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FDA and FTC Warn Against Making Unapproved COVID-19 Claims

April 8, 2020

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In response to the outbreak of COVID-19, the Food and Drug Administration (FDA) and Federal Trade Commission (FTC) have issued several new warning letters to companies claiming their products prevent, treat or cure the novel coronavirus. This follows the seven warning letters jointly issued by the agencies in early March.

  • Gaia’s Whole Healing Essentials LLC was warned for selling colloidal silver products with claims that the products can build immunity and possess anti-viral properties for the treatment or prevention of COVID-19.
  • Homeomart Indibuy was warned for claiming that its homeopathic drug products treat respiratory illnesses and act as a prophylactic to protect from COVID-19 infection.
  • Health Mastery Systems DBA Pure Plant Essentials was warned for selling essential oils with claims that the products are safe and/or effective for the treatment or prevention of COVID-19. In addition to identifying improper claims made on the manufacturer’s website, the warning letter also scrutinized the express and implied claims made in social media posts including the following hashtags: “#coronavirus #covid #prevention #preventativehealth #symptoms #essentialoil #aromatherapy.”
  • NeuroXPF was warned for advertising that its cannabidiol (CBD) product prevents and treats COVID-19. Given the existing regulatory scrutiny on the growing CBD industry, we expect particularly aggressive enforcement against CBD manufacturers who make unsubstantiated and/or unapproved claims regarding COVID-19.

States have also begun enforcement actions. Last month, the Missouri Attorney General sued televangelist Jim Bakker and his company, Morningside Church Productions Inc., for claiming, on a broadcast featuring a naturopathic doctor, that the product Silver Solution

Several U.S. Retailers Forced to Close by Law Enforcement as Non-Essential

Several U.S. retailers that remained open in the face of state and local shutdown orders have now been forced to close by local law enforcement.

Retailers that remain open should ensure that they qualify as “essential” under applicable state and local orders, that they have proper documentation for their employees and facilities demonstrating that they are essential, and that they comply with any health safety and social distancing requirements. BCLP is tracking these orders and the developing guidance, and a map of states with stay-at-home orders is available here.

Businesses forced to close include several national craft and fabric store chains, and specialty stores that sell video games, sports equipment, furniture, clothing and accessories, shoes, books, music, jewelry, and luggage.

What qualifies as an “essential business” may vary under each order, and the approach taken by enforcement agencies may also vary. For example, stores selling CBD products have been allowed to remain open in some jurisdictions, but forced to close in others.

Law enforcement actions also varied against firearms and ammunition retailers, until the federal government last week updated its Guidance on the Essential Critical Workforce (the “Guidance”) to include “workers supporting the operation of firearm or ammunition product manufacturers, retailers, importers, distributors, and shooting ranges.”

Some statewide orders, such as California, base their definition of an essential business on the Guidance while others, such as Oregon, do not. In updating the Guidance, Christopher Krebs, director of the Cybersecurity and Infrastructure Security Agency (CISA), stated “this advisory list

NAAG Polices COVID-19 Price Gouging, Demands Fair Pricing Policies and Actions

April 6, 2020

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The National Association of Attorneys General (NAAG) is actively monitoring consumer product prices and working to eliminate price gouging in the U.S. during the COVID-19 pandemic. At least 33 attorneys general signed on to letters issued recently to a number of major online retailers and online sales platforms.

The letters indicate that while the AGs “appreciate reports of the efforts made by platforms and online retailers to crack down on price gouging,…we are calling on you to do more at a time that requires national unity.”

Specifically, the letters ask for three concrete actions:

  • Set policies and enforce restrictions on unconscionable price gouging during emergencies.
  • Trigger price gouging protections independent of, or prior to an emergency declaration.
  • Create and maintain a ‘Fair Pricing’ Page/ Portal where consumers can report price gouging incidents to you directly.
  • In connection with these actions, the AGs are asking companies to proactively monitor consumer sales activity, to track spikes in pricing and stop or block such activity, with the goal to “prevent unconscionable and unjustified price increases.”

    The AGs hope to work with retailers to develop a system whereby the retailers will provide consumer’s complaints of price gouging to the AGs’ offices to “facilitate appropriate referrals for enforcement or prosecution.”

    On the NAAG consumer protection website consumers can find a link to submit a complaint to their AG. The site also highlights a number of specific enforcement actions various AGs have taken. These include:

    • Missouri AG obtaining a TRO to stop sales

    Year in Review: 2019 Food and Beverage Litigation and Regulatory Roundup

    2019 was another active year for new regulatory activity and litigation targeting the food, beverage, and supplement industries.

    In this roundup, Bryan Cave Leighton Paisner LLP presents a collection of regulatory developments, key court decisions, and notable settlements that were reached in 2019 and early 2020.

    The highlights of this 2019 roundup include:

    • New federal legislation governing food labeling.
    • New regulations and a burst of litigation regarding CBD-based products.
    • An update on slack fill litigation.
    • Notable rulings, trials, and settlements.
    • Prop 65 and food safety update.
    • A preview of areas to watch in 2020.

    We will continue our commitment to monitoring and analyzing industry trends in these areas and advising clients on legal and regulatory developments.

     

    U.S. CORONAVIRUS RELIEF BILL: The CARES Act – Provisions Affecting Employers and Employees

    April 3, 2020

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    Following tense negotiations throughout last week, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or “Act”) became law on March 27, 2020.  The CARES Act represents the third Phase of Congressional relief responding to the novel coronavirus (COVID-19) pandemic.  Phase I (Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (P.L. 116-123)) and Phase II (Families First Coronavirus Response Act (P.L. 116-127)) were signed into law on March 6 and 18, respectively.   At 883 pages, the CARES Act is the largest relief bill in U.S. history and addresses on multiple fronts the hardships faced by individuals and businesses throughout this crisis.  These efforts include an unprecedented expansion of unemployment benefits, significant funding for the health care industry, aid to large and small businesses valued in the billions, and even direct payments to individuals.

    The majority of economic relief provisions for U.S. workers and employers is provided in Titles I through IV of Division A of the Act (Division B consists of emergency appropriations to fund various program). The CARES Act also has specific provisions regarding relief for airlines, financial institutions, and other sectors that are considered critical to national security.  Titles I through IV of Division A of the CARES Act is are described in relevant part below.

    Title I – Keeping American Workers Paid and Employed Act

    Title I of the CARES Act provides relief through employee paycheck protections, loan forgiveness, and small business contracting relief.  The Act enables the Small Business Administration (“SBA”) to provide

    Bay Area Counties Require Essential Businesses to Establish and Post Social Distancing Protocols

    Seven Bay Area counties renewed and modified their shelter-at-home orders yesterday, extending the shutdown period through May 3, and in all cases but one, requiring that all essential businesses that remain open establish and post social distancing protocols by April 2 at 11:59 p.m.: San Francisco, Marin, Contra Costa, Santa Clara, San Mateo, Alameda, and Santa Cruz.

    Santa Cruz County also extended its order through May 3, but does not include the same provision requiring establishment and posting of social distancing protocols.

    The orders specify that social distancing protocols must be substantially in this form, and be posted at or near the entrance of the business where it is easily viewable by the public and employees. A copy of the social distancing protocol must also be provided to each employee performing work at the business.

    The social distancing protocol must explain how the business is achieving the following, as applicable:

    • Limiting the number of people who can enter into the facility at any one time to ensure that people in the facility can easily maintain a minimum six-foot distance from one another at all times, except as required to complete the Essential Business activity;
    • Where lines may form at a facility, marking six-foot increments at a minimum, establishing where individuals should stand to maintain adequate social distancing;
    • Providing hand sanitizer, soap and water, or effective disinfectant at or near the entrance of the facility and in other appropriate areas for

    U.S. Congress CARES: Legislative Overview of Tax Provisions

    April 1, 2020

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    The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or “Act”) was signed into law by President Trump on Friday, March 27, 2020.  The Act provides tax benefits to businesses and individuals and includes a number of changes to the Internal Revenue Code, including changes to the limitations on the deduction for net operating losses (“NOLs”) and business interest expense.  A number of the CARES Act provisions reverse or defer the effective time for certain changes made by Public Law 115-97, informally known as the 2017 Tax Cuts and Jobs Act (“TCJA”).  We will be releasing additional alerts to provide more in-depth analysis of certain of the tax benefits included in the CARES Act.

    Tax Benefits for Businesses 1. NOL carryback and excess business losses

    The CARES Act temporarily repeals the prohibition on the carryback of NOLs in order to obtain a current refund of U.S. federal income taxes paid in prior tax years.  The provisions allow the carryback of NOLs generated in tax years 2018, 2019, and 2020 to each of the five (5) taxable years preceding the year such NOL arose.  Further, for tax years 2018, 2019, and 2020, taxpayers can use their NOLs up to the full amount of taxable income (rather than up to 80% of taxable income).  There are special rules for real estate investment trusts and life insurance companies, as well as rules related to the repatriation tax and farming losses.

    The CARES Act also retroactively delayed the imposition of the excess business loss

    COVID-19: Considerations for Retailers on Employee Furloughs in U.S. and California

    As an alternative to laying off employees, many retailers may be considering furloughs – unpaid leaves or drastic reductions in work hours or work schedules – that allow them to retain employees and possibly continue to provide certain benefits. Retailers should be aware that furloughs still likely trigger notice requirements under state WARN laws, and in California may be considered a termination of employment requiring payment of final wages.

    This post provides an overview of furlough considerations with respect to unemployment benefits, WARN laws, possible termination implications, reduced hours or work share, use of vacation time, and benefits.

    Unemployment Insurance

    Furloughed employees, as well as many employees with reduced hours, are eligible for unemployment insurance benefits. In California, Governor Newsom’s Executive Order N-25-20 removes the waiting period to receive benefits. More information on filing for unemployment benefits is available here.

    WARN Laws

    The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers with at least 100 employees who lay off at least 50 employees to provide advance notice of the “employment loss.” However, furloughs of less than 6 months do not qualify as an employment loss under the federal law.  At least 20 states have WARN laws, and the laws vary from state to state.

    California’s WARN law, which applies to employers with 75 or more employees who lay off at least 50 employees, applies to furloughs exceeding a “de minimis” amount of time. The California Court of Appeal has held that a four- or five-week furlough

    Lead Generation and the TCPA: How to Protect Your Company from Downstream Bad Actors

    Many businesses, including retailers, rely on inbound lead generators to identify prospective customers for telephone or text-based direct marketing campaigns.  Sourcing inbound leads from a variety of providers allows firms to tap into market segments that might otherwise be unavailable to them and improve conversion rates on their marketing spend.  But outsourcing lead gen to downstream providers also carries risk, as it is not uncommon for the original source of the lead to be several layers removed, making it difficult to verify the quality of the leads or to ensure that the proper consents were obtained.  Given the daily deluge of class action lawsuits brought under the Telephone Consumer Protection Act, 47 U.S.C. § 227 (”TCPA”) by industrious plaintiff’s lawyers, it is only a matter of time before your company comes into their crosshairs.  How can you protect your company?

    The TCPA prohibits calls or texts to a cellular telephone using an automated telephone dialing system (“ATDS”) or prerecorded voice, or calls to a landline using a prerecorded voice, without the express consent of the called party (or contrary to a do-not-call listing).  47 U.S.C. § 227;  47 C.F.R. § 64.1200.  Violators are subject to $500 in statutory damages for each call or text, or $1,500 for knowing violations, thus making TCPA class actions an irresistible enticement to the plaintiff’s bar.  Although liability under the TCPA generally falls upon the entity that generated the call or text, the courts have held that sellers can be vicariously liable for the actions

    What Retailers Need to Know About the CARES Act, SBA Lending, and Loan Forgiveness

    March 26, 2020

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    The Coronavirus Aid, Relief, and Economic Security, or “CARES Act”—the third emergency bill that Congress has prepared in response to the Coronavirus (COVID-19) pandemic—is likely to be signed into law by Friday, March 27, 2020. Bryan Cave Leighton Paisner lawyers have been analyzing drafts of the bill, scouring its relevant provisions, and stand ready to advise clients on what impact it may have on their businesses and whether those businesses may be eligible for assistance.

    The bill has significant relief for small businesses, including $349 billion in Small Business Administration (SBA) loan guaranties and subsidies and additional funding for SBA programs. Highlights include:

    • Expansion of SBA’s 7(a) Loan Program to Support New “Paycheck Protection Program” Loans. The SBA’s existing 7(a) program will see:
      • Increase in maximum loan amount to $10 million.
      • Allowable uses expanded to include:
        • Payroll support (including paid sick or medical leave);
        • Employee salaries;
        • Mortgage, rent and utility payments;
        • Insurance premiums; and
        • Other debt obligations.
    • Loan Forgiveness. Certain borrowers would be eligible for loan forgiveness equal to the amount spent during an eight-week period after the origination date of the loan on:
      • Payroll costs;
      • Interest payment on any mortgage incurred before Feb. 15, 2020;
      • Rent on any lease in force before Feb. 15, 2020; and
      • Utilities for which service began before Feb. 15, 2020.

    The amount forgiven would be reduced in proportion to any reduction in employees retained compared to the prior year and to the reduction

    U.S. COVID-19: Commercial Leases – Rent Obligations in the United States

    March 26, 2020

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    While it is true that a number of States and local municipalities have stopped all eviction proceedings and many courts are currently closed, the issue of rent remains front and center between landlords and tenants. The following sets forth some guidelines to begin thinking about these issues:

    • Review your Leases. Payment obligations will generally rest on the specific language of the lease, but the answers may not be as clear as a landlord or tenant might assume. Provisions often relegated to the “Miscellaneous” section in leases (e.g., force majeure, severability, independent covenants etc.) may take center stage.
      • Lease provisions that landlords should focus on include:
        • Requirements that rent be paid without deduction or set-off;
        • Provisions that afford a landlord broad rights to shut down its building in an emergency without any abatement of rent;
        • Force majeure clauses that carve out monetary obligations from their applicability;
        • In the retail setting, operating covenants and, if breached, the effect on percentage rent;
        • Provisions that spell out the independent nature of lease covenants, arguing that the tenant’s obligation to pay rent is independent from the obligation of the landlord to keep its building open; and
        • The availability of their tenants’ credit support – Are letters of credit getting close to expiration and what are the draw procedures (and is the bank’s draw office available for presentment)?
      • Lease provisions that tenants should focus on include:
        • Abatement and other rights in the event of loss of access to the building or cessation of landlord’s

    COVID-19: Employee Assistance, Benefits and HR Guidance for Retailers

    March 24, 2020

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    As retailers continue to respond to the COVID-19 crisis, the following posts from our colleagues at BCLP At Work and Benefits BCLP can help navigate through the various employee assistance and benefits programs, and help answer human resources questions.

    For more information, contact the authors or visit our COVID-19 Thought Leadership web page.  You can also seek assistance from our COVID-19 Client Task Force.

     

    CRA Advises California Distribution Centers Can Stay Open Under State Order

    California Governor Newsom has clarified that distribution centers in California can remain open under his Safer At Home order, stating that “distribution centers are part of critical infrastructure for many industries,” according to the California Retailers Association.  CRA also reports that it has obtained oral confirmation from the governor’s office that online sales and shipping activities can continue under the order.

    As we previously reported, Governor Newsom on Thursday issued a statewide order directing all individuals to stay at home “except as needed to maintain continuity of operations of the federal critical infrastructure sectors.” The order went into effect on Thursday, and is in place until further notice.

    As to exempt business activities, the order and web page providing more information on the order both refer to the Guidance on the Essential Critical Infrastructure Workforce by the U.S. Dept. of Homeland Security’s Cyber Infrastructure (CISA), which lists 16 federal critical infrastructure sectors, including Food and Agriculture.

    The Guidance lists as critical Food and Agriculture workers who support “food, feed, and beverage distribution, including warehouse workers, vendor managed inventory controllers and block chain managers” as well as employees who support “infrastructure necessary to agricultural production and distribution.”

    Other exempt Food and Agriculture workers include:

    • Workers supporting groceries, pharmacies and other retail that sells food and beverage products
    • Restaurant carry-out and quick serve food operations – Carry-out and delivery food employees
    • Food manufacturer employees and their supplier employees

    More than a dozen California counties and

    COVID-19: California Issues Statewide Stay At Home Order; What It Means for Retailers

    Following COVID-19 shelter-in-place orders by nearly a dozen different California counties, Governor Gavin Newsom on Thursday evening issued a statewide order directing all individuals in the state to stay home “except as needed to maintain continuity of operations of the federal critical infrastructure sectors.”

    The web page providing more information on the order directs residents to stay at home “except for essential needs.”  As under county shelter-in-place orders, it advises that essential services will remain open such as:

    • Gas stations
    • Pharmacies
    • Food: Grocery stores, farmers markets, food banks, convenience stores, take-out and delivery restaurants
    • Banks
    • Laundromats/laundry services

    The following are closed statewide:

    • Dine-in restaurants
    • Bars and nighclubs
    • Entertainment venues
    • Gyms and fitness studios
    • Public events and gatherings
    • Convention centers

    Governor Newsom’s order expressly orders that Californian’s working in 16 federal critical infrastructure sectors may continue their work “because of the importance of these sectors to Californians’ health and well-being.”  Of particular relevance to retailers, one of the sectors listed is “Food and Agriculture.”

    In order to help determine what businesses and workers qualify under this and other sectors, the federal government has provided a “Guidance on Essential Critical Infrastructure Workforce”  Under food and agriculture, the Guidance lists, among others:

    • Workers supporting groceries, pharmacies and other retail that sells food and beverage products
    • Restaurant carry-out and quick serve food operations – Carry-out and delivery food employees
    • Food manufacturer employees and their supplier employees …
    • Employees engaged in the manufacture

    COVID-19 in 19 Teleconference: Force Majeure Provisions

    March 19, 2020

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    In the first of our series of 19-minute teleconferences on the impacts of COVID-19, leaders of our COVID-19 Task Force will discuss force majeure provisions and the doctrine of impracticability as they apply to commercial contracts in the United States.

    Presented by Meryl Macklin and Mark Duedall

    Event Details

    Date Friday, March 20, 2020 Time 10:30 a.m. to 10:49 a.m. PT 11:30 a.m. to 11:49 a.m. MT 12:30 p.m. to 12:49 p.m. CT 1:30 p.m. to 1:49 p.m. ET Dial-In Instructions Provided to registrants in advance of the teleconference.

    Register

    COVID-19: Four Steps to Help Protect Supply Chains in Face of Shelter-in-Place Orders

    Effective March 17, 2020, San Francisco and six other Bay Area counties passed “Shelter in Place” ordinances preventing workers not engaged in providing Essential Activities, working at Essential Businesses or providing Essential Government Services from leaving their homes to go to work. Such laws are now being considered throughout the country. This alert provides actionable steps companies can take to ensure that Shelter in Place laws in their jurisdictions do not inadvertently block employees from getting to work at their Essential Businesses.

    First, be proactive, contact your state and local government officials to make sure they understand why your business is essential. If your product or service is truly essential, no government official is going to want to be blamed for inadvertently causing a shortage of that product. Note the Bay Area Orders define Essential Businesses to include “Businesses that supply other essential businesses with the support or supplies necessary to operate.” If your business falls into that category, you may want to have that business explicitly enumerated as an Essential Business rather than rely on a judgment call that this catch all provision applies. To proceed, identify to make sure they know. BCLP can help (a) identify the appropriate officials at the State and local level and reach out to them, (b) develop the message to be delivered as to why your employees should not be required to Shelter In Place and (c) draft language to clarify why your business and its supply chain should be exempt from the

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