What recourse do businesses have when their products are incorrectly identified as the source of a foodborne illness outbreak? For the time being, it appears that the answer to that question is “very little.” In a recently dismissed lawsuit concerning FDA’s 2008 warnings linking tomatoes to a Salmonella outbreak in New Mexico and Texas, which proved to be wrong, a federal court held that the government’s error did not constitute a regulatory “taking” under the Fifth Amendment, even though the warnings had significant financial impact on the marketplace. Despite the court’s decision, and its impact on prospective regulatory takings claims, a compensation provision under the Food Safety Modernization Act (FSMA) provides a potential avenue of recourse for farmers, and it is likely that litigants will test this compensation theory in the future.

Trace-back procedures are a notorious mix of art and science, in which individuals that have been sickened by an adulterated food are asked to recall everything they have eaten in the last several days (often after a very unpleasant and painful day or two). The Centers for Disease Control and Prevention (CDC) work with FDA to cross-reference common foods eaten by the sickened individuals in order to trace back the root cause through the supply chain. In some cases, a positive pulsed-field gel electrophoresis (PFGE) fingerprint of the responsible pathogen is never linked to the recalled product. When produce is involved, there can be significant co-mingling during distribution, and that does not account for multiple-ingredient products, like fresh salsa. While trace-back procedures continue to improve, misidentification incidents are nearly certain to occur again.

Under FSMA, Congress instructed the Comptroller General of the United States to consider which mechanisms are available to compensate persons for recall-related costs when a recall is later determined to have been in error. Congress also instructed that, if the Comptroller General determines that such compensation mechanisms are inadequate, the USDA would be required under FSMA section 206(e) to study the feasibility of implementing a farmer indemnification program to provide restitution to farmers for losses sustained as a result of a mandatory recall that is later determined to be in error.

In July 2012, the U.S. Government Accountability Office (GAO) issued a report on FDA’s food advisory and recall process in order to, among other things, identify mechanisms that may compensate the food industry for erroneously ordered food recalls or erroneous food-related advisories. The GAO report noted that tomato growers and shippers lost around $145 million because of FDA’s 2008 warning that incorrectly linked tomatoes with Salmonella. In the report, GAO identified various government mechanisms that might be available for these purposes, but it found no examples that such mechanisms have actually been used to provide the type of compensation contemplated by Congress under FSMA.

While GAO did not state specifically that existing compensation schemes are inadequate, the report seems to suggest the same and leaves open the possibility that USDA could examine the feasibility of implementing a farmer indemnification program. Another possibility is that Congress could, as GAO suggests, consider a one-time legislative act for specific events as a mechanism to provide one-time funding for affected industry members after an instance of an erroneous food recall or advisory. Although the measure was not enacted, Congress considered a bill in 2008 that proposed $100 million in emergency assistance to tomato growers and handlers to address losses associated with FDA’s 2008 advisory.

At the end of the day, however, the food industry is left with no clear compensatory scheme in the case of an inaccurate trace back and, with FDA’s broad authority to publicize public health risks, little recourse once FDA has made up its mind about the source of an outbreak.