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.