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What Rules Will Govern Claims Relating to CBD in Food, Beverages and Supplements?

Within the last two months, three class action lawsuits have been filed in federal courts against companies that sell ingestible products containing cannabidiol (CBD), a chemical compound found in the cannabis plant, alleging that the products contain significantly less CBD than advertised.  Sellers of other food and supplement products facing this type of claim regarding their non-CBD products’ content have successfully argued that such claims are preempted by the federal Food, Drug and Cosmetic Act (FDCA) and its implementing regulations.  But the Food and Drug Administration (FDA) has not yet approved CBD as an ingestible ingredient, food or dietary supplement.  And while some states have followed the FDA’s lead, other states have legalized sales of ingestible, hemp-derived CBD products.  This can leave food, beverage, and supplement companies confused about what rules apply to CBD as an ingredient in ingestible products.

The first of the three class actions was filed on August 16, 2019, in the United States District Court for the Southern District of Florida.  Plaintiff alleges that defendants operate “JustCBD,” which advertises and labels ingestible products as containing certain amounts of hemp-derived CBD, when they really contain much less.  Plaintiff allegedly tested defendants’ products and found that (1) the “JustCBD honey Liquid Tincture” has only 48.92mg of CBD even though it purports to have 100mg, and (2) the “JustCBD Apple Rings Gummies” contain a non-detectable quantity of CBD even though they purport to contain 250mg of CBD.  Plaintiff claims he relied on representations and warranties regarding the quantity of

Are Your Gift Cards Accessible? Lawsuits Assert Gift Cards Should Be Offered in Braille

In addition to concerns surrounding the accessibility of a business’ website, retailers now have a new concern – the accessibility of their gift cards. Plaintiffs have recently filed a number of lawsuits alleging that the failure to sell gift cards containing writing in Braille is a denial of full and equal access to blind and visually impaired individuals, and thus is a violation of Title III of the Americans with Disabilities Act (“ADA”).

On October 24, 2019, twelve lawsuits were filed in the United States District Court for the Southern District of New York against well-known retailers, restaurants, and other businesses. The complaints allege, in part, that because store gifts cards are generally the same size and texture as credit cards, they are indistinguishable by a blind person from credit cards and other gift cards.

To support this new theory of ADA liability, the complaints provide some background into the gift card market. They cite industry surveys stating that sales of store gift cards amount to $400 billion in 2019 and that such sales grow annually at 10 percent.  They also allege that store gift cards increase revenue for merchants because they foster communication and brand loyalty, increase sales, and because consumers often spend more money than the amount of the gift card.

The complaints allege claims for violation of the ADA, violation of the New York State Human Rights Law, and violation of the New York City Human Rights Law. For relief, the plaintiffs seek both declaratory and injunctive

Avoid a Catastrophic Loss From a Customer’s Bankruptcy — Five Tips

One day, you get a notice in the mail that an important customer has filed chapter 11. Your customer recently paid $250,000 on invoices that were delinquent for several months and still owes you $500,000. The customer, a brick-and-mortar store, sent form letters to its vendors expressing optimism that the chapter 11 process will allow the store to continue to operate while it locates a buyer which will continue to operate the store.

A few weeks later, no buyer has been located and the customer seems headed into a liquidation. Your inventory will probably be dumped on the market at bargain prices — potentially depressing the price of your product.  You may not see any of the proceeds of the liquidation, which will most likely go to pay the customer’s bank lenders. Lastly, you are losing a significant customer.

Not only are you looking at potentially writing off $500,000 in uncollectable accounts receivable, but, after speaking to bankruptcy counsel, you discovered that you may have to repay the $250,000 you recently were paid.

Given the size of your business, this outcome is serious, if not catastrophic.

If you are facing or have ever faced this scenario, you are not alone. This is an increasingly common situation, particularly in the current, challenging retail environment.

How can this situation be avoided or mitigated? Here are 5 tips.

1. Recognize the warning signs

  • When a customer files bankruptcy, vendors who are owed money will often say there were warning signs for months

California Chamber of Commerce Challenges Prop. 65 Warning for Acrylamide in Food and Beverage Products

October 18, 2019

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The California Chamber of Commerce has filed a lawsuit seeking to prevent the state from “enforcing a requirement to provide a false, misleading, and highly controversial cancer warning for food and beverage [] products that contain the chemical acrylamide.” Cal. Chamber of Commerce v. Becerra, No. 19-0962 (E.D. Cal., October 7, 2019).

The complaint argues that although “certain governmental and scientific entities” have identified acrylamide as a carcinogen in laboratory animals, “[s]cientific studies in humans, however, have found no reliable evidence that exposure to acrylamide in food products is associated with an increased risk of developing any type of cancer. In fact, epidemiologic evidence suggests that dietary acrylamide—i.e., acrylamide that forms naturally in normal cooking of many food products—does not cause cancer in humans or pose an increased risk of cancer in humans. Indeed, some food products that contain acrylamide (e.g., whole grains and coffee) have been shown to reduce the risk of certain diseases, including cancer.”

The Chamber argues that California’s Office of Environmental Health Hazard Assessment (OEHHA) requires businesses to warn consumers about potential exposure to acrylamide under the state’s Safe Drinking Water and Toxic Enforcement Act (Prop. 65) despite the fact that “neither OEHHA nor any other governmental entity has determined that acrylamide is a known human carcinogen, and in fact OEHHA has acknowledged that the agency does not know that acrylamide increases the risk of cancer in humans.” Therefore, the Chamber argues, the acrylamide warning requirement violates the First Amendment “by compelling Plaintiff’s members and other entities that produce, distribute,

The ABCs of AB-5: How California’s New Employee Classification Law May Impact Retailers

Following passage and signature into law of California Assembly Bill 5 (“AB-5”), retailers should be aware of how the new law affects whether they can classify workers as independent contractors.

AB-5 codifies a decision last year by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court of Los Angeles establishing the “ABC test” for determining whether workers can be classified as independent contractors for purposes of wage order claims, and extends the test beyond wage order claims to the California Labor Code, generally.  The new law takes effect January 1, 2020.

Although AB-5 is making headlines for its potential impact on the gig economy, the law may impact any business that uses independent contractors.  For retailers, this may include workers ranging from freelance artists to models.

Under AB-5 and the “ABC test,” a worker is considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

  • The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • The person performs work that is outside the usual course of the hiring entity’s business.
  • The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
  • Under AB-5, the “ABC test” now applies to a variety of claims, including claims for overtime,

    CCPA Loyalty Club FAQ: Is a Retailer Required to Delete Information Concerning a Loyalty Member?

    October 11, 2019

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    Typically no.

    Loyalty programs can be, and are, structured in a variety of different ways.  Some programs track dollars spent by a consumer, others track products purchased.  Some programs are free to participate in, others require consumers to purchase membership.  Some programs offer consumers additional products, other programs offer prizes, money, or third party products.  All loyalty programs share one thing in common however – they provide some form of reward to a consumer in recognition of (or in exchange for) their repeat purchasing patterns.

    One of the rights conferred by the CCPA is the ability of a consumer to request that a business delete personal information “which the business has collected from the consumer.”  While numerous retailers have expressed confusion regarding whether that right requires the deletion of loyalty program related data, it is important to remember the right to deletion is not an absolute right and may rarely apply in the context of a loyalty program.

    As an initial matter, because the right to deletion is limited to information that the business has collected “from” the consumer, if a business receives a deletion request under the CCPA, there is a strong argument that the business is permitted to keep information about the consumer that it developed itself (e.g., its transactions or experiences with the consumer), or information that it received from third parties (e.g., third party businesses that may participate in the loyalty program).  As this information was not collected “from” the consumer, it arguably does not fall

    Supreme Court Denies Review in Website Accessibility Case Against Domino’s Pizza

    Businesses should expect that lawsuits and demand letters alleging that their websites violate the Americans with Disabilities Act (“ADA”) will continue to increase in the wake of the United States Supreme Court’s October 7, 2019 decision denying Domino’s Pizza’s (“Domino’s”) petition for a writ of certiorari in the Robles v. Domino’s Pizza case. The Supreme Court’s decision to deny certiorari to Domino’s petition will send the lawsuit back to the United States District Court for the Central District of California to be tried on its merits.

    Guillermo Robles (“Robles”) filed this lawsuit in September 2016 alleging, in part, that Domino’s website contained barriers to accessibility in violation of the ADA. Robles alleged that he unsuccessfully tried to order custom pizza online from a nearby Domino’s location. Robles sought, in part, a permanent injunction requiring Domino’s website to comply with the Web Content Accessibility Guidelines (“WCAG”) 2.0.

    In March 2017, the District Court dismissed the case, without prejudice, based upon the primary jurisdiction doctrine, which allows courts to stay or dismiss lawsuits pending the resolution of an issue by a government agency, because absent “regulations and technical assistance” from the Department of Justice (“DOJ”), Domino’s due process rights would be violated. The District Court, however, also held that Title III of the ADA applied to Domino’s website.

    As we previously reported, on January 15, 2019, the Ninth Circuit reversed the District Court’s order. The Ninth Circuit agreed with the District Court that the ADA applies to Domino’s website and mobile application,

    Stop the CCPA Fearmongering: Retailer Loyalty Programs Will Survive

    October 2, 2019

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    Anytime a new statute or regulation comes along, some law firms unfortunately flag issues that may not be of true concern to companies, or highlight problems that may not, in fact, exist.  Unfortunately, that continues to happen in connection with the California Consumer Privacy Act (“CCPA”).  In the context of retailer loyalty or reward programs, firms have said that the CCPA may spell the “end of loyalty programs,” or implied that the CCPA could lead to “the potential elimination of loyalty programs due to the nondiscrimination requirements.”  Some law firms have gone so far as to advise retailers to “address the issue[s]” caused by their loyalty programs by “not offer[ing] preferential pricing through loyalty programs” or by “mak[ing] loyalty program pricing available to all customers” regardless of whether they are, in fact, members of the loyalty program.  Such changes would, of course, destroy the business-case for having a loyalty program in the first place.

    These concerns are incorrect and demonstrate a lack of understanding of the requirements of the CCPA.  While the Act is, without a doubt, flawed, poorly drafted, and prone to misinterpretation, it does not lead to the conclusion that most loyalty programs are inherently problematic; nor should it cause most retailers to drastically change the terms and structure of their program.  The hyperbolic treatment of loyalty programs by some law firms may also have contributed to several companies and industry groups echoing these concerns with the California legislature and the California Attorney General and alleging (incorrectly) that

    Congress Presses FDA to Act on CBD Regulations

    Following statements by the U.S. Food and Drug Administration that cannabidoil (CBD) in food and beverage products remains illegal, and amid the patchwork of state laws and enforcement actions, a group of U.S. lawmakers, led by Reps. Chellie Pingree (D-Maine) and James Comer (R-Ky.), have urged the FDA to “quickly adopt a policy of enforcement discretion and to consider issuing an interim final rule to regulate CBD as a dietary supplement and food additive while simultaneously moving forward with a robust framework for evaluating the safety and accurate labeling of these products.” The letter stated that the agency’s “current regulatory posture on CBD has created significant regulatory and legal uncertainty for participants in this quickly evolving industry. We are discouraged by FDA’s estimation that a rulemaking process could span 3 to 5 years. We believe there are more expeditious measures that FDA could take that would establish regulatory clarity while pursuing enforcement actions against bad actors.”

    In the U.S. Senate, Majority Leader Mitch McConnell (R-Ky.) reportedly took a different path in an effort to reach the same ends by proposing to amend the Senate appropriations bill to insert language that would compel FDA to issue temporary guidance on how it will enforce rules on the sale of products containing CBD. The proposed amendment would require the agency to inform Congress within 90 days about its progress in creating its regulatory policies on CBD and implement a temporary policy within 120 days.

    The House of Representatives also received a

    New York Law to Take Effect Requiring Warning, Tip Restraints for Clothing Storage Units

    September 20, 2019

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    New York furniture retailers and manufacturers have until October 12, 2019 to comply with a New York state law that requires that clothing storage units be labeled with a permanent tip hazard warning and sold with a tip restraint device.

    The law, named “Harper’s Law” after a 3-year-old boy who died from a furniture tip-over incident, requires that clothing storage units comply with a voluntary industry safety standard, ASTM F2057, which provides minimum stability standards, requires that covered furniture come with wall-anchoring kits, and be labeled with a permanent tip-hazard warning.

    Sale of Crib Bumpers Banned: Also taking effect on October 12, a New York law bans the sale of crib bumper pads and prohibits their use in child care facilities or places of public accommodation. New York State is the third U.S. state to ban crib bumper pads, along with Maryland and Ohio. Crib bumpers are also banned in Chicago and Watchung borough in New Jersey. There are also proposed bans in Vermont, Illinois, and Missouri.

    Under Harper’s Law, retailers must either (1) label the furniture with a permanent tip-hazard warning and provide a tip restraint device, or (2) sell tip-restraint devices in the store and post a conspicuous notice that states: “Certain furniture may become unstable and tip over, leading to possible injury or death. Tip restraint devices may prevent tipping of furniture when properly installed.”

    The law defines “furniture” as a clothing storage unit that is freestanding and at least twenty-seven inches in height including

    FTC Warns Companies Against Advertising CBD Products as Treating or Curing Diseases

    The U.S. Federal Trade Commission has announced that it sent warning letters to three companies that sell “oils, tinctures, capsules, ‘gummies,’ and creams containing cannabidiol (CBD),” a chemical compound derived from the cannabis plant. The letters warn the companies, which have not been identified, that “it is illegal to advertise that a product can prevent, treat, or cure human disease without competent and reliable scientific evidence to support such claims.”

    The FTC states that each company marketed its CBD products as being able to “treat or cure serious disease and health conditions,” such as relieving “’even the most agonizing pain’ better than prescription opioid painkillers,” or treating cancer, Alzheimer’s disease, multiple sclerosis (MS), fibromyalgia, cigarette addiction, colitis, schizophrenia, anxiety, depression, Lou Gehrig’s Disease (ALS), stroke, Parkinson’s disease, epilepsy, traumatic brain injuries, diabetes, Crohn’s disease, psoriasis, and AIDS.

    In the letters, the FTC urges the companies to review all claims made for their products, including consumer testimonials, to ensure they are supported by competent and reliable scientific evidence. The letters also warn that selling CBD products without such substantiation could violate the FTC Act and may result in legal action that could result in an injunction and an order to return money to consumers. The letters instruct the companies to notify the FTC within 15 days of the specific actions they have taken to address the agency’s concerns.

    In In April 2019, the FTC and the U.S. Food and Drug Administration issued similar joint warning letters to three companies

    Food Suppliers: Understand What Your Contamination and Recall Insurance Policies Cover — Then Plan Accordingly

    Last year saw a massive E. coli outbreak linked to romaine lettuce which left growers, packers and retailers struggling to identify root causes and assign liability – all while trying to protect end users from illness and injury.  To address the costs of contamination and recalls, food producers and manufacturers commonly obtain contamination insurance.  However, typical contamination policies cover only those losses incurred due to actual contamination, while arguably providing no coverage for recalls due to potential contamination.  A company that recalled its salads due to a risk that its romaine was contaminated with E. coli faces the likelihood that its insurer will claim the recall costs are not covered under the standard food contamination insurance policies – even though the recall was in the public’s best interest.  Food suppliers should evaluate whether there is a gap in their insurance coverage created by the limited language in certain contamination policies and how best to close that gap, including through specialized recall insurance or contractual protections with their supply chain partners.

    Several courts have held that product contamination insurance policies do not cover the costs of recalls issued due to potential contamination.  For example, a California District Court held in the Ruiz Food Products case that a policy that covered “any accidental or unintentional contamination … provided that the use or consumption of the Insured product(s) … [h]as resulted in or would result in [bodily injury]” did not cover a recall issued due to potentially contaminated products.1  In Ruiz, an upstream

    No Longer a “Whisper” – California Appellate Court Joins List of Courts to Weigh in on Website Accessibility

    In the first decision by a California appellate court addressing the application of Title III of the Americans with Disabilities Act (“ADA”) to websites, the court in Thurston v. Midvale Corp. (Sept. 3, 2019) 2019 WL 4166620, affirmed summary judgment for the plaintiff and held that the ADA, as incorporated by California’s Unruh Act, applies to websites connected to a brick and mortar business.

    California’s Court of Appeal for the Second Appellate District declined to adopt the position of the U.S. Court of Appeals for the Third Circuit that the ADA applies only to physical locations. Instead, the court followed the position of the U.S. Court of Appeals for the Ninth Circuit, holding that “including websites connected to a physical place of public accommodation is not only consistent with the plain language of Title III, but it is also consistent with Congress’s mandate that the ADA keep pace with changing technology to effectuate the intent of the statute.” Id. at *6.  Declining to go a step further, the court refrained from holding that a website unconnected to a physical location is similarly subject to the ADA because that issue was not squarely presented.

    The court also affirmed the trial court’s order requiring compliance with the Web Content Accessibility Guidelines (WCAG) 2.0, though it made clear that the defendant’s failure to comply with WCAG did not itself violate the ADA. It was merely evidence of the ultimate question – i.e., whether the website was accessible.

    Finally, the court rejected the defendant’s

    Senate Members Ask DOJ to Take Action as Number of Website Accessibility Lawsuits Continues to Rise

    Members of Congress are once again asking the U.S. Department of Justice (“DOJ”) to take action addressing website accessibility under the Americans with Disabilities Act (“ADA”) in light of the increasing number of lawsuits and claim letters asserting violation of the ADA.

    Based on the first six months, 2019 is likely to exceed the records set in 2018 for the number of website accessibility cases filed, according to digital accessibility solutions provider AudioEye, which tracks such case filings. More than half of the cases filed, or 55 percent, were against retailers, followed by complaints against defendants in the hotel, restaurant, banking, and real estate industries. Many of those defendants have been hit with more than one lawsuit.

    Despite the increasing number of lawsuits and claim letters, the DOJ has not issued regulations concerning website accessibility under the ADA. As we previously reported, the DOJ issued an Advanced Notice of Proposed Rulemaking concerning website accessibility standards in 2010, but withdrew the proposal in 2017, stating that it was “evaluating whether promulgating regulations about the accessibility of Web information and services is necessary and appropriate.” 

    In a September 2018 letter to then Attorney General Jeff Sessions, seven Senators urged DOJ “to promptly take all necessary and appropriate actions within its authority – including filing statements of interest in currently pending litigation – to resolve the current uncertainty.” The letter is similar to a June 2018 letter by a bi-partisan assembly of 102 members of the House of Representatives, which we

    Making the Case for the Long-Term Benefits of Corporate Sustainability Pledges

    During Steve Poplawski’s June presentation at the Chemical Industry Council of Illinois’ Hot Topics conference on the opportunities and challenges presented by current efforts to make the life cycle of plastics more sustainable, one of the challenges raised by the audience was whether corporate sustainability pledges to improve packaging were getting ahead of consumer acceptance. An article published by WasteDive focusing on McDonald’s green pilot restaurants in Canada, suggests there is a business case for risking being ahead of consumer acceptance on this issue as a way of being ahead of an inevitable curve promoted by efforts like Yelp’s piloting of sustainability scoring at restaurants.

    In speaking to over 200 EHS professionals in Kansas City in April, Steve made a similar argument on doubling down on sustainability.  In that presentation, Steve made the case that it was to every company’s advantage to develop and own their individual corporate sustainability narratives because, if a company doesn’t develop transparent reliable information on the sustainability of their supply chain and operations, third parties will fill the information vacuum through social media and other means, leaving their companies defensively responding to what could be inaccurate but still damaging information.

    Demonstrating that you are better at managing plastic or, even more powerfully, enabling your customers to better manage plastic throughout its life-cycle, are particularly effective ways, given the current challenges presented by single use plastic, to show your stakeholders your company’s commitment to long term environmental sustainability.

    For questions or more information, contact

    U.S. Supreme Court Strikes Down Bar on “Immoral or Scandalous” Trademarks

    On June 24, 2019, the U.S. Supreme Court struck down as unconstitutional the Lanham Act’s “immoral or scandalous” prohibition on trademark registration.  In Iancu v. Brunetti, the Court held—in context of Brunetti’s failed attempt to register the trademark “FUCT” for use in connection with a clothing line—that the noted provision violates the First Amendment because it “disfavors certain ideas.”  In doing so, the Supreme Court built on its holding in Matal v. Tam, 137 S. Ct. 1744 (2017), that the Lanham Act’s bar on the registration of “disparag[ing]” trademarks was invalid under the First Amendment as a viewpoint-based restriction.  Tam involved the use of the slur “Slants” as the name and trademark of an all-Asian American musical group.

    Justice Kagan, who authored the Brunetti majority opinion, noted that the U.S. Patent and Trademark Office (PTO) had found that “FUCT” met its test for “immoral or scandalous” marks, in that the mark was “highly offensive” and “vulgar,” and possessed “decidedly negative sexual connotations.”  The PTO found that Brunetti’s use of the mark was accompanied by imagery of “extreme nihilism” and “anti-social” behavior, communicating “misogyny, depravity, [and] violence.”

    Citing dictionary definitions of “immoral” and “scandalous,” the Court stated “the Lanham Act permits registration of marks that champion society’s sense of rectitude and morality, but not marks that denigrate those concepts.”  As such, the “immoral or scandalous” criteria in the Lanham Act are viewpoint-based, not viewpoint-neutral, and hence violate First Amendment free speech principles.

    The PTO unsuccessfully argued to the Court

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