As the CBD boom continues to gain a foothold in mainstream commerce, the Food and Drug Administration (FDA) has been slow to provide retailers and consumers with meaningful guidance or regulation.

On December 20, 2019—in response to prompting from Senate Majority Leader McConnell for FDA guidance on CBD regulation— the Further Consolidated Appropriations Act (the “Act”) (P.L. 116-94), was passed. The Act required the FDA to provide a report regarding its progress towards developing a policy for enforcement and use of CBD as an FDA-regulated product (the “Report”).

The Report—along with a public press release—was issued on March 5, 2020. While many CBD industry participants hoped the Report would provide substantive guidelines for safe manufacturing and distribution practices and approved uses, the Report lacked significant guidance. Indeed, the Report largely reasserts the position the FDA has taken in the more than 50 warning letters issued to CBD companies since 2015—namely, that CBD poses health risks, is not an approved drug, dietary supplement or food additive, and that retailers and manufacturers are not permitted to make unsubstantiated claims regarding the health benefits of these products.

While public safety and lack of definitive science continues to remain a top concern, the main take-away from the Report is that the FDA is seriously considering “potential pathways for certain CBD products to be marketed as dietary supplements.” Specifically, the Report notes the “FDA has the authority to create an exemption through notice-and-comment rulemaking [] that would allow products containing CBD to be sold legally as dietary supplements.”  While the rulemaking procedures contemplated are notoriously time intensive, the fact that the FDA has unveiled a strategy for working toward regulation is considerable forward progress.

The path for the use of CBD as a food ingredient remains less clear. The FDA reiterated that “[i]t is not currently lawful to add CBD to human or animal food.” However, the FDA remains open to changing its position as it continues to “encourage interested parties to continue to develop and share with the FDA information regarding whether there are conditions under which CBD could safely be added to food.”

While understandably anxious consumers and retailers must continue to wait for more definitive regulation and guidance, the Report is an encouraging sign that the FDA remains committed to creating a workable regulatory framework for the safe sale and consumption of CBD products. The Report acknowledges, for example, the “incredible amount of interest in CBD across a wide range of product areas” and the “significant interest in the development of therapies and other consumer products derived from cannabis and its components, including CBD.”  The FDA also confirmed it is “excited about potential new therapeutic uses for CBD that may be substantiated through further clinical study, as we are committed to doing all we can to encourage the development of CBD drug products and additional cannabis-derived drug products through existing, legal pathways.”

Until comprehensive guidance is available, manufacturers and retailers should continue to act conservatively and carefully by avoiding advertising claims related to health benefits. Stakeholders with scientific research on CBD’s health effects should also consider working with regulators by providing them with data needed to evaluate and approve CBD as an FDA regulated product.

The rapid spread of COVID-19 (also commonly referred to as “novel coronavirus”) has caused nations and organizations across the world to take emergency action in the interest of public health. Most companies are issuing statements advocating for consistent hygiene (handwashing and minimal face touching) aimed at containing the spread of the virus. Other companies are taking more aggressive action by instituting work from home policies and even travel bans.

The food industry is particularly susceptible to experiencing a duel impact from the global outbreak, both in terms of both domestic sales and supply chain disruptions. Many food manufacturers have foreign production facilities in China, Italy, and other locations where coronavirus has stalled the workforce, and in turn, the economies. And, because a timeline on a meaningful dissipation of the outbreak is so uncertain, manufacturers, distributors, and retailers must prepare to engage in significant deviations in their current approach, by considering diversions to alternative sourcing locations, and an increased focus on inventory management. For example, not surprisingly, grocery stores have seen a surge in demand for hand sanitizers, soaps, and other disinfectants, leaving many retails with empty shelves. Indeed, supply of these products is so scarce that recipes for “DIY” hand cleaners are being circulated by news and social media outlets.  Retailers that are able to meet that demand will benefit from increased foot traffic and overall sales.

Continue Reading A Recipe for Disaster: The Impact of COVID-19 on Food Safety and the Food Industry

U.S. District Judge Edmond E. Chang in the Northern District of Illinois recently granted certification in a wheat market rigging suit filed against Kraft Foods Group Inc. (“Kraft”). The class, comprised of Chicago Board of Trade (“CBT”) wheat market investors, alleges that Kraft artificially manipulated the wheat commodities market by taking sizable futures positions to influence prices.

Specifically, the class of investors alleges that Kraft purchased $90 million (15 million bushels) of December 2011 wheat futures contracts “in order to depress cash market wheat prices and inflate the futures price of wheat”. Plaintiffs claim Kraft’s behavior was suspicious considering Kraft had never before purchased such a substantial quantity of wheat and did not have adequate storage capacity for such a purchase.

Continue Reading Class Certification Granted to Kraft Investors Alleging Wheat Market Rigging

This month, the U.S. Department of Justice (DOJ) opened a criminal investigation into collusive behavior among some of the largest producers of Atlantic salmon.  This inquiry follows the DOJ’s June announcement of its separate investigation into the chicken industry.

Atlantic salmon producers implicated by the investigation include Grieg Seafood, SalMar, Leroy Seafood Group, and Mowi.  The launch of the U.S. inquiry comes on the heels of the European Commission’s (EC) announcement of an investigation into the Atlantic salmon industry following a series of raids at the facilities of several prominent producers. The EC stated it had “concerns that the inspected companies may have violated E.U. antitrust rules that prohibit cartels and restrictive business practices.”

Continue Reading Atlantic Salmon Producers Netted by DOJ

If you are a typical shopper, the last thing on your mind at the checkout counter is your printed credit card receipt.  As you juggle your grocery store bags, you might absentmindedly fold the receipt into your wallet, or crumble it up and drop it into the depths of your bag.

However, for more than a decade, printed credit card receipts have been the subject of considerable litigation all over the country.  The Fair and Accurate Credit Transactions Act (“FACTA”), enacted in 2003, prohibits retailers from printing “more than the last 5 digits of the credit card number or the expiration date” on a consumer’s receipt.  The potential penalty for a FACTA violation is harsh: the statute awards up to $1,000 damages per violation when the conduct is willful, making it an area ripe for class action lawsuits—with restaurants, grocery stores, and other food retailers being primary targets.

Continue Reading Will the Eleventh Circuit Fall in Line with its Sister Circuits in Interpreting Spokeo’s Standing Requirements in FACTA Cases?

The United States District Court for the District of Oregon recently denied a marijuana grower’s motion to dismiss a Racketeer Influenced and Corrupt Organizations Act (“RICO”) lawsuit in Momtazi Family, LLC v. Wagner et al., No. 3:19-cv-00476-ER (D. Or. Aug. 27, 2019) [Doc. No. 26] (“Order”). The plaintiff in the case is the former operator and current lessor of a biodynamic vineyard in Oregon, whose property abuts the defendant’s marijuana farm.

The crux of the plaintiff’s claim is that its neighbor’s marijuana growing operations caused the plaintiff to suffer lost sales and decreased rental revenue. Id. at 3-4. Specifically, the plaintiff alleges that one of its customers cancelled an order for six tons of grapes grown on the portion of the vineyard adjacent to the defendant’s property, based on the belief that the odors emitted by the marijuana would permeate the grapes and taint any wine made from them. Id. The plaintiff further claims that terracing on the defendants’ property caused runoff into its reservoirs, endangering fish and wildlife that form “an essential part of Plaintiff’s biodynamic operation.” Id. Additionally, according to the plaintiff, it was forced to accept decreased rent from its winery tenant due to a perceived diminution in property value. Id.

RICO is a federal law enacted to combat organized crime in the United States, including illegal drug trafficking. RICO provides a civil cause of action for a person “injured in his business or property by reason of a violation of RICO[.]” Order at 11. While several states have legalized the manufacturing and sale of marijuana, the drug remains illegal under federal law. As a result, marijuana cultivation remains sufficient to support a RICO claim. See Id. at 18-19.  Due to  RICO’s treble damages and attorneys’ fees provision, the cause of action is an appealing alternative to state law nuisance claims. Indeed, in the past few years alone, multiple RICO lawsuits against cannabis growers have cropped up around the country.

Many of these claims have ultimately proven unsuccessful, largely due to the plaintiffs’ inability to establish an injury-in-fact and non-speculative damages.  In cases where the plaintiffs have not attempted to sell, lease, or otherwise monetize their property interests prior to filing suit, courts have typically rejected their claims of an unrealized diminution in value or “loss of enjoyment” allegedly suffered as the result of neighboring marijuana operations. See Order at 12-13.

In contrast, in Momtazi, the Court held that the plaintiff’s allegations of financial loss were sufficiently concrete to confer standing because the plaintiff had already experienced a quantifiable diminution in value, in the form of cancelled orders and decreased rental revenue from an existing lessee. Order at 10, 16-17. Momtazi could therefore pave the way for farmers with similarly concrete injuries to assert RICO claims for damages suffered due to their proximity to marijuana growing operations.

StarKist, the country’s largest producer of canned tuna, was hit with a $100 million fine for its participation in a conspiracy that inflated prices for canned tuna.  The judge handed down the sentence for the maximum fine allowed under the law on September 11, 2019.

StarKist’s sentence brings to a close the prosecution of the nation’s three largest canned tuna producers for their participation in a wide-ranging conspiracy to fix the price of tuna sold in the United States. The collusive conduct was uncovered in the course of a failed merger between the other two major tuna producers—Bumble Bee Foods LLC and Thai Union Group P.C.L., the parent company of Chicken of the Sea. The government’s investigation stemmed from suspicious documents produced by the proposed merger participants in response to a second request issued by the U. S. Department of Justice (DOJ).

Continue Reading StarKist on the Hook for $100M Fine for Tuna Price-Fixing

Chief Judge Tunheim recently dismissed, with leave to amend, the class complaints in In Re Pork Antitrust Litigation.  The Pork case— filed in the District of Minnesota against Tyson, Hormel, JBS and other major pork producers—alleged a conspiracy beginning in 2009 to inflate artificially the price of pork sold in the United States.  While the court was “unwilling to force Defendants into significant and costly discovery without plausible allegations that they engaged in the conduct alleged,” Judge Tunheim provided the class plaintiffs with a guide to cure the deficiencies of their respective complaints.

The Pork Antitrust Litigation is one of several recent antitrust cases lodged against “Big Food” producers. Like the Broiler Chicken antitrust suit pending in the Northern District of Illinois, the allegations in Pork involve the defendants’ use of a benchmarking service to exchange sensitive business data and coordinated production cuts aimed at raising prices industry-wide.  Both the Chicken and Pork complaints chronicle Big Food CEOs’ practice of publically calling for production cuts as evidence of a conspiracy.

Because conspiracies are clandestine by nature, plaintiffs often lack direct evidence of the cartel.  Antitrust law therefore allows plaintiffs to plead the existence of a conspiracy by inference when circumstances exist that signal-concerted action, or in the words of the United States Supreme Court, “evidence that tends to exclude the possibility of independent action.”

Specifically, plaintiffs must allege that defendants engage in parallel conduct and that certain “plus factors” exist, making it more likely that the parallel conduct is the result of a collusive behavior.   Judge Tunheim ruled that although the Pork plaintiffs demonstrated that the U.S. pork market endured supply contractions during the alleged conspiracy period, with the exception of defendant Smithfield, they failed to adequately allege that individual defendants decreased production, or that these market-wide periods of reduced output were a result of conscious “parallel conduct” by the defendants.

On this point, the court distinguished the sufficient allegations of parallel conduct in Chicken. Judge Tunheim noted that the Chicken complaints specified the individual companies responsible for production cuts and the timing of the cuts, which, in turn, provided the needed support for the theory that the defendants acted in concert.

Judge Tunheim stated that he did “not believe that those deficiencies cannot be cured.” The class lawyers confirmed their intention to amend and the next iteration of the complaint will almost certainly include more detailed allegations on defendant-specific production cuts that the Court previously found lacking.

Eighty-six years after the repeal of Prohibition, Bacardi USA and Winn-Dixie are facing a putative class action predicated on Florida Statute Section 572.455, a 150 year-old remnant of the temperance movement.  In Uri Marrache v. Bacardi USA, Inc., et al., Case No. 2019-023668-CA-01 (Miami-Dade Cir. Ct. Aug. 9, 2019), Plaintiff alleges that Bombay Sapphire gin, a Bacardi product sold at Winn-Dixie, is “adulterated” with grains of paradise in violation of Section 572.455 and Florida’s Deceptive and Unfair Trade Practices Act (“FDUTPA”).

Grains of paradise are the seeds of an African plant in the ginger family, known as Aframomum melegueta. They are ground and used as a spice akin to cardamom, with a citrusy black pepper taste.  Florida Statute Section 562.455 states that, “[w]hoever adulterates for the purpose of sale, any liquor, used or intended for drink with . . . grains of paradise. . . or any other substance which is poisonous or injurious to health, and whoever knowingly sells any liquor so adulterated shall be guilty of a felony of the third degree[.]”

Continue Reading Trouble in Paradise for Bacardi and Winn-Dixie Over New FDUTPA Class Action

Eager to curb foodborne-illness outbreaks, retail giants like Walmart and Albertsons are turning to blockchain technology [1] to track exactly where their foods are coming from. Blockchain, as compared to the eye-straining, paper-heavy tracking systems before it, allows retailers to trace the supply-chain history for a single food item within seconds.

For example, in a test case using IBM’s blockchain technology, Walmart traced the supply chain for two off-the-shelf mangoes randomly taken from one of its stores. Using conventional source-checking methods, it took them 7 days to do so. Through blockchain, however, they were able to track the entire supply chain in 2.2 seconds!  As a former Walmart executive put it, blockchain “allows us to see the whole chain in seconds! We [could] take a jar of baby food and see where it was manufactured and trace back all the ingredients to the farms!” Before blockchain, that simply would not have been feasible.

Continue Reading Blockchain Will Likely Make a Meaningful Impact on “Big Food” Litigation