Sunland Foods, producer of contaminated peanut butter, goes out of business

Sunland Foods, the NM producer of organic peanut butter that was responsible for 42 cases of Salmonella in 20 states, closed its doors and filed for Chapter 7 bankruptcy. The financial costs of the peanut butter recall in conjunction with an FDA mandated shutdown (as part of FDA’s new powers granted them by FSMA) . The shutdown came after an FDA investigation that had some very troubling findings.

The recall began in September of 2012 when Trader Joe’s peanut butter was linked to a number of salmonellosis cases. While the company began some operations in January, 2013, it was not allowed to resume production of ready-to-eat items until May of 2013.
The insurance carrier for Sunland, is suing Sunland to get out its obligation for covering lawsuits that resulted from the contamination event.

 

Las Vegas Sun
NM peanut butter plant closes, files for Chapter 7
http://www.lasvegassun.com/news/2013/oct/13/us-peanut-butter-plant-bankruptcy/
The Associated Press
Sunday, Oct. 13, 2013 | 12:05 a.m.

An eastern New Mexico peanut butter plant involved in a nationwide salmonella outbreak last year has closed its doors and filed for Chapter 7 bankruptcy.

Workers at the Sunland Inc. plant in Portales were notified Wednesday that the plant was shut down.

Chapter 7 means the company shuts down and liquidates its assets.

The Food and Drug Administration shuttered the plant in September 2012 after its products were linked to 41 cases in 20 states.

Most of those were linked to natural peanut butter the company made.

The shutdown of the country's largest organic peanut butter processor left many stores scrambling for months to find alternative natural peanut butters.

Sunland reopened last May, but reportedly took a big financial hit from the closure and lawsuits that followed the salmonella outbreak.

Law 360
Sunland Insurer Fights Coverage For Salmonella Suits
Share us on: TwitterFacebookLinkedIn By Gavin Broad
http://www.law360.com/insurance/articles/475415/sunland-insurer-fights-coverage-for-salmonella-suits


Law360, New York (September 25, 2013, 1:20 PM ET) -- Great American Alliance Insurance Co. sued troubled peanut products maker Sunland Inc. in Ohio on Tuesday, saying a host of exclusions in its policies with the company may bar it from any obligation to cover several suits launched over a 2012 salmonella outbreak.

Sunland is seeking defense and indemnification from Great American under primary and umbrella liability policies for various third-party lawsuits brought by Sunland customers who claim they suffered losses from the recall that followed the outbreak, which sickened more than 40 people in 20 states, according to the complaint.

The insurer wants the Ohio federal court to declare what its obligations are under the various policies, suggesting that at least four exclusions — including an exclusion specifically governing product recalls — may bar coverage of those third-party claims.

“Great American therefore requests an order of the court declaring the respective rights and duties of Great American and Sunland as to the applicability of the ‘recall of products, work or impaired property’ exclusion to third-party claims related to the recall of Sunland products,” the insurer said.

In addition to the recall exclusion, Great American says coverage of the various underlying actions may be limited by a property damage exclusion, a “damage to your product” exclusion and an exclusion for “damage to impaired property or property not physically injured."

The insurer noted that Sunland sold its peanut butter products, shelled and in-shell peanut products and other nut butter products to numerous companies that either resold the products or incorporated those products into their own goods, and many of those companies were subsequently forced to recall those goods.

Several lawsuits followed the ordeal, including a March suit in which gourmet chocolates producer Swain Creations Inc. claimed it had suffered more than $1 million in damages as a result of a recall it was forced to undertake of products that incorporated the company’s peanut butter.

Sunland now seeks coverage under an agribusiness protection policy that includes commercial general liability insurance as well as two commercial umbrella liability policies, according to the complaint.

Although there were no fatalities from the outbreak, the contaminated peanut products sickened 42 people — the majority of whom were children under 10, according to the U.S. Centers for Disease Control — and triggered a U.S. Food and Drug Administration investigation that resulted in the agency’s first-ever suspension of a food producer's registration.

The FDA shut Sunland down last November under new powers granted to it by the Food Safety Modernization Act following an inspection revealing that Sunland had approved products for distribution that the company's own testing showed had strains of salmonella on 11 occasions between June 2009 and August 2012.

The investigation also revealed the presence of salmonella in 28 environmental samples, as well as poor employee sanitation and the exposure of raw materials to potential contamination, including raw in-shell peanuts stored outdoors in uncovered trailers, peanuts exposed to rain and warehouse facility doors left open.

The recall began with Trader Joe's Co.'s Creamy Salted Valencia Peanut Butter and quickly expanded to 76 other products manufactured by Sunland.

A month after the FDA pulled Sunland’s license, the U.S. government sued the company in New Mexico under the Federal Food, Drug and Cosmetics Act to block continued production and distribution. The parties subsequently entered into a consent decree laying out the conditions for the continuation of production at the facility, under which Sunland agreed to devise a written sanitation control program for the mill plant and designate an employee to oversee the cleanliness of the facility.

In January the agency gave the all-clear for Sunland to resume limited production at the plant tied to the outbreak, though the company remained barred from processing or distributing ready-to-eat food until it further improved conditions at its facility.

Representatives for the parties were not immediately available for comment Wednesday.

Great American is represented by Gregory Alan Harrison of Dinsmore & Shohl LLP.

Counsel information for Sunland was not immediately available Wednesday.

The case is Great American Alliance Insurance Co. v. Sunland Inc., case number 1:13-cv-00677 in the U.S. District Court for the Southern District of Ohio.

--Additional reporting by Megan Stride. Editing by Jeremy Barker.