Pooja S. Nair, a partner at Ervin Cohen & Jessup LLP compiles recent legal news affecting the restaurant, food and beverage and hospitality industries for Modern Restaurant Management (MRM) magazine.
States Pass Business Immunity Laws: Five states (Louisiana, North Carolina, Oklahoma, Utah, and Wyoming) have passed laws that grant businesses immunity from civil liability for claims relating to COVID-19. In May 2020, Governor John Bel Edwards of Louisiana signed three bills into law providing Louisiana businesses with protection from most lawsuits involving COVID-19 deaths or injuries. The bills took effect immediately and are retroactive to March 11, 2020. On May 4, 2020, North Carolina passed a bill providing immunity to any entity deemed “essential” in the emergency orders, including restaurants and grocery stores.
Cities Continue to Cap Delivery Platform Fees: Several major cities including Seattle, New York City, San Francisco, and most recently Los Angeles have capped the fees that third-party delivery platforms can charge restaurants for delivery and takeout orders. On June 3, 2020, the Los Angeles City Council adopted an ordinance capping third-party food delivery services fees at 15% for the duration of the COVID-19 public health emergency.
California Bill to Regulate Food Delivery Platforms Advances: The California legislature is considering Assembly Bill 2149 to prohibit food delivery platforms from listing restaurants, posting menus, or using the image of a restaurant without express written consent. Initially, the bill included a requirement that the delivery platform share consumer data with restaurants, but this part of the bill was struck due to privacy concerns. The bill advanced 68 to 5 in the Assembly, and is now being considered by the State Senate.
Paycheck Protection Loan Deadline Extended: The federal government enacted legislation to extend the deadline for eligible businesses to apply for the Paycheck Protection Program to August 8, 2020. The original deadline to apply for the loans was June 30, 2020. At the time of expiration, there was $130 billion remaining of the $660 billion allocated. Both the Senate and the House of Representative approved the extension unanimously.
First Circuit Revives “All Natural” Labeling Lawsuit Against Conagra: On May 5, 2020, the Court of Appeal for the First Circuit revived a Massachusetts lawsuit alleging that “100% Natural” label for Wesson brand vegetable oil was a deceptive trade practice in violation of state law. The district court had dismissed the case, finding that the label was not deceptive or unfair as a matter of law because it conformed to the FDA’s labeling policy. The First Circuit reversed the decision and allowed the lawsuit to continue. The Court held that although the FDA’s regulations permit nondisclosure of GMOs on labeling, the use of the term “100% Natural” could lead reasonable consumers to believe that the product had no GMOs. The Court did not make a final determination about the lawsuit, but found that the Plaintiff had raised a threshold claim that a reasonable consumer could think that “100% Natural” meant that a product contained no GMOs, and then purchase the product based on that belief.
Applebee’s Class Action Proceeds After Arbitration Motion Fails: On June 12, 2020, the Court of Appeal for the Fourth Circuit declined to move a class-action lawsuit against Applebee’s brought by former employees into arbitration. The defendant, ERG, which owns Applebee’s restaurants in West Virginia, Kentucky, Ohio, Tennessee, and Virginia, had filed a motion to enforce an arbitration agreement. However, ERG did not have signed copies of arbitration agreements for at least 60 former employees who were part of the lawsuit. ERG stated that the lack of signed agreements was a clerical error, and offered a declaration from its HR department that these agreements had been signed. In the unpublished opinion, the Court allowed the case to proceed and declined to enforce the arbitration agreement.
Eleventh Circuit Finds Errors in $28M Wine Arbitration Award: On June 25, 2020, the Court of Appeal for the Eleventh Circuit found that a $28 million Chilean arbitration award involving a shareholder dispute about a Chilean wine company was erroneously calculated. In the underlying case, EGI-VSR made a $17 million investment as a minority shareholder in Vina San Rafael. EHI-VSR alleged that the majority shareholder breached the Shareholders’ Agreement, and were required to buy back the shares at a premium. EHI-VSR arbitrated the case in Chile, and was awarded $28 million. EGI-VSR then asked a district court judge to confirm the international arbitration award, which the court did. The Court vacated the lower court’s order and ordered the lower court to fix errors in the calculation of the amount related to the price of the shares.
FDA Temporarily Eases Food Labeling Requirements: On May 22, 2020, the FDA issued a policy easing food labeling requirements for manufacturers. The temporary policy gives companies permission to make minor adjustments to their products’ ingredients without requiring conforming label changes so long as any substitutions or omissions of ingredients do not significantly alter the finished produced or create a health risk.
FTC Issues Proposed Rule for Made in USA Labeling: On June 22, 2020, the Federal Trade Commission issued a proposed Made in USA Rule. Under the Rule, advertisers would be prohibited from making unqualified Made in USA claims unless final assembly or processing of the product occurs in the United States; all significant processing that goes into the product occurs in the United States; and all or virtually all ingredients or components of the product are made and sourced in the United States. The Rule would permit the FTC to issue civil penalties for companies that use any variation of a “Made in the USA” claim without meeting these factors.
DOL Launches Online FFCRA Tool: On June 23, 2020, the Department of Labor launched an interactive online tool to help workers determine if they qualify for paid sick leave or extended family and medical leave to cover time away from work for reasons related to the coronavirus. Currently the tool is only available for employees, but an employer version is expected to be launched soon. The tool is available here: https://www.dol.gov/agencies/whd/ffcra/benefits-eligibility-webtool
CDC Issues Restaurant Guidance: On June 30, 2020, the Center for Disease Control issued Considerations for Restaurants and Bars related to reopening during the COVID-19 pandemic. The guidance is available here: https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/business-employers/bars-restaurants.html, and includes communication restaurants and templates for restaurants. The guidelines are meant to supplement—not replace—any state and local laws.