Not So Sweet: Failure to Timely Recall Contaminated Ice Cream Results in Major Consequences for Texas Manufacturer
On May 1, 2020, Blue Bell Creameries L.P. (Blue Bell) agreed to plead guilty to charges that it distributed contaminated ice cream products that were linked to a 2015 listeriosis outbreak. The Blue Bell outbreak made headlines in 2015, largely because it resulted in multiple cases of listeriosis and, tragically, three deaths. Aside from the obvious health-related consequences to the public and reputational harm to the nationally-known manufacturer of sweet treats, the basis for the various charges and causes of action related to the outbreak demonstrate the broad range of legal consequences, both civil and criminal, that can result from the failure to address food safety requirements and regulatory compliance more generally.
According to the plea agreement, in February 2015, South Carolina officials notified Blue Bell that two of its ice cream products manufactured in the company’s Brenham, Texas factory tested positive for the bacterial species Listeria monocytogenes, which can lead to serious illness or death in pregnant women, newborns, the elderly, and those with compromised immune systems. At that time, the company directed its delivery drivers to remove the products from store shelves, but Blue Bell did not issue a recall or otherwise communicate the potential contamination to customers. Two weeks later, state officials informed Blue Bell that additional testing confirmed the presence of Listeria in a third product, but the company again chose not to issue a formal notification or recall.
In March 2015, tests conducted by the Food and Drug Administration (FDA) and the Centers of Disease Control and Prevention (CDC) linked the Listeria found in the Blue Bell products to five Kansas patients hospitalized with listeriosis. The FDA, CDC, and Blue Bell issued public recall notifications on March 13, 2015, and subsequent testing resulted in another recall announcement later that month. According to a lawsuit brought by an investor, discussed further below, Blue Bell also discovered Listeria in one of its plants on multiple occasions in 2013 and 2014, but the company failed to adequately investigate the potential for the bacteria to lead to food product contamination. Ultimately, the outbreak of serious foodborne illnesses and subsequent investigations into Blue Bell’s manufacturing practices resulted in the recall of all of its products and a temporary shutdown in operations. According to the Department of Justice (DOJ) press release announcing the settlement, Blue Bell has since taken significant steps to enhance sanitation processes and has enacted a program to test products for Listeria before they ship.
In its press release, DOJ also highlighted that the outbreak has resulted in the second largest-ever amount paid in resolution of a food-safety matter, an amount that includes $17.25 million for a criminal fine and forfeiture, plus $2.1 million to resolve civil False Claims Act allegations related to sale of the contaminated products to federal facilities.
The plea agreement was filed with a criminal information alleging that the company violated the Food, Drug and Cosmetic Act (FD&C Act) by distributing ice cream products manufactured under insanitary conditions. Blue Bell pleaded guilty to two misdemeanor counts under the FD&C Act of distributing adulterated ice cream through interstate commerce, which resulted in the $17.25 million criminal fine and forfeiture.
According to DOJ, the civil False Claims Act settlement resolves allegations that Blue Bell shipped products manufactured in insanitary conditions to federal facilities and later failed to comply with contractually required recall procedures when removing the products because it did not disclose the details of the potential contamination to federal officials.
The Texas-based company’s former president was also charged with seven felony counts related to alleged efforts to conceal the Listeria contamination from customers. Specifically, he allegedly directed other Blue Bell employees to remove potentially contaminated ice cream products from store freezers without notifying retailers or consumers about the reason behind the withdrawal. He also directed employees to mislead individuals who asked why products were removed from stores.
This plea agreement follows on the heels of the announcement of a $60 million settlement between Blue Bell’s directors and an investor who brought a suit related to the mishandling of the Listeria outbreak. The plaintiff in that suit, who is a limited partner in the company, alleged that the company’s general partner and exclusive manager, its parent company, and the parent’s board of directors ignored years’ worth of reports of “unsanitary practices and conditions” at the ice cream manufacturing facilities. The settlement will result in the return of $15 million to the company and the cancellation of a $45.2 million note owed by one partner to another. Blue Bell has posted the relevant settlement documents on its website here. In mid-2019, we also covered a separate shareholder suit that resulted in significant director liability related to the same listeriosis outbreak associated with Blue Bell's products.
The Blue Bell outbreak is an extreme example of a company’s failure to comply with critical regulatory requirements and the consequences that can result from such failure. That said, the outcomes of the various charges and causes of action serve as a reminder to anyone operating in a highly regulated industry of the importance of adequate safety controls, ongoing monitoring of employees and products, and robust, effective compliance programs.