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Agriculture Groups Sue FDA on Chlorpyrifos Ban

As previously reported, the Environmental Protection Agency (EPA) published a final rule on August 30, 2021 that revoked all tolerances for the pesticide chemical chlorpyrifos on raw agricultural commodities; the rulemaking was driven by toxicity concerns, primarily concerning exposure in children. The tolerances are set to expire on February 28, 2022, effectively banning the use of chlorpyrifos on food crops. In light of the expiration, FDA published a guidance document to assist food producers and processors that handle foods which may contain chlorpyrifos restudies.
In October of 2021, agriculture stakeholders submitted formal written objections and a request to stay the tolerance revocations to EPA. More than 80 stakeholders signed the document, arguing that significant harms would result from banning chlorpyrifos and urging the agency to stay implementation of the rule until objections were formally addressed by EPA.
Agriculture stakeholder groups are now seeking a court injunction against EPA’s ban on chlorpyrifos. On February 10, 2022, agricultural trade groups representing thousands of members filed a lawsuit against EPA before the Eight Circuit Court of Appeals, alleging that the agency ignored its own scientific findings regarding 11 high-benefit and low-risk crop uses for chlorpyrifos and that the revocation will cause irreparable damage. It remains to be seen how EPA will respond to the lawsuit.

Article By Food and Drug Law Practice Group at Keller and Heckman LLP

For more food and drug legal news, click here to visit the National Law Review.

Ongoing Canadian Protests Shine Spotlight on Ripple Effect of Supply Chain Disruptions

Although the last two years have seen a nearly never-ending line of supply chain impacts for manufacturers, the latest disruption is also serving to shine a spotlight on the broader impact that relatively small disruptions in the supply chain can have on the global economy. We all know that trucking is a critical component of the economy. The U.S. estimates seventy two percent of goods in the U.S. travel by truck. Trucking has become even more important in this era of increased deliveries and backlogs at ports and other logistics hubs.

In Canada, what began as protests by truckers regarding certain pandemic-related restrictions and mandates have snowballed into broader protests and blockages of roads, bridges, and border crossings.

Protesters have been blocking various bridges and roads in Canada in protest of certain pandemic-related restrictions and mandates. On Tuesday, the bridge connecting Windsor, Ontario to Detroit (a critical linkage for cross-border travel) was largely blocked, with traffic stopped going into Canada and slowed to a trickle going into the United States. The blockades are now leading U.S. automakers to begin trimming shifts and pausing certain operations in their Michigan and Canadian plants. The bridge protests and automakers’ reduction in capacity continued on Thursday without an end in sight.

The ongoing protests in Canada have also served as a reminder of how seemingly local trucking disruptions in one country can cascade through the supply chain. This is not the first time that trucking strikes and blockages have rippled through the supply chain and economy. In 1996, a truckers’ strike in France lasted 12 days, barricading major highways and ultimately leading to concessions from the French government over certain worker benefits and hours. The resulting agreement led to heightened tensions with Spain, Portugal, and Great Britain due to the impact felt across borders. In 2008, truckers went on strike in Spain and blocked roads and border crossings, protesting fuel prices. In 2018, truckers in Brazil staged a large strike and protest that lasted for 10 days, blocking roads, disrupting food and fuel distribution, canceling flights, and causing certain part shortages for automakers.

The ongoing protests in Canada have similarly expanded from Ottawa to the current blockage of border crossings, further raising their profile internationally as they begin to impact global trade. It remains to be seen how the blockades and protests will resolve, as leaders call for de-escalation and re-opening of roads and crossings. However, the ripple effects of what started as a localized protest will continue to be felt far beyond Canada’s borders.

Article By Lauren M. Loew of Foley & Lardner LLP

For more COVID-19 and supply chain legal news, click here to visit the National Law Review.

Federal Cannabis Reform – Is 2022 the Year?

Hope soared with the possibility of federal cannabis reform in 2021. And for good reason – the induction of a new, more liberal administration, rapid state-level legalization, broad support by Americans,[1] and growing bipartisan backing led many to believe that 2021 was going to be the year where federal decriminalization of cannabis would become a reality. But, as 2021 continued on, optimism dwindled as any advancement in federal cannabis reform was hobbled by the inability of Congress to agree on the appropriate level of reform and the proper mechanics for passage. Specifically, tension rose amongst the elected Democrats on whether to support incremental reform (like access to banks or removal of cannabis from the list of Schedule 1 drugs) or comprehensive legalization with provisions to address social inequities stemming from the legacy of the War on Drugs. And so 2021 came to an end, and the cannabis industry saw yet another year of failed meaningful change on the federal level.

Still, momentum for reform has not been lost. If anything, last year saw more bills introduced into Congress (including two new federal legalization proposals) than ever before – clearly indicating its import to our nation’s leaders. Justice Clarence Thomas from the Supreme Court even subtly advised Congress to address legalization, noting that the Federal Government’s current “half in, half out regime” on cannabis strained the principles of federalism.

And so, as we move forward in 2022 with hope, we review the bills before Congress and their progresses to assess which of these may have some traction for passage during this upcoming year.

Secure and Fair Enforcement (“SAFE”) Banking Act of 2021[2]

Considered modest reform, the SAFE Banking Act of 2021 mainly focused on granting cannabis-related businesses access to federally-backed financial institutions. The bill was introduced early in 2021,[3] and passed in the U.S. House of Representatives on April 20, 2021 by a vote of 321 to 101. At the time of the House’s passage, many believed the SAFE Banking Act of 2021 would easily move its way through the Senate, due – in part – to its demonstrated bipartisan appeal with 106 Republican votes in the House. Congressman Ed Pearlman, one of its drafters, even remarked:

After years of bringing up this issue, I’m thrilled to see overwhelming support for this bipartisan, commonsense legislation in the U.S. House once again. I feel optimistic about the path forward for the SAFE Banking Act and, more broadly, reforms to our federal cannabis laws.[4]

However, after its passage in the House, the SAFE Banking Act of 2021 languished in the Senate’s Committee on Banking, Housing and Urban Affairs. Momentum for the bill slowed, with those opposing it campaigning for more comprehensive legalization. In late September 2021, fervor for the SAFE Banking Act of 2021 arose again when the House passed, by voice vote, an amendment to the National Defense Authorization Act for Fiscal Year 2022 (“NDAA”) to add the SAFE Banking Act of 2021. Many hoped that by couching the SAFE Banking Act of 2021 in the NDAA, it would make it easier to pass through the Senate. On November 23, 2021, 4 Senators[5] penned a letter to the Senate’s Armed Services Committee urging them to retain the SAFE Banking Act of 2021 in the NDAA. Despite these efforts, the SAFE Banking Act of 2021 was stripped from the NDAA on December 10, 2021 – stalling its progress once more.

The Marijuana Opportunity Reinvestment & Expungement (“MORE”) Act

The MORE Act is the oldest comprehensive legislative proposal. It was passed in the House in December 2020, during a lame-duck session, but never made any headway in the Senate.[6] On May 28, 2021, Representative Jerrold Nadler reintroduced the MORE Act into the House and much of its substance provided the legislative stepping stones for the Cannabis Administrative and Opportunity Act (“CAO”).

The MORE Act aimed to end criminalization of cannabis by removing it from the list of controlled substances, eliminate related past criminal penalties and convictions, and provide essential criminal justice reform, social justice and economic development for those affected by the War on Drugs. The MORE Act also would tax cannabis products starting at 5% to 8% (increasing by 1% over 5 years) to help fund social reform projects, make Small Business Administration loans and services available to cannabis-related businesses, and prohibit denial of federal public benefits (like housing) and protections under immigration law on the basis of cannabis-related conduct or conviction.

After sitting in the House Judiciary Committee, the bill was finally approved in the Committee on September 30, 2021, with 2 Republican Representatives voting yes. This act sent the measure to the House floor for another vote before it could make its way to the Senate.

The Cannabis Administrative and Opportunity Act

Embracing the MORE Act’s goals for comprehensive reform, Senate Majority Leader Chuck Schumer (along with Senators Cory Booker and Ron Wyden) introduced the long awaited draft of the CAO into the Senate on July 14, 2021. Considered a historic and ambitious bill, the CAO aimed to implement a full-scale federal scheme for cannabis reform that reaches beyond just decriminalization. It hopes to provide restorative measures “to lift up people and communities who were unfairly targeted in the War on Drugs.”[7] Specifically, the CAO seeks to do the following:

Decriminalize cannabis by removing it from the Controlled Substances Act and automatically expunge any arrests and convictions for non-violent federal cannabis offenses;
Transfer primary agency jurisdiction over cannabis to the Food and Drug Administration (“FDA”), the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), and the Bureau of Alcohol, Tobacco and Firearms (“ATF”) so that cannabis can be federally regulated similar to alcohol and tobacco;
Establish a Center for Cannabis Products responsible for regulating the “cannabis aspect of all products containing cannabis,” and implementing requirements related to cannabis products (g., good manufacturing practice, product standards, product labeling, product distribution and recall, etc.) within the FDA;
Mandate federal research and studies regarding the impact of cannabis (including any benefits and/or impairments) on the human brain and health conditions and its impact on drivers under its influence;
Permit movement of cannabis products through channels of interstate commerce;
Establish Opportunity Trust Fund Programs funded by federal cannabis tax revenue to restore and reinvest in communities greatly impacted by the War on Drugs (including funds for job training, reentry services, legal aid, and youth recreation/mentoring programs) and to help level the playing field by granting entrepreneurs of color access to the cannabis industry through small business loans;
Prohibit denial of federal benefits or immigration protection due to a past cannabis-related offense; and
Impose federal excise tax on sale of cannabis products, starting at 10% and increasing up to 25% in a span of 5 years, with certain favorable tax credit for cannabis producers with less than $20 million sales.

Though the CAO has lofty goals, it does not force states to legalize cannabis, emphasizing the integrity of state-specific cannabis law.

As a draft bill, the CAO was subject to a review period in which its authors requested public comments by September 1, 2021. At the expiration of this review period, the drafters of the bill received numerous comments from both supporters and those criticizing the CAO as overly ambitious and a big-government approach. In particular, many critics take issue with the bill’s tax structure, calling the imposition of an ultimate 25% federal excise tax burdensome. Indeed, the CAO – as it stands – implements the highest tax structure for cannabis products of all the bills proposed in 2021. Many allege that the high federal tax in addition to any state-imposed tax could promote the illicit cannabis market rather than encourage business owners to engage legally. Additionally, the high federal tax could force states to reduce their own tax requirements, negatively affecting their own ability to fund state-run social equity and education initiatives.

For now, the public comments have been taken under advisement as the cannabis industry waits to see what the drafters decide to incorporate. Once formally filed, the CAO will be sent to a committee for continued discussions and revisions before it can be advanced to the Senate floor for a vote.

The States Reform Act

The States Reform Act (“SRA”) is the latest comprehensive reform bill led by Republican Representative Nancy Mace and introduced in the House in November 15, 2021. Like the MORE Act and the CAO, the SRA also seeks to decriminalize cannabis and provides retroactive expungement for non-violent federal cannabis offense, except for any person involved in a drug cartel. However, the SRA differentiates itself by limiting federal social equity reform programs. Instead, the SRA vests the authority to determine what level of cannabis reform, including outright prohibition, in the individual states. States will also retain authority to regulate the use, distribution, sale and manufacturing of cannabis, with some general federal oversight by the FDA, TTB, ATF and the Department of Agriculture. Specifically, the SRA aims to regulate cannabis like alcohol (and alcohol alone) – another substantial difference from the CAO. The SRA permits each state to determine the appropriate age limit for purchase of cannabis products, but incentivizes states to implement a 21+ limit by eliminating funding for highways for any state with an age limit of under 21 years of age and prohibiting advertisements directed at any person under the age of 21. The bill also seeks to provide veterans with access to medical cannabis without fear of discrimination or denial of Veteran Affairs benefits. The SRA also generally requires that medical cannabis be permitted for treatment of arthritis, cancer and chronic pain. Similar to the CAO, the SRA will also allow the interstate cannabis transportation.

Notably, the SRA provides the lowest tax structure for cannabis products in comparison to other reform proposals, with the proposed imposition of a single tax rate of 3% that cannot be increased for at least 10 years. Revenues from the tax would be used to support SBA programs for cannabis businesses, law enforcement initiatives including reentry programs, and veteran mental health programs.

Given its recency, little is known about the bill’s reception in the House and any progress that has been made. However, the SRA does carry potential bipartisan appeal, particularly because it is sponsored by 4 Republican Representatives. Additionally, it is anticipated that the Congressional Republicans will appreciate the SRA’s straight forward tax structure capped at a low rate for at least 10 years and its stance on states’ sovereignty regarding cannabis reform. The real issue for the SRA is its lack of restorative justice and social equity efforts, which may be its death knell in the current Democrat-controlled House.

Implications for 2022

There are now 4 bills (3 with comprehensive legislation) circulating Capitol Hill that could provide much needed cannabis reform in 2022. Congress will likely continue debating, revising and attempting to compromise on the terms in the MORE Act, the CAO and the SRA. Potentially, if the 3 comprehensive bills remain on the discussion table, they will compete with one another, potentially dividing the Legislators’ support. Congress should thus focus on forging a compromise or middle ground on these reforms to increase bipartisan support and avoid competing and inconsistent bills floating around, resulting in another year of unwanted (and unnecessary) deadlock. Indeed, the CAO could be an example of such needed compromise – especially if the drafters seriously heed the criticisms and comments provided during the bill’s review period and consider incorporating certain bipartisan elements of the SRA, like a more stream-lined and lower rate tax structure. With that said, the status of these cannabis reform bills, particularly the CAO and the MORE Act, face potential change should this year’s mid-term elections change the makeup of who controls the Senate, House or both.

Regardless, until Congress can iron out the kinks on comprehensive cannabis reform, the SAFE Banking Act of 2021 remains a practical law to pass in the interim. The SAFE Banking Act of 2021 is currently the least controversial of all the cannabis-reform bills, has substantial bipartisan appeal, and will provide immediate financial resources and relief to the largely cash-based cannabis industry. Though a small reform, it is still a necessary one that is long overdue. The SAFE Banking Act of 2021 (and its predecessors) has already made its way through the House 6 times, proving that federal lawmakers believe it will help cannabis businessmen. It may not resolve the issue of prohibition on cannabis, but its passage will likely be a great victory for the cannabis industry, signal federal de-stigmatization of cannabis, promote public safety by discouraging participation in the illicit cannabis market, and help cannabis-related businesses comply with tax laws.

Footnotes

[1] https://news.gallup.com/poll/356939/support-legal-marijuana-holds-record…

[2] On February 4, 2022, the SAFE Banking Act passed again in the House – this time, as an included amendment to the America COMPLETES Act.

[3] The bill is the successor to the previously introduced SAFE Banking Act of 2019. See https://www.cannabislawblog.com/2021/09/safe-banking-act-2021/

[4] https://perlmutter.house.gov/news/documentsingle.aspx?DocumentID=5486

[5] Gary Peters, Angus King, Kevin Cramer, and Mark Kelly

[6] https://www.cannabislawblog.com/2020/12/house-representatives-passes-bil…

[7] https://www.democrats.senate.gov/imo/media/doc/CAOA%20Detailed%20Summary

Article By Jennifer N. Le of Sheppard, Mullin, Richter & Hampton LLP

For more cannabis legal news, click here to visit the National Law Review.

Mississippi Enacts Medical Marijuana Law

Mississippi Governor Tate Reeves signed legislation legalizing medical cannabis on February 2, 2022. Known as the “Mississippi Medical Cannabis Act”, the law permits the use of medical cannabis to treat certain debilitating medical conditions including cancer, Parkinson’s disease, Huntington’s disease, muscular dystrophy, HIV/AIDS, hepatitis, ALS, Crohn’s disease, ulcerative colitis, sickle-cell anemia, Alzheimer’s disease, dementia, post-traumatic stress disorder, autism, cachexia or wasting syndrome, chronic pain, severe or intractable nausea, seizures, severe and persistent muscle spasms, among others. The law was effective immediately upon signing by the Governor, although medical cannabis will not become available for months.

Medical cannabis products will include cannabis flower, cannabis extracts, edible cannabis products, beverages, topical products, ointments, oils, tinctures and suppositories.

The medical cannabis law contains many favorable provisions for employers. Specifically:

Employers are not required to permit or accommodate the medical use of medical cannabis, or to modify any job or working conditions or any employee who engages in the medical use of cannabis, or seeks to engage in the medical use of cannabis;
Employers are not prohibited from refusing to hire, discharging, disciplining, or otherwise taking adverse employment action against an individual with respect to hiring, discharging, tenure, terms, conditions or privileges of employment as a result, in whole or in part, of that individual’s medical use of medical cannabis, regardless of the individual’s impairment or lack of impairment resulting from the medical use of medical cannabis;
Employers are not prohibited from establishing or enforcing a drug testing policy;
Employers may discipline employees who use medical cannabis in the workplace or who work while under the influence of medical cannabis.
The law does not interfere with, impair or impede any federal requirements or regulations such as the U.S. Department of Transportation’s drug and alcohol testing regulations;
The law does not permit, authorize or establish an individual’s right to commence or undertake any legal action against an employer for refusing to hire, discharging, disciplining or otherwise taking an adverse employment action against an individual with respect to hiring, discharging, tenure, terms, conditions or privileges or employment due to the individual’s medical use of medical cannabis;
Employers and their workers’ compensation carriers are not required to pay for or to reimburse an individual for the costs associated with the medical use of cannabis;
The law does not affect, alter or otherwise impact the workers’ compensation premium discount available to employers who establish a drug-free workplace program in accordance with Miss. Code Section 71-3-201 et seq.;
The law does not affect, alter or otherwise impact an employer’s right to deny or establish legal defenses to the payment of workers’ compensation benefits to an employee on the basis of a positive drug test or refusal to submit to or cooperate with a drug test, as provided under Miss. Code Sections 71-3-7 and 71-3-121;
The law does not authorize an individual to act with negligence, gross negligence, recklessness, in breach of any applicable professional or occupational standard of care, or to effect an intentional wrong, as a result, in whole or in part, of that individual’s medical use of medical cannabis;
The law prohibits smoking and vaping medical cannabis in a public place or in a motor vehicle;
The law prohibits operating, navigating, or being in actual physical control of any motor vehicle, aircraft, train, motor boat or other conveyance in a manner that would violate state or federal law as a result, in whole or in part, of that individual’s medical use of medical cannabis; and,
The law does not create a private right of action by an employee against an employer.

Mississippi employers should review the law to determine whether any revisions to drug and alcohol testing policies or other workplace policies will be necessary.

Article By Kathryn J. Russo of Jackson Lewis P.C.

For more cannabis legal news, click here to visit the National Law Review.

New Poll Underscores Growing Support for National Data Privacy Legislation

Over half of all Americans would support a federal data privacy law, according to a recent poll from Politico and Morning Consult. The poll found that 56 percent of registered voters would either strongly or somewhat support a proposal to “make it illegal for social media companies to use personal data to recommend content via algorithms.” Democrats were most likely to support the proposal at 62 percent, compared to 54 percent of Republicans and 50 percent of Independents. Still, the numbers may show that bipartisan action is possible.

The poll is indicative of American’s increasing data privacy awareness and concerns. Colorado, Virginia, and California all passed or updated data privacy laws within the last year, and nearly every state is considering similar legislation. Additionally, Congress held several high-profile hearings last year soliciting testimony from several tech industry leaders and whistleblower Frances Haugen. In the private sector, Meta CEO Mark Zuckerberg has come out in favor of a national data privacy standard similar to the EU’s General Data Protection Regulation (GDPR).

Politico and Morning Consult released the poll results days after Senator Ron Wyden (D-OR) accepted a 24,000-signature petition calling for Congress to pass a federal data protection law. Senator Wyden, who recently introduced his own data privacy proposal called the “Mind Your Own Business Act,” said it was “past time” for Congress to act.

He may be right: U.S./EU data flows have been on borrowed time since 2020. The GDPR prohibits data flows from the EU to countries with inadequate data protection laws, including the United States. The U.S. Privacy Shield regulations allowed the United States to circumvent the rule, but an EU court invalidated the agreement in 2020, and data flows between the US and the EU have been in legal limbo ever since. Eventually, Congress and the EU will need to address the situation and a federal data protection law would be a long-term solution.

This post was authored by C. Blair Robinson, legal intern at Robinson+Cole. Blair is not yet admitted to practice law. Click here to read more about the Data Privacy and Cybersecurity practice at Robinson & Cole LLP.

For more data privacy and cybersecurity news, click here to visit the National Law Review.

New Tools in the Fight Against Counterfeit Pharmaceuticals

The explosive growth of internet pharmacies and direct-to-consumer shipment of pharmaceuticals has provided increased access to, and reduced the cost of, important medications. Unfortunately, these same forces have increased the risks that counterfeit medicines will make their way to consumers, endangering patient safety and affecting manufacturers’ reputation in the public eye.

While the Food and Drug Administration attempts to police such misconduct through enforcement of the Food, Drug, and Cosmetics Act (FDCA), the resources devoted to enforcement are simply no match for the size and scope of the counterfeiting threat. Fortunately, pharmaceutical manufacturers are not without recourse, as several well-established tools may be used in the right circumstances to stop counterfeiters from profiting from the sale of knock-offs.

Experienced litigators can use the Lanham Act and the Racketeer Influenced Corrupt Organizations (RICO) Act to stop unscrupulous individuals and organizations from deceiving customers with counterfeit versions of trademarked drugs. Until recently, these legal weapons – including search warrants, seizures, forfeitures, and significant penalties – were typically wielded only by the government and only in criminal prosecutions.

As one recent case demonstrates, however, many of the tools that law enforcement has used for years to combat counterfeiters are also available to pharmaceutical manufacturers. In Gilead Sciences, Inc. v. Safe Chain Solutions, LLC, et al., the manufacturer of several trademarked HIV medications filed a civil complaint, under seal, alleging violations of the Lanham Act and RICO against scores of individuals and companies that were allegedly selling counterfeit versions of these drugs to patients across the country.

By deploying private investigators and techniques typically used by law enforcement, Gilead was able to gather a substantial amount of evidence before even filing the case. The company then used this evidence to secure ex parte seizure warrants and asset freezes, allowing it to locate and seize thousands of counterfeit pills and packaging before they could be shipped to unsuspecting consumers. Through the seizure of the financial proceeds of the alleged counterfeiting, Gilead prevented the dissipation of assets. If the company can successfully prove its RICO case, it stands to recover treble damages and attorneys’ fees as well.

Manufacturers of trademarked pharmaceuticals may consider using these and other tools to tackle the threat posed by counterfeiters. By drawing upon the experience and skills of trained litigators – particularly counsel who previously deployed these tools on behalf of the government while serving as federal prosecutors – companies can proactively protect their intellectual property and the consumers who depend on their products.

Article By Eric J. Beste, Anthony J. Burba and Heather F. Delgado of Barnes & Thornburg LLP

For more health law legal news, click here to visit the National Law Review.

Legal Considerations for Ready-to-Drink Cocktails

The ready-to-drink cocktail or “RTD” category has exploded in recent years, and it’s occupied by more than merely craft distillers familiar with a carefully made cocktail. Brewers, distillers and even vintners have joined in, capitalizing on consumers’ desires for pre-made, no-fuss beverages. The most unexpected development to emerge with RTDs, however, is the legal complexity surrounding these products—something the industry is only beginning to understand.

Many of these legal issues stem from the fact that the legal regulatory landscape in most states has not caught up with the rapidly evolving alcohol industry. That leaves ready-to-drink cocktails, much like hard seltzers, as not having a specific class or type in certain states. Suppliers looking to enter the space have plentiful options when creating a new product, subject to what licenses the manufacturer holds and what those licenses allow them to produce.

Ready-to-drink cocktails can be spirits, malt, sugar, cider or wine-based. The base of the RTD product, nonetheless, is the key federal factor. It is also an important factor in most states when determining how the product will be treated from a legal perspective in the following areas:

Licensing needed to manufacture, distribute and sell the product;
Applicable franchise law (Do beer franchise laws apply to low-proof spirits?);
Available channels of distribution (Can you sell this product in grocery or convenience store?);
Excise tax rate charged to the manufacturer (Does state law have a lower excise tax rate for low ABV products?);
Labeling and advertising considerations (Is your product a modified traditional product?); and
Trade practice considerations/promotions (Do spirits laws apply?).

Industry members dabbling in a sphere that is relatively new to the market, state regulators and legislatures should be mindful of the patchwork of emerging regulations. Like hard seltzer, ready-to-drink cocktails are not a clearly defined category under existing alcohol law. Meanwhile, states are working quickly to legislate in this domain. New Jersey is considering a reduced alcoholic beverage tax rate on low-ABV liquors to align with the beer tax rate (NJ SB 701), Vermont is considering legislation to define “low alcohol spirits beverage” and treat it as a “vinous beverage” (VT HB 590) and the Washington State Senate has a bill pending that would establish a tax on low-proof beverages (WA SB 5049).

From franchise issues to excise tax, the issues discussed here are only a glimpse of the nuanced and complicated legal landscape that governs the distribution of RTDs and alcoholic beverages across all categories.

Article By Nichole D. Shustack and Isabelle R. Cunningham of McDermott Will & Emery

For more food and beverage legal news, click here to visit the National Law Review.

PFAS Water Cleanup…Have You Bought Yourself a Multi-Million Dollar Superfund Issue?

The last two years have seen an incredible uptick in activity with respect to PFAS regulations, and media coverage of PFAS continues to fuel the fires from the public, non-government organizations and environmental groups for additional action to be taken. The EPA continues its process of determining Maximum Contaminant Levels for PFAS. The FDA is examining the ways that it might regulate PFAS levels in both food and food packaging. Meanwhile, states, bombarded with constituent outcries and under pressure to take action to fill the gap until the EPA and FDA finish their regulatory review processes, quickly enact drinking water limits for PFAS and ban PFAS-containing products, such as children’s toys and food packaging.

As states continue setting drinking water limits for PFAS and in preparation for the EPA’s final determination of a Maximum Contaminant Level for PFAS in drinking water, many water utilities are beginning to evaluate the steps needed to come into compliance with existing or anticipated water regulations. Comprehensive compliance programs are being created and costly well testing sites are being built to determine PFAS content at various points along the waterways for drinking water sources. At water treatment facilities, expensive water filtration systems are being installed to remove as many PFAS as possible from drinking water sources. With water utilities coming under fire in the litigation world for PFAS issues, these steps may curtail the short-term issues and costs associated with PFAS litigation.

However, the long-term impact of the remediation steps that water treatment facilities ae taking may only be pushing litigation costs further down the road, not eliminating them. In addition, little considered Superfund laws may be triggered through PFAS water filtration that could end up costing water treatment facilities tens or hundreds of millions of dollars in cleanup costs.

CERCLA and PFAS

Under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), once a substance is designated as “hazardous” by the EPA, the Act gives the EPA considerable power to designate sites containing such substances as Superfund sites and force parties responsible for the pollution to pay for the cleanup of the site. Without a designation of a substance as “hazardous” (and therefore a site as a Superfund site), the EPA may either pay for the cleanup of the site itself or attempt to pursue, through time-consuming and costly litigation, the property owner for the costs of cleanup.

One of the most closely watched developments in the PFAS world is whether the EPA will make the determination that PFAS are “hazardous” under CERCLA. Although the EPA has promised its determination soon and various lawmakers are pressuring the EPA to make a determination in the near future, it is still uncertain as to when the EPA will issue its final regulations.

In the meantime, however, water utilities are under increasing pressure to filter out PFAS from drinking water. These PFAS are typically deposited in landfills. Out of sight, out of mind? Not exactly, when it comes to PFAS. As the quantity of PFAS accumulate in landfills, if the EPA makes a determination that PFAS are “hazardous” substances under CERCLA, the EPA could immediately designate landfills full of PFAS as Superfund sites and take action to pursue parties to pay for the cleanup. Water utilities could therefore be at significant risk of having to pay for Superfund site cleanup.

Further, in some instances, water utilities may have previously been involved with Superfund site cleanup for other reasons and believed the site issues to be fully remediated. However, since PFAS have not yet been classified as “hazardous”, Superfund sites were never tested for PFAS. Should the EPA determined that PFAS are “hazardous” under CERCLA, the EPA will have the right to reopen previously closed Superfund sites for further testing and remediation specific to PFAS, even if parties deemed responsible for the pollution already paid millions of dollars to clean up the site for other contaminants.

Water utilities in particular must pay special attention to PFAS developments under CERCLA. Proactive planning is needed to determine alternate means of disposing of or eliminating PFAS from water sources. Failure to enact forward-thinking strategies may very well end up costing water utility companies tens of millions in unexpected and unwanted costs if they fail to do so.

ARTICLE BY John Gardella at CMBG3 Law.

For more on EPA PFAS regulation, see the National Law Review Environmental, Energy & Resources law 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.

ARTICLE BY Food and Drug Law at Keller and Heckman LLP.

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

FDA Issues Warnings to 15 Companies for Illegally Selling Products Containing CBD

On November 25, 2019, the U.S. Food & Drug Administration (“FDA”) published a press release, published a revised Consumer Update, and announced the issuance of new warning letters to 15 companies for illegally selling and marketing various products containing hemp-derived cannabidiol (“CBD”).

To quote the FDA:

“Today’s actions come as the FDA continues to explore potential pathways for various types of CBD products to be lawfully marketed. This includes ongoing work to obtain and evaluate information to address outstanding questions related to the safety of CBD products, while maintaining the agency’s rigorous public health standards. The FDA plans to provide an update on its progress regarding the agency’s approach to these products in the coming weeks.”

In the meantime, however, these steps appear to be an effort to stem the tide of proliferation of CBD products on the market – and the growing consumer demand for those products. It is great that the FDA intends to provide an update on its efforts to develop a regulatory pathway for CBD products under the Federal Food Drug & Cosmetic Act (“FD&C Act”). But, it is frustrating that the FDA still refuses to identify a set date for that update – or, to publicly commit to a meaningful resolution of the regulatory uncertainty that persists for CBD products today.

A Reminder: Don’t Make Unsubstantiated Claims

As made clear in prior FDA warning letters – and the 15 letters released on November 25th – there continues to be significant regulatory risk in the labeling and marketing of CBD products for sale in interstate commerce. However, the FDA’s enforcement efforts still appear to be focused on companies and products that engage in the most egregious violations of the FD&C Act – including those making disease claims and those marketed to (or for use by) children and other vulnerable populations.

Among other things, this round of warning letters address the following major issues:

Marketing products for use by children and other vulnerable populations.
Including a supplements facts panel on product labels, which indicated the company’s intention to market the product as a dietary supplement.
Marketing products that are intended for use in the cure, mitigation, treatment, or prevention of diseases and/or intended to affect the structure or any function of the body.
Posting materials on the companies’ social media websites that link to a third party’s content indicating that CBD can be used in the cure, mitigation, treatment, or prevention of diseases and/or intended to affect the structure or any function of the body.
Misbranding products intended to be marketed as drugs.
Marketing human and animal food containing CBD in interstate commerce.
Marketing unapproved new animal drugs by selling pet products containing CBD that are intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in animals and/or intended to affect the structure or any function of the body of animals.

Many of these issues have been referenced in prior actions and warning letters released by the FDA. By now, it should be clear to all market participants that it is illegal (and irresponsible) to market your CBD products as a cure for cancer, Alzheimer’s, diabetes, or other medical diseases, ailments, or conditions. CBD companies should heed this clear warning and stop the practice. Just don’t do it.

The New Concerns

This round of enforcement action seems to signal that the FDA is taking a more aggressive stance on its view of CBD health and safety issues. The press release and the consumer update both indicate that the FDA has broad safety concerns about CBD products, that there exist many unanswered questions and data gaps about CBD toxicity, and that some of the data available to the FDA raises serious concerns about potential harm from CBD.

The consumer update contains troubling statements like “CBD has the potential to harm you, and harm can happen even before you become aware of it,” and “CBD can cause liver injury.” But, no direct evidence or substantiation for these claims is linked to the consumer update or press release. Instead, the consumer update attempts to draw a corollary line between the data obtained from trials performed in connection with one FDA-approved CBD drug and the non-pharmaceutical products available on the market today. Equating that data against the products available to consumers today does not produce an apples-to-apples comparison. There are likely different scientific outcomes from, and different levels of toxicity caused by, the delivery of high dosages of concentrated CBD to mice in a clinical laboratory setting versus the relatively low dosages of CBD found in many food and supplement products available to consumers today.

More scientific research is absolutely needed on the efficacy and safety of CBD used in products intended for human consumption. And that research will come in time. But, the information released by the FDA this week appears to be an overstatement of the potential health risks associated with CBD products – at least, as they are known today. There are health risks associated with bad products – and there are bad products on the market today – but that merely highlights the need for clear regulatory guidance from the FDA.

The Future of CBD

The FDA recognizes that there is a significant public interest in CBD. It also recognizes that there are reports of CBD products containing potentially harmful contaminants, such as pesticides and heavy metals. Yet, despite that strong interest and recognition of a need for regulation in the industry, the FDA has delayed its development and implementation of meaningful regulatory guidance for CBD companies. That continuing delay does a disservice to the industry and to the general public.

Companies that cut corners and sell CBD products containing potentially harmful substances need to be regulated out of existence. Consumers deserve to know that the CBD brands they purchase and use have been responsibly grown, responsibly and safely manufactured, and are free from potentially harmful substances, like heavy metals and pesticides. And well-intentioned, responsibly operating CBD companies need and deserve clear regulatory guardrails within which they can safely – and legally – operate their business.

Unfortunately, it appears that regulatory uncertainty will continue to persist until there is more scientific data to support the safety and efficacy of CBD in consumer products. Obtaining that additional research and data will take time, so the industry may face a long slog until the FDA identifies a clear, detailed regulatory “pathway forward” for CBD. Until then, it is important for CBD companies to carefully consider the FDA’s position on CBD and the warnings sent this week, and to incorporate those factors into their internal compliance practices as they develop, produce, advertise, and sell their products in interstate commerce.

ARTICLE BY Tyler J. Russell and Allen N. Trask, III of Ward and Smith, P.A.

For more on cannabidiol/CBD regulation, see the National Law Review Biotech, Food & Drug law page.