The overwhelming majority of courts (including all seven federal circuits that considered the issue) have rejected the so-called “innovator liability” doctrine.[1]  In 2017, however, the California Supreme Court in T.H. v. Novartis Pharm. Corp.[2] unanimously recognized the doctrine holding that brand-name prescription drug manufacturers owe a duty to warn to consumers who use generic drugs.[3]  In March of 2018, the Massachusetts Supreme Judicial Court (SJC) considered the issue, and took a middle ground.  Specifically, in Rafferty v. Merck & Co., Inc.,[4] the SJC held that plaintiffs who ingest the generic form of a drug may bring failure to warn claims against the brand-name manufacturer of the drug if the brand-name defendant acted recklessly by “intentionally fail[ing] to update the label on its drug while knowing or having reason to know of an unreasonable risk of death or grave bodily injury associated with its use.”[5]  In so doing, the SJC reasoned that a plaintiff is, in fact, injured by a brand-name product’s label despite never having used said product because statutes require identical labeling of the generically manufactured version.[6]

The Facts

In 2010, a physician prescribed Finasteride, the generic version of the brand name drug Proscar, to treat Rafferty’s enlarged prostate.[7]  Rafferty experienced anticipated temporary side effects from the drug, causing him to stop taking the medication.[8]  Rafferty, however, continued to experience these side effects and his physician informed him that they could actually continue “indefinitely.”[9]  The potential lifelong side effects of this drug were not disclosed within the brand-name manufacturer’s nor the mirrored generic manufacturer’s warning label.[10]  Rafferty presented evidence that the brand-name manufacturer became aware of these potential long-term side effects by 2008, when it updated Proscar’s warning label in select European markets to include this risk.[11]

Rafferty filed suit against the brand-name manufacturer in 2013, asserting a claim of negligence for, inter alia, failure to warn and for violation of the Commonwealth’s Consumer Protection Statute, G.L. c. 93A.[12]  The Superior Court dismissed Rafferty’s claims, “ruling that [the brand-name defendant] owed no duty of care to [him].”[13]  The SJC took over the case by its own motion from the Appeals Court.[14]

The SJC Weighs In

Traditionally, Massachusetts has not recognized liability for products manufactured by others.[15]  However, the SJC noted that The Restatement (Third) of Torts allows a modification to this general rule in exceptional cases.[16] The SJC considered innovator liability to require such a modification given the certainty that a user of a generic drug will rely on the label fashioned by the brand-name manufacturer and as state law shields failure to warn claims from generic manufacturers, leaving plaintiffs without recourse for their injuries.[17] However, the SJC also recognized that imposing innovator liability could impact the public policy of encouraging innovation in the drug market and a potential increase in drug pricing.[18]

Balancing these competing interests, the court held that, “a brand-name manufacturer
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MillerCoors LLC, owner of the Blue Moon Brewing Company (“Blue Moon”) brand and purported brewer of the Belgian-style witbier, recently removed to the U.S. District Court for the Southern District of California a class action lawsuit filed by Evan Parent on behalf of himself and all similarly situated consumers.  Despite the fact that he claims to be a “beer aficionado,[1]” Parent alleges to have purchased Blue Moon beer from various retailers from 2011 to mid-2012 under the mistaken belief that it was a “microbrew or ‘craft’ beer.” Parent asserts that MillerCoors deceptively marketed and charged a premium for Blue Moon beer by: (1) misleadingly characterizing it as a “craft” or “artfully crafted” beer; and (2) withholding the name “MillerCoors” from its label.

In 1980, there were 8 craft breweries in the United States. By 2014, that number had grown to 3,418.  During that time, craft breweries have slowly cut into the massive share of the $100 billion domestic beer market held by large breweries, such as Anheuser-Busch and MillerCoors. Craft beer has quickly grown from roughly a 3% market share in 2000 to 19% in 2014.  The large breweries have responded by creating their own “craft beer” brands, such as Blue Moon and Shock Top, and by purchasing craft breweries, such as Goose Island, Kona Brewing Co., Leinenkugel, and 10 Barrel Brewing.

Parent’s claim is founded upon the definition of “craft beer” set forth by the Brewer’s Association, a not-for-profit trade association, “dedicated to small and independent American Brewers, their beers and the community of brewing enthusiasts.”  The Brewer’s Association defines “American Craft Brewer” as:

  • Small: Annual production of 6 million barrels of beer or less;
  • Independent: less than 25 percent is owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer; and
  • Traditional: a brewer that has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation.

Parent alleges that Blue Moon is located in Coors Field, but that the Blue Moon beer sold in stores is brewed at MillerCoors’ Colorado and North Carolina breweries. Parent asserts that MillerCoors’ massive annual production takes it outside the definition of Craft Brewer set forth by the Brewers Association.

It is undisputed that MillerCoors does not qualify as a “Craft Brewer” pursuant to the guidelines set forth by the Brewer’s Association. Contrary to plaintiff’s assertion, however, the Brewer’s Association is not the arbiter of how “Craft Brewer” is defined.  Additionally, it remains to be seen whether “craft beer” can only be brewed by a “Craft Brewer.” In other words, it is unclear whether the term “craft beer” is reflective of the brewer who produces it or relates to the product itself. Does MillerCoors’ size preclude it from producing a “craft beer,” even if it uses quality ingredients and small batch sizes? Presumably, Parent will have a difficult time disputing the “quality” of Blue Moon beer given he purchased and consumed it
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Certified Gluten Free Lable

The Food & Drug Administration (FDA) is preparing to release a regulation on the labeling of “gluten-free” food by the end of 2012. Although the regulation will provide much needed guidance to consumers and food manufacturers, it will also establish a standard that food manufactures will need to follow in order to use a “gluten-free” label.  If food manufacturers use the “gluten-free” label without properly following the regulation, they could face lawsuits from consumers purchasing their products.

An increasing number of people in the U.S. follow a gluten free diet.  Gluten is a protein contained in grains such as wheat, barley, rye and triticale.  Packaged Facts, a Maryland based research firm, estimates that U.S. retail sales of gluten-free products in 2010 was $2.3 billion dollars, up from $1 billion dollars in 2006.  The firm projects retail sales of gluten-free food to reach $2.6 billion in 2012, and $5.5 billion in 2015.

Although the recent increase in dollars spent in the gluten-free market presents opportunities to businesses, it also presents risks.  People choose to follow a gluten-free diet for a variety of reasons, and some individuals require that food they consume be prepared in a completely gluten-free environment. If individuals with Celiac disease consume gluten, they may suffer symptoms ranging from gastrointestinal issues to neurological problems and cancer (PDF download). According to a 2010 study, 10% of gluten-free consumers purchase gluten-free products because they or a member of their household have Celiac disease or an intolerance to gluten, wheat or other ingredients. Scientists estimate that approximately 18 million Americans have some degree of gluten sensitivity. This requires that businesses take food labeling and food handling procedures seriously.

Confusion over what is gluten and what type of special handling is required to comply with a “gluten free” label has made the universe of food labels confusing to both gluten-free consumers and manufacturers.  Food labels range from being marked “gluten-free,” “made with no gluten ingredients,” and “manufactured in a gluten-free environment.” Currently, a company can label a product as gluten-free regardless of whether the food has been tested for the presence of gluten.

McDonalds received a great deal of negative publicity in 2006 when the company admitted that the fries they had previously claimed were gluten-free, are actually prepared with an oil that uses hydrolyzed wheat bran.  After an outcry from gluten-free consumers, McDonald’s removed fries from their list of gluten-free options and began labeling them as containing the allergen wheat. Although lab results indicated that no gluten was present in the fries, McDonald’s has not relabeled the fries as gluten-free (and appears to no longer have a gluten-free list at all) possibly out of fear of more lawsuits.

The FDA has twice opened the comment period for the public to weigh in on the agency’s proposed rule on how to label food as gluten-free. The proposed rule may require, among other criteria, that food bearing the claim of gluten-free cannot contain 10 parts per million (ppm)
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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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