Last week the Fourth Circuit Court of Appeals ruled that the federal government could not be held financially responsible for issuing erroneous warnings about the source of an outbreak of foodborne illness that caused the loss of millions of dollars of tomatoes.
The warnings, issued by the FDA in 2008, turned out to be wildly inaccurate and deeply damaging.
The first, issued on June 3, warned consumers in New Mexico and Texas not to consume several types of raw tomatoes because they may be tainted with salmonella, a bacteria that can sicken and kill those who consume it. A few days later, on June 8, the FDA expanded the warning to include similar types of tomatoes across the country.
Soon after, on June 13, the FDA held a press conference that strongly inferred Florida tomatoes might be to blame. ("I'm not wanting to put the focus on Florida specifically, but…") But on July 17, the agency reversed course.
"After a lengthy investigation, the FDA has determined that fresh tomatoes now available in the domestic market are not associated with the current outbreak," reads an agency press release, which concluded instead that consumers "should avoid eating raw jalapeño and raw serrano peppers."
At the time of the first warning, on June 3, the FDA documented several dozen cases of foodborne illness it wrongly claimed were caused from eating tomatoes. By the time the agency admitted its error on July 17, the FDA acknowledged more than 1,200 such cases had occurred. By that time, the salmonella cases had mushroomed into "the largest foodborne outbreak in the United States in more than a decade."
Clearly, the FDA warning hadn't helped consumers, who continued to buy and be sickened by contaminated hot peppers. And it didn't help consumers who stopped buying perfectly good tomatoes at the agency's urging, or who threw away tomatoes they'd already purchased.
But if the FDA's misplaced warning was unhelpful at best and harmful at worst to consumers, it was downright devastating to tomato growers and handlers. The agency's warnings had spread like wildfire. For example, the New Mexico Restaurant warned its members against using tomatoes. Newspapers around the country warned consumers to avoid eating tomatoes. Demand for tomatoes plummeted by up to 40 percent in the wake of the warning, and prices fell by half. The industry lost hundreds of millions of dollars.
Congress held hearings in the wake of the FDA's retraction of its tomato warning.
"Shipments ground to a halt," Anthony DiMare, whose family's company suffered enormous losses, told Congress. "Tomatoes were left in the fields, in the packinghouses and on trucks that were turned away by our customers."
DiMare criticized the FDA and CDC for acting without "knowledge they clearly lacked" and urged the agencies to work with industry so that they wouldn't repeat their mistakes.
A group of tomato growers and handlers, including DiMare, sued the FDA in federal claims court in 2013, arguing that the incorrect warnings had served effectively as a regulatory taking under the Fifth Amendment. They argued, as a judge wrote in a 2014 order in the case, "all or almost all of the value of plaintiffs' perishable tomatoes was destroyed by the collapse in the market for tomatoes triggered by the FDA's warnings."
Nevertheless, the judge rejected the claims of the tomato growers and handlers.
"A regulatory takings claim is not plausible and cannot proceed when the government action at issue has no legal effect on the plaintiff's property interest," the judge ruled. "Advisory pronouncements, even those with significant financial impact on the marketplace, are not enough to effect a taking of property under the Fifth Amendment."
I wrote an amicus brief in support of the plaintiffs in the case.
"The FDA's improper warning cost the tomato producers millions of dollars and turned tons of good tomatoes into tons of food waste," I told Law360 in the wake of the ruling. "For the court to say that producers of food—here, tomatoes—have no recourse is to set a dangerous precedent."
That brings us to last week's ruling by the Fourth Circuit Court—in a $15 million case brought by a separate group of tomato growers and handlers—which upheld a lower court decision denying the growers' claims.
Is there some other recourse for losses suffered directly due to false warnings like these? Not really. Insurance—which all commercial food producers and sellers carry—generally won't cover losses such as those suffered by the Florida tomato growers. Some commentators have suggested that complying with regulations is the best strategy to minimize the risk that your food might be subject to adverse and erroneous actions taken by the FDA. But the tomato producers here were all in compliance, and that didn't save them from millions of dollars in losses.
What can be done? The FDA—working with the Centers for Disease Control & Prevention (CDC)—should investigate and work to combat foodborne illness, while also mitigating the presence of harmful bacteria in the food supply.
But when an agency like the FDA gets it wrong—as it clearly did here—and that action is directly responsible for the loss of hundreds of millions of dollars, then food producers must have recourse against the agency. If that's something courts refuse to recognize, then Congress should step in and draft new laws that rightly hold the agency accountable for the losses it's caused.