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Insurance Options for Organic Farmers

July 10, 2014

by Jack Hornickel

The USDA’s Risk Management Agency (RMA) is on its way to providing insurance coverage for all organic crops, but farmers may have to wait another growing season before their investment is accurately protected by federal insurance programs. The trouble is that certified organic crops fetch higher sales prices than conventionally-grown crops; yet most organic crops only can be insured at conventional rates because the data for organic pricing remains limited. Previously, only three organic crops were priced: corn, soy, and cotton. The 2014 Farm Bill instructed RMA to determine pricing for all organic crops “as soon as possible, but not later than the 2015 reinsurance year.” While the beginning of the insurance year varies per crop, the RMA is nowhere near establishing price rates for all organic crops.

A recent RMA update tracks its progress and strategic plan moving forward. In addition to corn, soy, and cotton, the RMA has now established price rates for organic:

  • almonds (only in California),
  • apples, fresh (Idaho, Oregon, and Washington),
  • avocados (California),
  • blueberries (all types in California; Early to Late Highbush type in Oregon and Washington),
  • grapes, Concord (Oregon and Washington),
  • oats,
  • pears (Oregon and Washington),
  • peppermint,
  • peaches, nectarines, plums, and apricots (California),
  • stonefruits, fresh (Idaho, Oregon, and Washington), and
  • tomatoes, processing (California).

Clearly, the RMA has a long way to go before all organic farmers are fairly protected. Those on the eastern seaboard are particularly out of luck. Until the RMA is able to collect more robust and regional data that establishes the true value of organic production, federal insurance programs will continue to cut short on organic farmers.

In the meantime, the RMA recommends the following insurance programs that organic farmers can use to protect themselves at full organic value:

  • Contract Price Addendum – If organic farmers are growing crops under contract, they can use the contracted sale price as a price rate for federal insurance programs. This method can even be used for organic crops that have established price rates, providing insurance that is more reflective of the actual crop value. Currently, this coverage is available for 62 organic crops.
  • Actual Revenue History – This pilot program offers insurance based on the farmer’s actual documented revenue, protecting against losses based on yield, price, and/or quality. Unfortunately, the program is only available for cherries, navel oranges, and strawberries and limited to the states of California, Idaho, Oregon, and Washington.
  • Adjusted Gross Revenue and AGR-Lite – Based on income reported on federal tax returns, organic farmers can insure any agricultural production. AGR is available selectively by state, and AGR-Lite is available almost everywhere.
  • Whole Farm Revenue Protection – Designed for diversified farms, this new pilot program allows farmers to insure an entire farm rather than a specific commodity. Whole Farm Revenue Protection uses the same calculation as AGR and AGR-Lite but increases coverage. More information will be available later this summer.

Ag Gag Laws and the Drone Exploit

July 8, 2014

by Jason Foscolo

Ariel Schwartz at fastcoexist.com postulates the fascinating idea that aerial drones can be used to circumvent so-called “ag gag” laws that restrict the use of photography and video to expose the abuse of livestock. The idea is so original it deserves detailed consideration. The article’s subtitle posits: “Some states have made it illegal for people to take photos or video of livestock operations. Drones to the rescue?”

Upon examining a few state ag gag laws, it appears that drones may be a viable way for activists to circumvent the laws, but not because the drones do not qualify as “people.” Drones instead make it possible to exploit ambiguities in trespass law.

CameraDroneSome states’ ag gag laws simply would not apply to the drone hypothetical. For example, Iowa’s law (Iowa Code § 717A.3A) states that “a person is guilty of agricultural production facility fraud” if the person obtains access to an agricultural operation by false pretenses, or makes a false statement on a job application in order to perform an act within the facility “not authorized by the owner.” Basically, this statute makes it illegal to lie on a resume in order to surreptitiously film inside of an ag business.

Similar to the Iowa law, Utah (Utah Code Annotated § 76-6-112) criminalizes entry by a person into an agricultural operation under false pretenses for the purpose of taking pictures as well. The Utah law, however, goes a bit further by also criminalizing the taking of pictures and video during a criminal trespass. Interestingly enough, “entry” is defined as “intrusion of the entire body” onto someone else’s land (Utah Code Annotated § 76-6-206). This “body” requirement makes this the one specific ag gag statute we found so far which could be circumvented by a flying Go Pro.

Kansas (K.S.A.§ 47 – 1827) prohibits a person from entering into an animal facility, not then open to the public, or remaining concealed after invitation, with intent to “take pictures by photograph, video camera or by any other means.” In essence, this is just a specialized form of trespass.

Idaho’s law (Section § 18-7042 of the Idaho Code) is both a beefed-up trespass statute and a “don’t lie on your resume” statute. It criminalizes a “person” who “is not employed by an agricultural production facility and enters an agricultural production facility by force, threat, misrepresentation or trespass,” obtains “employment with an agricultural production facility by force, threat, or misrepresentation with the intent to cause economic or other injury to the facility’s operations” or who enters “into an agricultural production facility that is not open to the public and, without the facility owner’s express consent or pursuant to judicial process or statutory authorization, makes audio or video recordings of the conduct of an agricultural production facility’s operations.” 

Montana criminalizes the unauthorized acquisition or exercise of control over a production facility. The act also prohibits entry into an animal facility to take pictures by photograph, video camera, or other means with the intent to commit criminal defamation (Montana Code Annotated § 81-30-103).  Montana makes the most deliberate effort to broaden the definition of “person” to include “a state agency, corporation, association, nonprofit corporation, joint-stock company, firm, trust, partnership; two or more persons having a joint or common interest; or some other legal entity” (Montana Code Annotated § 81-30-102).

For those ag gag laws predicated on entry into an agricultural facility, a hypothetical drone case is not likely to turn on the personhood of the drone. There may be some elasticity in the definition of personhood that is not contemplated by the statute but nevertheless would allow a criminal prosecution. Any ag gag prosecutor could argue that a person mediates their presence through the drone, which is under his or her control. The flying machine would be considered an extension of the operator for the purposes of establishing presence. Typically, a person can be liable for a trespass if he or she causes a thing to enter onto someone else’s property.

These cases are more likely to turn on the issue of whether a trespass or entry has occurred. A drone does not “enter” a facility in the way that all of these ag gag statutes contemplate, and whether or not a trespass can be committed by a remote controlled flying camera is ambiguous. The Volokh Conspiracy had a great post about drones and trespass from a few years back, which explains that land owners have the right to “exclusive control of the immediate reaches of the enveloping atmosphere,” which includes “at least as much of the space above the ground as he can occupy or use in connection with the land.” Given the novelty of drone technology, there is yet no clear indication of how low is too low for drone flight to be considered a trespass. An ambiguity this big, especially in the realm of criminal law, is ripe for exploit by animal welfare organizations.

The Supreme Court’s POM v. Coca-Cola Decision: Complying With FDA Labeling Rules Is No Longer Good Enough

July 7, 2014

by Laura Gaudreau

With a 8-0 decision on June 12, the Supreme Court welcomed another player to question the legality of food and beverage labels: competitors. In Pom Wonderful, LLC v. The Coca-Cola Company, the Court unanimously held that competitors may bring federal Lanham Act claims alleging unfair competition from false or misleading food product labels, even if those labels comply with FDA regulations.

POM Wonderful, a marketer of pomegranate juice products, sued a competitor, Coca-Cola, alleging that the labeling of Coke’s pomegranate blueberry flavored juice blend was deceptive and misleading under §43 of the Lanham Act and hurt POM’s sales. Coke’s product label prominently featured the words “Blueberry Pomegranate” even though the beverage consisted of 99% grape and apple juice, and was only about 0.2% blueberry juice and 0.3% pomegranate juice. Significantly, Coke’s labeling was permissible under the extensive FDA rules governing juice product names.

The issue before the Supreme Court was not the label itself, but the intersection between the Food, Drug, and Cosmetic Act (FDCA) and the Lanham Act.  The FDCA prohibits the misbranding of food through false or misleading labels. Private parties may not bring enforcement suits under the FDCA, so the FDA has nearly exclusive enforcement authority. In contrast, the Lanham Act confers private rights of action, allowing business to sue competitors for unfair competition and false advertising. The Court evaluated whether FDA’s extensive regulation of food labeling under the FDCA precludes private claims challenging food labels under the Lanham Act.

The lower courts sided with Coca-Cola, which claimed the FDCA precludes a Lanham Act claim because the Lanham Act may not be used to preempt or undermine the FDA’s authority. Essentially, Coca-Cola claimed if the juice label satisfied the rules of the FDA, it had the stamp of approval for sale, and could not be challenged through private action via other statutes.

The Supreme Court disagreed with the lower courts, holding that competitors are allowed to bring Lanham Act claims alleging unfair competition from false or misleading food product labels. Justice Kennedy wrote the opinion, noting the two statutes are complementary. The FDCA is concerned primarily with public health and safety, while the Lanham Act protects commercial interests from unfair competition.

This decision potentially opens the door for a high volume of litigation over food labels, and puts substantial power in the hands of competitors. In his decision, Kennedy noted that competitors’ “awareness of unfair competition practices may be far more immediate and accurate than that of agency rule makers and regulators” due to their knowledge of how “consumers rely upon certain sales and marketing strategies.” Likewise, competitors have a financial incentive and possibly greater resources than FDA to challenge deceptive food labeling. Moving forward, food manufacturers must now be concerned not only with whether their labeling complies with FDA regulations, but also with whether it may invite lawsuits from competitors.

Will the Hobby Lobby Decision Affect Food Law?

July 3, 2014

by Jack Hornickel

This post is not intended to poke fun at any faith particularly or religion generally. Rather, it is meant to examine the possible implications of the Supreme Court’s policy of corporate personhood for laws meant to protect and inform consumers.

On Monday, the Supreme Court handed down a ruling in Burwell v. Hobby Lobby Stores, Inc., one of its most controversial cases this term. In an ideological 5-4 split, the Court ruled that closely-held, for-profit corporations operating on sincere religious principles are protected by the Religious Freedom Restoration Act of 1993 (RFRA) from laws of general applicability that burden the exercise of religion. Hobby Lobby, an Oklahoma-based arts and crafts chain, objected primarily to the contraceptive mandate promulgated by the Department of Health and Human Services, pursuant to the Affordable Care Act.

communionThe dissenting justices, however, argued that the Court’s decision would open the door for corporations to remove certain medical practices from their healthcare plans, such as vaccinations, blood transfusions, and antidepressants, on the grounds of corporate religious liberty. But what effect, if any, could the Hobby Lobby ruling have on the laws governing food producers?

During oral argument, Justice Alito posed an apt hypothetical: if Congress outlawed certain slaughtering techniques as inhumane, could kosher or halal butchers assert a religious exemption? (Nevermind momentarily that ritual slaughter is already explicitly exempt from the Humane Methods of Slaughter Act.) Answering his own question, Justice Alito’s opinion in Hobby Lobby would allow Jewish and Muslim butchers to opt out of such a law, so long as they were closely-held for-profit companies operating on sincere religious principles.

This leads me to wonder: could food purveyors bring challenges to other types of food laws based on the recent ruling? For example, the FDA protects consumers from misbranded foods by enforcing accurate labeling. Imagine now a company that produces wines and breads for Catholic communion (closely-held, for-profit, sincerely religious) that wishes to remind purchasers of the sacred mystery of transubstantiation by printing “Contains the Body and Blood of Christ” on its products. When the FDA takes enforcement action, could the corporation successfully sue under RFRA for burdening its exercise of religion? Likewise, the Church of Scientology utilizes a detoxification program that aims to promote spiritual wellness, relying on a routine of exercise, sweating, and vitamins. Could a company advertise the cocktail of vitamins as “Guaranteed to Heal Your Spirit” with impunity?

The possibilities are admittedly farfetched, but worth considering:

-Could a Muslim-owned business deny its employees their 60 minutes of mealtime during the month of Ramadan, contrary to state labor laws?

-Could producers of kosher beef, which must chew cud, challenge the Farm Bill provisions that favor corn-fed cattle?

-Could Rastafarians observing strict Ital challenge FDA regulations that do not require explicit labeling of hevery food additive?

In the wake of the Hobby Lobby decision, the conflict of food law and religion may one day reach the courts. Because RFRA covers “any exercise of religion, whether or not compelled by, or central to, a system of religious belief,” the cry of corporate religious freedom can be extended as far as any company wants to take it, so long as the belief is sincere.  The Court assures in its opinion that federal courts are capable of “weed[ing] out” insincere religious beliefs. Only time will tell.

Responding to an FDA Food Safety Inspection

June 26, 2014

-by Jack Hornickel

Earlier this week, Food Safety News reported on a Los Angeles-based seafood distributor cited in an FDA Warning Letter for deficiencies in its seafood HACCP plan. This quote from the article caught our eye:

FDA’s district office used the warning letter to express its concerns about shortcomings the agency found in the company’s response to its earlier concerns.

Food Safety News drew this conclusion from the Warning Letter itself:

We acknowledge receipt of your written response dated October 18, 2013. We have reviewed your response, which included an updated HACCP plan, as well as corresponding records.  However, based on your response and your HACCP plan that was provided, your canned raw scallops and canned pasteurized crab meat continue to be adulterated.

This is a perfect example of how the FDA will ratchet-up its enforcement authority if it receives an insufficient response from a food processor during an investigation. In this case, an inadequate response to a relatively discrete inspection precipitated a public flogging in the form of this Warning Letter.  This exchange demonstrates why it is so utterly important to respond accurately and comprehensively to any issues raised by regulators during an FDA inspection.

Immediately after a facility inspection, FDA must meet with the company’s manager and discuss the findings. The FDA’s Investigations Operations Manual coaches FDA inspectors to advise the company that its response to the observed violations “may impact FDA’s determination of the need for follow-up action, if FDA receives an adequate response to the [results of inspection] within 15 business days.” While nothing in the law requires an inspected company to reply, a well-crafted response is a company’s best chance of avoiding a public warning and further enforcement.

The key takeaway from all this is to have an attorney review all communication with the FDA to ensure that no statement is made during an investigation that can expose the business to additional liability. FDA has a continuum of powers it can use against food businesses. The strongest administrative actions available are mandatory recall of adulterated food, suspension of food production, and temporary seizure of food products. Communication errors at any step during an investigation could provoke the FDA to use these powers, so food businesses have plenty of reason to tread very carefully throughout an inspection.

FDA Prohibits Certain Omega-3 Claims

June 23, 2014

by Jack Hornickel

The FDA recently issued a final rule prohibiting the use of certain nutrient content claims regarding omega-3 fatty acids. After a lengthy review of proposed claims submitted by three companies, FDA refused to permit claims such as “good source of,” “high in,” and “fortified with” docosahexaenoic acid (DHA) and eicosapentaenoic acid (EPA), while allowing certain claims regarding alpha-linolenic acid (ALA) content. The rule becomes effective January 1, 2016.

Fortified with . . . stench

Fortified with . . . stench

The reason for FDA’s decision is quite logical. Under the Food, Drug, and Cosmetic Act, food producers can request official permission to use nutrient content claims, accompanied by supporting research from the National Academy of Sciences or some other federal health authority. Among other requirements, the request must prove that the nutrient content claim accurately represents the scientific research. Because phrases such as “good source of,” “high in,” and “fortified with” clearly imply a better-than-average nutrient content, the scientific research must identify a daily reference value of the nutrient — in other words, how much of the nutrient we should have in our diets.

After reviewing the provided scientific research from the Food and Nutrition Board of the Institute of Medicine at the National Academy of Sciences, FDA was not convinced. The scientific authority, FDA decided, did not accurately identify a baseline nutrient level to which the claims referred. Thus, without an adequate scientific basis, the nutrient content claims do not convey meaningful information; rather, they mislead consumers.

Omega-3 fatty acids are found in a number of food products and ingredients: soy, walnuts, canola oil, flaxseed, hempseed, chia seed, liver, fish, eggs, algae, and seaweed. Omega-3s are widely believed to reduce inflammation, and risk of heart disease and cancer. Thus, while the new FDA rule seeks to protect consumers from the proverbial snake oil salesman, it leaves consumers to refer to sites such as veganhealth.org and DHAbaby.com for tips on what foods are a “good source of” omega-3s. Food manufacturers may continue to make accurate labeling claims identifying the omega-3 content of their products, such as “contains ___ mg of DHA omega-3 fatty acids per serving.”

Meet Jack Hornickel, Food Law Intern

June 19, 2014

I always fashioned myself an environmentalist. Growing up in Minnesota, I more or less lived in the woods. During my teenage years in Ohio, I kept my punk friends from drive-by littering while we carpooled. In New York City, I rode my bike everywhere, painted rooftops white to keep buildings cooler in the summer, and petitioned for the electric Taxi of Tomorrow. Our day-to-day lives, as I saw it, were trashing this planet, and it only made sense that I should do my best to preserve it.

jack_desertOf the many interactions humans have with their environment, I came to realize, farming and eating are by far the most intimate. Our dear Earth provides us with the optimal circumstances to selectively grow the organisms that both fuel our bodies and taste incredible. What an awesome gift! Yet, as with many other human enterprises, farming and food production have become more industrial, more obscure, and more damaging to environmental and human health.

And so my environmental mission has been narrowed: Keep farms and food real. The more genuine our experience with growing and eating food, the healthier our bodies and planet will be. The best tool to accomplish this goal, by my logic, is the law. Law is the body of ideas by which our society operates, so the law should support real farming and real food. This can be accomplished either by discouraging destructive farm/food practices or by supporting healthy farm/food businesses. Though I plan to do both, I prefer the latter. The people are more interesting, their stories are more inspiring, and it leaves a better taste in the mouth.

I recently completed my second year at Vermont Law School, a student of the Center for Agriculture and Food Systems, and I am very excited to be interning with Foscolo & Handel PLLC this summer! Their knowledge of and passion for agricultural and food law is truly motivating. Keep an eye out for my blog posts on a wide range of topics; I can be reached at jackhornickel@vermontlaw.edu.

“Made With Real Sugar”

June 13, 2014

by Lauren Handel and Laura Gaudreau

PepsiCo’s announcement earlier this year that it will launch “Pepsi Made with Real Sugar” is part of a larger industry trend to market food products as containing simple, natural ingredients. It also is a response to developments in food law relating to the labeling of sweeteners.

Undoubtedly, Pepsi’s move to “real sugar” is designed to appeal to consumers seeking a natural alternative to high fructose corn syrup (HFCS). A previous attempt by the corn syrup industry to label HFCS with the more natural-sounding term “corn sugar” was rejected by FDA in 2012.

Pepsi’s announcement presents an interesting food law question: what is “real sugar” anyway? Under FDA regulations, the term “sugar” may be used in the ingredient statement of a food label to refer to sucrose obtained from crystallization of sugar cane or sugar beet juice that has been extracted by pressing or diffusion, then clarified and evaporated.

While a manufacturer may specify that cane sugar is used, FDA has taken the position that the term “evaporated cane juice” is misleading. A 2009 draft guidance from the FDA advises “sweeteners derived from cane syrup should not be listed on food labels as evaporated cane juice.”  The FDA advised that “cane juice” is not a juice as is defined in regulations, 21 C.F.R. §120.1, and therefore industry should stick to the wording “dried cane syrup.” Supporters of the 2009 draft guidance claim the term “evaporated cane juice” is false and misleading, implying to consumers it is healthier than regular sugar. Industry comments on the draft guidance urge the FDA to recognize that “dried cane syrup” has not historically been used by industry and is not recognized among customers.

In March 2014, FDA reopened the comment period for the 2009 draft guidance to obtain additional data and information on the properties of the ingredient described as “evaporated cane juice,” how it is produced, and how it differs from other sweeteners. FDA has not yet issued final guidance.

Legal Assistance for Military Veterans in Farming

May 5, 2014

UnknownFarming and food production can involve a variety of complicated legal transactions. Professional advice is essential at innumerable points during a farmer’s career. The Farmer Veteran Coalition now has a resource for farmer-veterans who have questions about contracts, product liability, labeling law, trademarks, or any other issue they may face. In cooperation with our firm, The Farmer Veteran Coalition can now offer a range of free legal services to military veterans who have previously registered with the Coalition.

Jason is a former Judge Advocate and veteran of the United States Marine Corps, as well as general counsel to the Coalition. This law firm is committed to the successful transition of military veterans into the agriculture industry, and we are very proud to support the superb work of the Farmer Veteran Coalition.

If you are a military veteran with legal questions about your farm business, you can contact info@farmvetco.org, or you can contact Foscolo & Handel PLLC directly at (888) 908 – 4959 or at info@foodlawfirm.com.

The Coalition supports the efforts of farmer-veterans across the country. If you are a fellow attorney willing to provide pro bono services to veterans in your jurisdiction, send an email to jason@foodlawfirm.com and introduce yourself! We can refer veterans to you as the need for local counsel arises.

Will Vermont’s GMO Labeling Law Survive Legal Challenge?

May 5, 2014

by Lauren Handel

Vermont’s GMO labeling bill is expected to be challenged in the courts soon after it is signed by the Governor. In an opinion piece for Food Safety News,  Shelley Powers predicts “Vermont Will Triumph Against Court Challenges to New Labeling Legislation.” My prediction more lawyerly and less sanguine: Vermont’s GMO labeling law might survive constitutional challenge, in part, or it could be entirely struck down. The two biggest constitutional hurdles for Vermont’s law are federal preemption and the First Amendment guarantee of free speech.

Regarding preemption, Ms. Powers says that the “Supremacy Clause doesn’t apply to Vermont’s law” because FDA does not formally regulate GMO labeling. It is true that FDA has issued only informal guidance regarding labeling of GMO products. For that reason, I agree with Ms. Powers that Vermont’s law is not likely preempted with respect to the labeling of food products within FDA’s jurisdiction. However, I believe that Vermont’s law is preempted to the extent that it requires labeling of foods within USDA’s authority. While the law has an exemption for “food consisting entirely of or derived entirely from an animal which has not itself been produced with genetic engineering,” foods made in part with meat or poultry would be subject to the labeling requirement. The labeling of such foods is governed by USDA under the Federal Meat Inspection Act and Poultry Products Inspection Act. Both of those statutes expressly preempt state laws imposing labeling requirements “in addition to, or different than” federal law. Vermont’s law requires labeling in addition to and different than that required by USDA and, thus, it likely is preempted with respect to foods containing meat or poultry.

The First Amendment analysis could go either way, largely depending on what test the court decides to use. Ordinarily, laws regulating commercial speech are analyzed under the test articulated by the US Supreme Court in Central Hudson Gas and Electric Corp. v. Public Service Commission of New York. That is the four-part test Ms. Powers references. If the court applies Central Hudson, the State of Vermont will have the difficult burden of proving (not merely claiming, as Ms. Powers states) that it has a substantial interest in requiring GMO labeling and that the law materially alleviates the problems. Although the Vermont bill declares that it has an interest in preventing consumer deception, preventing potential risks to human health, protecting religious practices, and protecting the environment, it is not clear that the State has evidence sufficient to prove that these are legitimate concerns or that labeling of GMO foods would materially advance any of these interests. 

Ms. Powers quotes from an analysis of the Vermont bill by the law firm Emord & Associates, which opines that the law is constitutional under the First Amendment. The authors of that memo anticipate that a court reviewing the Vermont law will apply a fairly lax (regulation-friendly) First Amendment test from the Supreme Court’s decision in Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio. In that case, the Court held that government may require commercial speakers to make “purely factual and uncontroversial” disclosures that are “reasonably related to the State’s interest in preventing deception of consumers,” as long as the requirements are not “unjustified or unduly burdensome.” The Supreme Court never has applied this test in circumstances where the government did not have an interest in preventing consumer deception. However, the US Court of Appeals for the Second Circuit (Vermont is within the Second Circuit) has held that the Zauderer test is appropriate where the state requires a purely factual disclosure, even if its interest is unrelated to preventing deception.

Even where Zauderer applies, the Second Circuit has said that the state’s interest has to be something more than satisfying consumer curiosity. In the mid-1990s, the same court found that a Vermont law that would have required labeling of dairy products produced with the synthetic growth hormone rBST violated the First Amendment because the State’s only interest was in satisfying consumer curiosity. Vermont will have a difficult time, I think, in distinguishing its present interest in informing consumers about the presence of GMOs from its earlier interest in disclosure of rBST. Thus, even if the court applies the easier test, Vermont’s “triumph” is far from a sure thing.