Last week, Jensen Farms, the grower of the cantaloupe implicated in the Listeria outbreak of 2011, filed for bankruptcy. Prominently listed in the filing were lawsuits associated with the outbreak, from which 146 people were sickened and 36 died. According to the Denver Post, Jensen’s attorney said the filing should free up millions of dollars in insurance and other funds.

Foodborne illness attorney Bill Marler has filed at least 11 lawsuits and is representing almost 40 families or persons said to have been sickened or killed because of the contaminated cantaloupe. According to an article in Marler-published Food Safety News, the bankruptcy filing means that his clients

“can move on to file lawsuits against companies further down the supply chain: Frontera Produce, the cantaloupe distributor; retailers such as Walmart and Kroger; and Primus Labs, the third-party auditor whose subcontractor, Bio-Food Safety, gave Jensen Farms facilities a ‘superior’ inspection rating just six days before the outbreak began.”

“Bankruptcy of Jensen Farms was a necessary prerequisite to allowing families of those who died and those who were injured to seek compensation against Frontera, Primus, suppliers and retailers,” Marler said.

If Mr. Marler is successful in bringing and winning these cases, it is telling us that someone as distant from the farm as the retailer is highly vulnerable to being sued if a farmer’s product makes someone sick and that farm then declares bankruptcy. If you sell adulterated food – or have some role in handling, distributing, or maybe even transporting anywhere along the food chain of that adulterated food, you would be liable to some extent – regardless of the cause or origination of the contamination.

What does this mean to you and the industry?

We are back to that old issue of controlling risk in the supply chain. It is becoming increasingly important  that you spend time assessing and addressing risk across your product line supply chains. As we’ve seen in recent outbreaks, it is not enough to focus on historical incidents – cantaloupe was not known to carry Listeria; raw egg has long been a factor in Salmonella outbreaks, but it was likely the cookie dough flour that caused that 2011E.coli O157:H7 outbreak.

Risk assessment is not only critical for consumer and brand protection, it is a key aspect of the preventive provisions of FSMA. In fact, the pending rule, Hazard Analysis and Risk-Based Preventive Controls (Section 103) focuses directly on this area. As we stated in a previous newsletter, preventive controls should be tied to preventing foodborne illness, not just decreasing product contamination.

The vulnerability of not knowing and validating your entire supply chain is becoming more evident. One forward, one back may still be law for product tracking, but back to the farm is fast becoming the legal definition of responsibility. And without continuing the barrage against third-party auditors too heavily, it is a responsibility that processors and retailers are becoming leery of outsourcing, especially for high-risk products. And should these companies decide to conduct all their own supplier assessments and audits because they no longer trust outsourced audits, it could force food-industry consolidation and will fly in the face of robust programs like GFSI. I would like to bet that a Kroger or a Walmart would rather conduct 50 audits of large farms than be forced to audit 500 small farms. It is a potential that does not bode well for small suppliers, and could literally cut them out of the loop for many retailers.

In addition, whether or not such potential would come to fruition, supply chain management is specifically listed as an area for which risk-based preventive controls are required by the Food Safety Modernization Act (FSMA). As noted in a previous newsletter on FSMA key provisions, as part of its food safety plan, a facility may be required to document sanitation procedures, a recall plan, a food allergen control program, supplier verification activities, and environmental sampling testing.

In a late 2011 speech, FDA Deputy Commissioner for Foods Michael R. Taylor discussed the need for partnerships across the food sector. While his primary message was focused on the globalized food supply chain, the message is just as applicable to management of your entire supply chain: No matter where we call home, what language we speak, or culture or economy we follow, we are connected through the global marketplace, and that, as well as the implementation of the U.S. Food Safety Modernization Act, make it more critical than ever before that everyone–foreign and domestic–work together as partners in food safety.

The tough reality today is that if you aren’t partnering with, assessing, and validating every supplier all the way back to the farm; if you aren’t assessing and addressing risk of all the ingredients and products your purchase, process, or sell – instead of the companies being named in today’s headlines, tomorrow’s name on the foodborne-illness lawsuit could be yours. This situation creates massive economic pressures on a system that is built on low margins and thus will be a force toward vertical integration and consolidation which is exactly what someU.S.consumers are pushing hard against. Somewhere in this mix there is a balance, but as with Mr. Marler’s cases noted above, not without a lot of pain along the way.

David Acheson, former Assistant Commissioner for Food Protection in the FDA, is a partner at Leavitt Partners. This commentary was originally posted June 7, 2012 in the Leavitt Partners blog, Food Safety.

  • David –
    You appear to be suggesting that a retailer may be held liable for selling contaminated product to one or more of their customers, in the event that such a sale resulted in demonstrable injury to the customer. What I hear you saying is, that a retailer may comply with all applicable regulations and yet still be liable for damage done by another entity earlier in the chain. Have I got that right?
    The following is a quote from this same issue’s previous post:
    “New York State Apple Cider 2004, Non-O157 STEC: Direct sales of fresh pressed apple cider from an orchard in New York State led to outbreaks of E. coli 0111 and Cryptosporidium parvum. The facility qualified as a retail establishment and was exempt from HACCP regulations.”
    Mr. Marler seems to be saying that the qualification of this apple orchard as a retail establishment was sufficient to exempt it from HACCP regulations. To me, the implication of such exemption would be freedom from any legal responsibility resulting from any injury done by this product. Are you in disagreement with Mr. Marler or am I missing some legal nuance here?
    Historically, the consumer has never had the opportunity to test the foods she buys. That has now changed in the case of arsenic, lead and mercury contamination of food, where the consumer may (for five bucks/heavy metal) join with other consumers to order state of the art, high quality testing that will stand in any venue (including courtrooms) ( If you were a retailer, what defense would you mount against your own customer, in possession of a lab report finding levels of heavy metals in one or more products purchased from you that were in excess of regulatory limits?

  • Ollie

    Holy bloodsuckers, Batman!
    Is there no end to the deep-pocketed targets being lined up to be bent over and sued? Maybe suck dry the trucking firms that hauled the produce. Don’t forget the seed and fertilizer companies who they may have done business with. Oh, and their bankers — yeah, that’s maybe the richest one to loot — you know the lenders on the mortgage and the equipment, maybe some credit card companies who were reckless enough to do business with them. Let’s hammer the financial crap out of the land grant universities too for publishing information on how to grow farm crops in the first place. Leave no cow flop unturned!
    Good reason for professional food producers and distributors to retire and scrap their inventories. It will be fine with lots of dreamers around here to leave only a few little local outfits still standing. Should be fun and games suing them when their turn comes. I wonder what use a food poisoning victim’s family might have for a rusty truck with mismatched bald tires, some dirty overalls and a selection of state of the art 5 tined dung forks?
    I foresee a time in the near future when professional food producers will move headquarters offshore and operate in the US with empty shell corporations that own nothing and are setup to pull the bankruptcy switch on a moment’s notice, tossing workers and contractors over the side in an eye blink. Not exactly a sustainable course and probably not one that will enhance food safety but it may be the only survivable approach. Or we can always import all our food from Brazil or Argentina or Liberia or somewhere.

  • Ollie –
    A food-poisoning victim’s family is facing a tragedy that did not have to happen. We don’t live in a country where health care is considered the right of every citizen. We live in a place where any person whose becomes sick for whatever reason is deemed a profit center by the health care industry and bled dry with bills that are horrendous if you have insurance, astronomical if your don’t and which may or may not bear any relationship to actual costs involved. Some years ago, a hospital had the temerity to try and charge me five dollars for a single Band-Aid! Victims and their families should be able to litigate whoever may be responsible for their tragedy. That way, they may at least be able to pay their bills. Otherwise, the bill collectors will hound them to either bankruptcy or their graves; whichever comes first.
    If you are saying that domestic, American food producers are in a lop-sided competition with foreign suppliers merely because foreign food producers are harder to locate and harder to bring a lawsuit against, you have my complete agreement. Last year, FDA has already published their vision for the future where domestic suppliers have been largely driven out of the market because they cannot compete on price. This does not have to happen. FDA must have the funding it needs to implement FSMA. Testing 2% of imports is nowhere near good enough. Allowing Low-Bid-Sid to sneak crap into this country because of inadequate monitoring and enforcement distorts the real price of food and complicates business for both American and foreign producers of quality food. Great Britain found that consumers are willing to pay a premium for high quality food of assured safety. It just seems to me that we should use the tools we already have rather than worry about shell games.

  • Leland

    Philosophize all you like about how higher retail prices could make food safer and how thrifty moms on tight budgets will see the light and loosen the purse strings. Out here in the real world things are far more pragmatic.
    Practically no one wishes to sicken or kill a customer and it should never happen and it is always tragic on those rare occasions when it does happen. Sure, medical costs and reasonable damages should be recovered. It seldom stops there when deep pockets beckon, however. You know this if you get out among real people at all.
    Can’t imagine food no longer being produced in America but certainly can expect intelligent businesses to protect themselves from being financially sodomized by 1) operating safely in the first place and 2) by shifting excessively punitive liability risk onto stationary targets down the supply chain. That would be farmers, processors and other contractors who hold land and bricks & mortar factories and who employ workers. As individuals these contractors are expendable, after all, and voids in product flow seem rapidly to backfill without much planning — seems like everyone wants to grow food and sell it.
    That offers retailers an intelligent business strategy of leasing everything/owning nothing, contracting all services and operating as a temporary permutation in the retail market. When financial disaster strikes merely pick up the money, fold up the tent and move to the next permutation. Supplier bankruptcies will sift themselves out as the system keeps rolling along, displaced American workers will find new jobs or not, who cares?
    Offshore holds a lot of opportunity and lately those offshore locations could benefit by actively recruiting and hosting successful businesses. Looks like a win-win arrangement shaping up!

  • O.W.H.

    Bankrupting Jensen Farms was a “necessary prerequisite” to looting retailers who were so foolish as to accept supply from the likes of Jensen Farms. Is Jensen Farms the source of this tragic disaster or are they merely a procedural nuisance, just so much collateral damage in the serious business of high stakes ambulance chasing? We would like to think the victims and their families are being fairly recompensed but how much is fair and how will excessive punitive awards be invested to improve public food safety? This is where things tend to cross over onto the dark side. We hate it and are powerless to stop it.