U.S. v. Farinella

• Decision Date: 12 March 2009
• Docket Number: No. 08-1839.,No. 08-1860.,08-1839.,08-1860.
• Citation: 558 F.3d 695
• Parties: UNITED STATES of America, Plaintiff-Appellee/CrossAppellant, v. Charles FARINELLA, Defendant-Appellant/CrossAppellee.
• Court: U.S. Court of Appeals — Seventh Circuit

558 F.3d 695

UNITED STATES of America, Plaintiff-Appellee/CrossAppellant, v. Charles FARINELLA, Defendant-Appellant/CrossAppellee.

No. 08-1839.

No. 08-1860.

United States Court of Appeals, Seventh Circuit.

Argued February 17, 2009.

Decided March 12, 2009.

David E. Bindi (argued), Office of the United States Attorney, Chicago, IL, for Plaintiff-Appellee/CrossAppellant.

Michael B. Nash (argued), Chicago, IL, for Defendant-Appellant/CrossAppellee.

Before POSNER, KANNE, and WOOD, Circuit Judges.

POSNER, Circuit Judge.

The defendant was convicted by a jury of wire fraud, 18 U.S.C. § 1343, and of introducing into interstate commerce a misbranded food with intent to defraud or mislead. 21 U.S.C. §§ 331(a), 333(a)(2). The judge sentenced him to five years' probation (including six months of home confinement) and to pay a $75,000 fine and forfeit the net gain from the offense, which was in excess of $400,000. The government's cross-appeal challenges the sentence as too lenient. The defendant's appeal primarily argues that there was insufficient admissible evidence to convict him of misbranding. The briefs contain no separate discussion of the wire-fraud charge, and we construe the statement in the government's brief that the misbranding count was "the basis of" the wire-fraud charge as a concession that if the misbranding charge falls, the wire-fraud charge falls with it.

The facts, stated as favorably to the government as the record permits, but without extraneous detail, are as follows. In May 2003 the defendant bought 1.6 million bottles of "Henri's Salad Dressing" from ACH Foods, which in turn had bought it from Unilever, the manufacturer. The label on each bottle said "best when purchased by" followed by a date, which had been picked by Unilever, ranging from January to June 2003. ACH had purchased Henri's Salad Dressing from Unilever when the "best when purchased by" date was approaching. The intention was to sell the salad dressing to consumers through discount outlets. The defendant accordingly resold the salad dressing he bought from ACH to "dollar stores," which are discount stores, but before doing so he pasted on each bottle, over the part of the label that contains the "best when purchased by" date, a new label changing the date to May or July 2004. The government calls these the dates on which "the dressing would expire." That is itself false and misleading, and is part of a pattern of improper argumentation in this litigation that does no credit to the Justice Department. The usage echoes the indictment and was employed repeatedly by the prosecution at trial; in her opening argument the principal prosecutor said that "it's a case about taking nearly two million bottles of old, expired salad dressing and relabeling it with new expiration dates to pass it off as new and fresh.... [N]obody wants to eat foul, rancid food." The term "expiration date" (or "sell by" date, another date that the government's brief confuses with "best when purchased by" date) on a food product, unlike a "best when purchased by" date, has a generally understood meaning: it is the date after which you shouldn't eat the product. Salad dressing, however, or at least the type of salad dressing represented by Henri's, is what is called "shelf stable"; it has no expiration date.

ACH had faxed the defendant that it would guarantee the freshness of the salad dressing for up to 180 days past the "best when purchased by" date, but the dates that he had affixed to them were more than 180 days after the dates that Unilever had picked. ACH received some complaints about the relabeling, though none about the taste or other qualities of the salad dressing, and complained in turn to the defendant, who stated that he had checked with the Food and Drug Administration and that the relabeling was okay. He had not checked with the FDA. He made other false statements as well, but they are not the basis of the misbranding charge, because they are not statements that appeared on the labels that he put on the bottles. That charge, upon which as we said the government's entire case depends, is limited to the change of the "best when purchased by" dates on the labels. It is conceivable that ACH or Unilever might have a tort or contract claim against the defendant for altering the "best when purchased by" date and pretending to have been authorized by the FDA to do so, but that has nothing to do with this criminal case.

It is important to understand what else this case does not involve, and also what is not in the record—the omissions are more interesting than the scanty contents of the government's threadbare case. There is no suggestion that selling salad dressing after the "best when purchased by" date endangers human health; so far as appears, Henri's Salad Dressing is edible a decade or more after it is manufactured. There is no evidence that the taste of any of the 1.6 million bottles of Henri's Salad Dressing sold by the defendant had deteriorated by the time of trial—four years after the latest original "best when purchased by" date—let alone by the latest relabeled "best when purchased by" date, which was 18 months after Unilever's original "best when purchased by" date. There is no evidence that any buyer of any of the 1.6 million bottles sold by the defendant has ever complained about the taste.

The term "misbranded food" is defined in some detail in 21 U.S.C. § 343, but there is nothing there about dates on labels, so that the defendant's conduct if illegal is so only if it can be said to be "false or misleading in any particular." § 343(a)(1). No regulation issued by the Food and Drug Administration, or, so far as we are informed, by the Federal Trade Commission or any other body, official or unofficial, defines "best when purchased by" or forbids a wholesaler (as here) or retailer to change the date. There is evidence that Unilever picked the "best when purchased by" dates on the basis of tests that it conducted, but the tests were not described at the trial and we do not know whether for example they are taste tests.

There is also and critically nothing in the record concerning consumers' understanding of the significance of "best when purchased by." Without evidence of that understanding, whether the defendant's redating was misleading cannot be determined. No consumer evidence was presented, whether as direct testimony or in survey form. The government's able appellate lawyer surprised us by arguing that if the manager of a grocery store, after tasting Henri's Salad Dressing, decided that there was no diminution of flavor after two years and relabeled the bottles accordingly, he would be guilty of the crime of misbranding, just like the defendant. Conceivably consumers understand the "best when purchased by" date to refer to a date picked by the manufacturer, but there is no evidence of that and it is not, as the government believes, self-evident.

No evidence was presented that "best when purchased by" has a uniform meaning in the food industry. The government wants us to believe that it is a synonym for "expires on" but presented no evidence for this interpretation, and indeed argues the point by innuendo, simply by substituting in its brief, as in the indictment and in the prosecution's statements at the trial in the hearing of the jury, "expires on" for "best when purchased by."

The parties have found no previous case, either criminal or civil, and no administrative proceeding, in which alteration of the "best when purchased by" date was challenged as unlawful. As far as the evidence shows, any firm in the chain of production and distribution that leads from the manufacturer to the ultimate consumer can make its own judgment of when the taste of the product is likely to deteriorate. For all we know, the date is determined less by a judgment about taste than about concern with turnover. The manufacturer might want to affix an early "best when purchased by" date so that his distributors would be more inclined to repurchase the product within a reasonably short time, so that he has more sales. Admittedly, this is speculation, for while a date in the near future will increase turnover it will do so at the cost of making each bottle less likely to be sold at retail, and hence less valuable. Grocery stores pay less for bottles that are less likely to be sold. The cost of restocking shelves more frequently also would drive down the price to the manufacturer.

Another possibility is that labeling a product with a "best when purchased by" date is a method of price discrimination. After that date, products are not destroyed, for they are not only safe but also, as far as the record shows, of undiminished quality for an indefinite time. But well-off consumers prefer to buy before that date, and after the date passes the product will be sold at a discount in dollar stores or their equivalent, catering to less well-off consumers. In economic lingo, the label invites consumers to sort themselves into two groups, one of less-elastic demanders willing to pay a higher price for what may or may not be a higher-quality good and the others preferring the discount.

So was the defendant ripping off the consumer by selling salad dressing after its "best when purchased by" date had passed, without disclosing the fact? Apparently not, because it sold the salad dressing to dollar stores rather...