The Food Safety Modernization Act: Another Law of Unintended Consequences?

Critics of the FSMA argue that it will not have a significant effect on decreasing the number of outbreaks of food-borne illness and will only increase the overall costs of selling food products and managing the inherent risks of food contamination. Proponents of the FSMA claim that the law will focus more on preventing outbreaks rather than on reacting to them locally and abroad, particularly in light of the recent European E. coli outbreak.

One incident that was widely considered to be a catalyst for the passage of the FSMA was the July 2009 salmonella outbreak traced to peanuts sold by the Virginia-based Peanut Corporation of America (PCA). As a result of this incident, nearly 700 people became ill, and nine people died. Litigation is currently ongoing against PCA in federal court in Virginia, and PCA filed for bankruptcy within weeks after the first report of illness. In July 2008, E. coli was traced back to green onions served at two Taco Bell restaurants, and in April 2010, a salmonella outbreak affected 155 people as a result of beef sold at Taco Bell. In August 2010, Wright County Egg of Galt, Iowa, conducted a nationwide voluntary recall of shell eggs. More than 500 million eggs were involved in the nationwide recall.

The FSMA has come into the spotlight concerning the raw milk debate. The FDA has been conducting sting operations and armed raids against raw milk producers. Currently, Pennsylvania Amish farmer Dan Allgyer is facing an injunction against selling raw milk across state lines. Seemingly in connection with this raw milk debate, the FDA announced on May 5, 2011, two interim final rules to implement portions of the FSMA. Both interim final rules became effective on July 3, 2011, after comments were received and reviewed. Under the first rule, the FDA is now able to detain food administratively when the agency has “reason to believe a food is adulterated or misbranded.” The second rule implements section 304 of the FSMA, to require food importers to report the name of any country to which the article of food has been refused entry.

Although the underlying goal of the FSMA is to enable the FDA to better protect public health by ensuring the safety and security of the food supply, the practical effects of the FSMA are that it is costly, that it applies to essentially any entity in the food industry, that it is uncertain, that it gives the FDA sweeping new enforcement authorities, and that it will likely create a whole host of litigation issues. Mid-sized business are expected bear the greatest burden, because large food facilities are likely to be already strictly monitoring the safety of food they produce, and small businesses are exempt from many of the requirements. Moreover, funding for the act (estimated at $1.4 billion over five years) still has to be approved. However, the FDA is moving forward with implementation based on existing resources and the assumption that the necessary additional funding will ultimately be provided.

Does this sound familiar? Here is another piece of legislation that has a laudable goal but that results in onerous, poorly-thought-out regulations that create unintended economic consequences on businesses struggling in the worst economic times that this nation has seen in decades. Indeed, this has become an all too familiar pattern that will likely result in billions of dollars in compliance costs to the food industry, leading to layoffs, bankruptcies, and business closures. We remember what Congress did in an effort to protect children from lead products imported from China. The Consumer Products Safety Improvement Act of 2008 turned into a nightmare for industry as well as the Consumer Products Safety Commission, as it was so poorly drafted and so overbroad in relation to the problem it was intended to address that it cost the industry billions of dollars to comply with it. That statute assumed that children would eat lead out of bicycle brakes.

This article addresses some potential litigation issues that can be expected to arise from specific provisions of the act, which became effective on January 2, 2011, as well as additional litigation issues that may arise in the future.

Notable Provisions
Three important provisions of the FSMA became effective on January 2, 2011: the FDA’s mandatory recall authority, expanded FDA access to company records, and whistleblower protections.

Mandatory Recall Authority
One of the most ominous and far-reaching provisions of the FSMA is the FDA’s new mandatory recall authority. The FDA issues general information about all new recalls it is monitoring through a weekly publication, Enforcement Report. As it relates to product liability law, this authority is noteworthy because it enables the FDA to initiate a mandatory recall campaign when a company fails to remove unsafe food from the market voluntarily.

The FDA may issue a recall under section 206, after determining “that there is a reasonable probability that an article of food is adulterated . . . or misbranded . . . and the use or exposure. . . will cause serious adverse health consequences or death to humans or animals.” The FDA must provide the company the opportunity to cease distribution voluntarily and recall the affected product. If a company fails to do so, the FDA can order it immediately to cease distribution. Following the order, the FDA will provide the responsible party an opportunity for an informal hearing within two days. Failure to comply with the recall order is a prohibited act and the responsible party may be subject to civil penalties. In addition, to make FDA recalls more transparent, the agency must, within 90 days after the date of enactment, update its website so that users can search for all information related to the recall, including the status of the recall. FSMA § 206, 21 U.S.C. § 3501 (2011). With the ability to access this information at any moment and to identify companies undergoing a recall, plaintiffs and their attorneys can quickly and more easily identify potential defendants and file suit against the recalling company. Therefore, companies should have a strong product recall plan in place to minimize potential injury to consumers and to the company, and they should maintain effective relationships with the media and regulatory agencies.

Given the FDA’s authority to order a recall under section 206 if it determines a food facility’s products have a “reasonable probability of causing serious adverse health consequences”—not that such consequences are “more likely than not”—there is a high probability that plaintiffs will attempt to use this finding to make the inferential leap that a company’s products are unreasonably dangerous and subject the company to product liability litigation. To recover under a strict product liability theory, a plaintiff need only show that a product was defective in manufacture or design, that the manufacturer failed to adequately warn of the product’s risks, or that the product breached a warranty. Restatement (Third) of Torts, Products Liability § 2. Plaintiffs will undoubtedly attempt to make the stealth preemption argument that if a food has been identified by FDA as causing serious adverse health consequences or risk of death, it is “defective” and breached express and implied warranties.

Furthermore, those companies that refuse to issue a voluntary recall and that are subject to a mandatory recall by the FDA, could find themselves subject to product liability claims for failure to warn. To establish a failure to warn claim, a plaintiff must show that a product is defective because of inadequate instructions or warnings when the foreseeable risks of harm posed by the product could have been reduced or avoided by proper instructions. Restatement (Third) of Torts, Products Liability § 2. If companies fail to issue warnings on their own, plaintiffs will likely argue these companies failed to warn consumers of the dangers in their products. Thus, the no-fault scheme of strict product liability may be exploited by eager plaintiffs upon implementation of these new regulations.

Similarly, pursuant to section 207 of the FSMA, the FDA now has the power to administratively detain food when the agency has “reason to believe an article of food is adulterated or misbranded.” FSMA § 207, 21 U.S.C. § 334 (2011). This standard lowers the bar for the FDA to use administrative detention. Foods detained by FDA are also likely candidates for negligence and product liability claims, as plaintiffs will likely argue that foods labeled “adulterated” or “misbranded” necessarily breach the standard of care to provide consumers with food safe for consumption. “Adulterated” and “misbranded” might as well read “defective” for purposes of product liability claims, even though, again, the FDA’s administrative standards are far more lax than what the common law requires.

Increased Records Access
Under the FSMA, the FDA has greater access to company records than ever before. Prior to the passage of the FSMA, the FDA could access records relating only to articles of food believed to be adulterated. Now, where there is a “reasonable belief” that an article of food is adulterated, the FDA may request not only the records of the affected food but also the records of any other article of food that FDA reasonably believes is “likely to be affected in a similar manner.” FSMA § 101, 21 U.S.C. § 350c (2011). Furthermore, the FDA is entitled to access “any records needed to assist” its determination of whether a food is adulterated. Thus, a company must not only produce records of a food believed to be adulterated but also provide the records of foods that may be similarly affected.

With the FDA’s new ability to request records of foods it believes may be similarly affected, plaintiffs have access to records never before released on such a wide scale. Under the Freedom of Information Act, plaintiffs will likely be able to access the documents amassed by FDA. The expanded records access opens the door to numerous possibilities for private litigation, and it also has the potential to provide plaintiffs with claims for punitive damages.

Claims for punitive damages require a showing of malice, oppression, or fraud. Judicial Council of California Civil Jury Instructions (CACI) No. 3940. To make this showing, the plaintiffs must prove that the defendants acted with intent to cause injury or with a willful and knowing disregard of the rights or safety of another. Id. Under the expanded records access, companies are required to produce all documents relating to the affected food, including all records relating to the manufacture, processing, packing, distribution, receipt, holding, or importation of the food product. Plaintiffs may now have access to records that they will be sure to claim reflect intent to cause injury or knowing disregard for the safety of consumers, which led to the contamination of the food product, allowing them to make a claim for punitive damages. Further, the documents could be used by plaintiffs to allege that the company had “knowledge” of contaminated food, which also may prove helpful in making a claim for punitive damages. Where a plaintiff can show that a company knowingly engaged in unsafe practices, the plaintiff may be more inclined to assert a claim for punitive damages.

Whistleblower Protections
The FSMA also establishes a series of whistleblower protections that apply to “any entity engaged in the manufacture, processing, packing, transporting, distribution, reception, holding, or importation of food.” FSMA § 402, 21 U.S.C. § 399d (2011). These provisions prohibit companies from discharging or discriminating against employees who identify, report, or refuse to participate in a violation of the FSMA’s requirements. FSMA § 402, 21 U.S.C. § 399d (2011). These protections also include an opportunity for the employee to file a complaint and a government investigation of that complaint. The Secretary of Labor, rather than the FDA, is charged with enforcing the FSMA whistleblower protections.

From a litigation perspective, employers should adopt strong anti-retaliation policies (including alternative avenues for an employee to complain), advise managerial personnel of the company’s anti-retaliation provisions, and provide training on ways to avoid the appearance of retaliation.

Additional Litigation Issues to Consider
Preemption
The FSMA does not have an express preemption clause prohibiting concurrent food safety regulation under state law. The act contains “no preemption” provisions in sections 103, 105, 112, and 402. Food companies must therefore be mindful of liability under state laws while complying with the FSMA. An example of potentially conflicting state laws is found in the Minnesota statutes. Those statutes permit state personnel to inspect facilities in Minnesota to enforce the Minnesota food laws. Minn. Stat. § 31.04 (2010). These inspections occur much more frequently than inspections that will be required under the FSMA. Thus, food facilities in Minnesota will continue to be inspected far more frequently under Minnesota law than under the FSMA. While the FSMA may give the appearance of creating uniform standards in food safety regulation, food companies must continue to monitor and abide by state-imposed regulations.

Potential Defendants
The FSMA may also permit plaintiffs to add new categories of defendants to lawsuits that they may not have considered, or even had a cause of action against, in the past. Companies involved in the transportation of food products may be one such category of new defendants added to the list, as they will soon be required to comply with FDA-established rules ensuring the “sanitary transportation of food.” Section 111 of the FSMA instructs the FDA to establish rules that require persons engaged in the transportation of food to use sanitary transportation practices. The regulation provides little guidance with respect to what practices will be considered “sanitary.” At this point, one can only guess what regulations the FDA may come up with, and until rules are established, those involved in food transportation will have little direction other than knowing they must adhere to the vague concept of “sanitary transportation of food.”

Under the current standards, restaurants and retailers remain largely unaffected by the FSMA. None of the provisions in the FSMA will have an immediate or direct impact on restaurants. However, restaurants may be subject to the enhanced tracking and tracing of food and record keeping. These regulations aim to decrease the reaction time in case of an outbreak of food-borne illness. In addition, restaurants that import directly from foreign countries will be subject to the regulations on imported foods. However, restaurants, like producers and manufacturers, should pay close attention to their food suppliers and prepare themselves to manage the recall process effectively. A recall initiated by a supplier could lead to increased costs and possibly a shortage of popular menu items, thus interrupting a restaurant’s business. At the same time, restaurants should have their own recall plans in place to ensure that recalls are effectively communicated among the staff so that possibly contaminated food is not served.

Class Action Certification
With the mass production techniques used in the production and distribution of the U.S. food supply, mass tort claims and class actions will likely serve as the litigation vehicle of choice by plaintiffs. However, plaintiffs will face significant hurdles in attempting to certify a class for damages caused by food-borne illness. For example, plaintiffs in a suit against ConAgra, which had issued a voluntary recall of all varieties of its frozen pot pie products, attempted to certify a class to pursue their claims against ConAgra. True v. Conagra Foods, Inc., 2011 U.S. Dist. LEXIS 6770 (W.D. Mo. Jan. 4, 2011). Plaintiffs attempted to certify two classes, one consisting of plaintiffs who had suffered physical injuries as a result of consuming the contaminated pot pies, and another class consisting of those individuals who purchased or consumed the pies, or both. The court found that the questions of law or fact common to class members did not predominate over any questions affecting only individual members, and refused to certify the classes. The court explained that individualized factual inquires were necessary to adjudicate each claim. For example, inquiries would have to be individually made to determine whether each plaintiff had actually been affected by Salmonella and whether the individual plaintiffs had properly prepared the frozen pot pies. The court ultimately determined that the class method was not the proper method for adjudicating these claims. Further, the court found that no common legal issues predominated, as the plaintiffs attempted to certify a class comprising individuals across the entire nation. Thus, while defendants must be wary of the looming class actions, plaintiffs will still face significant certification burdens in certifying potential classes.

Although the FSMA aims to enact the most sweeping changes to the United States’ approach to food safety, its future is far from certain. The FDA faces significant funding hurdles to implement the proposed regulations unless Congress reexamines the breadth and underlying implications of the act. Necessary funding will be provided for its implementation and enforcement. The future for food companies remains unknown, and Americans will continue to watch to see what effects the FSMA has on U.S. food safety, the food industry, and the cost of food. Undoubtedly, the uncontrollable increase in industry costs under onerous regulations will be passed on to the public. Finally, the FSMA has great potential to increase exponentially the number of consumer claims and lawsuits against all those involved in the food industry.

Keywords: Food Safety Modernization Act, FSMA, FDA, Food and Drug Administration, food safety

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