For a food producer, a public warning from the U.S. Food and Drug Administration (FDA) that its product may be contaminated and responsible for a foodborne illness outbreak can be devastating to its bottom line. Section 375 of the Federal Food, Drug & Cosmetic Act grants FDA the statutory authority to issue such a warning for food products when, in its opinion, there is an “imminent danger to health.” This grant of authority is in addition to FDA’s ability to issue a Form 483 warning letter directly to a food producer. A Form 483 warning letter is intended to notify a food producer that it is in violation of an FDA regulation and provides the company time to respond to the warning and demonstrate compliance.
In contrast, when FDA issues a public warning under section 375, the information is disseminated directly to the public without any prior warning to food producers whose product may be implicated and the company is not provided an opportunity to respond to FDA concerns before the warning is issued. The intent of an FDA public warning is advisory—to educate consumers about products that may not be safe to eat. The warning does not require a producer to withdraw the targeted product from the market. Nevertheless, negative publicity associated with a Section 375 warning can be just as harmful to a company’s brand and operations as a recall.
But what if the warned-about product is safe after all and the FDA erred? The implication arising from a recent federal appellate court opinion is that FDA error is a risk of being a food producer because recourse against the FDA for damages sustained as a result of an erroneous public warning is limited.
In Dimare Fresh, Inc. v. United States, Florida tomato growers filed a lawsuit claiming that FDA should be held liable for losses that growers sustained after FDA issued an incorrect warning implicating Florida tomatoes in a Salmonella outbreak that sickened more than 100 people. Initially, FDA issued a press release warning consumers to “not eat certain types of raw red tomatoes.” FDA noted that the warning was based on “preliminary data” that tomatoes were the cause of the outbreak, but no specific tomato grower was targeted. FDA recommended that “retailers, restaurateurs and foodservice operators not offer for sale and service” certain types of tomatoes unless they originated from a state listed as safe by FDA. Subsequently, FDA announced during a nationally broadcast media briefing an additional warning specifically identifying Florida as an area of concern, and stating that the “vast majority” of the tomatoes produced at the time of the outbreak were “very likely” to originate from Mexico or Florida.
Forty-four days after FDA’s initial warning, FDA announced that it had determined that the cause of the Salmonella outbreak was not Florida-grown tomatoes, and it issued a press release retracting its prior warning. But that retraction came too late for the tomato producers—in just a month and a half, the damage to brand and bottom line was done. The earlier FDA warning had triggered a market collapse for Florida-grown tomatoes and the Florida growers struggled to rebound even after the public retraction.
In their complaint, the Florida tomato growers argued that the federal government should reimburse them for the hundreds of millions in losses they suffered as a result of the mistaken warning because FDA’s conduct constituted a taking without just compensation in violation of the Fifth Amendment to the U.S. Constitution. Specifically, the growers contended that they had “a reasonable investment backed expectation to realize the market value of their tomatoes” and that FDA infringed upon their property right to market and sell tomatoes as a healthy food product.
The trial court disagreed, ruling in favor of the federal government and dismissing the tomato growers’ complaint. The appellate court affirmed the dismissal. The appellate court recognized that an action might exist when federal regulations “compel the property owner to suffer a physical invasion of his property or prohibit all economically beneficial or productive use.” In this case, however, the FDA warning did not prohibit the growers from selling their tomatoes. Instead, the warning merely provided information to the public regarding the tomatoes. Simply, as noted by the appellate court, “[t]he right previously enjoyed by the Tomato Producers—their ability to supply their tomatoes in the relevant market—[had] not changed.” Whether FDA erred when it issued its warning was not relevant to whether the growers could sustain a takings claim.
The Dimare case should cause concern for food producers, although the case outcome is not particularly surprising. In matters of public health and safety, regulatory agencies typically are given wide latitude to act expeditiously, often without all of the requisite information needed to make fully informed decisions.
This raises the question: How can a food company protect itself from this sort of government action? The answer is preparation, with compliance with Food Safety Modernization Act regulations serving as the preparation cornerstone.
First, a food company must be vigilant in its efforts to identify and prevent hazards and to produce safe food, including attentive management of internal operations and external supply relationships, to avoid circumstances that might give rise to surmise—let alone an actual finding—that adulterated food products have reached the marketplace.
Additionally, a food company must prepare for the worst case scenario that a Section 375 public warning notice, like a voluntary or FDA-ordered recall, embodies. Even a food company with a stellar food safety plan may find itself one day faced with a food safety crisis. A well-written, oft-practiced crisis management plan that addresses both food safety concerns and brand-reputation protection (including, where FDA has erred, complete records that show the safe-nature of the product) can help minimize the damage a food company is likely to suffer in the event FDA labels its product unfit for consumption.
Meghan E. Tepas, Esq., is an associate and member of the Food Industry Team at Freeborn & Peters LLP (Chicago).