Fallout From Listeria Outbreak Hits Wal-Mart: Retail

(Corrects headline on story published Nov. 7)

In late August, Charles Palmer ate cantaloupe bought at a Wal-Mart Stores Inc. (WMT) store in Colorado. Two weeks later, he began feeling sick, then became unresponsive and was rushed to a hospital where doctors diagnosed a listeria infection.

Now the 71-year-old retired Marine isn’t just suing Granada, Colorado-based Jensen Farms, which grew the tainted cantaloupe that he claims sickened him. He’s also suing Wal-Mart for selling the fruit.

Fallout from the outbreak that’s killed 29 Americans is broadening to other major retailers that sold the tainted produce and is spurring a national debate on the role groceries and stores should play in making the food-supply chain safe.

“Retailers are going to be left holding the bag,” said Bill Marler, a Seattle-based lawyer who’s filed at least eight lawsuits targeting both the Colorado farm, its distributor and Wal-Mart. “The grocery stores and retailers who sold the product -- from big-box stores to road-side stands -- are going to have to step in and fill the gap.”

Victims of the listeria outbreak may file claims seeking more than $100 million, Marler said in a telephone interview. A U.S. House committee is investigating the outbreak and may hold hearings.

Source: FDA

The Listeria outbreak, the first ever tied to cantaloupe, prompted Jensen Farms to recall the contaminated fruit on Sept. 14. Close

The Listeria outbreak, the first ever tied to cantaloupe, prompted Jensen Farms to... Read More

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Source: FDA

The Listeria outbreak, the first ever tied to cantaloupe, prompted Jensen Farms to recall the contaminated fruit on Sept. 14.

Expanding Checks

Craig Wilson, head of food safety at Costco Wholesale Corp. (COST), says producers should get ahead of the issue by expanding their internal food-safety checks to fight contamination. Jim Prevor, a Boca Raton, Florida-based industry analyst, said such tests by grocers or producers would be expensive and ineffective. Either way, retailers can expect the pressure on them to grow, Marler said.

Overall, food-based illness costs the U.S. $152 billion a year in health-care, workplace and other economic losses. More than a quarter of these costs, an estimated $39 billion, are attributed to illnesses from produce, according to a 2010 report by the Produce Safety Project, based at Georgetown University in Washington. The group seeks mandatory safety standards for produce.

Litigation that also includes growers and distributors -- along with new scrutiny by U.S. regulators and Congress -- is prompting calls for improved testing by the industry.

Listeria, a bacterial infection that can cause fever, intense headache, nausea, and vomiting and can be fatal in some populations, is among the pathogens with the largest measurable costs, the report said.

Not Targeted

Retailers and grocery chains aren’t usually targeted when food sickens customers, Marler said. In this outbreak, however, they’ll face litigation because the victims’ claims will add up to more than Jensen Farms, the grower of the cantaloupes, and its distributor carry in insurance, he said.

Besides Wal-Mart, a wrongful death lawsuit filed Sept. 26 in Denver County District Court in Colorado targets Jensen Farms and Dillon Companies Inc., a wholly owned subsidiary of Kroger Co. (KR), the operator of supermarkets including “King Soopers,” “Kroger” and “City Market.” Keith Dailey, a spokesman for Cincinnati-based Kroger, declined to comment, citing the litigation.

“There is no question that retailers will be sued if plaintiffs can identify where they purchased the cantaloupe,” said Sarah Brew, a partner at Faegre & Benson LLP in Minneapolis who represents manufacturers, distributors and retail companies in foodborne illness cases.

Jensen Farms, Wal-Mart

The Palmer lawsuit, filed by Marler in September in El Paso County District Court in Colorado, names both Jensen Farms, which has been producing cantaloupes since 1991, according to its website, and Bentonville, Arkansas-based Wal-Mart as defendants.

Jensen Farms declined to comment on the suits. In a statement on its website, the company said it’s reviewing a Food and Drug Administration report on its sanitary practices and awaiting additional information from the agency.

“Our operations will not resume until we are completely satisfied that we have done everything within our power to insure the safety of our products,” the statement said. “We continue to cooperate fully with the FDA and other government agencies and extend our deepest concerns to any and all members of the public who have been affected by this outbreak.”

Prevention in Place

Wal-Mart “wishes Mr. Palmer well and we take claims such as his very seriously,” said Dianna Gee, a spokeswoman for the retailer, in an e-mail. She said the company immediately worked with their suppliers to determine the source of the cantaloupes involved with the outbreak, and removed them from stores before a recall was announced Sept. 14.

The retailer already has prevention efforts in place with suppliers, Gee said. Wal-Mart is in the process of requiring its secondary suppliers to be certified in prevention-based standards established by the Global Food Safety Initiative. The group sets requirements for food safety and was started by international retailers in May 2000.

The initiative includes standards for continuous improvement and various metrics developed over the years, such as how frequently water should be tested, said Prevor, the industry analyst. Jensen Farms was audited in July. However, the audit examined good manufacturing practices and wasn’t a global initiative review, he said.

‘Test and Hold’

Wilson, vice president of Costco’s food safety and quality assurance division, believes the time is right for the cantaloupe industry to test melons and environments for pathogens.

“We can’t keep doing the same thing and expect a different result,” he said in a telephone interview. “It’s nuts. I’ve also challenged the industry. We can help the industry come together.”

Prior to the suit against Wal-Mart, Costco had extended to cantaloupe a “test and hold” screening program it set up for other ready-to-eat produce, he said. Under the system, the fruit can’t be sold at the Issaquah, Washington-based company’s warehouse stores until it’s tested for pathogens. The company will also require environmental sampling for contaminants where the fruit is washed or cut up for packaging, Wilson said.

Costco believes other cantaloupe producers should put a similar system in place, Wilson said. The company hasn’t projected the cost to producers or to the retailer for the testing, although he said it would be a minimal.

Others Follow

“A major player like Costco can make others follow,” Nancy Donley, president of the board of directors at STOP Foodborne Illness, a Chicago-based advocacy group, said in an interview. “We view retailers as a very important component, because producers will sometimes not do things unless it’s required of them.”

Prevor, the industry analyst who edits the website PerishablePundit.com, doesn’t agree. Nationwide testing of cantaloupe would be expensive and ineffective, he said in an interview.

“It’s really more PR,” Prevor said. “There is no one procedure that will guarantee there won’t be problems. There’s no way they can test every cantaloupe they sell. They’ll test one in a million.”

Edmund LaMacchia, global vice president of purchasing perishables at Whole Foods Market Inc., agrees with Prevor. Costco’s effort to hold and test cantaloupes “may not be super effective,” he said.

Whole Foods

Whole Foods, the largest U.S. natural-foods grocer based in Austin, Texas, is now looking into pathogen testing at farms and expanding audits of growers. The company also has six full- time field inspectors and buys directly whenever possible from farmers to help ensure food safety, he said.

Testing cantaloupe or any other fresh produce items doesn’t provide a complete picture of contamination threats or stand up to scientific scrutiny, David Gombas, senior vice president of food safety and technology with the Washington-based United Fresh Produce Association, said in an e-mail.

Cantaloupe Victim

“A single positive tells us nothing about how many cantaloupes -- or other produce items in a field or orchard -- are actually contaminated,” Gombas said. “Meanwhile, destroying an entire field adds costs that are passed on to consumers.”

Listeria victims’ families want Congress to intervene. Paul Schwarz’s father was hospitalized on Sept. 19 in Overland Park, Kansas, after eating listeria-tainted cantaloupe. Citing his father’s case, Schwarz said the debate needs to be as broad as possible in addressing how to protect consumers.

“My father may never go home again,” Schwarz, 62, of Independence, Missouri, said in a telephone interview. His 92- year-old father, who has the same first name, filed suit against Jensen Farms and its distributor on Oct. 18 in U.S. District Court in the Western District of Missouri.

Since being attacked by listeria, his father has had trouble remembering the names of family members and struggles to move his legs and feed himself, Schwarz said.

The Schwarz family is among more than 20 relatives of people sickened or killed by outbreak who signed an October letter to Congress calling for public hearings.

The letter was sent to House Energy and Commerce Committee Chairman Fred Upton, a Republican from Michigan and Representative Cliff Stearns, a Republican from Florida who leads the committee’s investigations panel. On Oct. 21, the panel requested a briefing on the outbreak from Jensen Farms.

Schwarz said that it remains “unconscionable they sold this.”

To contact the reporter on this story: Stephanie Armour in Washington at sarmour@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net

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