into law January 4, 2011  Preventive controls  Preventive controls  Inspection and Compliance

• FDA classifies fresh produce generally as “high risk” product for

f purposes of inspection priority.

 Imported Food Safety  Response  Enhanced Partnerships

Foreign supplier verification program

• Foreign supplier verification program
• Preventive controls for animal feed facilities
• Preventive controls for food facilities
• Produce safety regulations (standards for growing practices
• n the farm)

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Identifying Outbreaks Identifying Outbreaks

 Consumption of contaminated food  Doctor’s visit or hospital visit  Stool culture  Stool culture  Testing for appropriate pathogens g pp p p g  Positive finding reported to the health department  Health department investigation

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Delineating Fault Delineating Fault

PRODUCTS LIABILITY 1 Only issues to be decided are causation and damages

• 1. Only issues to be decided are causation and damages

 Are you the manufacturer or retailer?  Was the product contaminated or unsafe?  Did the product cause injury?

• 2. Was this an outbreak or a single isolated occurrence?

Outbreak:

 Defined as 2 or more people getting sick from the same source around the same time

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Delineating Fault Delineating Fault

Single Isolated Occurrence:

 Individual claims they ate your product or ate at y y p your restaurant and became ill  Even though it is a product liability theory you can bring in everything that you did to prevent illness h i ti when arguing causation

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Delineating Fault Delineating Fault

WHY THE ILLNESS WAS NOT CAUSED BY YOUR FOOD PRODUCT

 Go up the chain of distribution to the point

WHY THE ILLNESS WAS NOT CAUSED BY YOUR FOOD PRODUCT

p p

• f sale to prove wholesomeness (from

farm to fork).  It is important that you not only show why the illness was not caused by your product but also what the most likely  The most likely source can be, but does not have to be, a food source: product but also what the most likely source was

• Person-to-person transfer
• Recreational water
• Petting zoos
• Other meals, etc.

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Outbreaks Outbreaks

SEVERAL DIFFERENT WAYS TO APPROACH THE DEFENSE

 Questioning the source of the outbreak  DNA fingerprinting through:  DNA fingerprinting through:

• 1. PFGE (Pulsed Field Gel Electrophoresis)
• 2. MLVA (Multiple-Locus Variable Number Tandem Repeat Analysis)

CULTURE POSITIVE?

 Claimants that were treated and have a positive stool culture Claimants that were treated but have no stool culture Claimants that were not treated and have no stool culture

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Delineating Fault Delineating Fault

OTHER POTENTIAL SOURCES

NEW JERSEY TACO BELL E. COLI LITIGATION  Great Lakes Cheese and Ready Pac lettuce  Cheese was pasteurized

 Cheese came from two different distribution chains with different sources for the product

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Delineating Fault Delineating Fault

OTHER SOURCES OF FAULT

Jensen Farms – Cantaloupe Listeria Outbreak

Listeriosis Monocytogenes Listeriosis Monocytogenes First documented listeriosis outbreak associated with whole fruit or vegetable raw agricultural commodity.

Liability Picture Liability Picture

Jensen Farms – bankrupt Bio –Food Safety – 3rd party audit – bankrupt Bio Food Safety 3 party audit bankrupt Primus Labs Packing Equipment Maker – Pepper Equip Corp. Broker/Shippers pp Retailers

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How To Best Position the Litigation How To Best Position the Litigation

 CLASS ACTION  CLASS ACTION

• CAFA
• FRCP 23

 STATE CONSOLIDATION  MDL

• 28 USC Sec. 1407
• Judicial Panel on Multi-District Litigation

In Re ConAgra Peanut Butter Products Liability Litigation MDL

• In Re ConAgra Peanut Butter Products Liability Litigation, MDL
• No. 1845
• In Re Pet Food Products Liability Litigation, MDL No. 1950
• In Re McDonald's French Fries Litigation, MDL 1784

g ,

• Consolidation in one Federal District Court
• For purposes of discovery
• Tagalongs

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How To Best Position the Litigation How To Best Position the Litigation

SETTLEMENT SETTLEMENT

 Contacting claimants first  Matrix settlement  Resolve entire case load wholesale  Only culture positives  Settle as a class  Settle as a class

• Prevents other claims unless opted out

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How To Best Position the Litigation How To Best Position the Litigation

STRATEGIES TO AVOID PUBLICITY

 At outset in an outbreak – can’t be avoided

• There is a public interest in learning about the outbreak

 In single isolated occurrence – negative publicity can be minimized

• Get your message out

Be positive and confident

• Be positive and confident
• Reassure your customers
• Investigate early and determine if your product made the claimant sick
• A. If the answer is “yes” – get the case settled
• B. If the answer is “no” – you still have to do what is best to protect

your brand your brand

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Controlling the Aftermath Controlling the Aftermath

 Working out strategies with Plaintiff’s counsel

E ample press conference on co rtho se steps

• Example: press conference on courthouse steps

 Private Trial  Incentives for Plaintiffs

• High/Low Agreement

Fi lit N A l

• Finality – No Appeals
• Early Resolution

 Agreements to remove information about the outbreak from Plaintiff’s counsel’s website  Confidential settlement agreements and sealing the file  Confidential settlement agreements and sealing the file

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Controlling the Aftermath Controlling the Aftermath

RECALLS RECALLS

 Must plan for ahead of time

• During an outbreak is NOT the time to develop a

During an outbreak is NOT the time to develop a recall plan

• Have a crisis team in place
• Have a call center plan
• Have sample responses prepared for people

answering customer complaints

• Can be outsourced or use your third-party

administrator

 Have sample recall notices and websites set up  Work with a company that specializes in recalls to help you through the process

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Food Safety Claims: Food Safety Claims: P d t Li bilit I P d t Li bilit I Products Liability Issues Products Liability Issues

Mastering the Standards for Fault, Causation, and Damages in Foodborne Illness Litigation

By Felicity A McGrath By Felicity A McGrath By Felicity A. McGrath By Felicity A. McGrath fmcgrath@bonnerkiernan.com

Bonner Kiernan Trebach & Crociata LLP Bonner Kiernan Trebach & Crociata LLP Bonner Kiernan Trebach & Crociata, LLP Bonner Kiernan Trebach & Crociata, LLP 1233 20 1233 20th

th Street, N.W., 8

Street, N.W., 8th

th Floor

Floor Washington, DC 20036 Washington, DC 20036 (202) 712 (202) 712-

• 7000 Phone

7000 Phone (202) 712 (202) 712-

• 7100 Fax

7100 Fax

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HOW TO PAY FOR THE LOSSES RESULTING FROM A OO S O FOOD SAFETY PROBLEM

By Jonathan M. Cohen Gilbert LLP Washington, DC cohenj@gotofirm.com (202) 772-2259

GOALS GOALS

• Identify common ways that companies

lose money due to food-related recalls y and claims

• Match losses with sources of recovery

Suggest steps you can take now

• Suggest steps you can take now –

before a crisis hits

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IDENTIFICATION OF RISK IDENTIFICATION OF RISK

• Risks inherent in business versus risks

Risks inherent in business versus risks voluntarily taken

• Catastrophic events versus accumulated

smaller risks

• Company-specific risks versus supply

chain risks chain risks

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DETAILS, DETAILS, DETAILS

• “I do business in China, and I’m worried about my

supply chain.”

• Versus: “I am concerned about:

− Uncertainty of quality control, storage, and expiration dates; − Uncertainty of shipping disruptions (weather, pandemic, i ) piracy); − Uncertainty from poor working conditions or worker health; − Uncertainty of chemical/radiation exposure; Uncertainty of chemical/radiation exposure; − Uncertainty of business practices (FCPA).”

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COMMON LOSSES & COSTS COMMON LOSSES & COSTS

• Costs of risk prevention

I ti ti t

• Investigation costs
• Recall costs, including brand rehabilitation
• Damage to your own property
• Third party bodily injury and property damage
• Business interruption
• Downstream and supply chain claims
• Market fallout and shareholder claims

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PROTECTING AGAINST RECOGNIZED RISK PROTECTING AGAINST RECOGNIZED RISK

• The Four Corners of a risk control and risk transfer plan:
• The Four Corners of a risk control and risk transfer plan:

__ ________

Compliance and Quality Control Crisis Preparation

________ __________________________

Insurance Contract-based P t ti

____

Insurance Protections

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THE RISK TRANSFER MOSAIC THE RISK TRANSFER MOSAIC

TORT THIRD PARTY INSURANCE SPECIALITY INSURANCE FIRST PARTY INSURANCE INSURANCE PROCUREMENT REQUIREMENTS ADDITIONAL INSURED FINANCIAL INSTRUMENTS INDEMNITIES

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INDEMNITIES INDEMNITIES

• Which risks are covered
• How to draft and negotiate indemnities

g

• Enforceability issues
• Practical considerations
• Practical considerations

83

INSURANCE PROCUREMENT & INSURANCE PROCUREMENT & ADDITIONAL INSURED PROVISIONS

• Which risks are covered
• Proof of compliance (certificates of insurance)

p ( )

• How additional insured provisions work

– Three different kinds of provisions – Order of payments – Subrogation and other potential problems – Enforceability

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YOUR OWN INSURANCE PORTFOLIO YOUR OWN INSURANCE PORTFOLIO

Types of Insurance:

• General Liability
• First Party Property
• Business Interruption/Contingent Business Interruption
• Contamination/Recall
• Directors and Officers/Errors and Omissions
• Other

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INSURANCE ISSUES INSURANCE ISSUES

Wh i d?

• Who is covered?
• What is covered?
• Exclusions

– Pollution/contamination/microbe – Recall/sistership – Crime, fraud, and intent-based exclusions

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CONTAMINATION & RECALL POLICIES CONTAMINATION & RECALL POLICIES

Two components: Two components:

• 1. Insurance Coverage
• 2. Claim prevention and response services

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CONTAMINATION & RECALL POLICIES CONTAMINATION & RECALL POLICIES

• Insuring Agreement: “the Company agrees . . . to

Insuring Agreement: the Company agrees . . . to

reimburse the Insured for all or any Loss arising out of Insured Events . . . .”

(XL f ) (XL form)

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CONTAMINATION & RECALL POLICIES CONTAMINATION & RECALL POLICIES

Key Insured Events:

• Accidental Contamination:

“Accidental Contamination shall be: Error in the manufacture, production, processing, preparation, assembly, blending, mixing, compounding, packaging or labeling (including instructions for use) of any Insured Products; or instructions for use) of any Insured Products; or the introduction into an Insured Product of an ingredient or component that is, unknown to the Insured, contaminated or unfit for its intended purpose; or error by the Insured in the storage or distribution of any Insured Products while in the care or y g y custody of the Insured provided that the use or consumption of such Insured Products has led to

• r would lead to:

i) bodily injury, sickness, disease or death of any person(s) or animals(s) physically manifesting itself within three hundred sixty-five (365) days of use or consumption; or itself within three hundred sixty five (365) days of use or consumption; or ii) physical damage to or destruction of tangible property (other than the Insured Products themselves).” (XL Form) 89 ( )

CONTAMINATION & RECALL POLICIES CONTAMINATION & RECALL POLICIES

Accidental Contamination – Key Issues:

• What is contamination?

What is contamination?

• Link to bodily injury and property damage (Hot

Stuff and Little Lady) Stuff and Little Lady)

• Recall or contamination as triggering event

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CONTAMINATION & RECALL POLICIES CONTAMINATION & RECALL POLICIES

Key Insured Events:

• Malicious Contamination

– Definition: “The actual, alleged or threatened, intentional,

malicious and illegal alteration or adulteration of any Insured malicious and illegal alteration or adulteration of any Insured Products, or the creation of Adverse Publicity implying such alteration or adulteration, so as to give the Insured and/or the public reasonable cause to believe that the Insured Products public reasonable cause to believe that the Insured Products have been or are likely to be rendered dangerous or unfit for the use for which they were intended by the Insured.” (XL Form)

A t l t i ti t ti – Actual contamination versus extortion – Terrorism versus extortion

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CONTAMINATION & RECALL POLICIES CONTAMINATION & RECALL POLICIES

Key insured events:

• Other triggering events

– Governmental action (impact of FSMA on triggers) – Adverse publicity (what of industry-wide adverse publicity?) I i d i di t – Impaired ingredient – Others

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CONTAMINATION & RECALL POLICIES CONTAMINATION & RECALL POLICIES

C t i f fi t t l

• Categories of first party loss

– Recall costs R h bilit ti t – Rehabilitation costs – Lost profits (how calculated?) P t ti d t ti t – Preventative and testing costs – Investigations

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CONTAMINATION & RECALL POLICIES CONTAMINATION & RECALL POLICIES

• Other important terms

– Third party loss – Sublimits – Calculating and tracking loss

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CONTAMINATION & RECALL POLICIES CONTAMINATION & RECALL POLICIES

• Some key exclusions and limitations
• Some key exclusions and limitations

– GMO and specialized causes of loss C i d i d t l i – Crime and misconduct exclusions – Unidentified products and new product lines

• Other issues

– Limits, deductibles, and response costs – Timing of claim (claims-made coverage)

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CONTAMINATION & RECALL POLICIES CONTAMINATION & RECALL POLICIES

• Preventative and Crisis Response Provisions

– What is covered? – Typically, no deductible applies – Mandatory or voluntary Mandatory or voluntary – When is this useful?

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WHAT TO DO NOW WHAT TO DO NOW

1. Immediate steps:

• Conduct risk and insurance audit using outside counsel and/or
• Conduct risk and insurance audit using outside counsel and/or

independent broker

• Implement cost-tracking procedures
• Put insurance and indemnity requirements into response plan

Put insurance and indemnity requirements into response plan

And, most importantly, clarify goals to ensure preventative and response procedures meet business objectives f 2. If a crisis happens:

• Early decisions matter (notice, cooperation, counsel selection, etc.)
• Immediate and effective coordination of defense and insurance

t t strategy

• Working with insurers effectively
• Resolving disputes with insurers and within supply chain

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THANK YOU

Jonathan M. Cohen Gilbert LLP W hi t DC Washington, DC cohenj@gotofirm.com (202) 772-2259

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