August 2012

Genetically modified organism lemons

California’s Secretary of State recently announced that the California Right to Know Labeling Initiative will be Proposition 37 on this November’s state ballot. If passed, this initiative would require labeling by food manufacturers of any genetically modified organisms (GMOs), also known as genetically engineered organisms (GEOs).

GMOs made their first public appearance in 1994, when a tomato became the first genetically engineered product sold. Since then, GMOs have become increasingly more common in everyday products. In fact, the Grocery Manufacturers of America estimates that approximately 70 to 75% of processed foods available in U.S. grocery stores contain a GMO.   Furthermore, the FDA, which oversees product labeling requirements, considers GMOs to be “generally regarded as safe” (GRAS) and does not require that they be identified on product labels.  Nevertheless, despite nearly two decades of main stream retailing, it seems that the American public remains largely unfamiliar with the both the benefits and commonality of GMOs, as well the scientific community’s support for their safety.

How will Prop 37 impact the food manufacturing industry?

Should California vote in favor of Proposition 37, the imposition of similar labeling requirements is likely to follow in other states around the country.  As a result, manufacturers will likely experience increases in operational costs, as they are forced to adjust their manner of handling and preparing their products to account for GMOs.  Furthermore, food companies will also see increased legal costs,  because increased labeling requirements would also increase the potential for litigation, namely false-labeling class actions, which are becoming increasingly more common.  These class actions are not only costly to defend, but also harmful to a food company’s brand.

Where will these impacts manifest?   

  • Food producers will need to implement a system for maintaining separate inventories of product, so as not to mix the GMOs and non-GMOs.
  • Companies will be forced to amend their HACCP plans to address the handling of GMOs.
  • Overhead may increase as a result of inconsistent GMO labeling requirements nationally.
  • Companies will be forced to choose between having one label which adheres to each state’s requirements and utilizing different labels depending on the state in which the GMO containing product will be sold.
  • In response to potential consumer backlash against products containing GMOs, food manufacturing companies may need to raise the price of their products, discontinue certain brands, or engage in costly marketing campaigns to ensure future profitability.
  • Increased labeling requirements would also increase the potential for litigation in the form of false-labeling claims.

In business, smart companies aim to do business ethically and place the health and safety of their consumers first; they have the ability to meet goals while still complying legally with an ever-changing legislative landscape.

What are smart companies in the California food industry doing to prevent consumer backlash and insulate themselves from potential lawsuits in a post-Proposition 37 market?

  • Communicating: In-house counsel and litigation counsel should be having frequent conversations regarding the short and long impact of this initiative. Great litigation firms not only understand


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Court Ruling

  • The Massachusetts Payment of Wages Statute (the “Wage Act”) has lately received a great deal of attention from Massachusetts trial and appellate courts.  Although the statute has been in place since 1993, Massachusetts employers have recently faced a marked increase in Wage Act claims, likely due to the availability of treble damages and attorneys fees.  Just in the past year, Massachusetts court rulings have reflected this renewed interest in the Wage Act, as they attempt to define the law and its intricacies. Below is just a sample of Massachusetts courts’ continuing concern with the Wage Act:

Dow v. CasaleOut-of-state Employees.  Superior Court Judge Peter Lauriat recently ruled that an out-of-state employee could bring a valid Wage Act claim against his employers because they were located in Massachusetts.  Plaintiff had been a salesman for Starback Communications, Inc., and lived and worked in Florida.  When the company folded, he sued his employers in Massachusetts for unpaid commissions and wages.  The defendant employers moved for summary judgment, claiming that the Wage Act should not apply to employees outside of the Commonwealth.  Judge Lauriat disagreed, ruling that employees outside of Massachusetts could sue under the Wage Act if they have sufficient contacts with the Commonwealth.  In Dow, the court found that the plaintiff met this burden after considering that he:

  • Conducted most business over the internet;
  • Was in daily contact with his supervisor in Massachusetts;
  • Had customers in Massachusetts;
  • Traveled often to Massachusetts;
  • Occasionally worked in the same space at the company’s office in Massachusetts;
  • Owned business cards bearing the firm’s Massachusetts address; and
  • Was required to process all purchase orders through the Massachusetts location.

Moreover, Judge Lauriat ruled that,

“the Wage Act was designed to regulate the actions of Massachusetts employers, regardless of where the employees work,” and offered that “in this age of the ubiquitous Blackberry, IPad [sic] and smartphone, any person can work in any location that has internet access. Were the court to accept [the defendants’] argument, the Wage Act would afford no protection to an employee who conducted the employer’s business anywhere but in Massachusetts.”

Though Judge Lauriat’s expansion of the Wage Act does not hold precedential value, it will at least provide guidance to other trial courts.  As such, Massachusetts employers must be prepared that a court may very well hold that the Wage Act applies to employees located anywhere in the country, so long as their employer is located in Massachusetts and they establish sufficient contacts with the Commonwealth.

Farrell v. Farrell Sports Concepts, et al. Severance Pay.  Superior Court Judge Garry Inge recently held, in a very controversial opinion, that a fired employee cannot sue his employer for severance pay under the Wage Act.  Previously, in 2003, The Massachusetts Appeals Court held in Prozinski v. Northeast Real Estate Services that severance pay was not available through the Wage Act because it is not expressly mentioned in the statute.  Two years later, the Massachusetts Supreme Judicial Court ruled that the term
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