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Big Food and Plant-Based Protein: Potential MEATing of the Minds?

Capitalizing on an increasingly health and environmentally conscious era, plant-based meat substitute companies are positioning themselves as the future of protein. On May 2, 2019, Beyond Meat became the first plant-based product company to go public. Its stock skyrocketed to become the highest performing first-day public offering in nearly two decades. Impossible Foods is also performing well. While the company is in no rush to go public, they just secured $300 million in their latest funding round.

In light of these recent successes, the meat industry is grappling with how to address the new food phenomenon. With the long-term viability of the alternative meat market yet to be seen, traditional meat companies are taking both an offensive and defensive approach.

Many Big Food companies view cell-based meat as an opportunity rather than a liability. Taking the “if you can’t beat ’em, join ’em” approach, these companies are integrating plant-based protein investments into their own portfolio. For example, Tyson was an early investor in Beyond Meat. Tyson recently sold its 6.52% stake in the company, but Tyson is still fully committed to competing in the plant-based protein space. Tyson announced that it plans to launch an “alternative protein product” with market testing as early as this summer. The fact that Tyson is a household name synonymous with meat could impede its ability to build brand loyalty in the alternative meat space. That said, the producer’s well-established distribution networks and manufacturing facilities will enable them to hit the ground running—an advantage that start-up companies in the emerging market necessarily lack.

Simultaneously, however, the meat industry is taking active measures to hedge against what, on its face, appears to be an impending threat of market erosion.

The meat industry is also lobbying for laws banning any non-slaughterhouse-derived protein product from being labeled “meat.” Last year, Missouri was the first state to formally do so. Lawmakers in 17 states—including Arkansas, Kentucky, Mississippi, North Dakota, South Dakota, and Wyoming—have followed suit. Laws in Montana, Georgia, Nebraska, and Oklahoma are also on the horizon.

Legislators and meat industry lobbyists are touting these laws as necessary consumer protection measures. Not surprisingly, proponents of plant-based meat disagree and are fighting back against legislation they say is aimed to protect cattle and livestock producers’ bottom line. Tofurkey, the Good Food Institute, the American Civil Liberties Union of Missouri, and the Animal Legal Defense Fund are challenging the Missouri law on constitutional grounds. Jessica Almy, director of policy for the Good Food Institute believes that the appeal should put other states on notice “that there are significant constitutional problems with these laws” because labeling is a form of “commercial speech, which is protected as long as it’s truthful.” The constitutional issue has yet to be resolved.

If Big Food is on board as a champion of plant-based protein rather than an opponent, the future for the protein industry certainly looks bright. But, it appears—at least for the time being—that meat alternative companies will have their work cut out for them as they navigate a newly developing (and often times conflicting) patchwork of state laws designed to stifle their marketing efforts. These uncertainties will continue to trigger disputes about what producers (that often operate in multiple states) can say about their products without misleading consumers, and just how far states can go to regulate commercial speech.

Article by Jennifer Junger and Lori Lustrin from Bilzin Sumberg.

For more on the meat substitute industry see the National Law Review Biotech, Food & Drug page.

The Federal Grand Jury: Ten Tips If You Receive a Subpoena

Other than having to respect testimonial and constitutional privileges of the people called to appear before it, a federal grand jury can pretty much do what it wants in questioning witnesses and compelling the production of documents. Federal grand jury subpoenas are almost never quashed on grounds that they call for irrelevant information or go beyond the grand jury’s authority. Federal grand juries have a maximum of 23 members, 16 of whom must be present to form a quorum. Indictments are returned by a vote of 12 or more members. Federal grand juries typically sit for a term of 18 months and meet at regular intervals. As a practical matter, a grand jury will almost always return an indictment presented to it by a prosecutor. This is the basis for Judge Sol Wachtler’s famous saying that a prosecutor can get a grand jury to “indict a ham sandwich.” Testifying or providing documents to such a powerful body entails grave risks. You should never attempt to face these risks without the help of an experienced white collar criminal defense attorney. Here you will find 10 tips for responding to federal grand jury subpoenas that call for your testimony or documents. Of course, every case is different and you should always develop a strategy in consultation with your attorney.

1. Keep Your Attorney Close at Hand.

Your lawyer can’t be with you in the grand jury room, but he or she can be right outside the room and you have the right to consult with him or her after each and every question. In fact, you can spend as much time as you need conferring with your lawyer, as long as you are not attempting to disrupt the grand jury process. You can also leave the grand jury room in order to brief your attorney about the questions being asked and your responses. In most federal jurisdictions you can also take notes of any questions asked during the grand jury session. These can later be shared with your attorney.

2. Beware of Agreeing to Pre-Grand Jury Interviews

You are under no obligation to talk to government agents before the grand jury process begins. Some Assistant United States Attorneys trick unrepresented persons into interviewing with federal agents prior to the beginning of the grand jury session. The letter accompanying the witness’ subpoena may ask or direct the witness to appear an hour or two early at the grand jury room or the U.S. Attorney’s Office. These pre-grand jury interviews are dangerous and ill-advised and the government has no authority to compel them. You may make a harmful admission during one of these interviews. In addition, you may be accused of lying to a government agent during the interview. Lying to government agents during an interview, like lying to the grand jury, is a federal crime. At the grand jury session, however, there will be an official recording and/or transcript of the proceedings, so there will be no dispute about what you say. The pre-grand jury agent interview will not be recorded. Two federal agents will take notes of what you say and it will be their word against yours in the event of a dispute.

3. Don’t be Bullied or Misled About Grand Jury Secrecy.

Federal grand jurors, grand jury court reporters and the prosecutors running the grand jury are under a strict duty to keep any “matter occurring before the grand jury” a secret. This duty is codified in Rule 6(e) of the Federal Rules of Criminal Procedure. Violations of this rule can result in sanctions or criminal contempt charges against a prosecutor. But the rule of secrecy does not apply to federal grand jury witnesses. If you are a grand jury witness, you have the right to tell the whole world about your grand jury testimony. Of course, it may not be in your interest to do this. You may want to keep your appearance before the grand jury under close wraps. You need to understand, however, that it is your call-not the government’s. But some federal prosecutors attach cover letters to grand jury subpoenas, informing the witness that revealing the contents, or even the existence, of the subpoena “may impede” a criminal investigation. These cover letters then “request” non-disclosure of the subpoena (and/or the documents requested in the subpoena) and ask the witness to notify the prosecutor if the witness has any “problems” with non-disclosure. You should by no means put up with this nonsense. If you receive a cover letter like this, you should consider having your attorney write a polite response to the prosecutor or the case agent including the following language: “Your cover letter requests non-disclosure of the subpoena (and/or the documents requested in the subpoena) and asks to be notified if there are problems with such non-disclosure. I am reluctant to have my client take on a formal affirmative obligation, regarding either non-disclosure of the subpoena or notification of problems with such non-disclosure, beyond the requirements, if any, found in Fed. R. Crim. P. 6(e) or in some other statutory or court authority you can point me to. Rest assured, however, that my client has absolutely no desire to compromise your investigation or to publicize the existence of either the subpoena or your investigation.”

4. Insist on Grand Jury Secrecy from the Government.

As mentioned, Rule 6(e) prohibits the government from revealing “a matter occurring before the grand jury.” This prohibition, of course, covers the content of grand jury testimony. But it goes much further. The government cannot even reveal that you appeared before the grand jury or that you have been subpoenaed or scheduled to appear. Many prosecutors and agents get sloppy about this and reveal that a person or company has been subpoenaed. In addition, some grand juries have waiting rooms where multiple witnesses are invited to wait until they are called. In these situations, each witness is told, in effect, that the other witnesses waiting with him have been summoned to appear “before the grand jury.” On other occasions, members of the press, who know what day the federal grand jurors meet, have been tipped off to be at the courthouse entrance, so that they can see a grand jury witness enter and draw the obvious conclusion. Your white collar criminal defense attorney should be vigilant in guarding against these abuses and should put the federal prosecutors handling your appearance on notice not to violate grand jury secrecy with such maneuvers.

5. Let Your Attorney Accept Service of the Subpoena.

Your attorney should arrange with the prosecutor to accept service of the grand jury subpoena on your behalf. This spares you the embarrassment of being personally served by FBI agents at your home or in the workplace. What if the agents don’t know or care that you have an attorney, and decide to serve you personally anyway? You should politely accept service, tell the agents that you have an attorney, and decline to answer any and all substantive questions about the case. Refer all questions to your attorney. What if you don’t yet have an attorney when you are personally served with the grand jury subpoena? Politely accept service and tell the agents that you will decline to answer any substantive questions until you have had the opportunity to obtain an attorney. You are under no obligation to do anything other than accept service of the subpoena. If you say anything at all about the case to the agent you could be making dangerous admissions that may be used against you at a later time. For example, let’s say that you are being investigated in connection with an alleged tax fraud scheme involving foreign trust accounts. Assume that there are no documents which on their face tie you to any such trust accounts. Then an FBI Special Agent (or an IRS Criminal Investigation Division Special Agent) serves you with a grand jury subpoena for all records related to those foreign trust accounts. When she serves the subpoena, the agent asks: “Are you going to cooperate?” You respond: “Yes, I’ll cooperate. You’ll get the documents.” What have you done? You have just admitted to the government that you possess or have access to the foreign trust account documents. You have in effect acknowledged a connection between yourself and the foreign trusts. If you instead respond to the agent as follows: “I’m sorry, but I have an attorney and she will be contacting you,” you have admitted nothing.

6. Learn the Difference Between Types of Grand Jury Subpoenas.

Federal grand jury subpoenas are for: (a) testimony (ad testificandum); (b) documents or objects (duces tecum); or (c) both. The face of the subpoena will inform you which type of subpoena you received. You will be subpoenaed as an individual or as a custodian of records for a business entity. In many instances, individuals have the right to refuse to answer grand jury questions by invoking the Fifth Amendment’s Privilege against Self-Incrimination. Corporations and other business entities, however, cannot invoke this privilege. But since a corporation operates through human agents, it must designate a custodian of records when subpoenaed by the federal grand jury. Under Supreme Court case law the corporate custodian is only required to answer a narrow category of questions, related to how the subpoenaed documents were searched for and gathered. If you are properly subpoenaed as a business custodian, it is very important that you limit your answers to this narrow category of questions. Prosecutors love to get corporate custodians into the grand jury room and ask extra questions. These questions might seem innocuous, but they are often very dangerous. You need to have your white collar criminal lawyer with you for consultation, right outside of the grand jury room, to ensure that you are not tricked into answering one question too many. Some federal prosecutors have recently started the practice of issuing one subpoena to a person in that person’s individual capacity and his custodial capacity. This tactic is dangerous, confusing, and, in my view, unauthorized. It is tantamount to issuing one subpoena to two persons or companies. Your attorney should insist on two separate subpoenas-one for you as an individual and one to the company’s custodian of records.

7. Don’t Testify if You Have Exposure.

As mentioned above, if you are subpoenaed for testimony in your individual capacity, you may be able to avoid answering substantive questions by invoking the Fifth Amendment’s Privilege against Self-Incrimination. This is true even if you are not a target of the investigation. Keep in mind that even if a prosecutor designates you a witness or subject, rather than a target, this designation provides you with no rights or protection and can be changed at any time. The right to invoke the Privilege against Self-Incrimination is much broader than most witnesses and attorneys realize. If a truthful answer to a grand jury question would even tend to incriminate you, you can invoke the privilege and refuse to answer. How can an answer tend to incriminate you? If it furnishes a link in the chain that might lead to your conviction. Can a person who is totally innocent of wrongdoing invoke the privilege? Absolutely! The Supreme Court has ruled that the privilege protects the innocent as well as the guilty. Why would an innocent person want to invoke the privilege? To keep from being ensnared by a mistaken, incompetent, or unscrupulous prosecutor. Take the following example. The federal grand jury is investigating a corporation for accounting fraud. You work in the corporation’s accounting department. The prosecutor believes that any accounting department employee who reviewed Document X and later booked entries related to Document X is guilty of fraud. You looked at Document X and later booked entries related to Document X, but don’t believe you defrauded or intended to defraud anyone. No record shows that you reviewed Document X and no other person knows that you reviewed Document X, but several documents and co-workers can establish that you booked entries related to Document X. If you testify at the grand jury and truthfully admit that you reviewed Document X, you will tend to incriminate yourself, even though you don’t believe that you are guilty, because you will furnish a link in the chain that the prosecutor may use to indict and convict you. You also may be able to invoke the Privilege Against Self-Incrimination to avoid producing certain documents. Although documents created prior to receipt of a grand jury subpoena are typically not covered by the Privilege, this is not always the case. If the very act of producing a document would tend to incriminate you, the Privilege will often apply. For example, if you are under investigation for receiving classified documents, and you are subpoenaed for those documents, the very act of producing the classified documents to the grand jury is in itself incriminating.

8. Review Your Prior Testimony.

Some federal prosecutors like to call witnesses back to the grand jury to testify on multiple occasions. This is dangerous because it can cause you to inadvertently give inconsistent testimony under oath. Under §1623(c) of the federal criminal code, the government can prosecute you for testifying to two irreconcilably contradictory statements under oath, and the government does not even have to prove that either of the statements in question was false. When you are called back to the grand jury to testify for a second time, your attorney should insist on your right to review ahead of time the official transcript of your first session. In this way, you can refresh your recollection as to your earlier testimony, correct any mistakes, and prepare yourself for the upcoming session. The United States Court of Appeals for the District of Columbia Circuit recently ruled that grand jury witnesses, even if they have not been called back to testify for a second time, have an inherent right to review a transcript of their earlier testimony.

9. Conduct a Shadow Grand Jury.

If you have the money, your attorney can often conduct what is known as a shadow grand jury. Friendly witnesses will sometimes inform you if they have been subpoenaed to the grand jury and you and your defense team can often figure out who else the government may call. Grand jury witnesses are then interviewed, before or after they testify, giving you valuable information on where the investigation is heading. Of course, grand jury witnesses are under no obligation to cooperate with your defense team, and the use of shadow grand juries often infuriates prosecutors. You should proceed with great caution and make sure that all interviews are carefully documented so that your defense team is not accused of witness tampering or obstructing justice. And it should go without saying that your attorney and his staff should conduct and arrange all interviews-not you.

10. Don’t Wait Until the Last Minute.

Do NOT wait until one day or one week before your grand jury appearance date to contact a federal criminal defense attorney. Any decent attorney will need time to discuss the facts of your case with you in detail and talk to the Assistant U.S. Attorney who is running the grand jury. In other words, your attorney needs time to assess your level of exposure and develop a game plan. This can’t be done overnight. On rare occasions, prosecutors issue “forthwith subpoenas” requiring witnesses to appear before the grand on very short notice. Even in these situations, you should immediately consult an attorney who can advise you on how to proceed. At the end of the day, you may be nothing more than a routine witness, asked to provide routine documents. But federal grand juries exist to investigate, and prosecute, serious crimes. You could be stepping into a mine field. Don’t go it alone and don’t wait until the last minute to seek professional help.

This article was written by Solomon L. Wisenberg of Nelson Mullins.

For more on appearing in court & litigation, please see the National Law Review pages on Civil Procedure or Litigation & Trial Practice.

But I’m in HR – What Do You Mean I Can Go to Jail?

Wage and hour laws. Child labor laws. OSHA laws. Immigration laws. When employers do not comply with these types of employment laws, civil charges and lawsuits are not the only things that can happen. In what may come as an unwelcome surprise to employers, and to Human Resources, in particular, these laws have criminal penalties embedded in them too.

For example, willful violations of the Fair Labor Standards Act (FLSA) – the federal wage and hour law that also contains certain child labor provisions – may be prosecuted criminally, with violators subject to potential fines of up to $10,000. Various states also have their own wage and hour laws, and many of them include criminal sanctions.

Although the Department of Justice and administrative agencies enforce laws like the FLSA less or more vigorously, depending on who is president, a case from 2013, during the Obama administration, is instructive. In that FLSA matter, a company and its owner, plant manager, and office manager were all convicted of various felony counts. The facts were extreme, including that the employer had a history of FLSA violations, submitted false payment evidence to the Department of Labor during its investigation, demanded kickbacks from workers while continuing to fail to pay overtime, and kept a second set of time records hidden from investigators. These facts resulted in criminal convictions for the company and three of its management individuals.

The Department of Justice also enforces certain immigration laws that carry potential criminal penalties for employers. These laws are especially noteworthy in today’s atmosphere of heightened immigration enforcement. Employers who unlawfully employ persons who are not authorized to work in the United States could be subject to criminal prosecution. Federal and state OSHA laws also contain criminal in addition to civil penalty provisions.

We know that Human Resources professionals can sometimes have a hard time convincing other leaders in an organization to listen to their suggestions. It can be very frustrating, for example, when HR knows that certain employment policies need to be revised or certain payment methods may not comply with legal requirements, and yet other members of the management team will not make the changes.

One way HR can help guide managers who need to make decisions about certain employment policies – and to get their attention – is to point out that not only can failure to follow certain laws result in expensive civil lawsuits; but sometimes they can also result in criminal prosecution. Though rare, these prosecutions and convictions do happen – something clearly all HR and all managers want to avoid.

Are you likely to go to jail as an HR professional under these laws? Not likely. Nonetheless, HR professionals should be aware of the possibilities and be prepared to discuss them when educating management.

Article by John S. Lord Jr. of Foley & Lardner LLP.

For more on employment matters, see the National Law Review Labor & Employment page.

When Your Customer is In Bankruptcy, There Are Two Major No-Nos That You Must Remember.

First, don’t violate the automatic stay, which prevents a creditor from attempting to collect a debt while the debtor is in bankruptcy unless the creditor gets prior court approval. Second, don’t violate the discharge injunction, which absolves a debtor of liability for those debts covered by the bankruptcy court’s discharge order. The automatic stay takes effect when the debtor files bankruptcy, while the discharge injunction typically comes at the end of the case.

The United States Supreme Court recently decided a case involving the discharge injunction. In Taggart v. Lorenzen, the issue was the legal standard for holding a creditor in civil contempt when the creditor violates the bankruptcy discharge order. In a unanimous decision, the Supreme Court held that a court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct. In other words, civil contempt may be appropriate if there is no objectively reasonable basis for concluding that the creditor’s conduct might be lawful.

Bradley Taggart was a part owner of an Oregon company called Sherwood Park Business Center. He got into a dispute with some of the other owners, and they sued him in state court for breach of Sherwood’s operating agreement. During the lawsuit, Taggart filed a Chapter 7 bankruptcy. In Chapter 7, a debtor discharges his debts by liquidating assets to pay creditors. Taggart ultimately obtained a discharge. After the bankruptcy court entered the discharge order, the parties returned to the state court lawsuit. The parties who had sued Taggart before he filed bankruptcy obtained an order from the state court requiring him to pay post-bankruptcy attorneys’ fees of $45,000.00. Taggart contended this debt had been discharged and the parties’ actions violated his bankruptcy discharge.

Multiple appellate courts reached different conclusions as to whether – and why or why not – the parties had violated the discharge order. One issue the courts struggled with was the standard to apply to the parties’ conduct. Should the courts apply an objective test based solely on their conduct or should they consider their subjective beliefs and motivations? Should the courts impose strict liability for discharge violations or should they let creditors off the hook if they didn’t realize their conduct was improper? The Supreme Court agreed to resolve these questions.

In adopting the “no fair ground of doubt” standard, the Supreme Court noted that civil contempt is a severe remedy and basic fairness requires those enjoined know what conduct is outlawed before being held in contempt. The standard is generally an objective one. A party’s subjective belief he was complying with an order ordinarily will not insulate him from civil contempt if that belief was objectively unreasonable. Bad faith conduct, and repeated or persistent violations can warrant civil contempt. Good faith can mitigate against contempt and factor into the appropriate remedy.

Although a discharge order often has little detail, the Supreme Court pointed out that, under the Bankruptcy Code, all debts are discharged unless they are a debt listed as exempt from discharge under Section 523. A domestic support obligation, for instance, is exempt from discharge. (This recent article discusses how debts involving intentional, fraud-like conduct may be exempted from discharge.) In other words, ignorance of the bankruptcy law is no excuse.

In adopting the “no fair ground of doubt standard,” the Supreme Court rejected two other standards, one more lenient and one more harsh. First, the Supreme Court rejected a pure “good faith” test – a creditor’s good faith belief that its actions did not violate the discharge would absolve it of contempt. Second, the Supreme Court rejected a strict liability test – if a creditor violated the discharge, he would be in contempt regardless of his subjective beliefs about the scope of the discharge order or whether there was a reasonable basis for concluding that his conduct did not violate the discharge order.

The discharge injunction is no joke, and creditors violate it at their peril. A debtor can be compensated for damages resulting from a discharge violation. In this case, the bankruptcy court initially awarded Taggart over $100,000 for attorneys’ fees, emotional distress, and punitive damages. Creditors with customers in bankruptcy, or who have filed bankruptcy in the past, should consult counsel who can advise them on what debts they can pursue. And if a creditor finds itself accused of violating the discharge injunction, it should contact counsel to assess its chances of passing or failing the “no fair ground of doubt” test.

Article by Lance P. Martin of Ward and Smith, P.A.

For more on Bankruptcy, see the National Law Review Bankruptcy & Restructuring page.

NLRB Will No Longer Require Employers to Permit Union Organizers in “Public Space” on Employers’ Property

Overruling 38 years of precedent, the NLRB has determined employers have no duty to permit union organizers to use “public space” to solicit union support on their property. UPMC and SEIU, 368 NLRB No. 2 (June 14, 2019).

UPMC is a hospital system based in western Pennsylvania. SEIU organizers visited the hospital cafeteria and distributed organizing materials to employees over lunch discussing union organizing activity. The hospital maintained a no-solicitation practice that prohibited nonemployees from using the cafeteria for purposes of solicitation. When the hospital learned of the union organizers’ presence and purpose, they were asked to leave the cafeteria by security guards, and when they refused, local police were summoned and escorted the organizers off the property. The Union filed unfair labor practice charges, alleging that this act was illegal.

The NLRB disagreed. Since 1981, the NLRB has created an entitlement to union agents to obtain access to “public space” – or, space in an employer’s property open to the public – for the purpose of soliciting union support among employees. Typically, the “public space” involved a cafeteria or a restaurant, and union agents were permitted to use the space in a manner consistent with its intended use as long as they were not disruptive. Montgomery Ward & Co., 256 NLRB 800, 801 (1981).

“The Board’s approach has been soundly rejected by multiple circuit courts (of appeal).” In support of this finding, the Board recited decisions from the circuit courts of appeal of the 6th, 4th and 8th circuits, concluding the “public space” exception was insupportable in light of the United States Supreme Court decisions that permit employers to prohibit union agents from entering an employer’s property for organizing activity if the union could appeal to employees through other means and if the employer does not discriminate against unions by permitting other persons or organizations from soliciting on its property. NLRB v. Babcock & Wilcox, 351 U.S. 105, 112 (1956). Even when those conditions exist, the United States Supreme Court has held both of these exceptions are “narrow” and unions have a “heavy” burden of proof to establish the exception. Sears Roebuck & Co. v. San Diego District Council of Carpenters, 436 U.S. 180, 205 (1978).

The NLRB agreed with the judicial criticism of its previous precedent and held:

… to the extent that Board law created a “public space” exception that requires employers to permit nonemployees to engage in promotional or organizational activity in public cafeterias or restaurants absent evidence of inaccessibility or activity-based discrimination, we overrule those decisions.

While the NLRB decision stops short of rejecting the policy of “nonacquiescence” where the Board ignores circuit court precedent which refuses to enforce its orders, it is illustrative of a growing sensitivity to the maintenance of Board law that is inconsistent with the precedent of the United States’ courts which refuse to enforce flawed NLRB precedent.

This article was written by Mark A. Carter and Brian J. Moore from Dinsmore & Shohl LLP.

For more on Union matters, see the National Law Review Labor & Employment page.

Privacy Concerns Loom as Direct-to-Consumer Genetic Testing Industry Grows

The market for direct-to-consumer (“DTC”) genetic testing has increased dramatically over recent years as more people are using at-home DNA tests. The global market for this industry is projected to hit $2.5 billion by 2024. Many consumers subscribe to DTC genetic testing because they can provide insights into genetic backgrounds and ancestry. However, as more consumers’ genetic data becomes available and is shared, legal experts are growing concerned that safeguards implemented by U.S. companies are not enough to protect consumers from privacy risks.

Some states vary in the manner by which they regulate genetic testing. According to the National Conference of State Legislatures, the majority of states have “taken steps to safeguard [genetic] information beyond the protections provided for other types of health information.” Most states generally have restrictions on how certain parties can carry out particular actions without consent. Rhode Island and Washington require that companies receive written authorization to disclose genetic information. Alaska, Colorado, Florida, Georgia, and Louisiana have each defined genetic information as “personal property.” Despite these safeguards, some of these laws still do not adequately address critical privacy and security issues relative to genomic data.

Many testing companies also share and sell genetic data to third parties – albeit in accordance with “take-it-or-leave-it” privacy policies. This genetic data often contains highly sensitive information about a consumer’s identity and health, such as ancestry, personal traits, and disease propensity.

Further, despite promises made in privacy policies, companies cannot guarantee privacy or data protection. While a large number of companies only share genetic data when given explicit consent from consumers, there are other companies that have less strict safeguards. In some cases, companies share genetic data on a “de-identified” basis. However, concerns remain relative to the ability to effectively de-identify genetic data. Therefore, even when a company agrees to only share de-identified data, privacy concerns may persist because an emerging consensus is that genetic data cannot truly be de-identified. For instance, some report that the existence of powerful computing algorithms accessible to Big Data analysts makes it very challenging to prevent data from being de-identified.

To complicate matters, patients have historically come to expect their health information will be protected because the Health Insurance Portability and Accountability Act (“HIPAA”) governs most patient information. Given patients’ expectations of privacy under HIPAA, many consumers assume that this information is maintained and stored securely. Yet, HIPAA does not typically govern the activities of DTC genetic testing companies – leaving consumers to agree to privacy and security protections buried in click-through privacy policies. To protect patient genetic privacy, the Federal Trade Commission (“FTC”) has recommended that consumers withhold purchasing a kit until they have scrutinized the company’s website and privacy practices regarding how genomic data is used, stored and disclosed.

Although the regulation of DTC genetic testing companies remains uncertain, it is increasingly evident that consumers expect robust privacy and security controls. As such, even in the absence of clear privacy or security regulations, DTC genetic testing companies should consider implementing robust privacy and security programs to manage these risks. Companies should also approach data sharing with caution. For further guidance, companies in this space may want to review Privacy-Best-Practices-for-Consumer-Genetic-Testing-Services-FINAL issued by the Future of Privacy Forum in July 2018. Further, the legal and regulatory privacy landscape is rapidly expanding and evolving such that DTC genetic testing companies and the consumers they serve should be watchful of changes to how genetic information may be collected, used and shared over time.

This article written by Brian Hedgeman and Alaap B. Shah from Epstein Becker & Green, P.C.

For more on privacy issues see the National Law Review page on Communications, Media & Internet.

Juul Gives $7.5 Million for Research as Sales Continue to Climb

Just like the traditional tobacco industry, Juul has started to issue grants to study the effects of e-cigarettes on users. Back in the bad, old tobacco days, almost all research was funded by tobacco companies through the Council for Tobacco Research (CTR) and the Center for Indoor Air Research (CIAR). Both companies were included in fraud cases against the industry. After a settlement in 1998, the tobacco industry started funding private groups. Much of that funding was undisclosed in study results, suggesting there might be a conflict of interest.

So…is Juul, a company heavily funded by big tobacco, the same? Or is this highly successful, private interest, for-profit company an altruistic anomaly?

Juul’s grant program seems to be part of a new advertising campaign to reverse its bad reputation for targeting youth. Juul is now focused on creating a socially-responsible reputation for health-conscious product marketing, including:

Its unproven claim that the product works for smoking cessation;
An adults-only website landing page and public statement campaign; and, now,
An investment in e-cigarette research.

However, Juul’s concern for its product users only arose after coming under fire for the rising use of Juul products by underage users. By the time Juul launched its new advertising campaigns, it had already completed its big tobacco investment with Altria. According to reports, underage use of e-cigarettes had further increased another 40%. These facts throw shade on the selfless reputation Juul is trying to create with its new grant program. While you might applaud them for listening to their new tobacco investor, you should probably question their motives for the same reason.

If you look at this grant you will see Juul is giving $7.5 million tax-deductible dollars to a school. This is about 0.3% of its estimated annual sales. It’s a pretty meager investment with a high-value publicity gain. That is smart marketing–Juul’s key skill. Smart marketing is how Juul swept up 75% of the e-cigarette market, largely composed of underage users. Juul’s youth-focused advertising (which has decreased as of this date) smacks of historic big tobacco advertising which was eventually and belatedly banned. Juul’s similar approach has generated exponential market growth, and, more recently, FDA and congressional investigations into its operations. Regrettably, the initial investigations only seem to address the prevention of advertising to underage users. Although this satisfies an immediate and important need, it largely ignores the health dangers inherent in e-cigarette use; health dangers that affect the adult population as well.

E-cigarette product development is still unregulated due to former FDA chief, Scott Gottlieb’s, failure to impose immediate FDA oversight of the industry back in 2016 and 2017. There have been many e-cigarette explosions that have caused devastating, permanent, injuries to youth and adults alike. There is also the danger of developing life-altering lung conditions, terminal cancers, and other health risks related to inhaling e-cigarette chemicals into the body. These dangers are exacerbated by a higher rate of nicotine addiction—alleged to be worsened by Juul’s nicotine delivery system—because addicted users vape more often and for extended periods.

To ignore the health risks of vaping and nicotine addiction is to repeat history. The tobacco industry depended on nicotine addiction for recurring sales and to capture new markets. The vaping industry, including Juul, appear to be banking on the same.

Article written by Domenic B. Sanginiti, Jr of Stark & Stark.

For more on product safety, see the National Law Review Products Liability page.

UPDATE: NCAA Flexes Its Muscle in Response to California Fair Pay To Play Act

NCAA President Mark Emmert has predicted that it would become “impossible” for the NCAA to consider California colleges eligible to participate in national championship competitions should California pass the Fair Pay To Play Act (SB 206) and allow college athletes to maintain their amateur status while accepting pay for marketing their name, image and likeness (as discussed in our recent blog posts on March 4, 2019, and May 23, 2019).

Emmert stated this in a letter to Senator Nancy Skinner, the sponsor of the proposed legislation, and the Chairpersons of two California State Assembly Committees (the Arts Entertainment, Sports, Tourism and Internet Committee and the Higher Education Committee).

Emmert has requested the two committees postpone consideration of the proposed legislation while the NCAA convenes an investigatory working group of school presidents and athletics administrators who will be reviewing the current prohibition on NCAA athletes earning income from the use of their names, images, and likenesses. The working group, led by Big East Commissioner Val Ackerman and Ohio State University Athletic Director Gene Smith, is authorized to propose specific recommendations to potentially reform and modify current NCAA Bylaws.

In his letter, Emmert recognized the California legislature’s efforts in developing the bill, but noted, “when contrasted with current NCAA rules,

the bill threatens to alter materially the principles of intercollegiate athletics and create local differences that would make it impossible to host fair national championships.”

Emmert continued, “… it likely would have a negative impact on the exact students athletes it intends to assist.”

The timing of President Emmert’s request presents a dilemma for the California state legislature as the Ackerman and Smith-led NCAA group is not scheduled to update the NCAA Board of Governors until August and will not issue a final report until late-October, more than a month after the end of the current California legislative session considering SB 206.

SB 206 was just approved by the Committee on Arts without any formal opposition. The bill is now headed to the 12-member Committee on Higher Education, which must express its approval before July 11 and before the 61 Democratic members of the full 80-member California assembly will have an opportunity to consider the bill.

In its current form, the legislation would prohibit a California postsecondary educational institution, athletic association, conference, or any other organization with authority over intercollegiate athletics, from preventing student-athletes from earning compensation in connection with the use of the student-athlete’s name, image, or likeness. This would result in colleges, such as perennial sports powers like UCLA, USC, the University of California, and Stanford from being unable to stop their male and female student-athletes from signing endorsement deals or licensing contracts under the NCAA prohibition, circumventing the power and authority of the NCAA.

Senator Skinner responded to Emmert’s letter, saying, “It’s definitely a threat to colleges.”

She continued, “And this is what I think is so ironic: They are colleges. The NCAA is an association of colleges, and yet they’re threatening California colleges and saying that they would not allow them to participate in championships if my bill passes.”

Skinner reminded the public that if her bill were signed into law, it would not go into effect for another three years. She said the NCAA would have ample time to assess its own rules regarding student-athlete compensation. “Both the colleges and the NCAA have plenty of time to do the right thing,” she said.

Article by Gregg E. Clifton of Jackson Lewis P.C.

For more on NCAA and other sports news see the National Law Review page on Entertainment, Art & Sports.

Hungry for Change: ASA and Government Target Junk Food Ads

With childhood obesity rates in the UK among some of the worst in Europe, the Government has set a national target to halve childhood obesity by 2030. Whilst the Government acknowledges that this is a multi-faceted problem, it has reported that evidence suggests that children’s exposure to advertising of products that are high in fat, salt and/or sugar (“HFSS”) contributes to their consumption patterns.

HFSS product advertising is currently subject to content and placement restrictions under the Committees of Advertising Practice (“CAP”) broadcast and non-broadcast codes of advertising (“Codes”); however, campaigners and industry bodies have raised concerns that adverts are not being targeted correctly and that the existing rules do not go far enough. The Advertising Standards Authority (“ASA”) and the Government have taken steps in recent months to address these issues, with the ASA launching a monitoring exercise on targeted ads and the Government consulting on options to reduce children’s exposure to HFSS ads.

The rules

Each of the Codes contains rules dealing with adverts that are directed at or feature children, as well as specific rules in relation to advertising HFSS products, whether directly or indirectly. The restrictions include:

a prohibition on the use of licensed characters and celebrities popular with children in ads for HFSS products where the ad is targeted at under 12s;
in relation to broadcast TV, a prohibition on HFSS products being advertised “in or adjacent to programmes commissioned for, principally directed at or likely to appeal particularly to audiences below the age of 16”; and
in relation to ads placed in children’s media, “HFSS product advertisements must not be directed at people under 16 through the selection of media or the context in which they appear. No medium should be used to advertise HFSS products, if more than 25% of its audience is under 16 years of age”.

ASA monitoring

Although compliance with the Codes by advertisers is generally high, the ASA recently published the results of a ‘compliance sweep’ that used online avatars to monitor ads for HFSS products that were served to children. Similar technology was used earlier this year to track brands that breached CAP’s gambling rules on advertising to under 18s, which we reported on in April.

The avatars replicated the browsing habits of children of various ages and collected information about HFSS adverts appearing on children’s websites and on YouTube. The monitoring exercise found that the vast majority of HFSS ads on children’s websites were being targeted correctly; however, potential issues were identified in relation to HFSS ads being served on YouTube.

Moving away from its typically ‘reactive role’, the ASA took proactive action to notify a number of non-compliant brands which were each required to take steps to prevent further breaches, including making improvements to their targeting approach.

Government consultation

Despite strong compliance by the industry, the Government is still considering further advertising prohibitions and earlier this year launched a consultation in which it sought views on options to further reduce children’s exposure to HFSS in broadcast and online media, including the introduction of a 9pm watershed. Other options included a ‘ladder’ system for advertising restrictions on broadcast TV, the strengthening of current targeting restrictions for online advertising and a mixed option for online advertising consisting of a watershed for video and additional targeting restrictions for other types of marketing.

Whilst the watershed proposals have received extensive support from campaign groups such as The Children’s Food Campaign (Sustain) and the Obesity Health Alliance, the ASA and the Institute of Practitioners in Advertising have both stated that the proposed changes would be ineffective and disproportionate, particularly given the high level of compliance with the HFSS rules in the Codes.

Steps to take

The ASA has stated that it will carry out further compliance sweeps in future, and so advertisers should take care to continue to comply with the Codes.

Anyone advertising in the area should also make use of any available tools which allow the targeting of ads so as to restrict children and young people from seeing adverts for HFSS products. Advertisers must also ensure that terms with their media buyers are sufficient to guarantee that targeting has been put in place correctly. As with labelling or other regulated industries such as financial services, agencies may wish to make clear that responsibility for compliance with these specialist rules lies with their clients (in particular if an assessment as to whether a product is indeed HFSS is required).

Article by Carlton Daniel and Natasha Maric of Squire Patton Boggs (US) LLP

For more on Health & Obesity, see the National Law Review page on Biotech, Food & Drugs.

A Judge’s Tips for Keeping Trade Secrets “Secret”

Just because information is sufficiently sensitive and valuable that it can qualify as a “trade secret” does not mean that it will qualify unless the owner of the information takes adequate steps to protect its secrecy.

In a recent decision, Judge John J. Tharp, Jr., of the U.S. District Court for the Northern District of Illinois explained that “there are two basic elements to the analysis” of whether information qualifies as a “trade secret”: (1) the information “must have been sufficiently secret to impart economic value because of its relative secrecy” and (2) the owner “must have made reasonable efforts to maintain the secrecy of the information” (internal quotation marks omitted).^[1]

According to Judge Tharp, some of those “reasonable efforts” that a company can take to maintain the secrecy of its information include:

using non-disclosure and confidentiality agreements with employees;
enacting a policy regarding the confidentiality of business information that is more detailed than a mere “vague, generalized admonition about not discussing [company] business outside of work”;
training “employees as to their obligation to keep certain categories of information confidential”;
asking departing employees whether they possess any confidential company information, and, if they do, instructing them to return or delete it;
adequately training IT personnel about data security practices;
restricting access to sensitive information on a need-to-know basis; and
as appropriate, labelling documents “proprietary” or “confidential.”

As Judge Tharp made clear, companies that fail to institute reasonable measures to protect sensitive information do so at their own peril.

_{[1] Abrasic 90 Inc. v. Weldcote Metals, Inc., No. 1:18-cv-05376 (N.D. Ill. Mar. 3, 2019) at 11.}

This article was written by Peter A. Steinmeyer and Erica McKinney from Epstein Becker & Green, P.C.

For more on employer/employee relations see the National Law Review Labor & Employment page.

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