F&B Legal Roundup – January 2019

Pooja S. Nair, a food and beverage lawyer and litigation member at TroyGould PC in Los Angeles, compiles recent legal news affecting the restaurant, food and beverage and hospitality industries for Modern Restaurant Management (MRM) magazine.

Court Decisions

Cheez-Its Whole Grain Class Action Continues: On December 11, 2018, the Court of Appeals for the Second Circuit reversed a lower court’s dismissal of a class action lawsuit against Kellogg’s regarding the advertising of Cheez-Its as “made with whole grain.”  The Court found that plaintiffs’ Complaint “plausibly alleged that a reasonable consumer would be misled by Defendant’s whole grain labels to believe that the grain in whole grain Cheez‐Its was predominantly whole grain.”  The Court found that reasonable consumers were likely to understand that crackers were typically made predominantly of grain and to look at the bold assertions on the packaging, rather than the ingredients list, to discern what type of grain.  The Court vacated the district court’s dismissal of the lawsuit and remanded the case for further proceedings.

Ninth Circuit Panels Finds Restaurant Website and Mobile App Subject to ADA Requirements: On January 15, a panel of the Court of Appeals for the Ninth Circuit found that Domino’s website and mobile app were subject to the Americans with Disabilities Act (ADA).  The Court found that the website and app connected customers to the goods and services of Domino’s physical restaurants and was therefore required to comply with the ADA.  The panel reversed the lower court’s dismissal of the plaintiff’s complaint and remanded for further proceedings.

San Francisco Soda Warning Ordinance Fails to Meet First Amendment Burden: On January 31, in a victory for the soda industry, the Court of Appeals for the Ninth Circuit struck down a San Francisco ordinance requiring health warnings on advertisements for certain sugar-sweetened beverages.  These beverages were defined as sugar-sweetened beverage that had one or more added Caloric Sweeteners and contains more than 25 calories per 12 ounces of beverage.  However, the ordinance did not include drinks such as milk, plant-based milk alternatives, and natural fruit juices, even if they also contained sugar.  The San Francisco ordinance required that the warning for the covered products take up 20 percent of the advertising space.  A coalition including the American Beverage Association sued for a preliminary injunction, which was denied by the district court.  A panel of the Ninth Circuit reversed the district court’s ruling, and the case was ordered to be heard en banc by a full panel of judges.  The Court ultimately found that the City of San Francisco had not met its First Amendment burden to show that the warnings were “neither unjustified nor overly burdensome.”  Therefore, the Court found that the beverage associations had shown a likelihood of prevailing on the merits, and a preliminary injunction was justified.

Florida Supreme Court Strikes Down Miami Beach Minimum Wage: On February 5, the Florida Supreme Court declined to consider Miami Beach’s appeal of a lower court decision striking down the city’s minimum wage.  Miami Beach had passed a city ordinance setting the minimum wage at $10.31, higher than the statewide minimum wage of $8.46 an hour.  In the lower court, business groups had successfully argued that allowing cities to set their own minimum wage would create confusion and negatively impact business.  The state appeals court blocked Miami Beach’s ordinance from taking effect.

Federal and State Legislation

Agricultural Improvement Act Changes Status of Industrial Hemp: On December 20, 2018,  the Agricultural Improvement Act of 2018 was signed.  The bill de-scheduled hemp from being a federally controlled substance and legalized hemp-derived CBD that met the legal definition of industrial hemp.  According to a statement from the FDA Commissioner, “this new law changes certain federal authorities relating to the production and marketing of hemp, defined as cannabis (Cannabis sativa L.), and derivatives of cannabis with extremely low (less than 0.3 percent on a dry weight basis) concentrations of the psychoactive compound delta-9-tetrahydrocannabinol (THC). These changes include removing hemp from the Controlled Substances Act, which means that it will no longer be an illegal substance under federal law.”  However, the FDA is still empowered to regular products containing CBD that fall within the scope of its powers under the Food, Drugs, and Cosmetics Act.  This means that while industrial hemp is no longer an illegal substance, anyone seeking to offer a hemp product as a food or drug would need to follow standard FDA procedures for approval before sale.

State and Local Health Departments Crack Down on CBD Edibles: On February 4, the Maine Department of Health and Human Services ordered that all edible products containing CBD be removed from stores on the grounds that CBD is an unapproved food additive.  The Los Angeles County Health Department has issued a statement that beginning in July 2019, the use of industrial hemp/CBD in food will result in a health code deduction for restaurants.  New York City’s Health Department has also begun seizing CBD edible products from restaurants and coffee shops.

Nebraska Mulls Bill Targeting Plant-Based Meat Advertising: A Nevada state senator has proposed a law banning advertising a product as “meat” if it is not derived from livestock or poultry.  This proposed law follows in the footsteps of Missouri’s similar law banning using the word “meat” on food labels unless the product came from harvested livestock or poultry.  The Missouri law went into effect on January 1, 2019 and is the subject of a federal lawsuit.

Additional States Propose Change on Drinks in Kids’ Meals: State legislatures in Connecticut and Rhode Island have proposed requiring that the default drink option in children’s menus be something other than soda—i.e. water, sparkling water, unflavored milk, or a nondairy milk alternative.  California is so far the only state that has actually passed such legislation, which went into effect on January 1, 2019.  California’s law requires that the default beverage in children’s meals be water, milk, or a nondairy alternative, but does not prohibit the sale of soda if requested.

Administrative Developments

USDA Sets Standards for GMOs, Effective January 2020: On December 21, 2018, the Agricultural Marketing Service of the USDA proposed a new standard of disclosure for genetically modified or bioengineered food.  The standard requires food manufacturers, importers, and other entities that label foods for retail sale to disclose information about bioengineered food and food ingredients. This rule is part of the agency’s authority under the Agricultural Marketing Act and will go into effect on January 1, 2020.

FDA Sets Uniform Compliance Date of January 1, 2022 for New Food Labeling Regulations: On December 20, 2018, the FDA announced that it was establishing January 1, 2022 as the uniform compliance date for food labeling regulations published between January 1, 2019 and December 31, 2020.  This uniform compliance date is intended to minimize the economic impact of complying with food labeling regulations.