Federal Preemption

Is The Writing On The Wall For Prop 65?

Beverage, FDA, Federal Preemption, Food, Prop 65

                                                                                                                                                                                                       

By: Brent E. Johnson 

On October 12, 539 BC, Persian ruler Cyrus the Great conquered Babylon.  According to the Biblical Book of Daniel, on the night before the overthrow, the Babylonian king, Belshazzar, witnessed the appearance of a mysterious hand, which wrote on a palace wall, “Mene, Mene, Tekel, Upharsin.”  Belshazzar called for Daniel to interpret the mysterious inscription.  Daniel’s translation: “You have been weighed . . . and found wanting.”  Is the same writing on the wall for Prop 65?

First came “Roundup.”  As we’ve blogged about in the recent past, Monsanto, the manufacturer of the herbicide Roundup, filed a petition in Fresno County Superior Court to prevent the California Office of Environmental Health Hazard Assessment (“OEHHA”) from listing glyphosate (the principle ingredient in Roundup) as a Prop 65 chemical requiring a warning label.  Finding no success, Monsanto and several state agricultural associations moved to federal court seeking an order that they are not required to put a warning label on Roundup or food products containing glyphosate.  While the federal case is ongoing, the court granted a  preliminary injunction so that no warning is required during the pendency of the action.  The federal court gave particular credence to Monsanto’s first amendment argument that it was being required to engage in commercial speech with which it did not agree.  The court held that the State of California may only require commercial speakers to disclose “purely factual and uncontroversial information,” and the science before it was questionable regarding whether glyphosate is a carcinogen.  In 2015, the International Agency for Research on Cancer (“IARC”) – a division of the World Health Organization — issued a report finding that glyphosate is a “probable carcinogen.”  More recently, however, the Environmental Protection Agency issued a draft human health risk assessment that concluded that glyphosate is likely not carcinogenic.  The federal case will put on trial the science behind OEHHA’s glyphosate listing, which is predicated exclusively on the IARC study.

After Roundup came coffee.  As we’ve blogged about recently, in response to a ruling by the Los Angeles Superior Court that coffee must bear a Prop 65 cancer and reproductive harm warning, OEHHA announced, and opened a period for public comment on, a proposed regulation that would eliminate the need for cancer warnings on coffee products.  OEHHA’s reasoning is illuminating:   “In a review of more than 1,000 studies published this week, the World Health Organization’s International Agency for Research on Cancer (IARC) concluded that there is ‘inadequate evidence’ that drinking coffee causes cancer. IARC found that coffee is associated with reduced risk for cancers of the liver and uterus, and does not cause cancers of the breast, pancreas and prostate. IARC also found that coffee  “exhibits strong antioxidant effects related to reduced cancer risk.”  It seems that OEHHA is willing to look at coffee in its entirety — even though  the Los Angeles Superior Court opinion and Prop 65, itself, focuses on the chemical alone.  See Council for Education and Research on Toxics v. Starbucks Corp. et al., No. BC435759 (Cal. Super. Ct. L.A. County March 28, 2018)

And just this week, the California Court of Appeal (Second Appellate Division) ruled that breakfast cereal manufactures are not required to label their boxes with Prop 65 warnings based on the presence of acrylamide because federal law pre-empts Prop 65 when it comes to Fruity Pebbles.  Post Foods, LLC v. Superior Court, No. B284057, 2018 WL 3424800, at *6 (Cal. Ct. App. July 16, 2018).  The Court held that mandating a Prop 65 warning on cereals presented an “obstacle” to the Food and Drug Administration’s stated objective of encouraging the consumption of whole grains.

For those of us who practice in the food and beverage space, a finding of federal pre-emption of a state statute or regulation is the Holy Grail.  In this case, the Court of Appeal found “obstacle pre-emption” by citing to correspondence between FDA and OEHHA in the early and mid-2000s regarding the application of Prop 65 to food, in general, and acrylamide, in particular.  Specifically, in a July 14, 2003 letter from FDA Deputy Commissioner Lester Crawford to Joan Denton, Director of OEHHA, Commissioner Crawford stated:

“FDA is concerned that premature labeling of many foods with warnings about dangerous levels of acrylamide would confuse and could potentially mislead consumers, both because the labeling would be so broad as to be meaningless and because the risk of consumption of acrylamide in food is not yet clear. [¶] Furthermore, consumers may be misled into thinking that acrylamide is only a hazard in store-bought food. In fact, consumer exposure may be greater through home cooking. … In addition, a requirement for warning labels on food might deter consumers from eating foods with such labels. Consumers who avoid eating some of these foods, such as breads and cereals, may encounter greater risks because they would have less fiber and other beneficial nutrients in their diets. For these reasons, premature labeling requirements would conflict with FDA’s ongoing efforts to provide consumers with effective scientifically based risk communication to prevent disease and promote health.”

Post Foods, 2018 WL 3424800, at *2.

FDA’s letter should be read for what it is – a scathing indictment of Prop 65 as it pertains to food.  FDA essentially told OEHHA:  (1) Your Prop 65 labeling is so ubiquitous as to be “meaningless;” (2) Your science regarding acrylamide is suspect; and (3) Your labeling requirement is actually counterproductive because, to the extent consumers read the warnings, the labels might actually deter them from eating healthy foods, such as whole grains.  FDA followed up with OEHHA in 2006 reaffirming its earlier position and observing that an acrylamide warning on food might “create unnecessary and unjustified public alarm about the safety of the food supply; dilute overall messages about healthy eating; and mislead consumers into thinking that acrylamide is only a hazard in store-bought food.”

These recent developments go to the core of several long-standing criticisms of Prop 65:  (1) The science behind requiring a warning – in most cases, a study by IARC – is dubious; (2) The warning requirement is myopically focused on the presence of the accused chemical and does not take into account broader considerations of the value of the product as a whole or the actual risk posed by the presence of the chemical in the product; and (3) The “over-warning” engendered by Prop 65 dilutes the impact of consumer product warnings that are actually important.  While Prop 65 apologists often resort to the argument that the law is “just a warning statute — it doesn’t ban products,” this argument glosses over the fundamental issue of what the warning actually means.  Do the words “known to the State of California” mean that hard science supports the cancer or reproductive harm warning?  Does the very presence of the chemical in the product actually increase the risk of cancer or reproductive harm to the consumer who uses it or consumes it?  Does the product have benefits that outweigh any risks from exposure to the chemical?

These criticisms of Prop 65 finally have been heard by Congress, a group that was more than happy to legislate away Vermont’s GMO law, but heretofore has been disinclined to take on California.  On June 18, 2018, a bipartisan group of congressmen introduced H.R. 6022 (“The Accurate Labels Act”), a bill “[t]o amend the Fair Packaging and Labeling Act to require that Federal and State mandated information declarations and labeling requirements applicable to the chemical composition of . . . consumer products meet minimum scientific standards to deliver accurate and clear information . . . .”  Among the bill’s sponsors is Representative Jim Costa, a Democrat from California’s 16th Congressional District in the central San Joaquin Valley.  The bill prohibits departments and agencies of the federal government as well as states and political subdivision of states from requiring information — including warnings — on consumer commodities unless, among other things, the information/warning is:  (1) risk-based; (2) based on the best available science; and (3) based on an appropriate weight of the evidence review.  Therefore, to the extent a Prop 65 chemical listing is based on the mere presence of the chemical in a product (i.e., not based on the risk of a particular exposure); is made purely because a single health organization (read, IARC) has determined that the chemical may be a carcinogen or reproductive toxicant; or does not weigh the risk/benefits of the chemical in particular products, the listing would run afoul of H.R. 6022.  The bill also authorizes “[a]ny . . . person that is . . . required to display or communicate to a consumer covered information about a covered product, or is, or may be, subject to an enforcement action with respect to that requirement by a State or a political subdivision of a State, [to] bring a civil action in an appropriate district court of the United States against that State (or any private entity that is authorized to bring an enforcement action on behalf of that State) . . . if the requirement of the State or political subdivision does not comply with the requirements [of this Act].”  If the bill becomes law, Bounty Hunters in California may find themselves the subject of federal lawsuits for making Prop 65 claims.

H.R. 6022 has been referred to the House Committee on Energy and Commerce.  An analogous Senate bill, S 3109, is before the Committee on Commerce, Science and Transportation.  While these bills will have a difficult time making it out of committee because of timing issues and the likelihood of opposition from other California legislators in both houses, their very existence shows that Congress is paying attention.  When coupled with the recent Roundup and acrylamide decisions, the House and Senate bills – like the mysterious inscription given to Belshazzar – may be the writing on the wall for Prop 65?

Pokemon GMO

FDA, Federal Preemption, Food, Uncategorized,

** Update on the National Bioengineered Food Disclosure Standard Law **

By: Brent E. Johnson

closeup of a GMO UPC symbol on white

By a stroke of the pen, President Obama put to rest for all time (by “all time,” we mean a decade) the brouhaha over labeling foods containing GMO ingredients.  By signing the National Bioengineered Food Disclosure Standard law on July 29, 2016, the President and Congress proclaimed to the citizenry that GMO labeling is important — but not so important that the labels actually have to be seen.  How did we get to this point?  A brief history is in order.

When one of the editors of this blog watches Netflix with his English Bulldog, he is enjoying the companionship of a genetically modified organism (“GMO”).  Long before the first GMO food – the Flavr Savr tomato — hit grocery store shelves in 1994, humans were engineering crops and livestock the old fashioned way – selective breeding.  Modern GMOs, of course, differ from those derived from selective breeding.  They are developed on a molecular level – a specific gene from a donor organism that expresses a desirable trait is inserted into the genome of the target organism to give the latter that same trait.  While consumer organizations and environmental activists have sounded the tocsin (or toxin) over GMOs since the beginning of bio-engineering, the federal government – particularly the FDA – has not been alarmed.

Two years before Flavr Savr, the FDA published its “Statement of Policy:  Foods Derived from New Plant Varieties.”  In this document, the FDA reminded the public that a food additive must be approved prior to use unless it is “generally recognized as safe” (GRAS).  The FDA concluded that, while a plant gene inserted into another plant is an additive, generally that gene is GRAS.  “The agency is not aware of any information showing that foods derived by these new methods differ from other foods in any meaningful or uniform way, or that, as a class, foods developed from the new techniques present any different or greater safety concern than foods developed by traditional plant breeding.”  Based on that logic, the FDA’s regulations for plant GMOs are the same as those for traditional foods with the exception of a voluntary (“recommended”) consultation procedure with which developers of GMO-containing foods typically comply.  (Note that the USDA’s Animal and Plant Health Inspection Service plays a limited regulatory role with regard to GMOs that pose a risk to other plants or animals and the EPA regulates GMOs that are bio-engineered to produce a pesticide – for example, the infamous, but unblemished, Bt-corn.)

In the 1992 Policy, the FDA eschewed requiring food companies incorporating plant GMOs to label their products as such under the Federal Food, Drug, and Cosmetic Act because “the agency does not believe that the method of development of a new plaint variety (including recombinant DNA techniques) is normally material information within the meaning of 21 U.S.C. 321(n).”  The FDA has not deviated from this position in the past quarter decade.  The agency’s website has a page directed to consumers which rhetorically asks, “Are foods from GE plants safe to eat?”  The response is, “Yes.  Credible evidence has demonstrated that foods from the GE plant varieties marked to date are as safe as comparable, non-GE foods.”

The FDA’s refusal to mandate that food companies label their products containing GMOs does not mean that consumers who care about such things have been stymied.  In 1990, Congress enacted and George Herbert Walker Bush signed the Organic Foods Production Act, which required that the USDA develop national standards for organic products.  Ten years later, the USDA issued its final rule establishing the National Organic Program (NOP), which governs both fresh and processed food products, including crops and livestock.  The “USDA Organic” label means many things under the NOP — but one of them is no genetic engineering.  GMOs are prohibited in organic products as excluded methods of production.  7 CFR § 205.105.  Therefore, a consumer that doesn’t want to ingest a GMO need only look for the “USDA Organic” label.

The NOP was not enough for Vermont.  In 2014, Vermont enacted Act 120 – a manifesto against the federal government’s oversight of GMOs — that required labels on products containing genetically engineered ingredients.  “[F]ood offered for sale by a retailer after July 1, 2016 shall be labeled as produced entirely or in part from genetic engineering if it is a product:  (1) offered for retail sale in Vermont; and (2) entirely or partially produced with genetic engineering.”  Act 120, § 3043.  In addition, “a manufacturer of a food produced entirely or in part from genetic engineering shall not label the product on the package, in signage, or in advertising as ‘natural,’ ‘naturally made,’ ‘naturally grown,’ ‘all natural,’ or any words of similar import that would have a tendency to mislead a consumer.”  Id.

The food industry went into an uproar over Vermont’s law because – given the realities of interstate commerce – companies would have to change their labeling nationwide to satisfy the demands of Vermont.  While manufacturers have had to bend to the legislative will of California from time to time (“Made in the USA”/Prop 65), it’s quite another thing to answer to Vermont.

Due, in part, to persistent lobbying, Congress enacted the Bioengineered Food Disclosure Standard law just in time to pre-empt Vermont’s organic labeling law from going into effect.  The law requires that the USDA “establish a national mandatory bioengineered food disclosure standard with respect to any bioengineered food and any food that may be bioengineered” by July 2018.  Therefore, GMO labeling will be required nationwide sometime after 2018.  But because Congress clearly believes that this law is a solution in search of a problem, the statute has a unique labeling provision that “require[s] that the form of a food disclosure under this section be a text, symbol, or electronic or digital link . . . with the disclosure option to be selected by the food manufacturer.”  What does this mean?  Simply put, food companies will have the option of either a product label with a bar code accompanied by the words, “scan here for more food information” or a toll-free telephone number with “call for more food information.”  In short, an actual GMO disclosure on the label is not required.  Consumers who care will roam supermarket aisles – smart phones in front of their faces – scanning bar codes to find their non-GMO groceries like Pokemon Go zombies looking for Poke Balls.

Will Trucking Case Drive New Federal Arbitration Act Case to the Supreme Court?

Arbitration, Class Waiver, Federal Preemption, Supreme Court, ,

** Gas Company Looks for Post-Iskanian Certiorari After California Appeals Court Invalidates Arbitration and Class Waiver Provision in its Wage and Hour case with its Truck Drivers **            

By: Brent E. Johnson

                                                                                                                                                                                                                                                                                                                                                   California courts are known for their distaste for arbitration provisions – and for butting heads with the Supreme Court who has (on a number of occasions now) made clear that that the Federal Arbitration Act (FAA) (9 U.S.C. § 1) preempts California judicial rulings regarding the unconscionability of class arbitration waivers.  See e.g., AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).  The Supreme Court may get another chance to make the point, as courts in California continue with a “where there is a will – there is a way” approach to invalidating arbitration contracts.  See discussion, James v. Conceptus, Inc., 851 F. Supp. 2d 1020, 1036-37 (S.D. Tex. 2012) (concluding that, even after Concepcion, California courts continue to find arbitration forum-selection clauses unenforceable under far more stringent tests than other states).  One of the latest defendants to have their arbitration provision deemed unenforceable is Air Liquide in Garrido v. Air Liquide Indus. U.S. LP, 194 Cal. Rptr. 3d 297 (Cal. Ct. App. 2015).  However, Air Liquide has not taken it lying down – on May 3, 2016, it filed a writ of certiorari in the U.S. Supreme Court. Air Liquide Indus. U.S. LP v. Garrido, No. 15-1336, 2016 WL 2605541 (U.S.) (“Writ”).

A quick bit of history for context on the Garrido Court of Appeal decision.  Recall in Gentry v. Superior Court, 42 Cal. 4th 443 (Cal. 2007), the California Supreme Court held that a class-action waiver in an employment contract was unenforceable when the waiver would prevent employees from vindicating their rights.  The Gentry court concluded that even though individual arbitration could be a tool to enforce legal rights, in the context of the employment relationship – if each individual recovery would be modest, if an individual might be retaliated against if bringing a suit individually (rather than by merely joining a class) and if there are other real world obstacles in going it alone – then the provision would be invalid.  The practical effect of these Gentry factors made it highly unlikely that an employer arbitration provision would survive.  However, Gentry was overruled by Iskanian v. CLS Transportation Los Angeles, LLC, 327 P.3d 129 (Cal. 2014) (applying the then new rule from Concepcion).  The finding of Iskanian was that any California law that invalidated an arbitration provision was contrary to the FAA and therefore preempted.

However, in Garrido, the Court of Appeals deftly side-stepped Iskanian.  First, it determined that the FAA did not even apply to the case at hand.  194 Cal. Rptr. 3d at 302. Citing Section 1 of the FAA, which states that the FAA does not cover “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” the California Court of Appeals held that “transportation workers” fell within this exception.  (Citing Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 109 (2001)).  More specifically, the Garrido court held that the FAA carve-out did not apply to interstate truck drivers. 194 Cal. Rptr. 3d at 303.  And second, the Court of Appeals held that because the basis of the Iskanian decision was its nexus to the FAA – with that connection severed – Gentry not Iskanian governed. 194 Cal. Rptr. 3d at 304.  Finally (and not surprisingly), after applying the factor test from Gentry, the court held that the arbitration provision failed.

Air Liquide’s certiorari writ notes that the Court of Appeal’s severing of the relevant employment contract from the FAA was improper – foremost because the contract itself says that the FAA applies.  Air Liquide’s briefing notes that “the application of the Section 1 exemption directly contradicted the parties’ clear and expressly-stated intent to apply the FAA to their dispute. The Court of Appeal’s conclusion that the parties somehow intended to apply an exemption to the FAA to vitiate the very choice of law provision that they entered into, when in fact their intention was directly opposite, defied reason.” Writ at 5 – 6.  Air Liquide also criticizes the Court of Appeals decision for applying the “transport worker” exception outside of the trucking industry to it – a gas company – that just happens to transport its material from time to time.  Writ at 18 – 19.

This latter point raises an important issue that will apply to all companies who move their own products around the country – are their employees “transport workers”?  The more interesting and broader question, however, arises if Air Liquide fails on that question:  Can parties force the FAA to apply where it otherwise has no force?  Does an agreement that says the FAA “governs” carry with it those circumstances where it otherwise wouldn’t (because the FAA exempts it)? Interesting questions . . . and again – as we have blogged in the past – one that will be a test of the legacy of the arbitration jurisprudence of which the late Justice Scalia was the chief architect.

FDA Seeks All Natural Comments

All Natural Litigation, FDA, Federal Preemption, ,

Green apple with stethoscope

**Are we a step closer to solving the All Natural problem?**

By: Brent E. Johnson

There are problems faced by “All Natural” or “100% Natural” defendants.  See prior post. A specific problem for defendants is the inability to rely on any definitive Food and Drug Administration (FDA) guidance.  The FDA’s position has been clear – it “has not promulgated a formal definition of the term ‘natural’ with respect to foods.”  See Letter Leslie Kux, Assistant Commissioner for Policy, Food and Drug Administration, to the United States District Court, Northern District of California, dated January 7, 2014.  To date the FDA has created only an “informal policy statement.” Janney v. Mills, 944 F. Supp. 2d 806, 812 (N.D. Cal. 2013) (citing 58 Fed. Reg. 2302–01).  If there was federal regulation – defendants would have clarity in their positions – and state law claim would likely be pre-empted, see e.g., Lam v. General Mills, Inc., 859 F.Supp.2d 1097, 1102–03 (N.D.Cal.2012). In the absence of regulation, the question of what “natural” means and whether a product’s labeling violates the law is currently governed by an unwieldy “reasonable consumer standard”.  Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir.2008) citing Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir.1995)). This lack of objective standards is one of the reasons why the litigation has been able to take hold – at the same time as “natural” labeled food has boomed (the Washington Post reports that nearly $40.7 billion worth of food items in the U.S. has some labeling of this type). Fortunatley, the FDA has changed tack – responding, inter alia, to requests from Federal Courts and a citizen petition from the Grocery Manufacturers Association it has published a Federal Register notice asking for information and comments on the use of the term “natural” in food labeling. Specifically, the FDA asks for information and public comment on questions such as: whether it is appropriate to define the term “natural,”; if so, how the agency should define “natural,”; and how the agency should determine appropriate use of the term on food labels.  Notably, the FDA notes that it may be looking to expand its policy on natural foods to include – not only the synthetic/artificial divide, but also questions of whether pesticide free and manufacturing processes should be part of the equation.  The FDA is accepting public comments beginning on November 12, 2015 and finishing February 10, 2016.  Comments may be submitted electronically (under FDA-2014-N-1207).