Monthly Archives: April 2013

Canadian Food Inspection Agency Not Liable for Negligent Performance of its Duties

Canadian Food Inspection AgencyIn April of 2013, Nicholas Kluge wrote an article titled: Government Liability for an Unnecessary Product Recall  This article analyzed the recent decision of Los Angeles Salad Co. v. Canadian Food Inspection Agency, 2013 BCCA 34, which is a British Columbia Court of Appeals case.  In this case, “the Court of Appeal addressed the issue of liability – or lack thereof – on the part of a Canadian government regulatory for damages arising out of negligent performance of its duties where the performance of those duties led to a recall of the plaintiff’s product.”  Id.

The plaintiff, Los Angeles Salad Co., supplied carrots to Costco outlets in the United States and Canada. According to the statement of claim, in 2007, the Canadian Food Inspection Agency (CFIA), the Canadian government regulator empowered to enforce food safety legislation in Canada, received reports from four consumers of the carrots who had contracted shigellosis, a potentially fatal illness caused by consumption of food contaminated with shigella bacteria. The CFIA, assisted by the Public Health Agency of Canada and Health Canada, inspected the carrots. The inspection was allegedly conducted negligently, and the CFIA informed Los Angeles Salad, Costco, the U.S. Food and Drug Administration and the public that the carrots might be contaminated with shigella bacteria, and advised the public not to consume them. As a result of this information, Costco recalled the carrots from its retail stores in Canada, and Los Angeles Salad voluntarily recalled its carrots from retail stores in the United States. The recalled carrots were destroyed, along with carrots in inventory and “in the ground.” It was ultimately determined that the carrots were in fact not contaminated with shigella bacteria and had not been the source of the shigellosis outbreak.

Los Angeles Salad sued the CFIA, alleging that the CFIA’s negligence in identifying its products as the source of the shigellosis outbreak was the proximate cause of economic losses suffered as a result of the recall and destruction of its carrots. The CFIA brought an application to strike out the action on the basis that the CFIA owed no private law duty of care to the plaintiffs.

The trial-level British Columbia court agreed with the CFIA and dismissed the action. Los Angeles Salad appealed the decision to the British Columbia Court of Appeal. In a decision released January 29, 2013, the Court of Appeal upheld the trial-level ruling, finding that under Canadian law there exists no private law duty of care owed by the CFIA to food sellers and similarly placed entities, as if such a duty were to be recognized, it would put the CFIA and other government regulatory bodies in the untenable position of having to balance public interests — ensuring food and product safety in the Canadian marketplace — with the private interests of commercial actors, which could produce a chilling effect on the proper performance of governmental duties.  Id.

Interestingly, the Canadian Court of Appeals decision in Angeles Salad Co. v. Canadian Food Inspection Agency, 2013 BCCA 34 is consistent with similar cases in the United States.  A review of relevant U.S. case-law shows, almost without exception, that no private cause of action exists for a violation of governmental duties owed to the public. The exception to this general rule is often found where the statute or ordinance imposes such a duty.  Accordingly, it is safe to say that the general rule is that a private party – even when actually harmed – cannot maintain a civil action against a governmental agency for negligence in either the U.S. or Canada.

What does this mean for the food industry?  As former president Ronald Regan said, “trust, but verify.”  A food company would be well advised to maintain command and control over its food safety program and any government inspection of its products and facilities.  Do not be afraid to get a second opinion from an independent laboratory and to challenge the government’s findings if a discrepancy is found.  After all, this is why both the FDA and the USDA provide the industry with due process rights.  Knowing what they are and how and when to use them may protect your company serious damage to its reputation, customer relations and back account.

PACA Trust Litigation Alert

PACA Trust Litigation Alert

PACA Trust Litigation Alert

On April 16, 2013, a civil action was filed in Puerto Rico against Fernando Baez-Gonzalez and Joanna Torres-Gonzalez in an effort to collect about $50,000.00 in alleged PACA trust debt.

On April 17, 2013, a civil action was filed in California against Warehouse Markets LLC in an effort to collect about $70,500.00 in alleged PACA trust debt.

On April 19, 2013, a civil action was filed in Illinois against Aame, Inc. d/b/a Dino’s of Elgin Finer Foods in an effort to collect about $26,500.00 in alleged PACA trust debt.

Please check your A/R to see is these cases affect you.  If they do, please do not wait to assert your rights.

Jason Klinowski to Attend the CPMA’s Convention & Trade Show in Toronto

CPMA Convention PicFreeborn New Logo

 

Members of Freeborn & Peters’ Food Industry Team will attend the Canadian Produce Marketing Association’s annual convention and trade show in Toronto this week. If you are attending, please do not hesitate to contact us during the show.  We are looking forward to the convention and would love to connect with you in Toronto!

PACA Trust Litigation Alert!

PACA Trust Litigation Alert

PACA Trust Litigation Alert

On March 21, 2013, a civil action was filed in Pennsylvania against Jerilu Fruit and Produce Company d/b/a Jerilu Produce Center to collect about $423,700.00 in alleged PACA trust debt.

On April 3, 2013, a civil action was filed in California against The Alphas Company, Inc. to collect about $340,500.00 in alleged PACA trust debt.

On April 5, 2013, a civil action was filed in Maryland against Panache Cuisine, LLC to collect about $167,400.00 in alleged PACA trust debt.

On April 8, 2013, a civil action was filed in California against Sunset Fresh Produce Co., Inc. to collect about $9,000.00 in alleged PACA trust debt.

On April 8, 2013, a civil action was filed in Connecticut against Connecticut Fresh, Inc. to collect about $12,800.00 in alleged PACA trust debt.

On April 11, 2013, a civil action was filed in Florida against Fresh Results LLC to collect about $1,750,000.00 in alleged PACA trust debt.

Please check your A/R to see if these cases affect you.  If they do, please do not wait to enforce your rights.

Obama’s Proposed Budget for FY2014 Calls For $252 Million in Fees For the Food Industry

FDA Budget PicAs reported by Food Safety News on April 11, 2013, the Obama administration is “seeking a significant increase in funding at the U.S. Food and Drug Administration to help the agency implement the monumental Food Safety Modernization Act.”  Obama Administration Seeks FDA Funding Increase for FSMA Implementation

Noting that the “administration’s budget is very unlikely to be enacted,” Food Safety News reported that:

The White House proposed $3.8 trillion in spending for fiscal year 2014, including $4.7 billion for FDA, which represents a more than 20 percent increase over its 2012 budget. More than 90 percent of the $821 million boost would come from industry user fees.

For food safety, the administration is proposing a $295 million increase, compared to FY 2012, to “build a strong, reliable food safety system,” but only $43 million of that increase would be regular funding. More than $252 million of it would come from food facility registration and inspection fees and food importer fees, but it’s not clear that Congress will actually mandate those fees for the food industry.

According to the budget breakdown from the White House, legislation will be proposed to allow FDA to collect fees for food facility registration and inspection as well as for food import to implement the requirements of FSMA. The document says $59 million would come out of registration and inspection fees. On the import side, the administration estimates it would collect $166 million to support food safety efforts. The food industry has long argued against user fees.

As the FDA continues to roll out FSMA, the produce industry should make every effort to stay up-to-date on how FSMA will impact the industry from a practical standpoint.  To be clear, FSMA will (rightly or wrongly) bring global changes to the produce industry and those changes require funding.  No matter what the final budget looks like, the food industry will ultimately bear the bulk of the costs associated with implementing and enforcing FSMA.  For that reason alone, the produce industry should take great interest in every word used in every regulation and understand every dollar associated with every regulatory fee charged.  I urge you to contact your industry association, your peers, your lawyer, etc…. Voice your concerns about how FSMA affects your business.

United Fresh Produce Association Calls for More Time to Comment on FSMA’s Proposed Rules

United Fresh LogoOn April 11, 2013, United Fresh Produce Association, on behalf of almost 90 separate produce industry groups, formally petitioned the FDA to enlarge the May 16, 2013 deadline for submitting industry comments to the proposed Produce Safety and Preventative Controls Rules under FSMA.  United Fresh’s request for more time is “necessitated by the complex and substantial changes proposed for the fresh and fresh-cut produce industry by these proposed rules.”  United Fresh’s April 11, 2013 Letter to FDA

United Fresh’s letter further states that the proposed Preventative Controls Rule “represents a substantial overhaul of the Current Good Manufacturing Practices (CGMP) regulations regarding the manufacturing, processing, packing, or holding of human food.  The CGMP regulations were last revised nearly thirty years ago.”  Based on this and other facts, United Fresh stated that “it would be impossible for any interested party to meaningfully comment on these two proposed rules by the current deadline of May 16, 2013.”  And, that the Produce Safety Rule and the Preventative Controls Rule “are actually two of a suite of interlocking regulations that will fundamentally alter the global fresh and fresh-cut produce industry.”

To be clear, United Fresh is calling for no less than a 180 day extension of the comment period AFTER the FDA issues the last of the proposed rules for “the Foreign Supplier Verification Program, Preventative Controls for Animal Feed, and the Accredited Third Party Certification.”  The FDA has yet to announce the publication date for these already past due rules.

What does that mean?  This is an open-ended request for an enlargement of time that may fail because it is open-ended.  In my opinion, United Fresh’s position is well founded and their request is appropriate.  However, I would hate to see the FDA deny United Fresh’s request based on a technical foul, which is the absence of a specific comment period closing date.  I think the better procedural approach would be to ask the FDA for an enlargement of time from May 16, 2013 to a date certain and separately (but perhaps in the same letter) request that each new proposed rule be given no less than a 180 day comment period right out of the gate.

Please remember that many of FSMA’s proposed rules are already significantly past their legislatively imposed publication date.  As a matter of fact, the Center for Food Safety and the Center for Environmental Health filed a civil action in August of 2012 against the FDA and the White House Office of Management and Budget in an effort to compel the federal government to comply with FSMA’s deadlines.  Against this backdrop, it may be risky for United Fresh to seek an open-ended enlargement of time on any comment period… no matter how well supported.

Is My Produce Buyer Creditworthy?

CreditworthinessNothing is more important to a produce company’s cash flow than ensuring the creditworthiness of its customers.  This statement begs the question:

How do I evaluate a buyer’s creditworthiness?

First, make sure your buyer has a PACA license and that the license is in good standing with the USDA.  To do this, simply go to the USDA’s website (http://apps.ams.usda.gov/pacasearch/) and search for your buyer.  If your buyer is a PACA licensee you will be able to see a summary report of their license, which has key information about the buyer.  Specifically, you will be able to see the buyer’s license number, the status of the license, the buyer’s business name and trade names, the buyers contact information, branch office information, and the principal of the buyer.  All of this information is free to those who know where to look and those who bother to look.

Your due diligence does not stop here.  The next step is for you to use either (or both) the Blue Book Services or the Red Book Credit Service to get credit and trade information about your buyer.  For those of you who do not know, the Blue Book Services and the Red Book Credit Services are companies who publish credit information about produce companies.  If one or both of these books list your buyer, you will be able to see whether that buyer possesses an industry credit rating and to what extent others extend credit to your buyer.  You may also be able to see how quickly the buyer pays its bills or if there are payment problems associated with your buyer.  With that said, it is important to note that not all payment problems are the result of financial problems.  Credit reporting agencies generally do not distinguish between a buyer’s inability to pay and a buyer’s legitimate refusal to pay an invoice.  As you can see, we are developing a buyer profile that helps us predict the amount of risk associated with a given buyer.

Next, you should take the information you have gathered thus far and look to the buyer’s secretary of state (usually the state in which the buyer is located, but not always) for copies of any publicly available incorporation documents, which are often online.  These documents show the buyer’s organizational structure (e.g. company, partnership, LLC, etc.) and they name the buyer’s registered agent.  A quick review of the buyer’s incorporation documents will tell you whether the company is in good standing and where you need to go to chase them for money, if needed.

Not to sound obvious, but it never hurts to simply spend time researching your buyer on the internet.  Look for articles about the buyer, look to see if the buyer maintains a website, look for any negative press about the buyer, look the buyer on various social media outlets, etc.  Gather as much information as you can about each buyer and save it in your client file.  You should also update this information from time-to-time.

Lastly, you can always call the PACA and ask a representative whether there are any pending PACA cases against your buyer at the USDA.  The representative may not give you too many details, but they will tell you whether there are any cases against your buyer for non-payment.

Every produce company should set up a due diligence process designed to help the company evaluate the creditworthiness of its customers.  The time invested in learning about your customers will help you make good credit decisions and will greatly reduce the amount of bad debt on your books.  As you know, a sale is never complete until you are paid in full.