Executive Order on the Food Supply Chain and the Defense Production Act: FAQs

Executive Order on the Food Supply Chain and the Defense Production Act: FAQs

Legal Sidebari

Executive Order on the Food Supply Chain
and the Defense Production Act: FAQs
May 1, 2020
On April 28, 2020, President Trump issued an executive order (EO) invoking the Defense Production Act
(DPA) to address the food supply chain for meat and poultry products during the national emergency
caused by the COVID-19 outbreak. The release of the EO was preceded by some state and congressional
calls for such an order, and significant media coverage about the potential contents of such an order. This
Sidebar addresses some frequently asked questions about the EO’s contents, legal bases, and potential
effects.
What does the EO do and how does it use the DPA?
The EO designates “meat and poultry in the food supply chain” as “critical and strategic materials” under
section 101(b) of the DPA. This section of the DPA permits the President to control distribution of
designated materials in the civilian market, if: (1) the material is determined to be essential to the national
defense, and (2) that the requirements of the national defense cannot be met through other means “without
creating a significant dislocation of the normal distribution” of the designated material “to such a degree
as to create appreciable hardship.” Having made such a finding, the EO authorizes the Secretary of
Agriculture to “take all appropriate action under [section 101(b)] to ensure that meat and poultry
processors continue operations consistent with the guidance for their operations jointly issued by the
[Centers for Disease Control and Prevention (CDC)] and [the Occupational Safety and Health
Administration (OSHA)].” Based on a plain reading of the text, the EO itself does not order any plants to
remain open. Rather, it permits the Secretary to issue regulations, orders, or take other actions to address
continued operation of processors, while also ensuring that processors adhere to the CDC/OSHA
guidance.
The EO further authorizes the Secretary to “identify additional specific food supply chain resources” as
“critical and strategic materials” under the DPA. Based on this authorization, the Secretary could
conceivably extend the reach of the EO beyond meat and poultry to any other commodity or resource
within a food supply chain, provided these commodities or resources satisfy the requirements of section
101(b).
Finally, the EO provides additional authority under section 101(a) of the DPA to allow the Secretary to
prioritize contracts or “allocate materials, services, and facilities as deemed necessary or appropriate to
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promote the national defense.” To implement this part of the EO, the President has also delegated
authority to the Secretary to, among other things, issue regulations and orders, require information or
records from any person, and seek to enforce DPA orders (discussed in more detail below). The U.S.
Department of Agriculture (USDA) currently has regulations, known as the Agriculture Priorities and
Allocations System (APAS), in place to set out how it will implement section 101 during emergencies and
non-emergencies, as directed by President Obama’s Executive Order 13603. President Trump’s new EO
seeks to ensure that USDA may create new or amended regulations if USDA believes it necessary to
address the COVID-19 emergency (i.e., USDA may rely on existing regulations, but could also issue new
or amended regulations).
How does an agency implement a DPA EO?
There is not necessarily a standard way of implementing an EO implicating the DPA, as much depends on
the contents of any EO and the fact that agencies have discretion to issue regulations and orders within the
scope of their authority, as they believe appropriate. That said, USDA appears, at least initially, to be
attempting to implement the EO via negotiation as opposed to more coercive measures (e.g., orders
directed to specific processors or regions). On April 29, 2020, USDA issued a statement that it intends to
first “work with meat processing [plants] to affirm they will operate in accordance with the CDC and
OSHA Guidance, and then work with state and local officials to ensure that these plants are allowed to
operate.”
Are there penalties for processors that fail to comply with DPA orders?
The DPA empowers the President and agencies to enforce DPA orders in several ways. First, they may
seek injunctions or restraining orders in federal court to require an entity to do or refrain from doing
something in violation of a DPA order. Second, they may promulgate regulations imposing liability on
non-compliant parties. These regulations may incorporate the statutory penalties set out in section 103 of
the DPA, which states that “any person who willfully” violates the statutory or regulatory provisions
involving Title I of the DPA (i.e., allocation or prioritization of contracts and orders against hoarding
supplies) may be fined up to $10,000 or imprisoned for not more than one year, or both.
USDA currently has regulations addressing compliance under its APAS program. If USDA chooses to rely
on these regulations to implement the prioritization and allocation of orders under the current EO, it could
also seek to rely on the penalty components of these provisions if processors refuse to comply with DPA
orders.
Does the EO or DPA limit the legal liability of processors?
The EO contains no reference to legal liability or immunity from lawsuits for affected processors and, on
its own, does not grant immunity to processors. However, the DPA contains a provision that provides
parties subject to DPA orders with a defense against liability, which applies regardless of whether an EO
expressly references it. Section 707 of the DPA states as follows:
No person shall be held liable for damages or penalties for any act or failure to act resulting directly
or indirectly from compliance with a rule, regulation, or order issued pursuant to this chapter,
notwithstanding that any such rule, regulation, or order shall thereafter be declared by judicial or
other competent authority to be invalid.
As an initial matter, this provision is not a blanket grant of immunity from liability for all actions that an
entity may take under a DPA order. Rather, the act (or failure to act) in question must “result[] directly or
indirectly from compliance” with an EO or other rule, regulation, or order issued by an agency. Thus,
while an entity may raise a DPA order as a defense if sued for actions taken while complying with that

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order, whether that entity will ultimately be granted immunity by a court is a fact-specific inquiry. This is
evident from a case in which a federal court of appeals rejected a company’s argument that it was immune
from liability for toxic waste cleanup costs because it was producing Agent Orange under a DPA order for
the federal government.
Moreover, whether section 707 extends beyond breach of contract situations to tort law (e.g., negligence
or product defect claims) remains debated and under-litigated. On its face, section 707 does not
differentiate between contract and tort law, which may indicate it could apply to both types of disputes
provided the act in question resulted “directly or indirectly” from compliance with a DPA order. As one
federal district court has noted, Congress originally designed section 707 to apply only to contract issues,
but Congress later removed the section’s express reference to contractual liability. Given this legislative
history, it may be that Congress intended that entities subject to DPA orders could raise section 707 as a
defense in both contract and tort litigation. But, as that same district court pointed out, it may be “unlikely
that Congress would work such a major change in tort law without being explicit about it.”
In sum, the precise scope and applicability of section 707 is unclear for at least two reasons: (1) it is
undecided whether and how far it extends beyond contract disputes to tort litigation, and (2) whether an
action in dispute results “directly or indirectly” from compliance with a DPA order is fact-specific and
must be determined on a case-by-case basis.
Does OSHA’s enforcement policy limit legal liability for processors?
OSHA’s interim enforcement response plan, as clarified by a statement of enforcement policy, does not
affect processors’ legal obligations. The response plan and enforcement policy are mechanisms used to set
out broadly OSHA’s enforcement priorities and indicate how it will exercise its enforcement discretion.
Thus, although OSHA indicates that it “does not anticipate citing employers that adhere to” the
CDC/OSHA guidance for operations, this is not a guarantee of non-enforcement or immunity.
Potentially to address processor concerns about legal liability resulting from continuing operations,
OSHA has indicated a willingness to entertain requests from processors that are sued for alleged
workplace exposure to COVID-19 to participate in the litigation, provided the processor being sued has
“demonstrated good faith attempts to comply” with the CDC/OSHA guidance. However, this is not a
promise to participate in litigation. Further, OSHA has extended a similar offer to employees, indicating it
may opt to participate on behalf of the employees “if their employer has not taken steps in good faith” to
comply with the CDC/OSHA guidance.

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