Product Recall Therapy, Natural Products Insider by Ronald J. Levine

1. The hypothetical sauce company Tasty Peanut Sauce is a young food
company focused on building a name in a highly competitive marketplace. As
the head of a startup, Tasty’s hypothetical CEO has a hundred concerns
keeping him up at night. High on his list? He’s been reading about pathogen

2. outbreaks and is well aware recalls can cost companies millions of dollars
and even have resulted in executives going to jail. It’s gotten so bad that he’s
now having nightmares about a product recall, so he calls his outside legal
counsel for advice. Here’s a transcript of a call where the company’s
hypothetical lawyer tries to help him come to terms with his fears.
The Session Begins
CEO: I’ve been having terrible nightmares about a potential recall. Am I
crazy? Or is Tasty Peanut Sauce a sitting duck?
Lawyer: You’re not crazy. Food companies have been issuing quite a few
recalls, and they’re under the microscope of government agencies and
plaintiffs’ lawyers. I wish I could point you to a single cause to look out for,
but a host of triggers are tough to avoid. You could face a recall due to
mislabeling, undeclared ingredients, contamination during production, or
even issues with adulterated ingredients from suppliers further down the
food chain. No matter how carefully you try to avoid a recall, you may have to
conduct one. The best thing you can do is to try to avoid a problem, and
preemptively plan for one, so you’re not taken by surprise.
Preemptive Plan
CEO: Where would I start if I had to deal with a recall?
Lawyer: You first want to discover the source, root cause and extent of the
problem. That means Tasty should develop and implement a traceability
program for your suppliers and ingredients. After that, you’ll need to locate
where your affected products have been shipped. In addition, Tasty must be
able to rapidly communicate with distributors and customers. All of this is
important, but ideally you want to do everything possible to not go down this

3. path. Prevention should be your top priority, and that starts by cultivating a
food-safety culture at Tasty that institutes manufacturing best practices,
including monitoring facilities with spot checks to ensure safe operating
procedures.
CEO: Sounds like we need a plan in case we must recall our sauce. Correct?
Lawyer: Absolutely. A formal recall plan is not only an essential
manufacturing best practice, but it is mandated in several laws. You must
have a team prepared in advance to implement the recall, and they must be
well-trained on the necessary steps to execute the plan. It can’t be a plan that
sits in a file drawer.
CEO: I already have so much on my plate. Do I need to drop everything to
get on this?
Lawyer: The coordination of the recall itself doesn’t have to fall on your
shoulders, although you should take the lead in planning. You can assign the
overall coordination of any recall situation to a trusted senior executive. This
recall manager should then identify a “recall team” made up of managers and
other key personnel throughout the company who can contribute to the
management or implementation of a potential recall. That said, you can’t
stick your head in the sand. When it comes to product safety, the buck stops
with you.
Test the Plan
CEO: I guess we should write a plan, appoint a point person and wait.
Lawyer: You can’t sit back and wait for the hammer to fall. The best food
companies test their response plans by conducting simulations. A table-top

4. exercise can reveal deficiencies in your response protocols and help
familiarize the team with their roles and the procedures to be implemented
in a recall.
CEO: If we simulate a recall, who should be involved?
Lawyer: The recall manager should decide who to keep informed as the
recall unfolds. In most situations, that includes consumers, distributors and
retailers, Tasty’s financial lenders, media outlets and regulatory bodies.
Statements and key messages should be tailored to each audience, so Tasty is
addressing the specific aspects of the recall that affect them. I suggest you
turn to public relations (PR) experts with knowledge and experience in
working on food recalls for help in creating and disseminating these
messages, especially if it involves the use of social media, where
misinformation and poorly worded responses can spread quickly and tarnish
all the good work you’re doing.
The Mouthpiece
CEO: If we have a recall, should I be prepared to be the “face” of the
company?
Lawyer: Not necessarily. In some cases, you can appoint a spokesperson
with excellent communication skills. Depending on the scope of the recall,
you might find it useful to pair them with another spokesperson or appoint
two spokespeople to handle different elements; for instance, one person can
handle supplier questions, and the other can handle investor outreach. If
that’s the case, be sure to try to speak with one “script,” so the messages to all
audiences are in sync. Questions from consumers and the media should be
directed to a centralized corporate response center to ensure current and
accurate information is communicated. Employees should be instructed not

5. to communicate with the press, but to immediately refer all inquiries to a
designated media relations official. In everything you do, be aware that
overzealous plaintiffs’ lawyers will drill down on everything the company
does during a recall, and some may use poorly phrased statements against
the company in litigation.
CEO: Any suggestions on how we can get up to speed on this front?
Lawyer: Tasty should work with its PR consultants with experience in
regulatory matters to develop a library of reference materials regarding the
company and its products, as well as a list of spokesperson and media
relations guidelines, and drafts of press statements for potential recalls that
can be quickly edited to address a specific situation. This is not an attempt to
manipulate the news, but a response to the fact that bad news travels quickly,
so you need to ensure the story is balanced from the outset.
CEO: What would we say?
Lawyer: Some lawyers are overly cautious and steer their clients toward a
“no comment.” I’m not a fan of that approach. I prefer my clients
aggressively address the situation and let their customers know they’re
concerned about their welfare. If the facts warrant, you should stress Tasty’s
concern for any harm or inconvenience and talk about how Tasty will
address the problem. It’s essential to keep the public informed as you do
everything you can to correct the problem and ensure the safety of your
product. Of course, any statement should be reviewed by counsel since it can
be used later by an adversary if a lawsuit develops.
CEO: If we prepare a press release in advance, what should it include?

6. Lawyer: You should have a press release prepared, so you can fill in the
details when necessary. It should provide a clear and detailed description of
the product, including things like lot number, production date and pictures;
as well as a concise explanation of the action the company is taking and the
potential health hazards. You should also include directions on handling or
disposing of the product, the company’s refund policy, and the contact
information for representatives at Tasty who can provide more information.
On refunds, you want to communicate a convenient procedure for
consumers, but in a way that avoids fraudulent refund claims from people
who didn’t purchase the product.
CEO: I can only imagine we would be under attack on social media!
Lawyer: That’s possible. Building a proactive social media plan is an
essential part of the recall strategy. You’ve done a phenomenal job promoting
your brand on social media, but you can’t retreat from it when your product
is under attack. You might want to consider implementing a social media
monitoring tool that can track postings and possibly tip you off about a
problem with your product.
Documentation management
CEO: Contamination can originate in ingredients from our suppliers. Should
you be reviewing our purchase and sale contracts?
Lawyer: Definitely. Certain provisions should be in your supplier contracts.
For example, you should require suppliers to assume the liability for their
products in case of a recall. Let’s also require suppliers to add your business
to their insurance policies as an additional insured party. And, you may want
to disclaim certain warranties to help minimize losses from negligence or
liability claims.

7. CEO: And I assume we need to worry about everything we are putting in
writing?
Lawyer: The recall may not be the end of the story. Well after the recall is
complete, consumers impacted by the adulterated product could file a class
action complaint. The government, as well as plaintiffs’ lawyers, also may
seek access to the company’s records, including documents related to
production, sanitation and sales, and documents generated during the recall.
Tasty must keep its eye on recording the steps it takes to address any past
food safety issues and the recall process. Everyone in the company must be
fully engaged and aware of potential pitfalls if they fail to record their actions
appropriately. In my “safe email and texting” classes for clients, I teach
employees how to refrain from putting speculative or spontaneous
comments in writing, because they can be used against the company. For
example, employees often say, “I’m not a lawyer but … ” before they go ahead
and speculate on liability. This must be avoided.
Costs and Insurance
CEO: How is this going to impact my bottom line?
Lawyer: Well-publicized product recalls have cost companies tens or even
hundreds of millions of dollars in lost sales, goodwill and reputational
damage. Direct costs can include the value of the tainted product,
notification costs, product transportation and destruction, and additional
labor and space to deal with destroying the product. Indirect costs can
include lost sales, including potential loss of customers, business
interruption and legal liability, especially if consumers suffer physical injury
from contamination or mislabeling. I hate to add this, but some have even
resulted in criminal prosecution.

8. CEO: This sounds scary and expensive. Should I also look at our insurance
coverage?
Lawyer: Yes. A standard commercial general liability policy will hopefully
provide a defense and indemnity for lawsuits brought by consumers alleging
physical sickness from your products. To trigger coverage, there would
probably have to be actual physical injury alleged by the plaintiff. The mere
risk of future bodily injury will generally not trigger coverage. Moreover,
your general liability policy probably doesn’t cover damage to your own
product and would not cover Tasty’s economic losses associated with a recall.
CEO: Is there special recall insurance?
Lawyer: Yes. Most recall policies do not require actual bodily injury to
trigger coverage. Rather, depending on the wording, it is sufficiently
triggered if the contamination would likely result in bodily injury within a
certain time after consumption, which could be up to one year. That’s
important because a recall could be required in the absence of direct
contamination or actual bodily injury. Policies cover recall and replacement
expenses, such as the cost to pull the product from store shelves and replace
it; lost profits; investigative costs to determine the cause of the
contamination; and crisis management expenses. I would start by talking to
your insurance broker about your current coverage and possible additional
coverage in these areas.
CEO: Thanks for this recall therapy session. We covered a lot, but I think I
have all the tools I need to address a recall and put an end to my recall
nightmares.

9. Source URL: https://www.naturalproductsinsider.com/legal-compliance/product-recall-therapy
Ronald J. Levine is an independent consultant with EAS Consulting Group
and serves as general counsel of Herrick, Feinstein LLP . Levine has 40
years of experience advising consumer products companies in complex
commercial matters. A pragmatic advisor who helps clients anticipate,
minimize and resolve the financial and reputational damage arising from
claims and potential claims, Levine specializes in crisis management, for
food and beverage manufacturers, and advises on class action litigations
and investigations, including serving as an expert witness, related to
labeling, the Food Safety Modernization Act (FSMA), advertising claims,
product recalls, FDA regulations and other concerns.