Legal News

Supreme Court Punts on Karsky Appeal

Soft drink giant Coca Cola is feeling the fallout from evidence that its employees rigged market acceptance tests of Frozen Coke. A lawsuit filed by a former Coke manager alleged that Coke marketing employees improperly influenced marketing tests conducted in Burger King restaurants three years ago by paying customers to purchase Value Meals featuring Frozen Coke in test markets. The inflated sales data generated from the tests prompted Burger King franchisees to purchase over $65 Million in Frozen Coke equipment for their restaurants. Sales of Frozen Coke in Burger King outlets have not met franchisees’ expectations. Coke has admitted that its employees rigged the tests and have offered over $20 million to Burger King and its franchisees to settle any claims.

The accusations have also prompted a criminal investigation from a Federal Grand Jury in Atlanta. Coke acknowledged the criminal probe in July and has pledged to cooperate with the government. Burger King has also acknowledged receiving subpoenas from the Grand Jury.


Texas Will Not Appeal Verdict Allowing Direct Wine Shipments

The Texas Alcoholic Beverage Commission has decided against appealing a decision of the 5th U.S. Circuit Court of Appeals allowing direct wine shipments to Texas consumers. Earlier this year the Appeals Court upheld a District Court decision that the Texas regulations prohibiting direct shipments of out of state wines violated the interstate commerce clause of U.S. Constitution. Wholesale distributors, who act as middlemen between producers and consumers and take a cut of all Texas wine sales, had persuaded the Commission to keep the restrictions in spite of efforts from wine consumers to open up the market for direct to consumer shipments. The Commission and wholesalers had maintained throughout the litigation that loosening the rules would make it easier for children to order alcohol. Under the court decision, adult consumers living in parts of Texas that allow alcohol sales can purchase wine from out of state and have it shipped by any of 400 carriers licensed to carry alcoholic beverages in the state such as United Parcel Service. Shipping wine through the U.S. Postal Service is still illegal.

Practice Note: Many other states still have restrictions on direct to consumer wine shipments. Zackler & Associates can provide you with a current listing of wine shipping rules for all 50 states and the District of Columbia.


European Court Sides with Producers in Geographical Food Names Dispute

The European Court of Justice has resolved a longtime dispute over the use of geographic names on food products. The Court sided with two Italian trade associations that sued over the use of the Parma ham and Grana Padano cheese names on cheeses and hams that had been sliced, grated and packaged outside of their Italian production regions. The Court reasoned that the grating of cheese and the slicing of ham constituted “important operations which may damage the quality and authenticity and consequently the reputations of the geographical names” if those requirements are not followed. As a result of the ruling, distributors or retailers can no longer use geographic designations if they choose to slice, shred or re-package these products outside of the production regions.


New California Organic Law Goes Into Effect

The first significant changes in California’s 1990 pioneering organic labeling law became effective on January 1, 2003. The changes conform California law to the National Organic Program (“NOP”) rules established by the USDA. The new law is intended to included organic labeling of products not covered by the NOP, specifically cosmetics; but the statutory language as well as the rules that have been promulgated by the California Department of Agriculture include any product that is labeled organic. This would include products such as clothing or lumber.


Racketeering Law Allows Competitors and Employees to Sue Companies Hiring Illegal Workers

RICO Isn’t Limited to the Tony Soprano School of Management

In separate decisions two United States Circuit Courts of Appeal have held that competitors and employees of companies that have a business practice of hiring undocumented workers can sue those companies under the Racketeer Influenced and Corrupt Organizations Act of 1970 which is commonly known as RICO. While RICO is far too complex and esoteric to fully explain in this article, one of its requirements is that the defendant engaged in certain “predicate acts,” the most common of which are mail and wire fraud. RICO encourages private lawsuits by giving successful plaintiffs treble damage recoveries and reimbursement of their attorney fees.

RICO’s coverage of hiring undocumented workers has not been in question because Congress amended RICO to make the knowing hiring of undocumented workers a predicate act. What has been in issue is who could sue a company that had such a engaged in such practices. The Ninth Circuit Court of Appeals recently held in Mendoza v. Zirkle Fruit Co. that employees of two Washington State fruit packers could sue their employer for knowingly hiring undocumented workers in order to depress wage rates. Previously the Second Circuit, which is based in New York, held in Commercial Cleaning Services v. Colin Service Systems that a janitorial services company could be sued if they hire undocumented workers in order to pay lower wages and thereby under bid its competitors.

Both lawsuits were in part supported by The Federation for American Immigration Reform or FAIR. In a press release FAIR stated that similar lawsuits are pending against Tyson Foods and IBP and that the organization expects many more workers and businesses to take advantage of the rulings.

Note that the occasional hiring of an undocumented worker is not a RICO violation. On the other hand, the deliberate failure to check worker immigration status could be characterized as an intentional scheme under RICO. Zackler & Associates can review your hiring practices for potential RICO related issues.