June 2012

 

Congress

Recently, the Subcommittee on Courts, Commercial and Administrative Law of the U.S. House Judiciary Committee, held a hearing on an important new bill aimed at furthering transparency in asbestos bankruptcy trusts.  Proponents of the controversial new bill, entitled H.R. 4369, the “Furthering Asbestos Claim Transparency Act (FACT) Act of 2012,” say that it would shed some much-needed light on the secretive claims processes of the bankruptcy trusts.

Asbestos-related liabilities have plagued hundreds of corporate defendants over the past twenty-plus years. Many have sought protection under Chapter 11 of the U.S. Bankruptcy Code.  Section 524(g) of that Chapter allows a debtor company to channel asbestos claims to a trust set up for the purpose of paying those claims.  Pursuant to that Section, the trust assumes the asbestos liabilities and the debtor’s assets are transferred to the trust, which then pays the asbestos-related claims.  The debtor company is thus relieved of all present and future asbestos-related liabilities.  See GAO-11-819, at 2-3 (2011), Report of theU.S. Government Accountability Office to the Chairman, Committee on the Judiciary, House of Representatives: Asbestos Injury Compensation; The Role and Administration of Asbestos Trusts, (pdf download). The problem, according to proponents of H.R. 4369, is that the claims process is a private, non-adversarial administrative process, and is shielded from public scrutiny by complex “trust distribution procedures,” or “TDPs.” Marc Scarcella, an economist at Bates White, LLC, testified in support of the bill.  Mr. Scarcella addressed concerns about the lack of mechanisms to cross-check trust claims against claims made to other trusts or in the tort system:

“lack of transparency and accountability may incentivize specious and inconsistent claiming across the tort and trust systems” and “may result in trust funds being depleted by erroneous payments.”  Hearing Before the H. Jud. Comm. Subcomm. On Courts, Commercial and Administrative Law, 112th Cong. (2011-2012) (statement of Marc Scarcella, Bates White, LLC).  H.R. 4369 would preclude such misuse by requiring each trust to file quarterly reports which disclose: (i) who has filed a claim against the trust; and (ii) the asbestos exposures alleged by each claimant.  See id.

The lone opponent of H.R. 4369 at the hearing was plaintiffs’ attorney Charles Siegel of Waters & Kraus LLP.  Attorney Siegal testified that the legislation “would place new burdens on trusts … but would only serve solvent defendants’ interests.”  Mr. Scarcella addressed these concerns, however, by stating that the new transparency considerations would benefit everyone involved, particularly future claimants.  Moreover, he testified that the reporting would not burden the trusts because the claims administration process is controlled electronically.

Concerns about asbestos bankruptcy trusts is not new. There are legislative efforts at reform underway in several states, including Ohio, Lousiana, and Texas, to name but a few.  The fact that the issue has finally made its way before the U.S. Congress is heartening, but there is a long way to go.  The bill in its current form does not appear to address the filing of “placeholder” claims, a common tactic used by plaintiffs’ attorneys.  Some trusts currently allow claimants to file a placeholder claim, which contains no substantive information and in which the claimant does not actually seek payment, but merely seeks to toll the statute of limitations until they refile a claim at later date (presumably after the claimant’s civil lawsuit is resolved).  Moreover, the bill must still make it out of committee and through both the House of Representatives and the Senate: no small feat in today’s political climate.  Regardless, H.R. 4369 is a bold step in the right direction.

 

Hebrew National hot dogs with mustard and relish

Hebrew National Hot Dogs may answer to a Higher Authority, but for the time being they’ll also be answering to the United States District Court of Minnesota.  Hebrew National Hot Dogs which are owned by ConAgra Foods, Inc. has been sued in a class action Complaint (pdf download) which alleges that it utilized deceptive and misleading labeling by representing that Hebrew National hot dogs are strictly 100% kosher in violation of applicable consumer protection statutes.  The suit claims that ConAgra’s kosher meat producer, AER Services, improperly slaughtered and did not maintain the slaughter house in accordance with Kosher laws by, among other things, using knives which were nicked thus preventing a clean cut as mandated by Kosher law and by failing to keep kosher meat separate from non-kosher meat.

The suit contains causes of action for:

  1. negligence;
  2. violation of state consumer protection acts;
  3. breach of express and/or implied warranty; and,
  4. breach of implied warranty of merchantability/fitness for a particular use.

The suit further alleges that employees of AER Services raised concerns about the procedures at the slaughter house, but those concerns were dismissed and the employees were either threatened with retaliation or fired.  None of the employees are named in the suit.

Hebrew National hot dogs are certified as Kosher by Triangle K, the Kosher Food Supervision and Certification Agency which is based in New York.  Neither Triangle K nor AER Services are named as Defendants in the Complaint.  In statements, Triangle K and AER Services have all denied that the allegations.  ConAgra which successfully removed this action to Federal Court has untilJuly 13, 2012to answer.  In response to the suit, ConAgra issued a press release which states that…

for more than 100 years, Hebrew National has followed strict dietary law, using only specific cuts of beef that meet the highest standards for quality, cleanliness, and safety with no by-products, artificial flavors, or artificial colors.”

Some states have statutes which regulate the labeling of Kosher food.  See e.g., the New York Kosher Law Protection Act of 2004.  We expect the Food and Drug Administration as well as other states to issue additional regulations pertaining to such advertising given the increased production and distribution of other religiously significant food products.  Food manufacturers and distributors should follow these regulations closely, as failing to follow them can be costly.  One recent suit brought in Orange County California against Super King Market subsequently settled for $527,000.  In that suit,  Super King allegedly improperly sold generic meat as halal meat, or that which follows Islamic law.

Ben & Jerry's Chocolate Nougat Crunch Ice Cream

With the Summer Solstice only days away, and peak ice cream eating season upon us, Unilever,PLC, the company which owns Ben & Jerry’s, is voluntarily recalling pints of Ben & Jerry’s Chocolate Nougat Crunch Ice Cream because the container label does not include a statement which warns that the product was manufactured on equipment also used to process peanuts and tree nuts.  In its press release concerning the recall, the Food & Drug Administration (“FDA”) warned that individuals who have an allergy to nut products would “run the risk of serious or life-threatening allergic reaction if they consume” this Ben & Jerry’s product.  The ice cream was distributed to retailers nationwide and it appears that the pints reached shelves for consumer purchase. Luckily, no illnesses have been reported to date.

In 2004, Congress passed the Food Allergen Labeling and Consumer Protection Act (“FALCPA),” which mandates the labeling of food allergens on packaged foods.  The Act was added to the Federal Food, Drug and Cosmetic Act and became effective in 2006.  21 U.S.C.  § 321.  FALCPA requires that manufacturers of foods which contain one of the eight major allergens responsible for 90 percent of food allergies (which includes peanuts and tree nuts) either:

  1. state on the food’s packaging that the food contains the allergen; or
  2. refer to the allergen in the ingredients listing.

According to the Food Allergy and Anaphylaxis Network, 4 percent, or 9 million adults, and about 8 percent or 6 million infants and young children in theU.S., suffer from food allergies. Every 3 minutes a food allergy sends someone to the emergency room in theUnited States.  In fact, more than 200,000 consumers require emergency room treatment each year.  According to the FDA approximately 150 Americans die each year from food allergies.  This is a large pool of potential claimants and you can rest assured that plaintiff firms are well aware of the statistics and track labeling related recalls closely.

We continually advise our manufacturing and processing clients that proper labeling, especially with respect to allergens is critically important.  We help insure that they have appropriate checks and balances surrounding food production and labeling.  Furthermore, we remind our retail (i.e. grocery stores and restaurants) and food services clients that they are held to the same FALCPA labeling standards if they package food for consumption at their facilities.

The Ben & Jerry’s recall is the perfect example of a situation that could result in serious food borne illness claims, and even wrongful death claims.  These claims can be difficult to defend if the labeling practices of a company violated FALCPA, and a claimant can provide proof that they consumed the mislabeled product and suffered an adverse reaction.  In cases such as the Ben & Jerry’s recall, an experienced plaintiff firm’s first step will be to attempt to preserve the food item and any packaging.  As such, any company conducting a recall for mislabeling should not destroy the product at issue, or risk a spoliation claim from future claimants.  Allow this latest recall to serve as a reminder to both attorneys who represent food companies and the food companies themselves that they must constantly evaluate labeling practices to ensure compliance with FALCPA.

Raw Hamburger As we reported several weeks ago, there has been a media fueled public outcry against the inclusion of Pink Slime, which is otherwise known as, “lean finely textured beef,” or “LFTB,” in ground beef.  LFTB is comprised of the beef scraps which remain after the valuable cuts of meat are sold.  These pieces of meat are separated from fat through the use of a centrifuge, and treated with ammonium hydroxide to kill harmful bacteria. The result is a safe, edible, high quality beef product containing the same nutritional value as other ground beef.   In fact, the United States Department of Agriculture (USDA) continues to proclaim that both LFTB and the use of ammonium hydroxide to eliminate bacteria in meat are safe.

Despite the USDA’s continued support for LFTB, the social media led firestorm directed against LFTB has caused a significant backlash against the product.  For example, all but three states which participate in the National School Lunch Program (NSLP), which is administered by the USDA to provide low income school children with a free or reduced cost  lunch, now refuse to purchase ground beef which contains LFTB, despite the fact that it costs three percent less than the alternative. In addition, many restaurants, including McDonalds, and supermarket chains have followed suit and ceased the sale of ground beef which contains LFTB. As a result, many large beef producers have suffered large declines in revenue.  In fact, Beef Products, Inc. (“BPI”), the largest LFTB manufacturer, was forced to close three of its plants and lay off 650 employees.

In an effort to resuscitate their flagging businesses, many beef producers recently submitted requests to the USDA to add labels indicating the inclusion of LFTB. In response, the USDA instituted a voluntary labeling initiative, which many beef manufacturers have already put into practice.   In a further effort to increase transparency and dispute misinformation, BPI has also set up a website, www.beefisbeef.com, which provides valuable factual information about LFTB and the way it is produced.

The impact which the “Pink Slime” phenomenon has had upon the beef industry and the speed with which it developed are staggering.  The sale and consumption of LFTB had been widespread for more than thirty years, with USDA approval. Nevertheless, in a span of a few months, one of the country’s largest industries was derailed through the lightning fast spread of misinformation and misperception.   Perhaps, the lesson to be learned by the food industry is that transparency is the only way to prevent attacks such as those waged against LFTB.