A team of Keller and Heckman attorneys recently obtained a jury verdict of $7.5 million on behalf of a frozen berry processer against a foreign supplier of contaminated pomegranate seeds (known as "arils"). The case illustrates important issues and challenges with traceability in the food supply chain, particularly from foreign suppliers. Key take-away points include: 1) U.S. health officials are increasingly more sophisticated in pinpointing sources of food-borne illness; and 2) U.S. companies should undertake heightened efforts to vet thoroughly the food processing and safety programs of food suppliers from abroad, particularly in light of strict liability principles and new FDA regulations for importers.
In May of 2013, the U.S. Food and Drug Administration (FDA), working with the Centers for Disease Control (CDC), identified a major outbreak (165 cases) of the Hepatitis A virus associated with Costco club members in the Western U.S. Hepatitis A is a serious disease which can lead to prolonged hospitalization, liver failure, and death. FDA and CDC quickly were able to isolate the source of the virus to a frozen blend of five berries (including the arils) processed and distributed by Townsend Farms, Inc. of Fairview, Oregon, thanks to Costco membership purchasing information and Townsend Farms' recordkeeping.
Townsend Farms fully cooperated with FDA's investigations and within days issued a voluntary recall. The outbreak stopped shortly thereafter. Using the latest techniques in whole genome sequencing and traceback/trace forward epidemiological analysis, FDA/CDC identified as the ultimate source of the contamination a single lot of pomegranate arils from Goknur Foodstuffs, located in Turkey.
Goknur refused to compensate injured consumers and denied all liability. In May of 2015, Townsend Farms sued Goknur in California federal court to shift over to Goknur the costs and attorneys fees incurred to investigate claims and make injured consumers whole by reason of strict liability.
In April of 2017, a jury found in favor of Townsend Farms on all legal claims and awarded $7.5 million in damages, a portion of which was awarded as punitive damages. To prevail at trial, Townsend Farms was required to adduce outside expert testimony to prove that the FDA and CDC correctly identified Goknur as the source of the contamination. The experts vindicated the latest techniques of the U.S. health officials to pinpoint a contamination source among five product ingredients that were sourced from many countries.
However, the trial and the expert testimony came at a cost in terms of time and money that was not insignificant, illustrating the difficulty of recovering against foreign supplier defendants. In cases of food borne illnesses, consumer attorneys typically can recover fully against any U.S. company in the supply chain, even though the actual wrongdoer was the foreign supplier. Unless insurance is adequate to cover the U.S. company's liability, it is highly advisable that U.S. customers choose their foreign suppliers wisely.
In this case, Townsend Farms did its due diligence and required a detailed supplier verification form from Goknur, and obtained the standard guarantees of compliance with all U.S. food safety laws.Townsend Farms also relied on long-time trusted brokers who visited the Goknur manufacturing facilities and who had a track record of sourcing reliable, safe product from Goknur in the past. Despite all of these efforts, however, the evidence at trial established Goknur's conscious disregard of basic food safety principles - such as proper training of workers, basic hand sanitation, production control and recordkeeping - was sufficient for an award of punitive damages.
Prior to the events leading to the contamination, a search of the FDA database for import alerts would have revealed several instances where FDA found that Goknur was shipping fraudulent or adulterated pomegranate juice into the U.S. Although Townsend Farms' due diligence on Goknur at the time easily met industry standards, in retrospect these import alerts could have served as a "yellow flag" for further investigations into Goknur's food safety and processing practices. A company that intentionally adulterates a product for profit, one can reasonably surmise, is less likely to be fastidious in implementing food safety standards consistent with U.S. law.
Firms would be well-advised to "go above and beyond" legal requirements in researching their suppliers, particularly foreign suppliers, given the increased technical capabilities of U.S. health officials to pinpoint the sources of food-borne illness, and the difficulties in recovering from suppliers located abroad.