Federal Court Denies Vermont’s Motion to Dismiss Food Producers’ Lawsuit against Labeling Law, But Denies Food Producers’ Motion to Enjoin Enforcement of the Law Prior to Trial

A long-awaited court preliminary decision on Vermont’s first-in-the-nation GMO labeling law was issued Monday (April 27, 2015).

Vermont’s GMO labeling law, Act 120, was passed and signed in May, 2014 and is scheduled to take effect in 2016.  It requires certain foods sold in Vermont to be labeled as containing GE ingredients and bans such foods from being labeled or marketed as “natural.”  A food industry group, the Grocery Manufacturers Association (GMA), sued the State of Vermont over the law and sought an injunction.  Vermont countered by moving for the dismissal of the entire lawsuit.  The Vermont federal court addressed the competing motions by issuing a preliminary decision on the constitutionality of the law.  In its analysis, the court addressed the two key aspects of Act 120: 1) the requirement that food producers label their products as containing GE ingredients (the “affirmative labeling requirement”), and 2) the ban on the use of the term “natural.”

1. Discriminatory Effects Under The U.S. Commerce Clause: Court holds that Act 120’s ban on the use of the term “natural” violates the Commerce Clause, but its affirmative labeling requirement does not.

In the lawsuit, GMA claims that Act 120’s ban on the use of the term “natural” on signs and advertising violates the Commerce Clause of the U.S. Constitution. The court stated that although under the Constitution the states retain some regulatory power concerning matters of legitimate local concern, they cannot regulate commerce, such as advertising, that takes place in other states and between and among other states.  Therefore, the court denied Vermont’s motion to dismiss this claim. This is a win for the plaintiffs (GMA).

The GMA also claims that Act 120’s affirmative requirement that manufacturers label their products as “produced with genetic engineering” violates the Commerce Clause by “discriminating” against manufacturers who sell products nationally.  The court found this argument unpersuasive because, as difficult or as expensive as it might be for manufacturers to label products separately for the Vermont market, the labeling requirement only applies to products sold in Vermont, not elsewhere. Therefore, the affirmative labeling requirement does not violate the Commerce Clause and the court granted Vermont’s motion to dismiss on this claim.  A win for Defendants (Vermont).

2. Federal Preemption: Court holds that Act 120’s GE labeling requirement is partially pre-empted by federal law.

The GMA claims that Act 120’s affirmative labeling requirement is pre-empted by certain federal laws that mandate what must be stated on the labels of food products.  With respect to non-meat foods, the court found that none of the several federal laws that dictate what must be stated on a food label (ingredients, nutrition information, etc.) prevent a state from requiring that additional information also be on the label.  Therefore, the affirmative labeling requirement is not federally pre-empted as to non-meat foods and the court granted Vermont’s motion to dismiss on this claim.  Another win for Vermont.

On the other hand, the court found that federal statutes that regulate meat and foods that contain meat are strict as to what a label must say and cannot say.  Therefore, Act 120’s affirmative labeling requirement, as it pertains to any GMO foods that contain meat, is federally pre-empted and the court denied Vermont’s motion to dismiss this claim.  A win for the plaintiffs.

3. First Amendment: The court believes that Act 120’s affirmative labeling requirement is not barred by the food producers’ free speech rights under the First Amendment, but denied Vermont’s motion to dismiss the First Amendment challenge because the court recognizes that this is a serious question of law as to which courts might disagree; but the court finds that Act 120’s ban on the term “natural” does violate the First Amendment.

The GMA claims that the affirmative labeling requirement infringes its free speech rights under the First Amendment.  The court found that Act 120 regulates only “commercial” as opposed to “political” speech and that courts apply a very low level of constitutional scrutiny to laws that regulate purely commercial speech.  The court therefore found GMA’s First Amendment claims against the affirmative labeling requirement to be unpersuasive.  Nevertheless, given the seriousness of this issue, the court denied Vermont’s motion to dismiss GMA’s First Amendment challenge to the affirmative labeling requirement.  A tenuous win for plaintiffs.

The GMA also claims that the ban on the use of the term “natural” violates its First Amendment rights.  Here, the court agreed with GMA because Vermont does not define anywhere what “natural” supposedly means.  Therefore, its use by food producers is not inherently misleading.  Act 120’s ban on the use of this term as it applies to foods that contain or may contain GE ingredients violates the First Amendment and the court denied Vermont’s motion to dismiss GMA’s challenge to the ban on the use of the term “natural.”  A win for plaintiffs.

4. Preliminary Injunction: The court denied GMA’s request that enforcement of Act 120 be enjoined prior to the trial of this lawsuit.

Although the court found that GMA is likely to prevail on certain of its claims (as explained above), it did not find that GMA proved that it will suffer “irreparable harm” if the enforcement of Act 120 is not enjoined prior to the trial of this lawsuit.  

Thus, this decision is a mixed bag. It expressed skepticism towards many of GMA’s claims that Act 120 is unconstitutional, but denied Vermont’s preliminary motion to dismiss most of those claims.  At the same time, it found that, prior to a trial on the merits, GMA was not entitled to enjoin the enforcement of Act 120, which becomes effective in 2016.

Walter Judge is a commercial litigator at Downs Rachlin Martin, Vermont’s largest law firm. 

-- 

UPDATE:  The Grocery Manufacturers Association (GMA) and the other plaintiffs have today (May 6, 2015) filed an appeal of the Vermont federal court's denial of their request for an injunction to block the law from taking effect. The appeal is to the United States Court of Appeals for the Second Circuit, in New York City, which is the federal appeals court that has jurisdiction over appeals from federal courts in Vermont, New York, and Connecticut.  In a statement, the GMA says, “The court’s opinion in denying our request to block the Vermont law opens the door to states creating mandatory labeling requirements based on pseudo-science and web-fed hysteria. If this law is allowed to go into effect, it will disrupt food supply chains, confuse consumers and lead to higher food costs.” 

Click here to read a copy of the Notice of Appeal.

 

Bookmark and Share

Categories: Health Care Law

Actions: E-mail | Comments

 

I have previously reported on the Vermont Supreme Court’s strict adherence to the Economic Loss Rule (ELR), and noted that some observers might find this surprising, since the  Vermont Supreme Court is generally regarded as “liberal” and sympathetic to claimants/victims/plaintiffs.  Yet the Court has repeatedly denied tort-based recovery to claimants, citing the ELR.  The Court’s adoption and adherence to the ELR goes back as far as 1998.  In Paquette v. Deere & Co., 168 Vt. 258, 719 A.2d 410 (1998), the Court rejected the negligence claim of owners of a defective motor home.  The plaintiffs there had not suffered any physical injury, but claimed that they had suffered economic damages – recoverable in tort, according to them – because of the defective and unsafe nature of their mobile home.  The Court held that allowing a negligence claim in such circumstances would vastly expand tort liability and completely subsume warranty law into tort law.  And that adherence continues unabated in a series of decisions up to 2012.  In Long Trail House Condominium Assoc. v. Engelberth Construction, Inc., 2012 VT 80 (Sept. 28, 2012) the Court affirmed the complete dismissal of a condominium owners association’s defective construction claims against the building contractor, because their only claim was a negligence claim, which the Court found to be barred by the rule. 

Now, in Walsh v. Cluba, the Court has arguably taken the ELR even further.  In Walsh, the Court applied the rule to bar the plaintiff’s negligence claim even though the claim involved  physical damage to real property.  Walsh was a commercial landlord.  Cluba was his tenant.  After signing the lease, Cluba formed the corporation Good Stuff, Inc., a retail company, and turned over possession of the leased premises to Good Stuff.  But Walsh never formalized the lease arrangement with Good Stuff – Cluba remained the tenant on the lease.  After Cluba and Good Stuff vacated the premises, Walsh sued Cluba under the lease (i.e., in contract) for unpaid rent, attorneys’ fees, and physical damage to the premises.  Walsh also sued Good Stuff in negligence (as noted, there was no lease/contract with Good Stuff) for the unpaid rent and for damaging the premises.  At the close of Walsh’s case at trial, the court granted Good Stuff’s motion for judgment as a matter of law, on the grounds that the Economic Loss Rule precluded Walsh’s tort claims against Good Stuff because the parties’ dispute was completely covered by Walsh’s and Cluba’s contractual relationship (i.e., the lease), which required Cluba to leave the premises in the same condition in which he took them.  Walsh argued that the ELR should not bar his negligence claims against Good Stuff because there was more than purely economic harm at issue – there was real physical damage to Walsh’s property.  The trial court was unpersuaded by this argument.  Walsh appealed. 

The Vermont Supreme Court was similarly unmoved by Walsh’s argument.  The Economic Loss Rule generally bars tort claims where the parties have a contractual relationship.  Even though Walsh had no lease (contract) with Good Stuff, the Vermont Supreme Court found that his claim for damages to the premises was governed exclusively by his lease with Cluba.  As he had below, Walsh argued that the ELR does not apply because there was physical damage.  The Vermont Supreme Court was unpersuaded and affirmed the trial court’s grant of judgment as a matter of law to Good Stuff.  The Court reasoned that the well-recognized “other property” exception to the ELR does not apply where there is a contract (i.e., the lease) that touches upon the “other property.”  In other words, the provision in the lease that required Cluba to return the premises to Walsh in the same condition as when they were leased, barred a separate negligence claim by Walsh for damage to his property.

A vigorous dissent argued that the existence of a lease (contract) between Walsh (the landlord) and Cluba (the tenant) should not preclude a tort claim by Walsh against a stranger to the contractual relationship (Good Stuff) where Good Stuff caused real physical damage to Walsh’s property.  Indeed, the dissent’s position seems to be that Walsh should have a tort claim not only against Good Stuff, but against Cluba, where Cluba and Good Stuff caused physical damage to Walsh’s property.

As the dissent argued, this decision by the Vermont Supreme Court is arguably much more than merely a reaffirmation of the Economic Loss Rule.  It is arguably a broad expansion of the rule; essentially a holding that the existence of a contract between A and B negates any independent tort duty by B not to damage A’s property. 

This is an interesting decision from the Vermont Supreme Court given that other state supreme courts have recently cut back on the application of the ELR. 

Bookmark and Share

Categories: Insurance Law | Product Liability

Actions: E-mail | Comments

 

This is a relatively new legal subject, so there isn’t much law out there.  In December, 2011, a Pennsylvania federal court answered this question in the negative.  In the case of Eagle v. Morgan, Linda Eagle, the founder of a company, Edcomm, had developed a significant LinkedIn presence closely connected to Edcomm. In 2010, Edcomm was purchased.  In 2011, she was terminated and Edcomm took over her LinkedIn account. She sued Edcomm.  Shortly thereafter, she regained control of her LinkedIn account and refused to return it to Edcomm. Edcomm counterclaimed against her in her lawsuit, contending that by regaining control of the LinkedIn account and refusing to return it to Edcomm, she had misappropriated Edcomm’s trade secrets.  She moved to dismiss Edcomm’s misappropriation claim. With little analysis, the court dismissed the claim, stating that the LinkedIn contacts on the Eagle/Edcomm account were “generally known . . . or capable of being easily derived from public information.”

In March, 2012, a Colorado federal court came to a different conclusion. In Christou, et al. v. Beatport, LLC, a nightclub company sued an ex-employee for stealing the company’s MySpace “friends” list.  The ex-employee moved to dismiss the lawsuit, arguing that a MySpace “friends” list couldn’t be a trade secret.  The court denied the ex-employee’s motion, holding that a company’s MySpace profiles and friends list can be a trade secret because, online, a MySpace profile contains a lot more information than just the “friend’s” name.  It gives the owner of the profile the “friend’s” personal information, including interests, preferences, and contact information that can have commercial value. It allows the “friend” to be contacted and advertised to.  This information goes beyond what is publically available. Duplicating all the information available from the “friends” list would be time-consuming and costly. The public can see the names of the company’s “friends” online, but the public does not have all the other information that the company gets by virtue of having these “friends.”  

In September, 2014, another federal court held that LinkedIn contacts could be a trade secret.  In Cellular Accessories For Less, Inc. v. Trinitas, LLC, a company sued an ex-employee who had left to form a competing company and taken his LinkedIn contacts with him. The ex-employee moved for dismissal of the lawsuit.  The court denied his motion, holding that the LinkedIn contacts that he had developed while working for his former company could be the company’s trade secret. The company had encouraged the employee to develop LinkedIn contacts during the employment.  The court said that the LinkedIn contacts may – or may not – have been viewable by other LinkedIn users; the ex-employee’s motion papers did not say whether the contacts were publically viewable.  Since they may not have been publicly viewable, they could be the company’s trade secrets.  

There you have it. What do you think?


Bookmark and Share

Categories: Social Media

Actions: E-mail | Comments

 

The Sharon Academy v. Massachusetts Bay Insurance Company, et al., Vermont Superior Court, Docket No. 442-7-13 Wncv (Feb. 25, 2015).

Relevant Facts:

Student goes on a study-abroad program in India (“Program”) sponsored by a Vermont school (“School”). The program is run and managed by a coordinator (“Coordinator”), and has both U.S.-based and Indian national employees in India.  Shortly after arriving, the student claimed that she was sexually assaulted by one of the Indian national employees of the program. Eventually the student files a lawsuit against the school and the coordinator in Vermont (“Underlying lawsuit”).  The underlying lawsuit alleges that the school and the coordinator were negligent in hiring and supervising the Indian national who (allegedly) assaulted the student. The school refers the claim to its insurer (“Insurer”). The insurer denies coverage under both a primary CGL policy and an umbrella policy. The insurer contends that the alleged assault occurred in India, which is not within the “coverage territory” of the CGL policy. Therefore, there is no coverage under that policy or under the umbrella. The school then sues the insurer for breach of contract and bad faith and, in the alternative, sues its insurance broker for failing to procure coverage. The school moves for summary judgment against the insurer, requesting a determination that the underlying lawsuit is covered. The insurer cross-moves for:  1) a determination of no-coverage, 2) to strike the school’s bad faith claim, and 3) for a determination that if it is required to cover the underlying lawsuit, it can choose defense counsel, rather than having to retain defense counsel of the school’s choosing.  The court granted the school’s motion, finding that the underlying lawsuit is covered under both the CGL and umbrella policies; that the insurer breached the policy by refusing to defend; and that the insurer must reimburse the school for reasonable defense costs incurred to date. However, the court rules that the insurer can retain defense counsel of its own choosing.

Here is a brief review of the court’s decision:

The primary CGL policy:

The court begins by citing and quoting cases that stand for the long-standing principles that if the claims in the underlying suit might be covered by the policy, the insurer must provide a defense, and that any ambiguities in the policy will be construed in favor of coverage.

The court notes that the policy includes a sexual molestation endorsement that includes the disputed “coverage territory” language. The sexual assault alleged in the underlying lawsuit describes injury that comes within the endorsement. The issue is whether the assault occurred within the “coverage territory.”  “Coverage Territory” in the endorsement is the United States, but also “all other parts of the world if the injury or damage arises out of the activities of a person whose home is in the U.S. but who is away for a short time on the insured’s business.” Thus, more specifically, the issue is whether the alleged assault arose out of the activities of a person whose home is in the U.S. but who was in India on the school’s business.  

Acknowledging that the “coverage territory” term of the policy has apparently not been litigated in Vermont and has been little-litigated elsewhere, the court concludes that there is coverage because the alleged sexual assault arose out of the student’s activities, and she lives in the U.S. but was in India for a short time on the school’s business.  

The court then rejects the insurer’s argument that the “coverage territory” definition above refers only to the alleged assaulter, i.e., the Indian national employee of the program.  The insurer argues that it was the assaulter’s, and only the assaulter’s, activities that specifically “caused” the alleged harm to the student, and that he, as an Indian national, is not within the coverage territory.  The insurer argues that, notwithstanding the allegations in the underlying lawsuit, the program's U.S.-based employees did not cause the student's harm.  The insurer argues that the phrase “arises out of” must be narrowly construed to mean “causation,” and that the assaulter – not the school, nor the program or its U.S.-based employees, nor the coordinator – is the only person who actually “caused” the student’s harm.  The court disagrees. It finds that the phrase “arises out of” is a broad term that includes much more than “causation.” The policy could have used the term “causation” instead of “arising out of,” but didn’t. The policy could have defined “arising out of,” but didn’t.

Because the court concludes that the student is a covered person, it does not address the school’s argument that its teachers/employees – who are alleged in the underlying lawsuit to have been negligent – are covered persons.

The umbrella policy:

The court notes that the umbrella policy contains two separate endorsements that exclude coverage for sexual molestation. But one of the endorsements (the 12/05 endorsement) contains an exception, which exception provides that the exclusion does not apply if there is coverage for sexual molestation in the underlying insurance (which, as explained above, the court found there was). The court rejects the insurer’s argument that only the endorsement without the exception (the 01/07 endorsement) should apply because that endorsement has a later date on it. The court finds that the two competing endorsements in the umbrella policy create an ambiguity that is to be construed against the insurer. The court rejects as unreasonable the insurer’s argument that the long string of numbers on the bottom of each page of the policy, including the two exclusionary endorsements, would inform the policyholder (the school) that the endorsement with the exception is overruled by the one without the exception because the latter one was added into the policy later. The court finds that the typical policyholder would not understand that an endorsement containing a string of numbers ending in “07” means that the endorsement is added later – and therefore invalidates – an endorsement containing a string of numbers ending in “05.”

Thus, the insurer must provide coverage for the school, and is in breach of the policy.

Defendant Coordinator:

The court agrees with the insurer that there is a fact dispute over whether the coordinator was an employee of the school, and therefore covered, versus whether she was an independent contractor. Therefore, the court denies summary judgment to the school on this issue.

The School’s Bad Faith Claim:

The court denies the insurer’s request that the school’s bad faith claim be stricken.  The court finds that the insurer’s behavior in this case could amount to bad faith. The court will allow the school to have discovery on this issue.

The School’s Defense Costs To Date:

The court agrees that, because the school was entitled to coverage all along, the insurer is liable to the school (but not to the coordinator – at least yet) for reasonable defense costs incurred to date.

Choice of Defense Counsel:

The court finds that although the insurer must provide a defense, it can do so with independent counsel of its own choosing, not the school’s existing, or preferred, defense counsel.  It relies on a 2011 Vermont superior court decision, Northern Ins. Co. v. Pratt, from another judge (now a Vermont federal judge) for this decision.  The Vermont Supreme Court has not yet addressed the issue of whether an insured can choose its own defense counsel, at the insurer’s expense, where there is a coverage conflict between the insured and the insurer.

Note that the court’s analysis under the CGL policy is different from the main argument that the school made. The school pointed out that the underlying complaint alleges that the school’s teachers/employees were negligent in hiring and supervising the Indian national who allegedly assaulted the student. The school argued that these persons were covered under the “coverage territory” definition in the policy because they were based in the U.S. Instead, the court found coverage based on the activities of the (allegedly assaulted) student in India. The school did cite to the court one case (Spears v. Nationwide) that construed this same “coverage territory” language in a situation where the insured’s employee was in the Ukraine and was the victim of an automobile accident there. In that case, the court found that the employee – the accident victim herself – was covered because the accident arose out of her activities. In this case the court did not cite Spears as support for its conclusion.  

Disclosure: the author of this article represents the insurance broker in this case.

 

Bookmark and Share

Categories: Insurance Law

Actions: E-mail | Comments

 

Alleged “patent troll” strikes out for second time in its efforts to have the Vermont Attorney General’s “unfair patent enforcement” lawsuit adjudicated in federal court.

In May 2013 the State of Vermont sued MPHJ Technology Investments, LLC for alleged consumer fraud arising from its numerous “cease and desist” letters sent to Vermont business and non-profit entities, claiming patent infringement and demanding licensing fees.  Since then, the parties have been disputing which court system the case should be heard in.  The Vermont federal court has, once again, “remanded” the case against MPHJ back to Vermont state court.

Vermont initially sued MPHJ in state court.  MPHJ “removed” the case to federal court, arguing that the case was about patent law and therefore belonged in federal court.  The federal court “remanded” the case back to state court, agreeing with the State that the case was not about MPHJ’s patents or about patent law, but only about the legality of MPHJ’s campaign of sending cease and desist letters into Vermont.

In its most recent attempt to obtain federal jurisdiction, MPHJ argued that, after the State filed its original Complaint against MPHJ, Vermont passed its “Bad Faith Assertions of Patent Infringement” law (i.e., the “anti patent troll” law) and that the interim enactment of this law gave MPHJ new grounds for federal court jurisdiction.  In response, the State and the federal court disagreed, pointing out that the State never attempted to incorporate that new law into its Complaint in this case.

Indeed, it is not clear that there would be federal jurisdiction even if the State had incorporated the new anti-troll law into its Complaint.  The Jan. 12, 2015 order from federal judge William Sessions concludes that this lawsuit is a matter for state (and not federal) court because the State’s case is not about the validity of MPHJ’s patents (which would give rise to federal court jurisdiction), but, instead, only about the legality of MPHJ’s activities in seeking to get Vermont businesses and non-profits to pay it licensing fees under Vermont consumer protection laws.  As it did the first time (and lost), MPHJ might attempt to appeal this most recent order to the federal appeals court.


Bookmark and Share

Categories:

Actions: E-mail | Comments

 

Assuming Vermont's GMO labeling law survives a court challenge, beginning in July, 2016, all producers of food products sold in Vermont that contain genetically modified ingredients will be required to label the products as containing GE ingredients (unless the GE component is below 1 percent of the total weight of the product). The label must be “clear and conspicuous” and must be no smaller than the size of the words “Serving Size” on the “Nutrition Facts” label required by federal law.

There will be three (3) labeling options: “Produced with Genetic Engineering”; “Partially Produced with Genetic Engineering”; and “May be Produced with Genetic Engineering.” Producers can use the label “Partially Produced with Genetic Engineering” if the product contains less than 75 percent GE material by weight. Producers can use the label “May be Produced with Genetic Engineering” only if the manufacturer does not know, and cannot reasonably determine in good faith and with due diligence, if the ingredients are genetically engineered. The Vermont Attorney General can determine whether a producer has used good faith in using this option. A producer is exempt from the labeling requirement if it obtains sworn affidavits from its suppliers that the ingredients are not genetically engineered or GMOs.

Retailers who sell raw commodities that contain or are the product of genetic engineering (e.g., raw corn in the produce section at the supermarket) must also label the product at the point of sale.

Producers/retailers are free, if they wish, to include a disclaimer that the U.S. Food and Drug Administration does not consider genetically engineered food to be materially different from non-GE food.

In addition to having to label their products, as described above, producers of food products containing GE ingredients cannot use the word “natural” or words of similar import (e.g., “all natural” or “naturally made”) on the product.

There are significant exceptions to the law. Pure meat and dairy products are completely exempted, as are alcoholic beverages. Food intended for immediate consumption (e.g., restaurant food, deli food, take-out, etc.) is also exempted. Also, food products containing small amounts of GE ingredients that are only used as processing aids do not need to be labeled. Lastly, also exempt are products that have been certified as “organic” or GE-free by an organization acceptable to the Vermont Attorney General (e.g., the Non-GMO Project).

The Vermont Attorney General is empowered to investigate and enforce the law.

Compliance with this law could be extremely challenging for both national and local food producers, for a variety of reasons. For national food producers, compliance with the law could mean: a) labeling ALL of their products nationwide just to comply with the Vermont law, even though Vermont constitutes only a tiny subfraction of the national market share; or b) specially-labeling the package on products intended exclusively for the Vermont market (if it is even feasible to do so), or c) changing their distribution systems to keep non-labeled products out of the Vermont market. Some observers have wondered whether some national producers will simply no longer ship their products into Vermont, rather than create special packaging and distribution just for the tine Vermont market.

For small or local producers, it could be an extreme hardship to: a) determine if their ingredients are genetically engineered, and/or then b) attempt to source only non-GE ingredients for their products. In addition, what if a national producer relabels its product to comply with Vermont law, but then a neighboring state passes a GMO labeling law with different labeling requirements than Vermont's? How many different state-specific packages would a national producer have to make for a single product?

Of course, the constitutionality of the law is currently being challenged in federal court by food manufacturers, and a decision in the lawsuit is pending.

 

Bookmark and Share

Categories: Food Safety

Actions: E-mail | Comments

 

In a significant decision issued on Friday, July 18, 2014, involving a retail store, the Vermont Supreme Court has abolished the old premises liability distinction between “business invitees” (i.e., customers) and licensees (other visitors).  The Court has now formally adopted a general negligence standard of reasonable care applicable to both types of visitors.  The case is Demag v. Better Power Equipment, Inc., 2014 VT 78.  

This case involved a visitor who was on the defendant’s business premises not as a customer, but as a vendor providing a service to the business.  He fell into a storm drain in the business’s parking lot because the drain cover had been dislodged by a snowplow.  The owners of the business claimed not to know that the storm drain cover had been dislodged.  The visitor sued the business.  The trial court classified the visitor as a “licensee” (i.e., not a customer) – as opposed to an “invitee” (i.e., a customer) and granted summary judgment to the business, reasoning that the business owed a lower standard of care to a licensee.  In other words, because the visitor was a licensee, the owners owed him no legal duty to be aware that the storm drain cover had been dislodged and posed a danger to him.  The Vermont Supreme Court reversed, ruling that there should no longer be any distinction in Vermont between a licensee and an invitee.  

In 99% of cases, this decision will generally not affect retail or business establishments, because, with respect to customers, they were already held to the higher standard for “invitees.”  However, sometimes the person who is injured in or around a business establishment might be a vendor.  In such cases, the business establishment can no longer argue that it has a lower standard of care because the vendor was a “licensee.”  The legal standard will now be the same regardless of whether the plaintiff is a customer of the business or a vendor.  Obviously, this decision has implications for business establishments.  While vendors who are injured while on another business’s premises will typically be covered by their own employer’s workers compensation insurance, they can still bring a claim against the business establishment for negligence.  This decision will potentially make their claim easier to prove.

Bookmark and Share

Categories: State Supreme Court

Actions: E-mail | Comments

 

The Vermont legislature has passed a bill that mandates effective July 1, 2016, the labeling of food that contains – or might contain – genetically modified organisms (GMOs).  The Governor signed the bill on May 8.  Although two other states have passed GMO labeling bills (Connecticut and Maine), Vermont’s bill is a first-in-the-nation bill because it does not contain a “trigger” clause, as the Connecticut and Maine laws do.  The trigger clause in Connecticut’s and Maine’s laws means that those laws do not take effect until some other state’s labeling law goes into effect first.  The idea behind including a trigger clause is that it reduces the likelihood that the enacting state will be sued by the food industry because, by definition, it will not be the first state to mandate labeling.  The absence of a trigger clause in the Vermont bill has now made Vermont a lawsuit-target, and the bill raises a host of issues that could make it hard to defend in court.

The Vermont bill specifically acknowledges that the federal FDA does not consider GMO foods to be materially different from non-GMO foods.  This could be a problem in defending the law.  If the federal government does not consider GMO foods to need labeling, why should Vermont single out such products for separate treatment?

The Vermont bill asserts that scientific research is mixed on the safety of GMO foods and that GMO foods present potential health risks.  Many would say that such a statement is false and anti-science:  there have been numerous peer-reviewed, reputable scientific studies showing no safety concerns from GMO foods, and no scientifically-valid studies to the contrary.  Thus, many would say that to imply that there is real scientific disagreement over the safety of GMO foods is like saying that there is genuine scientific disagreement over the reality of global climate change. 

The Vermont bill requires foods to be labeled either:  “produced with genetic engineering,” “partially produced with genetic engineering,” or “may be produced with genetic engineering.”  Many food producers, especially small ones, including small, Vermont craft food producers, may simply not know, and may not easily be able to tell, whether their products contain GMO ingredients.  Thus, they will be forced to “stigmatize” themselves with a label that says, “may be produced with genetic engineering.” 

The labeling mandate in the Vermont bill extends not just to food manufacturers, but also to retailers, both supermarkets and to Vermont “mom and pop” grocery stores.  In the case of unpackaged agricultural products that are or might be grown from GMO seeds, the retailer must label the display shelf or bin with the words “produced with genetic engineering.”   This may constitute a hardship for small Vermont food stores.  And supermarket chains operating in Vermont are certainly not going to like it, either.

The Vermont bill contains exemptions for meat and dairy products.  While the proponents of the bill argue that this makes the bill less vulnerable to legal attack, it could work the other way around.  Critics could argue in court that the bill is flawed because it singles out a favored and politically powerful Vermont industry – dairy farming – for exemption from a labeling requirement that everyone else is required to follow.

The debate on Vermont’s bill has focused on whether GMO foods should be labeled.  But included in the bill is a prohibition on the use of the terms “natural” on GMO foods.  This provision was not the subject of any significant public debate, and, again, could create problems for the law in court.  Hundreds if not thousands of processed foods on Vermont supermarket shelves tout themselves as “natural,” and the federal Food and Drug Administration (FDA) has declined to prohibit such labeling.  Why should one state be allowed to prohibit such labeling?  Will national food producers change their labels for one state?  Should they have to?  

The Vermont Attorney General has predicted that Vermont almost certainly will be sued, and that defending the law in court could cost Vermont taxpayers millions of dollars.  Worse, if Vermont loses the lawsuit, it could end up paying the other side’s attorneys’ fees as well, which could add up to $8-10 million dollars.  For a state of only 600,000 residents, and a much smaller number of taxpayers, that could mean each Vermont taxpayer ponying up real money cash.  Proponents of mandatory GMO labeling point to surveys that show a large percentage of Vermonters favoring such labeling.  But did those surveys ask whether the respondent favored mandatory labeling if it meant that she – and every other taxpayer – might have to reach into her wallet to support the law?  Especially when considering that Vermont has a mixed track record in defending its laws when they are attacked as unconstitutional or contrary to federal law – such as the Vermont law in the 1990s that mandated the labeling of dairy products from cows injected with bovine growth hormone.  That law was struck down.  Proponents of labeling argue that consumers have a right to know.  But is this about a “right to know,” or is it instead about attempting to stigmatize GMOs out of existence through fear?

There are other potential consequences besides an expensive lawsuit from the food industry.  Vermont is a small state with a miniscule consumer base.  Will hundreds or thousands of food producers agree to separately label their products exclusively for the Vermont market, because of this law, or will they simply decide to “write Vermont off” and not sell their products in Vermont? 

Lastly, as a practical matter, did the Vermont legislature think through what effect this law have on the thousands of small Vermont craft food producers who simply don’t know whether their products contain ingredients that may be derived from GMOs?  If you can’t be certain that your product contains no such ingredients, apparently you will be forced to label it as “may be produced with genetic engineering.”  And what if these local producers are simply unable to source their ingredients from non-GMO sources?  Simply put, this cannot be good for Vermont craft food producers and, by association, the Vermont economy.  Forcing them to label their products as possibly containing GMOs could kill off many of these good, homegrown industries.

Bookmark and Share

Categories: Food Safety

Actions: E-mail | Comments

 

In a significant legal decision with a connection to Vermont’s farming community, the United States Court of Appeals for the Federal Circuit has affirmed that organic farmers cannot obtain a judicial declaration to prevent Monsanto from suing them in the future for violating its patents on seeds.  The Federal Circuit court is the court of appeal for all patent cases, below only the U.S. Supreme Court.  The court said that the farmers do not have “standing” to seek such a declaration against Monsanto because they are themselves in no danger of being sued by Monsanto for “inadvertent” infringement of Monsanto’s seed patents.

Monsanto owns a number of patents on transgenic crop seeds – seeds that are genetically engineered to survive the spraying of herbicides to control weeds in the crop fields.  Farmers who purchase Monsanto’s GMO seeds must agree not to harvest the seeds from the resulting adult crops and use the harvested seeds for planting without Monsanto’s permission.  In effect, when a farmer purchases Monsanto’s patented GMO seeds, he or she is agreeing to use the seeds – i.e., Monsanto’s patented technology – for one-time use.  Monsanto has a history of suing farmers who harvest and replant its seeds.  Because Monsanto owns the patents on the seeds, their use without Monsanto’s permission constitutes patent infringement.

A large group of organic farmers and anti-GMO organizations, including Chittenden County state senator David Zuckerman, who owns an organic farm in Hinesburg known as Full Moon Farm, Inc.,  Northeast Organic Farming Association of Vermont (NOFA), and Rural Vermont, filed suit in federal court in New York in March of 2011.  They sought what is known as a “declaratory judgment” – an anticipatory legal ruling that Monsanto’s GMO seed patents are invalid and that Monsanto should be barred from suing them if their crops are inadvertently pollinated by crops grown in nearby fields with Monsanto’s GMO seeds.  “Inadvertent” pollination can occur if, for example, corn plants grown in a field using non-Monsanto seeds are pollinated by corn pollen blown in on the wind from a nearby field of Monsanto corn.  The non-Monsanto corn plants that are inadvertently pollinated by Monsanto corn pollen then produce seeds that contain Monsanto’s GMO technology.

In deciding whether to grant a declaratory judgment, the question before the New York federal court was: were any of the organic farmer plaintiffs in actual danger of having to face a patent infringement lawsuit by Monsanto if their crops were inadvertently pollinated?  The court said no.  True, Monsanto has a history of suing farmers who use harvested Monsanto seeds for replanting.  In fact, as recently as May, the U.S. Supreme Court in a 9-0 decision sided with Monsanto against a farmer in Indiana. The Court held that Vernon Bowman’s harvesting and replantation of Monsanto soybeans was patent infringement against Monsanto.  In this case, however, Monsanto made public that it had no intention of suing organic farmers whose crops might be inadvertently pollinated by Monsanto corn.  In response to Monsanto’s statement, the plaintiffs demanded a blanket promise from Monsanto never to sue them.  The New York federal court concluded that, because the plaintiffs were not in any real danger of being sued by Monsanto, they had no legal standing to seek a declaratory judgment that Monsanto cannot sue them.

Indeed, the court stated that the plaintiffs’ demand for a blanket promise from Monsanto never to sue them was an attempt to create a legal controversy where none existed.  The court dismissed plaintiffs’ argument that they felt threatened by Monsanto’s refusal to give a blanket promise never to sue them.  The court characterized plaintiffs’ arguments as “baseless” and “groundless” and their tactics as “not to be tolerated” and “unacceptable.”  The court further stated that plaintiffs’ demand of a blanket promise from Monsanto “was clearly intended to be used as a prop in this litigation,” and a “transparent effort to create a controversy where none exists.”  The court therefore dismissed the lawsuit.  Not content, plaintiffs appealed to the Federal Circuit.

The Federal Circuit court affirmed the dismissal, agreeing with the lower court that the plaintiffs had no standing to ask for a declaratory ruling when they were in no real danger of being sued by Monsanto, although the Federal Circuit’s language was not as critical of the plaintiffs was as the lower court’s.  The Federal Circuit pointed out that the plaintiffs’ alleged fear of a lawsuit from Monsanto was “too speculative.”

So, was the lawsuit by the organic farmer-plaintiffs merely an effort to attract attention to their anti-GMO, anti-Monsanto cause?  If so, is that a proper use of the court system?

This blog was originally posted on The IP Stone by Walter Judge on June 25. Click here to see the original post. 


Bookmark and Share

Categories: Patent Law

Actions: E-mail | Comments

 

An important federal appeals court has determined that a Connecticut court has jurisdiction over a Canadian citizen whose only act in Connecticut was accessing information on a computer server located in Connecticut.  In MacDermid, Inc. v. Deiter, 702 F.3d 72 (Dec. 26. 2012), a Connecticut-based company, MacDermid, Inc., sued its former employee, Deiter, a Canadian citizen who worked from Canada, in federal court in Connecticut for misappropriation of MacDermid’s trade secrets.  MacDermid alleged that Deiter sent confidential company information from her company email account to her personal email account.  The lower court dismissed the case, saying that Connecticut courts did not have jurisdiction over Deiter because she never set foot in Connecticut and only used a computer terminal in Canada.  MacDermid appealed.  The U.S. Court of Appeals for the Second Circuit, in New York, reversed, holding that it was proper for a Connecticut court to exercise personal jurisdiction over a Canadian employee of a Connecticut company because, even though she was located in Canada and physically interacted only with a computer in Canada, she “used” a server in Connecticut.


Background

MacDermid is a chemical company located in Connecticut.  Dieter, a resident of Ontario, Canada, worked for MacDermid’s Canadian subsidiary.  The email system for both MacDermid and its Canadian subsidiary is located on a server in Waterbury, Connecticut.  Just before Dieter was about to be fired, she forwarded what MacDermid claims is confidential information from her MacDermid email account to her personal email account.  In doing so, Dieter accessed MacDermid’s email server in Connecticut, even though she did so while located in Canada and physically interacting only with her computer terminal in Canada (albeit a company computer).  MacDermid sued Dieter in Connecticut for trade secrets misappropriation, and Dieter moved to dismiss, arguing that Connecticut courts did not have jurisdiction over her, as she had never left Canada.  The issue was whether the Connecticut “long arm” statute gave Connecticut courts jurisdiction over someone outside of Connecticut, and whether such jurisdiction would be constitutional.  One section of the “long arm” statute gives Connecticut courts jurisdiction over someone who “uses a computer” or “a computer network” located in Connecticut.  Therefore, the issue became whether accessing email via a server located in Connecticut constituted “using” a Connecticut computer or network.

Analysis

The lower court dismissed the case because it found that Dieter had not “used” a Connecticut computer or Connecticut computer network, but had only sent email from one computer in Canada to another computer in Canada.  The Second Circuit court disagreed.  It concluded that “using” a computer or network may involve more than just the act of physically interacting with a computer.  While Dieter had physically interacted only with her terminal in Canada, she had “used” MacDermid’s network in Connecticut by accessing it electronically when she sent an email from her company account to her personal account.  The Second Circuit pointed out that the “long arm” statute does not require that user be located in Connecticut, but only that the computer or network – i.e., the thing that is “used” – be located there.  In other words, the “long arm” statute extends to people who access Connecticut computers or networks remotely.

But, having determined that Connecticut’s “long arm” statute extended to Dieter, the Second Circuit still had to determine whether exercising jurisdiction over Dieter would be  constitutional.  It found that it was.  The court found that Dieter knew that, in using MacDermid’s email system, she was accessing a server in Connecticut.  Even though Dieter would have to travel from Ontario to Connecticut to defend herself in the lawsuit, that would not be an unreasonable burden on her.  Furthermore, according to the court, Connecticut has a significant interest in interpreting its misappropriation laws.  The Second Circuit concluded that it was proper for Dieter to be sued in Connecticut for the wrong she was alleged to have committed.

Implications

While this decision was based on Connecticut law, the Second Circuit federal appeals court covers New York, Connecticut, and Vermont.  Moreover, it is considered an important authority on commercial law.  So its analysis on personal jurisdiction could be persuasive in other courts.

Lesson

The lesson here is that if you think you are safe from suit in a particular state in the U.S. just because you access a computer from the comfort of a faraway state – or even, as in this case, another country – you might be gravely mistaken.

Walter Judge is a litigation partner at Downs Rachlin Martin PLLC who blogs on intellectual property litigation topics
Bookmark and Share

 
 

Submit Blog

If you wish to submit a blog posting for DRI Today, send an email to today@dri.org with "Blog Post" in the subject line. Please include article title and any tags you would like to use for the post.
 
 
 

Search Blog


Recent Posts

Categories

Authors

Blogroll



Staff Login