Consumer Law

ordinary recalls aren’t commercial advertising or promotion

ordinary recalls aren’t commercial advertising or promotion

Pictsweet Co. v. R.D. Offutt Farms Co., 2021 WL 4034222, No.
3:19-cv-00722 (M.D. Tenn. Sept. 3, 2021)

Defendant RDO has a subsidiary, CRF, which was in the
business of “producing, preparing, processing and selling frozen vegetables to
frozen vegetable producers, processers, repackers, distributors and wholesale and
retail re-sellers, including Pictsweet, for human consumption.” Pictsweet
packages frozen vegetables for various wholesale and resale customers,
including Kroger.

CRF assumed responsibility for
Pictsweet’s previous supplier’s facility and obligations, which Pictsweet
allegedly consented to in reliance on representations that CRF would fully
perform those obligations and that Pictsweet—through CRF— “effectively would be
doing business with RDO Farms, which was well known in the industry.”

However, shortly after CRF took
over, defendants allegedly became aware that products processed at CRF’s
facility had tested positive for Listeria or “exceeded an IEH2 Process Control
Test (‘PCT’) value of 9,” meaning that they knew the products were “adulterated,”
and they affirmatively chose not to notify Pictsweet of the Listeria-positive
test results, despite purchase orders containing express warranties by CRF
regarding the products’ wholesomeness and fitness for human consumption,
language regarding the seller’s obligation to notify Pictsweet of any
“significant issues” relating to the products, and indemnification provisions
requiring CRF to indemnify Pictsweet for any claims against it relating to
injury caused by the products.

In 2016, the CDC and the FDA began investigating reported
instances of illnesses related to Listeria and soon determined that the strains
were “closely related to strains” of Listeria detected in vegetables processed
at CRF’s facility. CRF thereafter issued two voluntary nationwide recalls of
its frozen vegetable products. The second recall “impacted 432 products and
included Pictsweet products.” However, Pictsweet alleged, the “second recall,”
for undisclosed reasons, also included products that were not contaminated. “Because
of CRF’s recall, Pictsweet, as required by law, issued its own recall of
products that either contained or could contain CRF green beans and green peas.
Pictsweet’s customers, including Kroger, were then required to issue their own
recalls.”

As a result of a consumer class action against Kroger, Pictsweet
allegedly obtained an FDA inspection report for CRF’s facility, from which it
learned for the first time that CRF had concealed positive Listeria test
results and PCT scores above 9 and that it had engaged in a protocol pursuant
to which it redirected and shipped product that it knew was contaminated to
Pictsweet and other customers that did not require finished-product pathogen
testing. Pictsweet allegedly also learned through discovery that “CRF’s representations
about [Listeria] contaminated products was [sic] inaccurate, and that a large
portion of the frozen green peas and beans CRF had supplied to Pictsweet were
not contaminated by [Listeria].”

Most of the decision is about alter ego liability, but the
court spends some time on the various business tort claims. Some fraudulent
concealment claims weren’t challenged in the motion to dismiss, but libel
claims failed because the complaint didn’t allege that CRF made any statements
about Pictsweet’s product. CRF allegedly knew that, “once it issued its recall,
Pictsweet would be obligated to issue its own recall, which would communicate
to Pictsweet’s customers that the product Pictsweet had delivered was
contaminated and not merchantable.” But that meant that “it was Pictsweet’s own
recall that communicated to its consumers false and disparaging information
about Pictsweet’s products, not CRF’s recall. CRF’s recall, necessary or not,
was only about its own product.”

Lanham Act claim: The recall was not “commercial advertising
or promotion.”  Innovation Ventures, LLC
v. N.V.E., Inc., 694 F.3d 723 (6th Cir. 2012), was not to the contrary. That
case involved a recall order based on a trademark/trade dress claim. The
plaintiff had sued two different manufacturers of competing energy shots and
gotten a preliminary injunction based on trade dress, but not trademark. It
then sent a “recall notice” to 110,000 convenience stores and truck stops,
without specifying which “6 Hour Shot” was covered or mentioning that there
were multiple such products on the market. There was no dispute in that case
about whether the notice was commercial advertising or promotion.

Here, the plaintiff didn’t sufficiently allege what in the
recall notice was false or misleading. But more important, the recall here “clearly
did not constitute commercial advertising or promotion of CRF’s product but
instead recalled it. Even if the court assumes that the recall was ‘misleading,’
insofar as it allegedly extended to products of its own that CRF actually knew
were not contaminated, this is simply “not the kind of misrepresentation
prohibited by the [Lanham] Act.’”

Tennessee Consumer Protection Act claims based on the same
conduct also failed, though there was other stuff going on (alleged
misrepresentation of the CRF/RDO relationship, and allegedly knowing provision
of contaminated/adulterated products to Pictsweet while representing their
wholesomeness/fitness for human consumption). The economic loss doctrine didn’t
bar recovery under the TCPA.

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