Food Safety Regulation and Litigation: Minimizing the Risk of - - PowerPoint PPT Presentation

Food Safety Regulation and Litigation: Minimizing the Risk of Product Liability Claims

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

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WEDNESDAY, APRIL 30, 2014

Presenting a live 90-minute webinar with interactive Q&A Lee N. Smith, Shareholder, Weintraub Tobin, Sacramento, Calif. Felicity A. McGrath, Partner, Bonner Kiernan Trebach & Crociata, Washington, D.C.

• W. Hunter Winstead, Partner, Gilbert, Washington, D.C.

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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 1 1 0 0 S A C R A M E N T O , C A L I F O R N I A 9 5 8 1 4 9 1 6 - 5 5 8 - 6 0 0 0 L N S M I T H @ W E I N T R A U B . C O M

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

Abstract

In January 2011 President Obama signed the Food Safety 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, 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 Controls for Food Facilities and the Produce Safety Rule were circulated for comment in early 2013. Issues with respect to these rules are still being discussed. 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”)

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)

 Most expansive changes in food safety since

the 1938 Act

 Sweeping new enforcement authorities  Exacting new food import requirements  Major new program activities for FDA/with

corresponding budgetary issues

8

Significant FSMA Provisions

 Stronger Records Access Authority (FSMA § 101)  Mandatory Recall Authority (FSMA § 206)  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

(requiring more information and additional disclosure) (FSMA § 211)

 Suspension of Registration (FSMA § 102)  Preventative Controls (FSMA § 103)  Produce Safety Rules (FSMA § 105)  FDA Lab Accreditation (FSMA § 202)  Traceability (FSMA § 204)  Major Changes to Regulation of Imports

(FSMA §§ 301,302)

 Prevention of Adulteration  Identification of High Risk Foods

10

Stronger Records Access Authority

(FSMA § 101)

 When “reasonable

probability” of “serious adverse health consequences”

 Now, includes records of

• ther food affected in

similar manner

 Proper credentials and

written notice

11

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

12

What Was the Status Quo Before the New Act?

 Recalls

 Class I Recalls:

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

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.)

 Recalls (cont.)

 Class III Recalls:

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)

 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 animals.

 Opportunity for voluntary recall within FDA appropriate

timing

 Hearing within two days of the order’s issuance

15

Increased Frequency of Inspections (FSMA § 201)

 Immediate increased frequency of inspections

 Once every 7, 5, 3 years

 Risk-based, high-risk facilities first

 The higher the risk, the more inspections

16

Whistleblower Protection (FSMA § 402)

 Protects employees from discharge, discrimination in

compensation or conditions of employment with respect to:

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

re: a violation

 Objecting to an “activity, policy, practice or

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

 Remember to update Employee Handbooks to reflect this

policy

17

Foreign Facilities and Refusal of Inspection (FSMA § 306)

 If the FDA requests that it be

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 admission

18

Broader Authority to Detain Foods (FSMA § 207)

 Administratively 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”

 “Reasonable probability” of “serious adverse

health consequences to humans or animals”

 “Responsible Party”

 FDA-registered facility where product is

“manufactured, processed, packed or held”

 “Requirement”

 Report to FDA portal within 24 hours

20

Amendments to RFR (FSMA § 211)

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

information” including

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

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

• f the reportable food

21

Suspension of Registration

 If FDA determines “reasonable probability” of food

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

 Facilities that are “responsible” and those that

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

 Regulations require

that

 Hazards be identified  Preventative controls

be enacted for

 Sanitation  Training  Environmental controls  Allergen controls

 A recall contingency

plan

 GMPs  Supplier verification

activities

 Monitor controls  Correction actions

23

Issues with the Rules

Law Suits as to timing. Time Frame for Finalization. Application to Farmers

24

Produce Safety Rule FSMA Section 105

 Section 105 of the Food Safety

Modernization Act (FSMA) directs FDA to set science-based standards for the safe production and harvesting

• f fruits and vegetables that the Agency

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

25

Produce Safety Rules

 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

routes of microbial contamination of produce, including:

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

so extensive the dates to respond were rescheduled

 Major issues relate to :

 Confusion over the application to certain industries

 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)

 FDA accredited labs

W/30 months

 Testing by FDA

accredited labs mandated

 Results sent directly to

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

28

Traceability (FSMA § 204)

 Traceability – Pilot studies are ongoing  Statute states that the FDA cannot require:

 A full pedigree or a record of the complete previous

distribution history of the food from the point of origin of such food

 Records of recipients of a food beyond the immediate

subsequent recipient of such food

 Product tracking to the case level by persons subject to

such requirements

29

Foreign Supplier Verification 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)

 FDA shall “provide for the expedited review and

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”

31

Import Certifications

(FSMA § 302)

 FDA may require third-party

certification as a condition of import

 FDA can create system of

accreditation for auditors

 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

• f which have yet to be finalized, as

indicated the Produce Safety Rule and the Preventative Control Rules

33

How do these Issues Effect Food Liability

 New statutory Standards of Care

 Identification of High Risk Foods

 Increased reporting standards  More information in the public record

 Including recalls and testing results

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

35

Appropriate Strategy & Relationship with FDA

 Cooperative but firm  Understand

communication is

• ne-way

 Understand and assert

rights

 Role-play during recall

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

37

Recalls Happen

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. 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

Workers leaving the Topps Meat plant in Elizabeth, N.J., on Friday. 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

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 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 have taken steps earlier to protect consumers or to head

• ff the plant’s closure.

After Extensive Beef Recall, Topps Goes Out of Business 39

Potential Recall Event: What to Do

 Follow recall plan that is in place  Log events, actions, and communications  Record all reported injuries  Document investigation  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  Supplier agreements

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

audits

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

insurance, class action, chain insurance

41

… for the recovery of damages… arising out of or alleged to have arisen out of (a) the delivery, sale, resale, labeling, use or consumption of any Product… Seller agrees to defend, indemnify and hold harmless Buyer

Careful Review of Supplier/Vendor Agreement

[Make sure they reflect your insurance coverage] [Indemnity only as strong as indemnitor]

42

Seller’s insurance described herein shall be primary and not contributory with Buyer’s insurance. Buyer shall be named as an additional insured… waivers of subrogation

Careful Review of Supplier/Vendor Agreement (cont.)

43

Insurance

 Sufficient coverage

 Products  Recall

 Sufficient limits  Involve legal counsel and

trusted broker who understands the industry and your business

44

Action Steps

 Review and amend

 Supplier agreements (indemnification, insurance, compliance

with FSMA)

 Insurance coverage (re-examine recall coverage)

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

compliance

 Recall plan and rehearsal  FDA inspection plan  Comment on rulemaking

45

LEE N. SMITH WEINTRAUB | TOBIN 400 CAPITOL MALL, SUITE 1100 SACRAMENTO, CALIFORNIA 95814 916-558-6000 LNSMITH@WEINTRAUB.COM

Contact Information

46

By Felicity A. McGrath fmcgrath@bonnerkiernan.com

Bonner Kiernan Trebach & Crociata, LLP 1233 20th Street, N.W., 8th Floor Washington, DC 20036 (202) 712-7000 Phone (202) 712-7100 Fax

Food Safety Claims: Products Liability Issues

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

The Food Safety Products Liability Claim

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

MO MOST ST CO COMM MMON ON PAT PATHO HOGENS GENS

• E. Coli O157:H7

Campylobacter Salmonella

48

Number of E. Coli O157:H7 Illnesses by Vehicle

(2005-2009)

Chicken Tenders 2% Cookie Dough 3% Fruit/Vegitable 1% Other Beef Products 8% Guacamole 4% Lettuce/Salad/Spinach 22% Milk Products 6% Other Foods 3% Unkown 32% Ground Beef 19%

Chicken Tenders Cookie Dough Fruit/Vegitable Other Beef Products Guacamole Lettuce/Salad/Spinach Milk Products Other Foods Unkown Ground Beef

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

TOTAL ILL: 3,319

49

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

Unkown 65% Cheese (pasturized) 15% Sprouts 2% Guacamole 6% Milk (unpasturized) 2% Fruit 1% Salad 9%

Unkown Salad Fruit Cheese (pasturized) Milk (unpasturized) Sprouts Guacamole

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

TOTAL ILL: 897

50

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

TOTAL ILL: 3,809

Number of Campylobacter Illnesses by Vehicle (2005-2009)

Other Foods 2% Unkown 12% Unpasturized Milk 60% Unpasturized Cheese 6% Fruit/Vegitables 4% Meat 9% Shellfish 7%

Fruit/Vegitables Other Foods Meat Shellfish Unkown Unpasturized Cheese Unpasturized Milk

51

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

TOTAL ILL ANNUALLY: 1,000,000

Number of Salmonella Illnesses by Vehicle

2004-2008

Beef 8% Pork 12% Eggs 18% Poultry 29% Other 20% Vine Vegitables Fruits and Nuts 13%

Poultry Eggs Pork Beef Vegitables, Fruits, and Nuts Other

52

Number of Listeria Illnesses by Vehicle

(2005-2009)

Chicken/Ham/Turkey 19% Milk 5% Taco/ Nacho Salad 2% Cheese 35% Unkown 14% Tuna Salad 5% Sprouts 20%

Cheese Chicken/Ham/Turkey Milk Sprouts Taco/Nacho Salad Tuna Salad Unkown

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

TOTAL ILL: 98

53

54

55

Recent Significant Outbreaks

SA SALMONELL LMONELLA A HEIDELBE EIDELBERG RG (2013 2013)

Ch Chicken (Fo en (Foster ter Fa Farms ms, Ca Califor

• rni

nia) a)  Outbreak in 25 states affecting 524 people, 37% hospitalized

 Antibiotic resistant strains

E.

• E. COLI

LI O15 157:H7 7:H7 (2013 2013)

Re Read ady to E

• Eat

at S Sal alad ads (Glass Onion Catering, California)  33 people infected with outbreak strain from 4 states

 7 hospitalizations and two ill persons developed HUS  Ready to Eat Salads containing chicken, STECO157:H7 PFGE pattern new to to Pulsenet database. Unclear what product caused illness.

LI LISTERIA STERIA (2011 2011)

Ca Cant ntal alou

• upe

pe (Jensen Farms of Colorado) 

Outbreak in 28 States affecting 143 people  33 reported deaths

56

Enterohemorrhagic E. coli

E.

• E. c

col

• li 01

0157 57: H7 H7

Def efin init itio ion

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

Com

• mmo

mon n Rou

• ute

te of

• f Tr

Transmi ansmission ssion

Foodborne/waterborne Person to person

Sym ymptoms ptoms

Mild Diarrhea to severe stomach cramping, watery stool followed by bloody diarrhea

In Incub ubati ation

• n Per

eriod iod

1-9 days

Com

• mmu

municabil nicabilit ity Peri eriod

• d

While culture positive

Tr Trans ansmi mission ssion

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 jerky, radish sprouts, alfalfa sprouts, cantaloupe, and fresh potatoes

Dia iagn gnos

• sis

is in in Pe Peop

• ple

le

Stool culture

57

Campylobacter

Cam ampylob pylobact acterios eriosis is

De Defini nition

• n

A bacteria best known for causing diarrhea

Co Comm mmon

• n Ro

Rout ute o e of Tr Tran ansmi smiss ssion

• n

Foodborne/waterborne person to person

Sy Symp mptoms

• ms

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

Inc ncub ubat ation

• n Pe

Period

• d

1-10 days

Co Comm mmun unicab cability Pe ty Period

• d

While culture positive

Tr Tran ansmi smiss ssion

• n

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

Di Diag agno nosis s in n Pe Peop

• ple

Stool culture

58

Salmonella

Sal Salmone monellosis losis (B (Bacteria) acteria)

Definition finition

Common bacterial cause of diarrhea. May lead to sepsis, and arthritis

Common mmon Route ute of f Tr Transmission nsmission

Foodborne/waterborne Person to person

Symptoms ptoms

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

In Incubation cubation Pe Period riod

6-72 hours

Communicability mmunicability Period iod

Days to months while stool positive

Tr Transmission nsmission

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

Diagnosis agnosis in People

• ple

Stool culture

59

Listeria

Li Listerio teriosis sis

Definition finition

An invasive bacterial infection spreading beyond gastrointestinal tract with varied symptoms

Common mmon Route ute of Tr f Transmi ansmission ssion Foodborne, waterborne; Person to person

Multiplies in refrigerated contaminated foods

Symptoms ptoms

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

In Incubation ubation Period riod

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

Communicability mmunicability Period iod

Several months in positive stool; 7-10 days in post- delivery mother’s urine and discharge

Tr Transmission nsmission

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

Diagnosis agnosis in People

• ple

Stool culture

60

Norovirus

Nor

• rovirus
• virus

Definition finition

An invasive bacterial infection spreading beyond gastrointestinal tract with varied symptoms

Common mmon Route ute of Tr f Transmi ansmission ssion Foodborne; Person to person, remains on surfaces

touched by infected persons

Symptoms ptoms

Diarrhea, nausea, vomiting, Fever, muscle aches, stomach pain.

In Incubation cubation Pe Period riod

24 to 48 hours after first exposure to the virus.

Communicability mmunicability Period iod

While ill with the virus and for up to three days after recovery.

Tr Transmission nsmission

Contaminated food and water, (leafy greens, fresh fruit, shellfish), person to person, touching contaminated surface

Diagnosis agnosis in People

• ple

Symptoms and Stool culture

61

FoodNet

 Foodborne Disease Active Surveillance Network (Foodnet)  Multi-state/agency collaborative project involving the CDC, 10 states, the USDA, and the FDA since 1995  Conducts surveillance on Campylobacter, STECs, Listeria, Salmonella, Shigella, Cryptosporidium, Cyclospora, Vibrio and Yersinia Pestis  Performs studies for infection risk reduction, disease prevention, disease response  Enhance scope of knowledge available to officials and the general public on foodborne illness  Publishes data on laboratory confirmed infections, illness

• utbreaks, comparative trends in illness rates, vehicle of

contraction, and other pertinent information

62

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 the Jack in the Box restaurant chain  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 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

63

Other Foodborne Illness Surveillance

NARMS (National Antimicrobial Resistance Monitoring System)

 Monitors antimicrobial resistance in intestinal bacteria isolated from humans, retail meats and food animals  CDCs primary role is to track and report antibiotic resistance in enteric bacteria isolated from people who have infections caused by Salmonella, Campylobacter, E.Coli O157:H7, Shigella or Vibrio species.

CaliciNet (National Electronic Norovirus Outbreak Network)

 Links norovirus clusters to outbreaks with common food source. Allows public health agencies to determine which samples part of outbreak  Begun in 2009, currently has 25 states participating. Linked to National Outbreak Reporting System.

64

USDA’s “Big Six” Regulation

USDA food inspection to launch program that tests for and detects the 6 strains in products entering commerce; designed as a preventive, not reactive, program.  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)  Rule applies to ground beef, beef trims and scraps, machine and needle tenderized steaks, and others

Food Safety Modernization Act (FSMA)

Inspection and Compliance

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

for purposes of inspection priority. Response Enhanced Partnerships Foreign supplier verification program Preventive controls for animal feed facilities Preventive controls for food facilities Produce safety regulations (standards for growing practices on the farm)

65

Identifying Outbreaks

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

66

Delineating Fault

PR PRODUCTS ODUCTS LIA IABI BILIT ITY

• 1. On

Only y issu ssues s to to b be d deci cided are ca causa satio tion and d damages

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

• 2. Wa

Was t s this s an o

• utb

tbreak k or a s single gle iso sola late ted occ ccurre rrence nce?

Outbreak:

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

67

Delineating Fault

Single Isolated Occurrence:

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

68

Delineating Fault

 The most likely source can be, but does not have to be, a food source:

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

 Go up the chain of distribution to the point

• 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 source was

WHY THE ILLNESS WAS NOT CAUSED BY YOUR FOOD PRODUCT

69

Outbreaks

SEVERAL DIFFERENT WAYS TO APPROACH THE DEFENSE

 Questioning the source of the outbreak  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

70

Delineating Fault

OT OTHER ER POT POTENT ENTIAL IAL SOURCES SOURCES

NEW EW JERSE ERSEY TACO ACO BE BELL LL E.

• E. COLI

LI LI LITIGA IGATIO TION  Great Lakes Cheese and Ready Pac lettuce  Cheese was pasteurized

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

71

Delineating Fault

OTHER SOURCES OF FAULT

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

Jensen Farms – Cantaloupe Listeria Outbreak

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

72

How To Best Position the Litigation

 CL CLAS ASS S AC ACTI TION ON

• CAFA
• FRCP 23

 ST STAT ATE E CO CONS NSOL OLIDA DATI TION ON  MDL MDL

• 28 USC Sec. 1407
• Judicial Panel on Multi-District Litigation
• 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
• Consolidation in one Federal District Court
• For purposes of discovery
• Tagalongs

73

How To Best Position the Litigation

SETTLEMENT

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

• Prevents other claims unless opted out

74

How To Best Position the Litigation

STRATEGIES TO AVOID PUBLICITY

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

• ided
• There is a public interest in learning about the outbreak

 In In single ngle isolated

• lated occurrence

currence – negat gative ive publi blicity city can n be minimi nimized zed

• Get your message out
• 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

75

Controlling the Aftermath

 Working out strategies with Plaintiff’s counsel

• Example: press conference on courthouse steps

 Private Trial  Incentives for Plaintiffs

• High/Low Agreement
• 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

76

Controlling the Aftermath

RECALLS

 Must plan for ahead of time

• 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

77

By Felicity A. McGrath fmcgrath@bonnerkiernan.com

Bonner Kiernan Trebach & Crociata, LLP 1233 20th Street, N.W., 8th Floor Washington, DC 20036 (202) 712-7000 Phone (202) 712-7100 Fax

Food Safety Claims: Products Liability Issues

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

HOW TO PAY FOR THE LOSSES

RESULTING FROM A FOOD SAFETY PROBLEM

By

• W. Hunter Winstead

Gilbert LLP Washington, DC winsteadh@gotofirm.com (202) 772-2344

80

GOALS

• Identify common ways that companies

lose money due to food-related recalls and claims

• Match losses with sources of recovery
• Suggest steps you can take now –

before a crisis hits

81

IDENTIFICATION OF RISK

• Risks inherent in business versus risks

voluntarily taken

• Catastrophic events versus accumulated

smaller risks

• Company-specific risks versus supply

chain risks

82

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, piracy); − Uncertainty from poor working conditions or worker health; − Uncertainty of chemical/radiation exposure; − Uncertainty of business practices (FCPA).”

83

COMMON LOSSES & COSTS

• Costs of risk prevention
• 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

84

PROTECTING AGAINST RECOGNIZED RISK

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

__________________ __________________________

Compliance and Quality Control CrisisPreparation Insurance Contract-based Protections

85

THE RISK TRANSFER MOSAIC

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

86

INDEMNITIES

• Which risks are covered
• How to draft and negotiate indemnities
• Enforceability issues
• Practical considerations

INSURANCE PROCUREMENT & ADDITIONAL INSURED PROVISIONS

• Which risks are covered
• Proof of compliance (certificates of insurance)
• How additional insured provisions work

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

87

88

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

89

INSURANCE ISSUES

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

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

90

CONTAMINATION & RECALL POLICIES

Two components:

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

91

CONTAMINATION & RECALL POLICIES

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

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

(XL form)

92

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 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 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 ii) physical damage to or destruction of tangible property (other than the Insured Products themselves).” (XL Form)

CONTAMINATION & RECALL POLICIES

Accidental Contamination – Key Issues:

• What is contamination?
• Link to bodily injury and property damage (Hot

Stuff and Little Lady)

• Recall or contamination as triggering event

93

94

CONTAMINATION & RECALL POLICIES

Key Insured Events:

• Malicious Contamination

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

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 have been or are likely to be rendered dangerous or unfit for the use for which they were intended by the Insured.” (XL Form)

– Actual contamination versus extortion – Terrorism versus extortion

95

CONTAMINATION & RECALL POLICIES

Key insured events:

• Other triggering events

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

96

CONTAMINATION & RECALL POLICIES

• Categories of first party loss

– Recall costs – Rehabilitation costs – Lost profits (how calculated?) – Preventative and testing costs – Investigations

97

CONTAMINATION & RECALL POLICIES

• Other important terms

– Third party loss – Sublimits – Calculating and tracking loss

CONTAMINATION & RECALL POLICIES

• Some key exclusions and limitations

– GMO and specialized causes of loss – Crime and misconduct exclusions – Unidentified products and new product lines

• Other issues

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

98

CONTAMINATION & RECALL POLICIES

• Preventative and Crisis Response Provisions

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

99

WHAT TO DO NOW

1. Immediate steps:

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

independent broker

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

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

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

strategy

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

100

101

THANK YOU

• W. Hunter Winstead

Gilbert LLP Washington, DC winsteadh@gotofirm.com (202) 772-2344