Category: Food & Hospitality

Overconsumption of Black Licorice Linked to Fatality in Massachusetts

A 54-year-old Massachusetts man died of cardiac arrest after his consumption of a substantial quantity black licorice. The man reportedly consumed a bag and a half of black licorice each day for several weeks.

The Food and Drug Administration (FDA) has warned consumers about the potential risks of overconsumption of black licorice.  Specifically, FDA has warned people 40 or older that eating 2 ounces of black licorice a day for at least two weeks may cause an irregular heart rhythm or arrhythmia.

Licorice root and black licorice contain glycyrrhizin, which can cause potassium levels in the body to fall, potentially triggering abnormal heart rhythms, as well as high blood pressure, edema, lethargy, and congestive heart failure.

FDA advises consumers not to eat large amounts of black licorice at one time, to stop eating black licorice if experiencing irregular heart rhythm or muscle weakness, and to consult a healthcare professional regarding possible interactions that licorice may have with drugs or supplements.

© 2020 Keller and Heckman LLP
For more articles on food and drug law, visit the National Law Review Biotech, Food, Drug section.

Blue Bell Fined Record $17.25 Million in Post-Conviction Criminal Penalties for Listeria Outbreak

As previously reported on this blog, a multi-state listeriosis outbreak in 2015 linked to Blue Bell Creameries LP’s ice cream products contaminated with Listeria monocytogenes led to recalls, state regulatory enforcement actions (discussed here), civil litigation (including shareholder lawsuits), and criminal prosecution of the company and its former president. According to the Centers for Disease Control and Prevention, at least 10 people were sickened with listeriosis and hospitalized in Arizona, Kansas, Oklahoma, and Texas, and three people in Kansas died.

Pursuant to a plea agreement filed in federal court in Austin, Texas, in May 2020, the company pled guilty to two misdemeanor counts under the Federal Food, Drug, and Cosmetic Act of distributing adulterated ice cream products through interstate commerce. After conviction, Blue Bell was recently sentenced to pay $17.25 million in criminal penalties ($9.35 million in criminal fines and $7.9 million in forfeiture). According to the U.S. Department of Justice (DOJ), this represents the largest-ever criminal penalty following a conviction in a food safety case.

Blue Bell also agreed to pay an additional $2.1 million to resolve civil False Claims Act allegations regarding ice cream products manufactured under insanitary conditions and sold to federal facilities. According to DOJ, the combined total of $19.35 million in fine, forfeiture, and civil settlement payments constitutes the second largest-ever amount paid in resolution of a food-safety matter (the largest to date is a $25 million fine paid by Chipotle Mexican Grill Inc. in connection with a three-year deferred prosecution agreement to avoid conviction through implementation of an improved food safety program). According to the U.S. Department of Justice’s (DOJ) press release announcing the Blue Bell plea agreement, since reopening its facilities in late 2015, Blue Bell has taken significant steps to enhance sanitation processes and enact a program to test products for listeria prior to shipment.

In a related federal action in the same court, Blue Bell’s former president, Paul Kruse, was charged with seven felony counts (including attempt and conspiracy to commit mail fraud, wire fraud, and attempted wire fraud) for his alleged efforts to conceal from customers what the company knew about the listeria contamination. Among other allegations, Kruse allegedly directed Blue Bell employees to remove potentially contaminated products from store freezers without notifying retailers or consumers about the real reason, directed employees to tell customers who inquired that there was an unspecified issue with a manufacturing machine instead of informing them that samples of the products had tested positive for listeria, and directed employees to conceal and destroy evidence. In July 2020, the court dismissed the felony charges for lack of subject-matter jurisdiction, after Kruse successfully argued that while prosecutors had filed an information to charge him, they had failed to properly secure the required indictment or, in the alternative, a waiver of the right of indictment.

© 2020 Keller and Heckman LLP
For more articles on food and drug law, visit the National Law Review Biotech, Food, Drug section.

COVID-19 Brings Consumer Convenience to Pennsylvania

Effective tomorrow, August 4, 2020, the Pennsylvania Liquor Control Board (PLCB) amended sections 407, 415, and 442 of Act 29 of 2020. These revisions allow Pennsylvania Restaurant (“R”) liquor licensees, Eating Place Malt Beverage (“E”) licensees, and Wine Expanded Permit (“WEP”) holders that possess interior connections to another business they operate, such as a grocery store, convenience store, or similarly situated business that cannot have its entire building or business licensed, to have the consumer use the cash registers at their other business to sell malt or brewed beverages and wine for off-premises consumption.

Consumer Convenience in Pennsylvania

Previously, all alcohol sales in these businesses were confined to the licensed areas where alcohol was stored, served, and sold. This confused many customers who tried to check out at the wrong register line with beer and wine purchases. However, during the COVID-19 pandemic, there has been a push to allow customers to use other registers in the store to create fewer touchpoints for customers by not having to use two different registers and to create less congestion in the licensed areas, which are typically fairly small.

Qualifications for Additional Cash Registers

In order to qualify, ALL the following requirements must be met:

  • The licensee’s building is 11,000 square feet or less;
  • The other business cash registers are in the same building as the licensed premises; and
  • The other business cash registers comply with the following standards as set forth by 47 P.S. 4-415(a)(8) and (9) of the Liquor Code:
    • Cash registers must have signage to designate that alcohol may be purchased at said register
    • Cash registers cannot be registers where customers scan their own purchases, which means that self-checkout is still prohibited for all alcohol purchases
    • Cash registers must always be staffed when patrons are purchasing alcohol
    • Cash register clerks must be at least 18 years of age and have completed Responsible Alcohol Management Program training
    • Cash register clerks must use a transaction scan device to verify the age of any patron purchasing alcohol who appears to be under 35 years of age before a sale can occur
    • The licensee may not sell or share the data from the use of its transaction scan device, except for providing said data to the Pennsylvania State Police Bureau of Liquor Control Enforcement

In order to start using additional cash registers, all the above-mentioned criteria must be met AND an email notification of compliance must be sent to RA-LBLICINV@PA.GOV including the following information:

  • LID, license number, and licensee name and address
  • The building’s total square footage
  • Plans or sketches that show the location of the specific cash registers being used
  • Confirmation that all conditions are met

 

©2020 Norris McLaughlin P.A., All Rights Reserved

ARTICLE BY Matthew B. Andersen and Theodore J. Zeller III at Norris McLaughlin P.A. Summer Associate Benjamin MacLuckie contributed.
For more on state liquor laws, see the National Law Review Biotech, Food & Drug law section.

FTC Proposes New Rule Codifying “Made in USA” Policy

On July 16, 2020 the FTC published a notice of proposed rulemaking in which it announced its intention to codify its long-time enforcement policy regarding products labeled as “Made in the USA” (MUSA); these claims are currently enforced through the FTC’s general authority to prevent unfair and deceptive practices.

The proposed rule does not change the substantive criteria on which such claims will be evaluated and rather is primarily intended to (1) strengthen the FTC’s enforcement mechanism by making it easier for the FTC to assess civil penalties against those making unlawful MUSA claims and (2) give marketers more regulatory certainty. Under the proposed rule, a MUSA claim may, as before, only be made where (1) the final processing or assembly occurs in the USA, (2) all significant processing that goes in the product occurs in the USA, and (3) all or virtually all of the ingredients or components of the product are made and sourced in the U.S. While the proposed rule would apply to a broad range of product labels, it would also apply to MUSA claims found outside of the product label such as mail order catalogs and mail order promotional materials defined to include “any materials, used in the direct sale or direct offering for sale of any product or service, that are disseminated in print or by electronic means, and that solicit the purchase of such product or service by mail, telephone, electronic mail, or some other method without examining the actual product purchased.”  The proposed rule would not apply to qualified MUSA claims.

Comments to the proposed rule are due by September 14, 2020.

© 2020 Keller and Heckman LLP

For more on labeling regulation, see the National Law Review Administrative & Regulatory law section.

Economic Relief for Businesses Impacted by Coronavirus (COVID-19)

In response to the Coronavirus (COVID-19) outbreak, the federal government and many states have developed paths towards economic relief for small businesses. Below is a summary of such programs at the federal level and in New York, Connecticut, and New Jersey.

I. Federal – U.S. Small Business Administration (the “SBA”)

In response to the Coronavirus (COVID-19) outbreak, the SBA has made Economic Injury Disaster Loans (“EID Loans”) available for qualifying businesses that have suffered economic injury as a result of the epidemic.  Below is a summary of the SBA’s eligibility requirements, application procedures, and general loan terms for the EID Loans.

SBA EID Loan Eligibility

In order to be eligible for an EID Loan a business must first be located in a geographic area that is a declared disaster area recognized by the SBA.  Recognized Declared Disaster Areas are listed on the SBA’s website. As of March 17, 2020, the following areas are approved for disaster loan assistance due to the Coronavirus (COVID-19): California, Connecticut, Idaho,  Maine, Massachusetts, New Hampshire, New York, Oregon, Rhode Island, and Washington. The entire State of Connecticut was declared a federal state of disaster due to the Coronavirus outbreak effective as of January 31, 2020. Many other states are currently in the process of submitting requests to the SBA for an economic injury disaster declaration as a result of the virus and should be eligible for EID loans in the coming days and weeks.

The SBA further requires that a business qualify as a small business to be eligible for an EID Loan. The definition of a “small business” varies by industry but generally is based on the number of employees a business has or the amount of revenue a business generates annually. The SBA has an interactive website to help companies determine whether or not they qualify as a “small business” under the SBA’s regulations. Generally, a full-service restaurant qualifies as a “small business” so long as it has less than $8,000,000 in annual revenue. Private and nonprofit organizations may also qualify for EID Loans.

Finally, a business must demonstrate that it has suffered “substantial economic injury” as a direct result of the disaster, in this case the Coronavirus outbreak, in order to qualify for an EID Loan. For the SBA’s purposes a “substantial economic injury” generally means a decrease in income from operations or working capital with the result that the business is unable to meet its obligations and pay ordinary and necessary operating expenses in the normal course of business.

Ultimately, an applicant’s eligibility for an EID Loan will be determined by the SBA based on the applicant’s type of business, available financial resources, and its demonstration of substantial economic injury.

EID Loan Application Process

An EID Loan, and all other SBA disaster assistance loans, can be applied for by an (1) online application or (2) by a paper form, using SBA Form 5. The SBA has suggested that online applications will be processed more quickly than applications submitted on a physical form.

In addition to the EID Loan application form, an applicant must submit the following documentation to the SBA –

  1. Tax Information Authorization (IRS Form 4506T), completed and signed by each principal owning 20% or more of applicant business, general partner, general manager or owner who has 50% ownership interest in affiliate business. (Affiliates include, but are not limited to business parents, subsidiaries, and/or other businesses with common ownership or management with applicant business.)
  2. Complete copies, including all schedules, of the most recent Federal income tax returns for the applicant business; if unavailable a written explanation must be submitted in lieu
  3. Personal Financial Statement (SBA Form 413) completed, signed, and dated by the applicant and each principal, general partner or managing member.
  4. Schedule of Liabilities listing all fixed debts (SBA Form 2202)

Following the submission of a complete loan application, the SBA will conduct a credit check of the applicant and verify the business’ financial information. The SBA may request additional financial information including tax returns for principals, general partners and managing members of the business, as well as a current profit-and-loss statements, and balance sheets for the business. The SBA’s stated goal is to review an application and decide on a business’ eligibility for the EID loan program within 2-3 weeks. Given the anticipated high volume of applications to this program as a result of the Coronavirus, it is likely that the application and review process will take longer. Once an application is fully accepted and approved, the applicant will need to sign the applicable EID Loan documents and return them to the SBA. The applicant can expect to receive a disbursement of the EID Loan funds within one week from the SBA’s receipt of the fully executed loan documents.

The EID loan amount awarded by the SBA will be based off an applicant’s actual economic injury and the business’ financial needs, as determined by the SBA. The SBA will factor in the availability of other potential sources of financial contribution and business interruption insurance when determining an EID loan amount to be awarded to a small business.

EID Loan Use and General Terms

The funds from an EID loan may be used by the small business to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The terms of an EID Loan shall be determined by the SBA on a case-by-case basis, based upon each applicant’s needs and ability to repay. Generally, the maximum amount of an EID loan for the Coronavirus disaster is $2 million with an interest rate of 3.75% for small businesses or 2.75% for non-profits. The maximum repayment term of an EID loan is 30 years. There are no pre-payment penalties imposed by the SBA on an EID loan.

Alternatives to EID Loans

Small businesses that do not qualify for EID loans or have alternative needs may still be eligible for financial assistance from one of the SBA’s alternative loan programs.

The SBA has an 7(a) Loan Guarantee Program involves loans for small businesses in an amount up to $5,000,000 made by private lenders that are guaranteed by the SBA (“SBA 7(a) Loan”). An SBA 7(a) Loan is made directly by a private lender, who also handles the application and loan process, but is subject to the SBA’s terms and guidelines. To encourage private lenders to make these loans, the SBA guarantees a certain percentage of the SBA 7(a) Loan amount.  Small businesses looking for an acceptable lender for a SBA 7(a) Loan can use the SBA’s lender matching tool or contact their local SBA office for recommendations. The local Connecticut SBA office can be reached at 860-240-4700. The general timeline for the approval of an SBA 7(a) Loan application is 5 to 10 business days.

In order for a business to qualify for a SBA 7(a) Loan, it must qualify as a “small business” under the SBA’s regulations, operate for profit, be engaged in, or propose to do business in, the U.S., have reasonable owner equity and resources to invest in business, and be for a sound business purposes. The acceptable use of the 7(a) Loan funds is generally less restrictive than that of the EID loans and permissible uses include use for working capital, expansion or renovations, new construction, the purchase of land or buildings, the purchase of equipment or fixtures, lease-hold improvements, the refinancing of existing debt for compelling reasons,  seasonal line of credit, inventory, or starting a business. The proceeds from an SBA 7(a) Loan may not be used for the reimbursement of an owner for previous personal investments toward the business, the repayment of any delinquent withholding taxes, or anything not deemed a “sound business purpose” as determined by the SBA. Interest rates for SBA 7(a) Loans are determined by the private lender and generally based off the prime rate or LIBOR rate at the time of the loan but are subject to interest rate caps set by the SBA.

For businesses that need loan funds in a shorter period of time, the SBA offers a SBAExpress loan program which provides term loans and line of credits in amounts up to $350,000. The approval process for an SBAExpress loan is generally completed within 36 hours of receipt of an application.  A SBAExpress loan must also be obtained through a private lender and may be used for the same general purposes as an SBA 7(a) Loan.

II. New Federal Legislation

Emergency Family and Medical Leave Expansion Act and Emergency Paid Sick Leave Act

On March 18, the United States Senate approved a relief package to provide sick leave, unemployment benefits, free coronavirus testing, and food and medical aid to people impacted by the pandemic. The legislation was passed by the House on March 14, and was signed by President Trump on the evening of March 18. The legislation contains provisions that require immediate review and action for employers with fewer than 500 employees.

Both the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act will take effect 15 days after enactment, i.e. April 2, 2020. These provisions expire on December 31, 2020.

Covered employers (i.e., private employers with fewer than 500 employees) will be provided payroll tax credits to cover the wages and health care contributions paid to employees under the sick leave and family medical leave programs, up to the specified caps.

III. New York

New York State is currently assessing options to mitigate hardships to NYS businesses. As of March 19, 2020, the following orders and programs have been established in New York State in response to the COVID-19 outbreak:

Work From Home

On March 18, Governor Cuomo announced he will issue an executive order directing non-essential businesses to implement work-from-home policies effective Friday, March 20, to help reduce density as a social responsibility to protect their workforce. He also announced that businesses that rely on in-office personnel must decrease their in-office workforce by 50%. Exceptions will be made for essential service industries, including shipping, warehousing, grocery and food production, pharmacies, healthcare providers, utilities, media, banks and related financial institutions and other businesses that are essential to the supply chain.

Paid Sick Leave

On March 18, Governor Cuomo signed legislation to provide the following:

  • Employers with 10 or fewer employees and a net income less than $1 million will provide job protection for the duration of the quarantine order and guarantee their workers access to Paid Family Leave and disability benefits (short-term disability) for the period of quarantine including wage replacement for their salaries up to $150,000.
  • Employers with 11-99 employees and employers with 10 or fewer employees and a net income greater than $1 million will provide at least 5 days of paid sick leave, job protection for the duration of the quarantine order, and guarantee their workers access to Paid Family Leave and disability benefits (short-term disability) for the period of quarantine including wage replacement for their salaries up to $150,000.
  • Employers with 100 or more employees, as well as all public employers (regardless of number of employees), will provide at least 14 days of paid sick leave and guarantee job protection for the duration of the quarantine order.

Shared Work Program

The New York State Department of Labor (NYSDOL) Shared Work Program allows businesses to manage business cycles and seasonal adjustments while retaining trained staff and avoiding layoffs. Employees can receive partial Unemployment Insurance benefits while working reduced hours. Full-time, part-time and seasonal employees are eligible.

IV. Connecticut

Connecticut has provided a number of resources, in addition to the SBA, for Connecticut businesses including the following:

DECD’s COVID-19 Business Emergency Response Unit

The Connecticut Department of Economic and Community Development has created a COVID-19 Business Emergency Response Unit dedicated to assisting businesses navigate resources and develop new resources. A dedicated phone line is has been set up at 860-500-2333 to provide assistance to Connecticut’s small businesses for this purpose.

Unemployment Assistance

Workers directly impacted by the coronavirus pandemic no longer must be actively searching for work to qualify for unemployment assistance. And employers who are furloughing workers can use the Department of Labor’s shared work program, which allows businesses to reduce working hours and have those wages supplemented with unemployment insurance. Further information can be found here.

Tax Filing Extensions

The Department of Revenue Services has extended deadlines for filing and payments associated with certain state business tax returns. Effective immediately, the filing deadlines for certain annual tax returns due on or after March 15, 2020, and before June 1, 2020, are extended by at least 30 days. In addition, the payments associated with these returns are also extended to the corresponding due date in June.

The impacted returns and the associated filing dates and payment deadlines are set forth below:

  • 2019 Form CT-1065/CT-1120 SI Connecticut Pass-Though Entity Tax Return: Filing date extended to April 15, 2020; payment deadline extended to June 15, 2020
  • 2019 Form CT-990T Connecticut Unrelated Business Income Tax Return: Filing date extended to June 15, 2020; payment deadline extended to June 15, 2020
  • 2019 Form CT-1120 and CT-1120CU Connecticut Corporation Business Return: Filing date extended to June 15, 2020; payment deadline extended to June 15, 2020

Business Interruption Insurance

A business interruption insurance policy should list or describe the types of events it covers. Events that are not described in the policy are typically not covered. It is important to review the policy exclusions, coverage limits, and applicable deductibles with your agent, broker or insurer. The Connecticut Insurance Department has an FAQ that provides more information.

V. New Jersey

New Jersey has not yet released any official assistance programs for businesses impacted by COVID-19. Several State agencies are currently engaging with local business leaders, local financial institutions, and business advocacy groups to better understand what supports would be most impactful to ensure business and employment continuity. While businesses await direction, the New Jersey Economic Development Authority (NJEDA) has a portfolio of loan, financing, and technical assistance programs available to support small and medium-sized businesses.

© 1998-2020 Wiggin and Dana LLP

Can the Government Really Shut Down My Business and Make Me Stay Home? Questions Answered Relating to Declarations of Emergency Due to Coronavirus

As companies face shutdowns and citizens are encouraged to stay home due to the coronavirus (COVID-19), businesses and people may be asking questions, such as can the government really do that? Those who followed China’s response to the outbreak—which involved using martial law to keep millions of citizens in their home—would have seen references in those stories western democracies being unable to use such extreme measures. Yet, it may now seem to some that our own democratic leaders are doing just that (and should be). Can they?

The short answer is yes, they can.

But fear not, because you are not likely to see tanks rolling down the streets enforcing martial law. There remain strong protections for citizens, even in times like these, preventing arbitrary government action. Unlike the famous Dunder Mifflin manager Michael Scott “declaring” bankruptcy in a building parking lot, when Governor Murphy declared a state of emergency in New Jersey he did not simply open the window of his office, shout “this is an emergency!” and then start issuing a list of edicts. His authority, and that of any executive, is restricted by the laws authorizing such a declaration.

A brief review from civics class:

To prevent abuse, the power to make laws, enforce laws, and interpret laws are separated into three branches, i.e., the legislative, executive, and judicial branches. That means the governor cannot simply do what he wants (like a king or dictator), even if he feels those actions are best for the people. He must do only those things which comply with the laws enacted by the legislature (as interpreted by judges). So upon declaring a state of emergency, Governor Murphy—and any other executive declaring an emergency—issued a series of executive orders invoking specific New Jersey legislative enactments. Those statutes pre-authorized the executive branch (which the Governor heads) to take certain, specific actions when the state is facing an emergency.

Most declarations of emergency in recent memory pertain to snowstorms or hurricanes. In those instances, the State invoked more familiar provisions of the statutes governing declarations of emergency, including freeing up money earmarked for emergency use; calling on the national guard to help with the effects of the storm; and allowing the police to redirect traffic. But the Governor’s statutory powers during an emergency are broad, flexible, and include the ability to “make such orders. . . as may be necessary adequately to meet the various problems presented by any emergency,” including “[t]he designation of vehicles and persons permitted to move during. . . emergency,” “[t]he conduct of the civilian population during the threat of and imminence of danger or any emergency,” and “[o]n any matter that may be necessary to protect the health, safety and welfare of the people. . . .”  N.J. S.A. App. A:9-45.  Violations of these orders are considered a disorderly person offense and may be punished by up to 6 months imprisonment, a $1,000 fine, or both.

In response to coronavirus questions:

Governor Murphy also invoked a provision of New Jersey law not implicated by other types of natural disaster called the “Emergency Health Powers Act,” which provided additional authorization for control over medical facilities, the distributions of medical resources, and authority to “identify areas that are or may be dangerous to the public health” and cause “movement of persons within that area to be restricted, if such action is reasonable and necessary to respond to the public health emergency.” N.J.S.A. § 26:13-9. The same law allows the State to “[r]equire the vaccination of persons as protection against infectious disease;” and although the vaccine cannot be “administered without obtaining the informed consent of the person to be vaccinated,” the state may require quarantine for “persons who are unable or unwilling to undergo vaccination. . . .” N.J.S.A. § 26:13-14. And the same law states that no public entity or its agents are “liable for an injury caused by any act or omission in connection with a public health emergency, or preparatory activities. . . .” N.J.S.A. § 26:13-19

So, can the government shut down your business and make you stay home?

Yes. And they can vaccinate you, quarantine you, and are immune from suit for doing any of those things.

There are, however, other avenues and considerations of which businesses and employees should be aware during these times. Many contracts contain force majeure clauses, which businesses should analyze to determine if they apply to coronavirus-related shutdowns, especially those mandated by the Governor’s recent executive order. Others may consider whether they have insurance coverage for a business interruption caused by the government-mandated shutdown. Employees and employers alike should keep abreast of the changing legal landscape surrounding paid sick leave.

©2020 Norris McLaughlin P.A., All Rights Reserved

Gin Manufacturer Bacardi Avoids Lawsuit for Its Use of “Grains of Paradise”

A federal judge in the Southern District of Florida recently dismissed an action alleging that Bacardi’s use of a botanical called “grains of paradise” in its gin was “harmful and illegal,” holding that the statute on which the lawsuit was based was preempted by federal law. Marrach v. Bacardi U.S.A, 19-cv-23856 (S.D. Fla. Jan. 28, 2020).

The complaint alleged a violation of the Florida Deceptive and Unfair Trade Practices Act. While Plaintiff himself suffered no harm from the drink, he cited a nineteenth-century provision forbidding the adulteration of alcoholic beverages with “grains of paradise” to support his claim that Bacardi’s use of the botanical was illegal. However, Bacardi argued in its motion to dismiss that the complaint was preempted because the Federal Food, Drug and Cosmetic Act (FDCA) permits the use of “grains of paradise.”

In an opinion that did not mince words, Judge Robert N. Scola granted the motion to dismiss, opening with the observation: “Numerous class actions have greatly benefited society such as Brown v. Board of Education, In re Exxon Valdez, and In re Agent Orange Product Liability Litigation. This is not one of those class actions.” He noted that the Food Additives Amendment of 1958 granted the FDA broad authority to monitor and control the introduction of food additives, signaling Congress’s intent to prevent rules unnecessarily prohibiting access to safe food additives. Judge Scola held that the Florida statute, which criminalizes adulterating liquor with grains of paradise, frustrated this purpose and was therefore preempted because it was in conflict with federal law.

Plaintiff attempted to counter this reasoning by arguing that the 21st Amendment gave states the right to regulate liquor, thereby overriding any argument that federal law governed in this matter. Judge Scola disagreed. As an initial matter, “the 21st Amendment does not in any way diminish the reach of the Supremacy Clause,” and therefore has neither the intent nor effect of undermining federal preemption of inconsistent state law. Moreover, Judge Scola noted that other courts have found similar state law prohibitions on food additives to be preempted by the FDCA.

Like previous cases we have covered on this blog, the decision underscores the FDA’s broad regulatory authority over food and beverage products which cannot be circumvented by plaintiffs simply by bringing claims under state law. In doing so, it provides important assurance to manufacturers of such products that their reliance on federal law will not be undercut by arcane state provisions.

© 2020 Proskauer Rose LLP.

For more on food & beverage authority, see the National Law Review Biotech Food & Drug section.

Proposed Class Action Lawsuit Claims Arizona Beverage’s Gummies are Not “All Natural” Because They Contain Synthetic Ingredients

On February 11, 2020, Christopher Silva, a New York resident, filed a proposed class action lawsuit against Hornell Brewing Co. Inc., Arizona Beverages USA LLC, Beverage Marketing USA, Inc., and Arizona Beverage Co. (“Defendants”) over defendants’ “all natural” gummy snacks.

The plaintiff claims that defendants’ advertising and marketing campaign is false, deceptive, and misleading because the gummies contain several synthetic ingredients, such as ascorbic acid, citric acid, gelatin, dextrose, glucose syrup, and modified food starch.  Silva seeks to represent a New York class and individual classes for all 49 other states.

In the complaint, Silva cited to the United States Department of Agriculture’s Draft Guidance Decision Tree for Classification of Materials as Synthetic or Nonsynthetic (natural).  Per that guidance, a substance is natural – as opposed to synthetic – if (a) it is manufactured, produced, or extracted from a natural source (i.e. naturally occurring mineral or biological matter); (b) it has not undergone a chemical change (i.e. a process whereby a substance is transformed into one or more other distinct substances) so that it is chemically or structurally different than how it naturally occurs in the source material; or (c) the chemical change was created by a naturally occurring biological process such as composting, fermentation, or enzymatic digestion or by heating or burning biological matter.

Silva noted that while the synthetic ingredients are all listed on the back of the package, reasonable consumers are not expected or required to review the ingredients list on the back in order to confirm or debunk defendants’ prominent front-of-the-product claims.  The package in question includes the phrase “All Natural” on the packaging behind the words, “Arizona” and “fruit snacks.” We will continue to monitor any developments.

© 2020 Keller and Heckman LLP

For more on food ingredient labeling regulation see the National Law Review Biotech, Food and Drug law section.

Pennsylvania Liquor Control Board Tackles Wine Slushie Sales by Restaurant Licensees

Ever since beer distributors in Pennsylvania were permitted to sell growlers for off-premises consumption, which is loosely interpreted as a closed container by the Pa.L.C.B., there has been an influx of beer distributors installing slushie machines and selling malt beverage slushies. Now, are wine slushies fair game?

In a recent Legal Advisory Opinion from the Pa.L.C.B., a question was presented as to whether Pennsylvania restaurant licensees that hold an additional Wine Expanded Permit (“WEP”) can sell wine to go in a container with a sealed lid.

Specifically, the question related to whether a WEP permits the sale of wine slushies to go in a sealed container.

As a bit of background, a WEP can be obtained by any restaurant licensee in Pennsylvania and permits the sale of wine, or wine-based drinks, for off-premises consumption. The sales of wine cannot exceed 3,000 milliliters in a single transaction (typically 4 bottles of wine), similar to the 192-fluid ounce (two six-packs) limitation for off-premises beer sales by a restaurant licensee. The sale of wine and beer can occur during the same transaction so long as the respective volume limitations are met for each product. Interestingly, the statute authorizing the issuance of the WEP to restaurant licensees does not have any limitations on the sale of wine to go, other than that the sale prices must not be less than what the licensee paid for the product from the Pa.L.C.B.

Now that we have covered the law related to a WEP, what was the Pa.L.C.B.’s response to the question in the Legal Advisory Opinion?

The Pa.L.C.B. stated that, because there are no other limitations for a WEP other than selling 3,000 milliliters or less in a single transaction, a WEP holder can sell wine slushies to go in any container, and are not limited to sales of wine in the container it was purchased by the WEP holder. This would permit wine, or any other wine-based drinks without any other alcohol mixed in, to be poured in a cup with or without a lid and sold for off-premises consumption as long as the volume does not surpass 3,000 milliliters in a single transaction.

It is important to note, however, that your local municipality may have open container rules that the licensee or its consumers must follow. With the proliferation of malt beverage slushie sales at beer distributors, I have to imagine this is something the municipalities have dealt with and are aware of. As far as Pennsylvania state law, this legal opinion clearly permits WEP holders to serve wine or wine cocktails (without liquor) in “to go” containers.

Additionally, the Pennsylvania Liquor Code generally prohibits the fortification or adulteration of any liquor, which includes wine.

The Pa.L.C.B. will permit the mixing or infusing of liquor or wine, but such mixtures or infusions, which are mixed in large volumes, must be discarded at the end of the business day. The Pa.L.C.B. has issued numerous advisory opinions stating that adding ice or water to create malt beverage slushies in the slushie machine would be adulterating the original product, but it appears this Legal Advisory Opinion permits WEP holders to serve wine-based drinks for off-premises consumption. In fact, there have been previous opinions that Distributor licensees were not permitted to mix because they are not permitted to have on-premises sales, which restaurant licensees are permitted to do. Therefore, if a WEP holder must add ice or water to the slushie machine to freeze the wine to make wine slushies, it must be discarded daily at the end of the business day (11 p.m. for WEP sales). To the extent that the slushie, or wine cocktail, is a single-serve preparation, those products can be sold in any container for off-premises consumption to the extent permitted by local ordinance.

Finally, because slushie machines have been determined to be “dispensing systems” (like a malt beverage draft system) they must be cleaned in conformance with the Pennsylvania Liquor Code, which requires weekly cleaning depending on the system you are operating.

©2020 Norris McLaughlin P.A., All Rights Reserved

For more liquor licensing updates, see the National Law Review Biotech, Food & Drug law page.

Bruce Lee Enterprises, LLC Sues Chinese Fast Food Chain for IP Infringement

Earlier this month, Bruce Lee Enterprises, LLC sued Shanghai Zhengongfu Fast Food Management Co., Ltd., Guangzhou Zhengongfu Catering Management Co., Ltd., and Guangzhou Zhengongfu Fast Food Chain Management Co., Ltd. (collectively referred to as Zhengongfu (真功夫)) in the Shanghai Second Intermediate People’s Court, asking Zhengongfu to cease using a Bruce Lee image (in marketing materials and signage), issue a public clarification in the media for 90 consecutive days that it has nothing to do with Bruce Lee, and requested the court to order Zhengongfu to pay 210 million yuan in economic losses and 88,000 yuan in reasonable expenses (about $30 million USD).

Zhengongfu was founded in 1990 and now has over 600 restaurants throughout China and is in the only Chinese brand in the top 5 of fast food chains in China.  Zhengongfu has been using a drawn image in store signage and marketing of a martial artist in a yellow top that is reminiscent of Bruce Lee dressed in a yellow-and-black one-piece tracksuit from the movie Game of Death.  Zhengongfu has also registered several trademarks incorporating the martial artist that Bruce Lee Enterprises, LLC alleges is Bruce Lee.  For example, in 2004, Zhengongfu filed for mark 3999537 reproduced below and registered in 2008.  There are at least eleven other Chinese trademarks bearing a similar image registered to Zhengongfu.

CN Trademark No. 3999537
This mark is regularly used in store signage as shown in the photo below of a Shanghai branch of the chain.
By WhisperToMe – Own work, CC0.

In the following screen shot from Game of Death, Bruce Lee, in a yellow-and-black tracksuit, strikes a pose similar to that in the trademark.

Still from Game of Death

The cause of action will most likely be portrait right violation, which is similar to California’s right of publicity and right of publicity for the deceased.  Portrait rights in China are protected in the General Principles of Civil Law, with relevant articles reproduced below:

Article 100 Citizens shall enjoy the right of portrait. The use of a citizen’s portrait for profits without his consent shall be prohibited.

Article 120 If a citizen’s right of personal name, portrait, reputation or honor is infringed upon, he shall have the right to demand that the infringement be stopped, his reputation be rehabilitated, the ill effects be eliminated and an apology be made; he may also demand compensation for losses.

The above paragraph shall also apply to infringements upon a legal person’s right of name, reputation or honor.

Although not explicit in the law, portrait rights in China apply to the deceased as the Supreme Court made clear in Zhou Haiying v. Shaoxing Yuewang Jewellery and Gold Co., Ltd. for violating Lu Xun’s portrait right.  The Court ruled that portrait rights continue after death and a close relative has the right sue on behalf of the deceased.  Accordingly, Bruce Lee’s daughter, Shannon Lee, may need to be a named plaintiff in the current lawsuit.

Further, other cases indicate that drawn or cartoon images of persons are also protected by portrait right.  As long as the person is identifiable in the image, portrait rights are infringed regardless of the medium (painting, sculpture, etc.).  For example, in Beijing Huariling Automobile Trading Co., Ltd. and Zhang Zhensuo (stage name: Zhang Liang), the First Intermediate People’s Court of Beijing held that a cartoon reproduction of the plaintiff violated his portrait rights.

On the other hand, Michael Jordan was less successful in the Supreme Court based on a silhouette of a basketball player not showing any facial characteristics.  The Supreme Court explained “the “portrait” protected by the right of portrait should be identifiable, which should contain enough information to enable the public to identify the corresponding right’s subject, that is, the personal characteristics of a specific natural person, so that it can clearly refer to the corresponding right’s subject…the facial features of natural persons are the most important personal characteristics of their physical features.”

Michael Jordan silhouette

In contrast, in the instant case, multiple characteristics potentially identifiable as belonging to Bruce Lee, including his facial characteristics, are present.  Accordingly, Bruce Lee Enterprises, LLC  and Bruce Lee’s daughter could prevail if the Shanghai Second Intermediate People’s Court rules that the Zhengongfu image is identifiable as Bruce Lee.

© 2019 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

For more IP infringement cases, see the National Law Review Intellectual Property law page.