F&B Legal Roundup – August 2018

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

Restaurant Group Not Liable for Unauthorized Faxes Using Its Logo:  On August 14, the Court of Appeals for the Seventh Circuit dismissed a case against Darden Restaurant Group.The case was brought under the Telephone Consumer Protection Act (“TCPA”).  The TCPA protects consumers from receiving unsolicited phone and fax communications.  Plaintiff had received an unsolicited fax advertising a wellness presentation that included the Olive Garden logo.  Darden owned the Olive Garden trademarks, and did not authorize either the sending of the fax or the use of the Olive Garden logo in the fax.  Plaintiff sued under the TCPA and argued that Darden was the “sender” of the unsolicited fax under the TCPA because they benefited from the advertisements. 

The Seventh Circuit held that for unsolicited fax advertisements sent in violation of the TCPA, “liability attaches only as to those persons and entities on whose behalf the unsolicited fax is sent.”  Darden did not become a “sender” of an unsolicited ad under the TCPA simply because someone else used its Olive Garden logo in an unauthorized way.

Children’s Meal Legislation on the Horizon in California:  On August 16, the California State Assembly passed Senate Bill 1192. SB-1192 is an attempt to regulate the sugar and calorie content of children’s meals. Restaurants that offer a children’s meal that pair a food item with a drink would be required to limit the beverage to be water or unflavored milk (or unflavored nondairy milk alternative). This would prevent restaurants from offering sodas or sweetened milk as the default drink in children’s meals.  Violations would be punishable by fines.  The bill previously passed the California State Senate, and will return there for a final vote before being sent to the Governor’s desk.

California Supreme Court Imposes Limitations on Background Checks:  In an August 20 decision, Connor v. First Student, Inc., the California Supreme Court ruled that an employer obtaining an investigative background check must comply with the stricter of two state laws before doing so. This means that employees running general consumer background reports must obtain the individual’s prior written authorization before obtaining an investigative background check.  This employment decision will have ramification on restaurant employers in California who want to do pre-employment background checks or background checks on current employees.

Restaurant Chains Drop No-Poach Provisions in Washington State:  On August 22, the Washington State Attorney General Bob Ferguson announced that corporate cast-food chains would be removing “no-poach” provisions from their franchise contracts nationwide. Eight companies — Applebee’s, Church’s Chicken, Five Guys, IHOP, Jamba Juice, Little Caesars, Panera and Sonic — will remove the language from current and future contracts, and will no longer enforce no-poach provisions included in franchise agreements.  The chains also agreed to notify all franchisees of the requirements.

Restaurant Liable to Insurance Company for Drunk Driver’s Crash: On August 22, the Court of Appeals for the Third Circuit reversed the dismissal of a case against a restaurant under Pennsylvania’s “Dram Shop” law. A patron of Stone Mansion restaurant became intoxicated at an event held there, continued to be served alcohol, and drove away from the restaurant with a passenger who also attended the event.  The drunk patron struck a guardrail with his car, and was killed. The passenger suffered significant injuries.  The passenger filed a lawsuit against the drunk patron’s estate, which was covered by insurance from Encompass.  Encompass paid out $600,000 in a settlement, and then sued Stone Mansion restaurant for contribution under the Uniform Contribution Among Tortfeasors Act (“UCATA”). Pennsylvania’s Dram Shop law provides that a business which serves alcohol to a visibly intoxicated person is legally responsible for any damage that person causes.  Stone Mansion removed the case from state to federal court, and the lower federal court the dismissed the action for failure to state a claim. 

The Third Circuit affirmed the removal of the case to federal court, but reversed the dismissal of the claims against the restaurant, finding that under the UCATA, Encompass Insurance had a right to seek contribution from Stone Mansion for the insurance claims it paid out.  The decision involved technical legal details on the right to removal, but an important takeaway for the restaurant industry is the need for proper training on alcohol service. 

Plastic Straw Bans Spread: In April, Prime Minister Theresa May announced that the United Kingdom would ban all sales of single-use plastics, including plastic straws and cotton swabs. In July 2019, two major cities- Seattle and San Francisco- banned single-use plastic straws and utensils.  The San Francisco ordinance is set to take effect in 2019.  Smaller cities across California, including Santa Cruz, Manhattan Beach, and Malibu have also banned plastic straws in bars, restaurants and retails stores.  California may now become the first state to pass a state-wide ban.  On August 23, the California State Assembly passed a ban on full-service dine-in restaurants from offering plastic straws unless customers request those straws.  The bill now goes to the California Governor for signature.

Missouri Law Prohibits Marketing Plant-Based Products as Meat: On August 28, a Missouri law prohibiting meat-alternative products from being marketed as meat went into effect.The law defines a meat product as “anything containing meat intended for or capable of use for human consumption, which is derived, in whole or in part, from livestock or poultry.”  The law makes it a violation to “misrepresent[] a product as meat that is not derived from harvested production livestock or poultry.”  The penalty for such a misrepresentation includes financial penalties and up to a year of jail time.  The law is already under attack in the courts, with four organizations arguing that the law violates the First Amendment and is harmful to consumers.