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Eric Skelly is a partner with MG+M. He is a civil litigator who focuses his practice on all aspects of civil litigation including food liability matters, business and commercial disputes, products liability, and toxic torts.

beefCareful consideration of the language used in an insurance policy, or any contract for that matter, is extremely important.  A food services company, Meyer Natural Foods LLC (“Meyer”), found that out the hard way in a recent case filed in the U.S.D.C for the District of Nebraska.[1]  Exclusionary language in an insurance policy precluded Meyer from recovering its $1.4 million of damages related to the loss of a beef order due to contamination from a pathogen.  Meyer had contracted with a beef supplier, Greater Omaha Packing (“Greater Omaha”) to purchase certain beef products.  As part of their contract, Meyer required Greater Omaha to obtain an insurance policy to protect the value of the beef that was to be shipped, which they did through the Defendant in this case, Liberty Mutual.  One of the beef shipments Greater Omaha made to Meyer, unfortunately, contained E. coli, which resulted in the destruction of the entire shipment valued at $1.4 million dollars.

In an effort to recover that loss, Meyer turned to the Liberty Mutual insurance policy, which was purchased by Greater Omaha pursuant to their agreement.  However, there were certain exclusions in the policy, which may not have been considered by Meyer and/or Greater Omaha, and this language is the reason that U.S. District Judge John M. Gerrard dismissed Meyer’s suit against Liberty Mutual.  The language in question? An exclusion of coverage for “loss attributable to . . . contamination”.  Meyer’s main argument was that the policy exclusion did not specifically refer to E. coli, and that the word contamination is ambiguous, such that E. coli cannot be included therein.  But that argument was unsuccessful, as the court simply relied primarily on the plain meaning of the word contaminate, “to render unfit for use by the introduction of unwholesome or undesirable elements.”  In doing so, the court determined that E. coli clearly fits within this definition.[2]

The first lesson to take away from this case?  Always read and understand the insurance policy that will be covering a potential loss of your property.  No matter where you are on the food chain, you must be aware of all provisions of the insurance covering your property.  In this instance, Meyer did not obtain the insurance policy directly, but rather Greater Omaha did as part of their contract.  This case is a cautionary tale for obtaining insurance coverage of your property through a third-party.  In cases where a third-party obtains coverage, you still must read the policy, and understand the implications of its various exclusions.

Taking a step back to think about this particular scenario, one must ask, for what purposes would a company in the food distribution and supply industry seek insurance on their food products from a potential loss?  Risk of contamination or adulteration of the beef due to a pathogen such as E. coli would clearly be high on that list and, therefore, it should have been tantamount for Meyers to have sufficient language in the policy to protect against such an incident and ensure coverage.  Is it possible that Meyer never saw the insurance policy? Sure.  But that is the point.  A company, or their counsel, should always read every insurance policy with a fine-toothed comb to ensure that their property will be protected in the event of loss, even if they did not directly obtain that policy.

This is not to suggest that Liberty Mutual was hiding the ball when including exclusions in their policy. Rather, it appears Liberty Mutual was simply protecting its own interests.  Liberty Mutual likely inserted this contamination exclusion with this very type of loss in mind.  In many cases, as in this one, insurance companies are providing coverage to sophisticated companies that have the ability to negotiate the policies terms.  Including multiple exclusions as a starting off point for a well negotiated insurance policy is simply good business for an insurance company.  In fact, this case is not alone, as there have been a number of recent cases in which similar exclusions have been applied by the courts to preclude policy coverage.[3]

There was one final gaffe: One of Meyer’s main arguments in the suit was that the word “contamination” was ambiguous and therefore did not include beef tainted with E. coli.  However, in their own Complaint in this very case, they referred to their property loss as the result of contamination.  In fact, they referred to the “contamination” of beef by a pathogen eleven times.  To even the non-legal trained eye this position is contradictory.  One would be hard pressed to persuade a judge or jury that the very word used by that party to describe their property loss, is actually ambiguous when written in the insurance policy intended to cover that very property loss.   A reading of Judge Gerrard’s decision shows that this word choice in the Complaint certainly impacted the Court’s decision.

Again, the final take-away of this case study: lawyers need to choose each and every one of their words very carefully in all pleadings submitted to court.

 

Meyer Natural Foods LLC, et al. v. Liberty Mutual Fire Insurance Co., C.A. No. 8:15-cv-03116

 

[1] Meyer Natural Foods LLC, et al. v. Liberty Mutual Fire Insurance Co., C.A. No. 8:15-cv-03116

[2] The plain meaning was not the only basis for Judge Gerrard’s conclusion, as will be explained further below.

[3] Perhaps the most extreme example is when the Eleventh Circuit Court of Appeals affirmed a decision by the USDC for Northern Alabama in 2011.  The Appellate Court determined that a curry aroma from a neighboring Indian restaurant was considered a “pollutant” under the insurance policy, such that the property damage (fur coats) caused by the aroma was not protected by the policies coverage.

Maxine Furs, Inc. v. Auto-Owners Ins. Co., 426 F. App’x 687, 687 (11th Cir. 2011).

In what is believed to be one of the largest verdicts for a sexual assault victim in Massachusetts history, Kira Wahlstrom*, now 41 years old, was awarded $6.6 million dollars as a result of a parking garage owner’s negligence.  The jury found that JPA I Management Co. Inc., which owned the Radisson Hotel and its parking garage, where the rape occurred, and JPA IV Management Co. Inc., which operated them, failed to provide adequate security and warnings. Ms. Wahlstrom was the second women brutally attacked in a two week span in 2009 by the same individual inside the parking garage which is located in Boston, MA.  Ms. Wahlstrom maintained that she was never informed a rape had occurred in the same parking garage less than two weeks prior to her rape, and that JPA did not take preventative measures to prevent the incident. Wahlstrom alleged that the hotel should have warned customers and posted extra garage security.  The jury agreed, awarding Ms. Wahlstrom $4 million dollars.  An additional $2.6 million was added to the verdict pursuant to Massachusetts’ pre-judgment interest statute.

One member of Ms. Wahlstrom’s trial team was attorney Don Keenan of the Keenan Law Firm, who is a well-known plaintiff’s attorney and co-author of “Reptile: The 2009 Manual of the Plaintiff’s Revolution.”  Keenan’s methods are commonly referred to as the “Reptile Theory,” which at its core is used by plaintiffs to frame a case so it appears the defendant chose to violate a safety rule and that the same defendant should not be allowed to needlessly endanger the public.  Reptile Theory proclaims that you can prevail at trial by speaking to, and even scaring the primitive and instinctual part of jurors’ brains.  The Reptile Theory may be a newer approach, but it is not without success – Keenan’s website boasts that plaintiffs have recovered more than $6 billion dollars in verdicts and settlements as a result of utilizing this theory. The Reptile Theory purports to provide a blueprint to succeeding at trial by applying advanced neuro-scientific techniques to pretrial discovery, jury selection and trial.  Plaintiffs state that the Reptile Theory is a strategy calculated to manipulate jurors to fear for the safety of themselves, their families, and their communities, and to play upon that fear to encourage jurors to punish defendants for their perceived unsafe and dangerous conduct in order for the jurors to protect themselves and their families.

There is little doubt that Reptile methods played a key role in the verdict amount. Keenan’s and Wahlstrom’s post-trial comments highlight the Reptile Theory and the impact it could have on plaintiff’s receiving large verdicts:

 

“It’s a national problem, a wake-up call to all of us: parking garages are not as safe as we think…This is not a ma and pa parking garage — there are 700 spaces. If anybody should have the resources to keep customers safe, it should be this company, and they didn’t.” – Don Keenan

 

“It was about helping people and maybe changing the way that people run their parking garages and the way they treat rape victims and, hopefully, more men and women will speak out when things like this happen.”

“We need to have better parking garage security, whether it be cameras or one person on every floor. They need to do something so that people are safe when they go there” -Wahlstrom

 

There are many legitimate criticisms of the purported science behind the Reptile Theory. That is, however, beside the point.  The bottom line is that the strategy is very effective as the framework of a plaintiff’s case, and the methods utilized by Reptile plaintiff counsel can lead to extremely damaging testimony by unprepared defense witnesses and experts both at deposition and trial. Furthermore, the methods are highly effective in voir dire, and also in influencing a jury in the opening/closing statement statements of trials. The verdict in the Wahlstrom matter, undoubtedly one of the highest for a sexual assault victim in Massachusetts history, highlights that defense counsel must be proactive in preparing their clients and case for the Reptile.

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At MG&M, we have worked closely with jury consultants, litigation psychologists and respected co-defense counsel in developing methods for combatting the Reptile. This includes witness preparation; motions in limine to preclude or limit the use of Reptile at trial; enhanced voir dire methods designed to counteract the Reptile during the first interactions with the jurors; and opening/closing statement strategy.  The defense of companies against the Reptile starts early, and spotting the Reptile Theory and its themes is imperative to a favorable outcome. Even your first witness in discovery needs to be prepared to face it. By way of one example, many of the questions posted by a Reptile plaintiff’s counsel at a deposition appear to be innocuous general safety questions that, on their face, are difficult with which to disagree. In fact, a defendant may be eager to agree with these questions posed by plaintiff’s counsel in an effort to demonstrate they are safety conscious and concerned about public safety.  These questions are, however, anything but innocuous.  Instead they are a carefully crafted set-up by plaintiff’s counsel to box defendants into a corner before they turn to case-specific questions.

Plaintiff’s counsel across the country certainly took notice of another Reptile victory this week, which resulted in a verdict significantly in excess of historical values in Massachusetts. And it is certain that they will continue to enhance and refine their amphibian ways. The question for defense counsel and their clients is, will you be ready to face it?

*Consistent with the approach taken by the Associated Press, we do not usually identify people who say they are victims of sexual abuse, but Ms. Wahlstrom has spoken publicly often about her case.

 

Children's MotrinThe Massachusetts Supreme Judicial Court has affirmed a record $63 million jury verdict against healthcare giant Johnson & Johnson for allegedly inadequate warnings about the health risks associated with Children’s Motrin. The facts underlying this remarkable verdict are undeniably tragic, but they also demonstrate just how important clear and comprehensive warnings are for product manufacturers. Further, as explained in more detail below, this case emphasizes that it is extremely difficult in Massachusetts for manufacturers to prove that the FDA would have rejected a plaintiff’s recommended warning change, a showing that the United States Supreme Court has suggested could shield a manufacturer from a failure to warn claim. With interest, Johnson & Johnson is currently liable for over $130 million to the plaintiffs.

The Case

In November 2003, seven-year-old Samantha Reckis took Children’s Motrin after showing signs of a fever. The popular pain reliever did not improve her condition. Instead, Samantha developed toxic epidermal necrolysis (“TEN”), a life-threatening skin condition that caused her to lose 80 percent of her lung capacity, 90 percent of her skin, and her vision. Since 2003, Samantha has undergone almost 100 surgeries, which have kept her alive.

Samantha and her parents sued Johnson & Johnson, the manufacturer of Children’s Motrin, for allegedly failing to provide adequate warnings about the risks associated with the drug. Specifically, the Reckis family claimed that Children’s Motrin should have included a warning that its use could result in a life-threatening condition. In February 2013, a Plymouth County jury returned a $63 million verdict in favor of the Reckis family.

The Appeal

Johnson & Johnson appealed the verdict, primarily arguing that the United States Supreme Court’s 2009 decision Wyeth v. Johnson & JohnsonLevine preempted the plaintiffs’ claims because the Food and Drug Administration (“FDA”) would have rejected the warning that the Reckis family argued should have been on Children’s Motion. In Wyeth v. Levine, the Supreme Court found that a drug manufacturer could still be liable for failure to warn even after the FDA had approved a drug’s warning label. However, the Court also indicated that if there was “clear evidence” that the FDA would have rejected a manufacturer’s proposed warning change, then the manufacturer would not be liable for failing to include such a warning.

In 2003, when Samantha Reckis took Children’s Motrin for her fever, the warning on the drug advised users to stop using it if an allergic reaction occurred, but did not mention TEN or that its symptoms could be a sign of a life-threatening condition. Thereafter, a group of citizens petitioned the FDA to revise the warning on pain relievers with ibuprofen, such as Children’s Motrin, to reflect that use of the product could lead to potentially life-threatening conditions such as TEN. The FDA rejected this petition and specifically noted that including disease names such as TEN would not be useful to consumers because most consumers would be unfamiliar with such terms. Johnson & Johnson argued that this rejection constituted clear evidence that the FDA would have rejected a revised label for Children’s Motrin that included any mention of it potentially causing “life-threatening” diseases.

The SJC rejected this argument, explaining:

the FDA’s decision not to request that manufacturers add a warning about life-threatening diseases could well have been merely a byproduct of its rejection of these requested warnings on the basis that they mentioned [certain life-threatening diseases] by name. Whether the FDA also would consider including a mention of life-threatening diseases, by itself, to be inappropriate and off limits on the OTC label is anybody’s guess; certainly the reason specified by the FDA for rejecting use of the disease names – consumer unfamiliarity – does not apply to use of such a phrase.

The SJC also rejected Johnson & Johnson’s argument that the $63 million verdict was excessive.

The Lesson

The SJC’s upholding of the verdict, one of the highest personal injury awards in Massachusetts history, highlights that manufacturers must be proactive with their warnings and ensure that warnings provide a thorough list of any potential adverse effects. Manufacturers must also remember that they, not the FDA or any other governmental agency, bear the ultimate responsibility for labeling their products appropriately. Furthermore, at least in Massachusetts, manufacturers should be very wary of relying on any argument that there was “clear evidence” that the FDA would have rejected a recommended warning change. As Johnson & Johnson just learned, the SJC’s standard for clarity is extraordinarily high.

How to ‘Bell-weather’ a Recall: Position Your Company to Withstand a Recall Efficiently and Effectively

 

Headlines announcing the recall of some product or another seem to appear as regularly as the changing of the seasons, and often times, to the consumer at large, they come and go just as subtly. It is wholly unsurprising, however, that recalls involving a food item often land with the jolt and turbulence of a spring thunderstorm.

The notion that food, the very purpose of which is to nourish and sustain, could in fact be causing us substantial harm is inherently alarming, and opportunistic news outlets are well aware that food-related recalls increase viewership and website traffic.

Making headlines right now, just as warmer weather is finally reaching much of the country, are two separate wide-ranging recalls involving that American favorite, ice cream. The recalls were initiated by popular producers Blue Bell Creameries, of Texas, and Jeni’s Splendid Ice Creams, of Ohio. The culprit in each recall has been identified as the bacteria Listeria monocytogenes, a potentially lethal contaminant.Jeni's Splendid Ice Creams

Jeni’s Splendid initiated a preemptive voluntary recall of its entire product line on April 23, 2015, while temporarily closing its retail scoop shops, after a random sample collected by the Nebraska Department of Agriculture tested positive for the bacteria. Blue Bell’s path to recall followed a rockier road.

A joint CDC and FDA investigation into an outbreak of 10 reported illnesses resulting in hospitalization, including three fatalities, from January 2010 through January 2015 eventually pointed to Blue Bell ice cream as the likely source. After laboratories in multiple states isolated the Listeria bacteria in several of its products, Blue Bell issued a limited voluntary recall of what it believed were the affected lines in March, 2015. After further investigation resulted in positive test samples in additional product lines, Blue Bell finally moved issued a full recall of all of its products currently on the market on April 20, 2015.

A recall has the potential to create consumer panic towards a product, sometimes an entire brand, and it is almost always a major conundrum for the product seller. The decision to issue a recall of a product that your company has placed on the market involves balancing as many factors as there are flavors of ice cream. The potential impacts are far reaching and substantial, not just to the consumer, but to everyone involved in placing the product in the stream of commerce, from the manufacturer, to the distributor, to the retail seller. What are the risks to the consumer? How many people may potentially be affected? What is the cost of the recall to your company, not just in dollars and cents, but in brand goodwill? How will your employees be impacted? Will you be facing punitive action by a regulatory agency is nothing is done? Will you be exposed to civil or criminal litigation? If a recall is necessary, how broad should it be?

The recalls issued by Jeni’s and Blue Bell followed different paths and for different reasons, but both necessarily caused significant impact on the companies and their respective brands. Blue Bell, avoiding the nuclear option of total recall, rolled out piecemeal corrective measures while continuing wide-scale production, thereby keeping revenue streams open, but exposing itself to protracted negative media coverage and potentially harming further consumers when additional product lines turned up positive for Listeria. There is also a risk that they may ultimately face punitive damages in a civil suit if it is found that their response was too slow or insufficient.

Jeni’s swift and sweeping response likely reduce any long-term impact of the incident to a hiccup, potentially minimizing damages in any future civil law suit.

Meanwhile, Jeni’s (having had the benefit of observing Blue Bell’s struggles,) opted to shut its operations down entirely at the first positive test, even absent any evidence of contaminate-related illnesses. Though likely causing substantial interruption to their bottom line in the short term, Jeni’s swift and sweeping response likely reduce any long-term impact of the incident to a hiccup, potentially minimizing damages in any future civil law suit, and perhaps even increasing consumer confidence in the brand due to their immediate and unequivocal response.

Blue Bell Ice CreamsEvery recall scenario is unique, and when the decisions are made companies do not have the benefit of hindsight, but whether you are an ice cream company, pasta maker, or industrial tool manufacturer, it is important to learn from a situation like Blue Bell’s and Jeni’s and prepare for the future. Companies would be well-advised to have a team on standby for a recall situation, consisting of product and industry specific specialists, and legal, financial and marketing professionals. Furthermore, it is important to think of the long term effects of an outbreak, particularly on your brand name, and not just the short term financial impact of a large scale recall when making any decision.

Of course, preparing a proactive strategy to avoid facing a recall situation in the first place by maximizing internal safety and quality control measures is vital to any manufacturer or supplier. For example, one measure which we have utilized to the benefit of our clients is to conduct periodic continuing education seminars on hot button litigation issues in their specific industry. These presentations benefit both company management and the everyday employees on the product floor and are designed to help limit reoccurring pitfalls and problems which we see once matters reach litigation. With proper preparation and guidance, a company can either avoid a recall altogether, or at the very least minimize any potential negative consequences in the unfortunate event that one must be issued.

A deadly Listeria outbreak has swept across the United States in recent weeks, sickening at least 29 people and taking the lives of three.  This latest tragedy is reportedly linked to the sale of commercially produced, prepackaged caramelized apples. If recent media reports are accurate, the situation highlights the devastation a single breach in sanitation protocol can thrust on an otherwise remarkable wholesale and retail food distribution system in the United States. The situation also serves to remind food growers, manufacturers, distributors and retailers alike that exposure to liability for food-borne illnesses today goes well beyond civil fines and damages and is increasingly subject to criminal prosecution.

 

Listeria outbreaks are rare but dangerous. In 2011, listeria in cantaloupes killed 33 people and sickened 147 in 28 states, according to the CDC. In 2012, 22 people were infected and four died in an outbreak attributed to a brand of ricotta cheese imported from Italy. Besides the potential civil suits, one of which has already been filed in connection with the caramel apple outbreak (James Raymond Frey, Individually and on behalf of the Estate of Shirlee Jean Frey, et al. v. Safeway, Inc., et al., No. CISCV180721 (Cal. Sup. Santa Cruz Co.)), food manufacturers should be aware of the unprecedented criminal prosecutions of food-industry defendants in multiple states.

In 2010 the U.S. Food and Drug Administration (FDA) began warning the food industry, that federal criminal laws would be enforced in the fooded safety industry, including the potential liability for food industry executives for the shipment of contaminated food, even though it was outside of the executive’s knowledge or consent. In light of the strict liability laws, U.S. v. Eric Jensen and Ryan Jensen resulted in Colorado’s Jensen brothers each serving  six months of home confinement in 2014 after pleading guilty to six of the “strict liability” federal criminal misdemeanors. The only evidence necessary was that the company distributed cantaloupes with the deadly pathogen; knowledge of the contamination was irrelevant.

Similarly, in United States v. Parnell, No. 13-cr-12 (U.S. Dist. Ct., M.D. Ga., Albany Div.) the food company employees are awaiting sentencing for “strict liability” misdemeanors because their contaminated eggs became part of interstate commerce. In addition, the recent jury trial and conviction of former Peanut Corporation of America (PCA) officers and managers has captured the attention of the entire food industry.

Most recently, criminal charges have been brought against the owners and employees of a pharmaceutical company linked to the deadly 2012 meningitis outbreak. Two of the fourteen arrested were the owners of the company, each of whom were charged with second-degree murder and racketeering in connection with the 64 deaths that resulted from the outbreak. The 131 count indictment alleges that the employees were aware that they were producing medication in an unsafe and unsanitary manner, yet distributed it anyway.

Although the requisite knowledge standard of those involved with the meningitis outbreak differs from the strict liability standard for those in connection with the listeria outbreak, the message is the same: it is imperative, regardless of industry, that proactive measures with regard to quality control, safety and sanitization, be implemented to ensure adequate protection to both consumers and prevent potential liabilities of companies, particularly in this new era for food and pharmaceutical safety enforcement.