U.S. Supreme Court Upholds Employee Class Action Suit Against Tyson Foods

David G. Savage reported in today’s Los Angeles Times that, “The Supreme Court dealt a setback to corporate America on Tuesday by upholding a nearly $6-million class-action verdict for a group of Iowa meat packers who contended they were not paid for time spent putting on and taking off safety gear.

“The high court has been skeptical of class-action claims in recent years, and when the justices agreed to hear the appeal from Tyson Foods, corporate groups — including the U.S. Chamber of Commerce and the National Assn. of Manufacturers — had hoped the justices would use the case to further rein in class-action claims.

“Instead, in a 6-2 ruling, the high court said the class-action claim made sense.”

Mr. Savage explained that, “In its appeal, Tyson had argued that the workers could not prove how much time they spent putting on their protective clothing, relying instead on estimates.

“Since the company did not keep records, workers used an expert who studied a sample and concluded they spent on average about 18 minutes a day putting on safety gear.

“That’s good enough, said Justice Anthony M. Kennedy. ‘A representative or statistical sample, like all evidence, is a means to establish or defend against liability,’ he said.”

Wall Street Journal writer Jess Bravin added that, “Tuesday’s decision was the latest suggestion the court is hesitating to further limit consumer and employee class actions. In January, the court rejected a telemarketer’s argument that it could kill a class-action case by offering the lead plaintiff the maximum damages provided under an anti-robocall law—in that case, $1,500.

“Another significant class-action case remains to be decided before July. In it, data-aggregator Spokeo Inc. argues it can’t be held liable for posting online false information about an individual if he can’t prove he was harmed by it.”

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Some Entrepreneurs May Want to Consider a “Receivable Insurance” Policy

Paul Sullivan reported in Saturday’ New York Times that, “After nearly two decades in the packaging industry, Izzy Eisenberg figured there was a need for more complicated specialty packing products — or as he put it, ‘the things that other people don’t like getting involved in.’

“He was right, and the business he started, Packaging Methods Defined, took off. What worried him, though, was that most of his revenue came from three or four large clients. If one of them didn’t pay — or was even overly slow in paying — his business might have been at risk of failing, taking his personal wealth with it.”

Mr. Sullivan indicated that, “After three years in business, he had enough of a track record to get credit insurance, also known as receivable insurance, to insure what buyers owed him. Since then, he has had four claims, including a large one that would have been a financial blow to his company. The insurance carrier paid them out or otherwise resolved them.”

Saturday’s article went on to explain that, “…[E]ntrepreneurs often need to protect their companies — and their personal wealth — in case a client doesn’t pay its bill. And it would be impractical to keep so much cash in reserve.

“This is where so-called limits insurers come in, offering coverage to firms with annual revenues of $1 million to $20 million.

“Euler Hermes, a limits underwriter, recently introduced a plan called Simplicity, aimed at helping businesses with $1 million to $5 million in sales. Another insurer, Coface, offers the International Policy, an industry favorite, that is meant to be easy for a midsize business to buy and use. The policy looks just at the top accounts and insures the rest with a blanket policy.”

Mr. Sullivan added that: “For many entrepreneurs, credit insurance has other uses beyond covering payments. The firms that offer the insurance to smaller businesses have databases on the creditworthiness of companies all over the world.

“‘We meet new companies all the time, but we don’t know anything about them,’ [Bill Hawkins, founder and president of Compatible Cable, a cable distributor in Concord, Calif.] said. His insurer can quickly check the creditworthiness of those businesses.”

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Intangible Business Assets: The Difficulty of Assigning Value

Vipal Monga reported in today’s Wall Street Journal that, “When RadioShack Corp. filed for bankruptcy protection last year, it raised more than $170 million by selling such holdings as real estate, leases and inventories of smartphones, computer cables and cameras.

“But the retailer’s books didn’t acknowledge two of its most valuable assets: its brand and its customer data.

“How do you attach a price tag to something you can’t see or touch?”

Today’s article noted that, “Assigning a value to a physical asset like a store or equipment is relatively easy. But, in the murky world of intangible assets, the calculations are squishy. The problem of how to value such assets has vexed accountants for decades.”

The Journal article explained that: “Altogether, companies in the U.S. could have more than $8 trillion in intangible assets, according to Leonard Nakamura, an economist at the Federal Reserve Bank of Philadelphia. That’s nearly half of the combined $17.9 trillion market capitalization of the S&P 500 index.

“These days, companies put far more money into nonphysical assets, such as customer databases, than they do in building new factories. Companies invested the equivalent of 14% of the private sector’s gross domestic product in intangibles in 2014, according to research by economist Carol Corrado. The investment in physical assets was about 10% of that sum. That’s essentially the reverse of 40 years ago, when 13% of private-sector GDP went to tangibles and 9% to intangible assets.”

On the other hand, today’s article pointed out that, “Some investors and analysts say they don’t need to know the specific value of intangible assets like data. They say a company’s stock price reflects the market’s appraisal of those assets.

“Take Facebook Inc. The stock market values the social-networking company at nearly $320 billion. As of Dec. 31, its assets minus liabilities totaled $44.2 billion. The difference between the two could serve as a proxy for the value of Facebook’s vast troves of user data, the algorithms it creates to mine that data and its brand.

“That would put the value of Facebook’s intangibles at about six times that of its tangible assets, such as cash, property and equipment.”

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GMO Labelling Issues Impacting Food Manufactures

Annie Gasparro and Jacob Bunge reported in today’s Wall Street Journal that, “The U.S. food industry is fighting one of its fiercest regulatory battles in years over labels for ingredients made with genetically modified organisms. And it is losing—to Vermont.

“The country’s first law requiring mandatory GMO labels is slated to go into effect in Vermont on July 1 after an industry-backed federal law that would block states’ authority stalled in the U.S. Senate last week. Facing fines up to $1,000 a day per product, food makers from giants like General Mills Inc. to regional businesses like Vermont Fresh Pasta are making big adjustments, many of which extend beyond the state’s borders.

“Vermont is a tiny market for most companies, but the integrated nature of supply chains gives it an outsize effect. On Friday, General Mills said it is slapping GMO labels on its packaged food nationwide, saying it would be too complex and expensive to create a separate distribution network for the 626,000-person state of Vermont.”

The writers pointed out that, “Some companies, fearing such labels will be a sort of scarlet letter and scare off consumers, are replacing ingredients altogether. Vermont Fresh Pasta, which touts its fresh, local fare, said it has swapped out canola oil, which typically contains GMOs, for olive oil, which has no genetically modified version.”

And today’s Journal article added that, “Other businesses appear confused about whether they need to use special labels.

“Food is exempt from labeling in Vermont if it is a direct animal product like meat and eggs, is certified as non-GMO, if none of the ingredients have a genetically modified version, or if the GMO ingredients make up less than 0.9% of the product’s weight.”

Meanwhile, a separate article today at The Wall Street Journal Online stated that, “Candy maker Mars Inc. joins a small group of U.S. food companies adding special labels to products that contain genetically modified organisms.

“Mars, which makes M&M’s chocolate and Wrigley gum, said it is adding GMO labels to its foods across the U.S. in response to the looming deadline of a Vermont law that requires such disclosure.”

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Data Breach Issues

Richard J. Sullivan and Jesse Leigh Maniff, of the the Federal Reserve Bank of Kansas City, recently penned an interesting article titled, “Data Breach Notification Laws.”

The authors noted that, “Data breaches, which expose sensitive data often used for payment fraud and identity theft, have recently worsened in the United States. Exposed records provide essential data for identity thieves, who in 2014 victimized 17.6 million people in the United States. As a consequence, policymakers are placing greater emphasis on procedures to protect consumers from harm.

“Breach notification laws are one such approach. Forty-seven state laws and some sector-specific federal laws already require organizations suffering a breach to disclose the incident and notify consumers if their data were exposed. In theory, breach notification laws serve two purposes important to public policy. First, they provide an incentive for organizations to protect sensitive data, as publicly disclosed security failures may harm their reputation and trigger costly remediation activities. Second, they inform individuals whose records were exposed, allowing them to react quickly to mitigate potential damages.”

The paper also stated that, “An organization’s legal duty to secure personal information can arise from tort law or legislation. In tort law, an organization may have a duty to protect its customers if the organization increases the foreseeable risk of harm from third-party criminals. If customers cannot prove this duty exists, they will be unable to satisfy a negligence claim against a breached organization. Even if customers prove this duty exists, they must then prove that the organization breached its duty, that the breach caused the harm, and that damages ensued. In previous cases, customers have had difficulty proving how they were harmed by the breach.

“To fill the gap, many state legislatures have enacted statutes affirming organizations’ legal duty to secure personal information and codifying potential consequences of their failure to do so.  The most common way states have created this legal duty is by enacting data breach notification laws that require organizations to notify customers if a breach occurs. These laws have their foundation in environmental law’s ‘community right to know’ (CRTK) provisions.”

At the conclusion of the paper, the authors indicated that, “In this article, we present evidence of data breach notification laws’ ‘right to know’ effect through which increased disclosure of breaches is associated with reduced identity theft. We find states with provisions that signal active state enforcement have lower rates of identity theft. Likewise, states with provisions that provide incentives to organizations to comply with notification requirements have lower identity theft. Finally, states with a provision that exempts organizations from notification laws if they have internal policies to notify customers also have lower identity theft.”

In addition to implementing safeguards to protect customer data, business organizations that warehouse customer data should also be aware of the jurisdictional procedures and legal requirements that are in place in the event that a data breach occurs.

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Farmobile Addresses Data Privacy Concerns in Contracts

Lauren Manning indicated late last week at AgFunderNews Online that, “Farmobile, an ag data collection and software service, is now offering farmers legal agreements that govern the ownership and control of their agronomic data.

“Developed in response to farmer feedback and concerns about the risks associated with sharing farm data, the agreements seek to simplify the relationship between a farmer and an Agricultural Technology Provider (ATP). This includes any company that uses a farmer’s data to provide decision support, field mapping, prescriptions, or other similar services.

“As big data becomes more common in farming, many farmers have expressed concerns about the data ownership rights involved. Once a farmer shares his or her data with a third party, he or she sometimes has little control over what happens to that data next. The vendor may sell the data to a marketing group or use the data for other purposes unrelated to servicing the farmer. Many farmers who use decision support services have no clue who has their data or what is being done with it.”

Ms. Manning added that, “In developing the agreements, Farmobile worked with the Farm Bureau Federation. Last year, the Farm Bureau led a coalition of ATPs and farm groups to develop the Privacy and Security Principles for Farm Data. This document outlines a number of policies to guide ATPs and farmers in creating clear legal relationships about farm data. The document underscores education, ownership, access, control, and transparency among other rubrics.

“‘To the best of my knowledge, Farmobile is the only company that offers farmers a way to receive value for their data,’ a spokeswoman for the Farm Bureau told AgFunderNews. ‘Some of my members believe the data provides them sufficient value by reducing input costs, etc. But the majority believe that if companies are benefitting from the use of their data, farmers too should benefit.'”

Recall that earlier this month, the Farm Bureau stated in a news release that: “A coalition of major farm organizations, commodity groups and agriculture technology providers (ATPs) debuted a tool designed to help farmers understand how their data will be used when they adopt precision agriculture technologies.”

In her AgFunderNews article, Ms. Manning also noted that, “According to the Farm Bureau spokeswoman…'[F]armobile’s agreements are currently under review with the Farm Bureau’s Transparency Evaluator, which will assess whether the agreement comports with the Privacy and Security Principles for Farm Data.’ [Jason Tatge, Farmobile founder and CEO] is one of the 37 signatories to the document and was a member of the group that developed the role of the Transparency Evaluator.”

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GMO Labeling Issues

Annie Gasparro reported yesterday at The Wall Street Journal Online that, “General Mills Inc. is changing its labels nationwide to indicate whether its foods contain genetically modified organisms, ahead of a Vermont law that will mandate it as of July.

“‘The complexity and the cost of having one system for Vermont and one for everywhere else is untenable,’ Jeff Harmening, the company’s chief operating officer of U.S. retail, said in an interview.

“He said he is still hopeful that Congress will pass a national law that would supersede such state laws, but the company had to move ahead to comply with Vermont.”

The article explained that, “Two years ago, the Vermont legislature passed a bill that made it the first state to require food makers to label products made with the technology. It stemmed from consumer backlash as some people raised concerns about their safety and environmental impact.”

Ms. Gasparro also reminded readers that, “General Mills’ decision comes after a federal bill that would pre-empt any state law on GMO labeling stalled on a procedural hurdle in the Senate two days ago, shortly before lawmakers left Washington for a two-week recess. Congressional aides were expected to continue the negotiations during the break.”

The Journal article added that: “The Vermont law applies only to packaged foods that contain GMO ingredients and fresh produce sold at retail outlets in the state. It doesn’t apply to meat and dairy products made from animals that consume GMO feed.”

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Early-Stage Investing in Start-Ups Has Changed in Recent Years

Katie Benner and Michael J. de la Merced reported in Monday’s New York Times that, “For the last few years, the spotlight in start-up investing has largely shone on those who poured money into a company when it was already well along on a growth path. It turns out that spotlight may have been misdirected.

“While some investors are throwing giant sums into more mature start-ups like Uber and Airbnb at soaring valuations, it is the venture capitalists who identify a promising company at its infancy and bet on its growth who often come out on top.

“Known as early-stage investors, they dominate a list of the top 20 venture capitalists worldwide that was recently created by the research firm CB Insights. About three-quarters of the top 20 are investors who put money into start-ups during their early rounds of financing. Only a handful on the list are focused on investing at a later stage in a company’s life.”

The Times article explained that, “The idea that early-stage investors can generate much larger returns has long been a core principle of venture capital: Get in early and grab a bigger stake in a company, with more opportunity for a larger return later, the thinking goes.

“Early-stage investments have accounted for the lion’s share of the venture industry’s gains since 1994, according to Cambridge Associates, a research firm that studied the quarterly financial reports of dozens of venture firms. Since the dot-com boom of the late 1990s, between two-thirds and three-quarters of the industry’s returns have been generated by early-stage investments in any given year.

“But the value of investing in a company when it is still nascent has been somewhat obscured in recent years as hordes of nontraditional start-up investors — including mutual funds, hedge funds and sovereign wealth funds — have piled into private tech companies, often when those start-ups are already proven growth stories. When Uber raised around $2.1 billion in December, for example, one of its investors was Tiger Global Management, a New York investment firm with a hedge fund component.”

The article added that: “Yet there is more risk in early investing, since unproven start-ups can easily fail;” however, “Early-stage investing has changed in recent years. The top-returning venture-capital investments in any given year were once dominated by just a handful of brand name, early-stage venture firms. That has shifted: Over the last decade, new venture firms have contributed to an increasing share of the best investments, according to Cambridge Associates.”

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Administrative Procedures Act Target of Senate Bill

Lydia Wheeler reported yesterday at The Hill Online that, “Senate Republicans unveiled legislation Thursday to crack down on regulatory overreach.

“The Separation of Powers Restoration Act would clarify the Administrative Procedures Act (APA) to state that courts, not agencies, are to interpret all questions of law, including both statutes and regulations.”

The article noted that, “The lawmakers say federal agencies have continued to accumulate more power since the Supreme Court’s 1984 ruling in Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc. That case, creating the Chevron doctrine, said that courts should defer to an agency’s interpretation of a statute as long as the statute is ‘ambiguous‘ and the agency’s reading is ‘reasonable.’
“Lawmakers say that deference allows agencies to rewrite laws and issue regulations as they see fit.”

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National Agricultural Law Center Outlines Important Ag Law Issues

Harrison M. Pittman, Elizabeth Rumley and Rusty Rumley of the National Agricultural Law Center, recently penned an interesting article titled, “14 ag law stories that could change the way you farm.”

The authors noted that, “Since 2015, there have been a number of legal developments for the agricultural sector. Many of these issues will continue to play out over the next year and will impact agriculture throughout the Mid-South and other regions of the country.

“In particular, there were important developments in environmental regulation of agriculture, food safety regulation, and use of drones in agriculture.”

The labeling of genetically modified foods was an issue identified in the article; the authors indicated that, “The issue of GM food labeling continues to be a hotly debated and controversial issue playing out at both state and federal levels of government.

“The Vermont GMO labeling law, set to go into effect on July 1, 2016, would be the first state law requiring mandatory labeling of certain foods containing GM ingredients. The Vermont law would require GM products to be labeled as ‘Produced with Genetic Engineering’ unless it falls under an exemption.”

Recall that the Senate failed to pass a measure to address this issue this week (a recap of this debate is available here), and the article also noted that, “An Ag & Food Law Consortium webinar from July 2015 provides an update on legal issues in GM labeling.”

Another issue identified in the article was food safety.

Specifically, the authors pointed out that, “While the Food Safety Modernization Act (FSMA) was signed into law almost five years ago, 2015 was an important year in terms of implementation. Two major regulations — the ‘produce safety rule’ and the ‘good manufacturing practices’ rule — were finalized.

“The produce safety rule addresses growing, harvesting, and packing holding conditions of fruits and vegetables that are typically consumed raw. The good manufacturing practices rule outlines requirements, including the necessity of a written food safety plan and monitoring preventative controls that covered facilities must meet.

“Together, these rules regulate the majority of food that American consumers purchase and consume.”

With respect to the Endangered Species Act, the paper stated that: “The Endangered Species Act, a federal law meant to protect endangered and threatened species, continues to stir controversy. Lawsuits have been filed against the U.S. Fish and Wildlife Service (FWS) by organizations in several states, asking that specific species be ‘delisted‘ and protections for those species be removed.

“Other new lawsuits argue to the contrary — that FWS acted wrongfully in refusing to list other species, denying them the protection of the law.

“Meanwhile, Congress has considered several bills and dozens of riders that might change either the mechanism of the law itself or the ability of FWS to enforce its provisions.

“An Ag & Food Law Consortium webinar provides a basic overview of the structure, operation, and implementation of the Endangered Species Act.”

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