Listeria Recall Toolkit

The FDA recently took the relatively unusual step of obtaining a court-issued warrant to seize all cheese products at Estrella Family Creamery, a small, family-owned artisan cheese maker in Washington State. According to the United States Attorney's Office for the Western District of Washington, "the FDA asked Estrella to recall all cheese products. The company refused." The FDA requested the recall after both products and the manufacturing environment at Estrella tested positive for Listeria. A copy of the FDA form 483 report immediately pre-dating the recall request is here.

As the Estrella situation illustrates, the FDA is not just focused on large-scale manufacturing. As the FDA and USDA move to more risk-based allocation of resources, they are increasingly concerned about smaller operations and retail. Below are issues any food manufacturer must tackle when it comes to Listeria (much of this also applies to other food-borne pathogens).

What is Listeria?

Listeria monocytogenes is a bacterium that causes listeriosis, which primarily affects persons of advanced age, pregnant women, newborns, and adults with weakened immune systems. Though it affects only a small portion of the population, Listeria is the most deadly food-borne pathogen in the United States, killing 20-30% of all those who become seriously ill.

What should you do if your product tests positive for Listeria?

Assemble your well-rehearsed crisis management team immediately if a product tests positive (or if a regulator believes that your product may be contaminated). Members of the crisis management team; food safety personnel; company executives; and representatives from accounting, legal, supply chain, sales and customer service all are essential in the decision making process below.

Can you trace back and isolate contamination?

Quality assurance and food safety personnel need to answer trace-back issues as soon as possible. Can you determine the source of the contamination? Is it limited to one lot or a single day of production? How often are production facilities sanitized? How often are production surfaces swabbed for Listeria? Does the production facility re-use contaminated product from shift to shift?

Will you have to issue a recall?

Both the FDA and USDA lack mandatory recall authority. Though, as Estrella learned, the agencies do have the bully pulpit and the ability to get a court order to seize products. Because of the high mortality rate, regulators (federal and state) take any positive Listeria test result in food products extremely seriously.

If the food is considered a ready-to-eat product (RTE), a positive Listeria test will almost invariably lead to the FDA or USDA requesting a class I recall.

Even for a non-RTE food, a positive Listeria test will lead to a requested recall. If the agencies believe that the cooking instructions are clear, are easily followed by consumers and, if followed, will kill the bacterium, then the recall may be considered class II.

A primary difference between class I and II is that the class I recall will result in much greater publicity. For FDA-regulated facilities, a class I recall also triggers reporting and notification requirements under the Reportable Food Registry (RFR).

What does the Reportable Food Registry require?

RFR requires FDA-registered facilities to report to the FDA portal within 24 hours when there is a "reasonable probability that an article of food will cause serious adverse health consequences." As part of the report, information must be submitted "one step back and one step forward" in the supply chain. Once a report is submitted, the FDA will promptly alert your customers of the "reasonable probability" that your product will result in "adverse health consequences or death." If suppliers and customers are also FDA facilities, the FDA will also pressure those companies to report to the portal.

The ticking of the RFR's 24-hour reporting deadline forces a company to make snap decisions that might affect its entire business. While RFR reports can be amended or withdrawn based on new information, in the world of food products, the bell can almost never be unrung. A more lengthy discussion of the RFR can be found here.

How do you marshal your case with the regulators?

Assuming that you have information showing that contamination is limited (or non-existent), how do you convince the regulators? The FDA and USDA’s concern is public health (and politics). The regulators’ concern is not for your business.

Providing information to the regulators in a manner they perceive as credible, prompt and transparent is critical. Once the regulators lose confidence in your company's credibility and competence, the game may be over. In most cases, the most effective way to marshal your evidence is a well-prepared and credentialed crisis management team (e.g., food safety, quality assurance, supply chain, accounting, sales, legal, media, etc.).

Take-Aways from November 17 Webinar: Sustainable Foods Increase Litigation Risks: Developing Strategies to Minimize Exposure

On November 17, we held our final webinar in a three-part series on bringing sustainable food products to market. Take-aways from the third webinar include:

• Be aware that "natural" is a hot button when advertising and labeling sustainable food products.

• "Sustainable" is not addressed in FTC Green Guides so it is imperative to be specific with your claim and/or use third-party certification.

• Truitt Brothers packaging/labels depict the source of their ingredients.

• Food-borne illness issues affect all food producers. Large producers have made significant investments in prevention in recent years; small producers of sustainable products without capital to improve farming or manufacturing practices are at a competitive disadvantage and possibly more susceptible to legal exposure from food borne illness claims.

• Food sellers should identify a crisis management team, review supplier agreements and understand insurance coverage to mitigate risk.

• Food sellers should understand that product recall coverage is excluded on most Commercial General Liability coverage forms.

Thanks again to our presenters and attendees. The recorded webcast was archived and is accessible here. Click here to access a PDF copy of the presentation slides.

Stay tuned for a possible new webinar series on food traceability. We're tracking the latest regulatory and legislative developments.

Take-Aways from November 3 Webinar: Making Good Marketing Claims: Product Labeling Pitfalls, Third-Party Certification and "Green Washing"

Tuesday, November 3, we held our second webinar in a three-part series on bringing sustainable food products to market. Thanks again to our presenters and attendees. The recorded webcast was archived and is accessible at this link. Click here to access a PDF copy of the presentation slides.

Take-aways from the second webinar include:

• With the exception of the FDA’s policy on “natural” claims, it has been silent on “green claims.”

• “Natural” could be hottest claim on the market but is becoming controversial. Food companies should continually monitor the marketplace to see which claims are drawing challenges.

• Food companies should pay attention to consumers union findings regarding eco-label credibility.

• While third-party certification may not help every food business, certification is a tool that supports your brand and your marketing/sales strategy.

• Retail leaders in sustainability, such as Burgerville, aspire for continuity of sustainability in each link in its supply chain.

• To understand the FTC green guidelines companies need to appreciate three key points: substantiation, specificity and qualification.

• To avoid “green washing” issues, food companies need to understand the complex matrix of federal, state, local and foreign statutes, regulations and guidelines governing “green” advertising.

I hope you can join me, Steve Marinkovich from Propel Insurance, my colleague at Stoel Rives, Anne Glazer, and Peter Truitt from Truitt Bros., Inc. on November 17, at 9 am PST, noon EST, (live Twitter feed at #sustainlaw) for the last webinar in the series as we discuss the following:

• Preventing and Dealing with Consumer Fraud, Unfair Trade and False Advertising Claims from Consumers and Competitors

• Real-Life Businesses Approaches to Sustainability, Product Labeling and Marketing

• Coping with Increased Risks of Food-Borne Illness from Local or Small Farm Products

• Insurance Coverage You Need, Think You May Have but Don’t Have or Think You May Want but Shouldn’t Get

Comment On Recent New York Times E. Coli and Beef Article: How Retailers Can Protect Themselves

Co-Authored By Guest Blogger Scott Hansen

According to its website, last Sunday’s New York Times article on E. coli and beef is among the most widely read pieces published by the newspaper this week. The article tells the story of a 22-year-old Minnesota dance instructor who was left paralyzed after being infected with a strain of E. coli in an “Angus Beef Pattie” she ate in fall of 2007. The article traces the story of her burger, points out the many limitations in the current system, and calls eating beef a “gamble.”

While the article is clearly targeted at meat producers and processors, food retailers selling beef products, such as grocery stores and restaurants, are also at risk. This piece is a reminder of the need for retailers to take steps to ensure proper systems and procedures for tracing food to its source (according to yesterday's statement by Secretary Vilsack, retail traceability of ground beef is soon to be a USDA requirement). The Times lauds Costco, which it says is one of the few big producers that tests trimmings for E. coli before grinding.

Retailers should also be mindful of the utility of supplier agreements sufficiently tailored to limit liability or to procure insurance coverage. The greater protections afforded by well-drafted supplier agreements and carefully placed insurance are the best way to mitigate exposure.

Some may choose strong indemnification provisions and additional insured provisions. Another route, not yet the prevailing trend in the industry but perhaps in the near future, involves wrap-up insurance covering the entire supply chain, accompanied by covenants of cooperation between members of the supply chain.

Wrap-up insurance/covenants of cooperation approach has the advantage of potentially avoiding expensive and reputation-damaging litigation between members of the supply chain. Wrap-up insurance is also more likely to result in sufficient coverage to protect the retailer or restaurant chain.

No matter the path chosen, thoughtful placement of insurance coverage and confidence in supply chain contracts can help a food company weather the storm of a food-borne illness outbreak.

Hungry for Change: ABA Journal on Food Safety Reform and Its History

Kristin Choo has written a piece for the ABA Journal tracking the history of food safety regulation, recent outbreaks and current legislation pending in Congress. I am grateful to be mentioned in the piece. The article can be found at this link.

 Ms. Choo writes:

Litigation is likely to increase as a pumped-up FDA, an arm of the Department of Health and Human Services, identifies more outbreaks of food-borne illness and collects more evidence about their causes. Meanwhile, many companies are likely to struggle, at least initially, with stricter requirements to develop safety plans, disclose business records when outbreaks occur and improve procedures for tracing products, according to Kenneth M. Odza, a member of Stoel Rives in Seattle, who litigates food safety cases and writes a blog on the subject.

Ms. Choo also includes a summary of information (see below) derived from CDC documented outbreaks (two or more people with the same illness after eating the same contaminated food) from 1990 to 2006 broken down by category of food. Note that nearly 50% of illnesses documented are from produce or "multi-ingredient."  Produce and "multi-ingredient" account for about twice the number of illnesses as beef and poultry combined.
 

Category Outbreaks Illnesses
Beef 518 14,191
Beverages 101 3,640
Breads and Bakery 179 4,904
Dairy 221 6,364
Eggs 351 11,143
Game 28 193
Luncheon and Other Meats 196 7,108
Multi-Ingredient 1,054 30,254
Pork 233 6,954
Poultry 620 18,906
Produce 768 35,060
Seafood 1,140 11,809
Other 369

183

 

Before the Outbreak, Preapprove Defense Counsel with Insurer

When a food-borne illness outbreak happens, few food companies (especially those whose brand is at stake) want an unfamiliar defense lawyer who has little knowledge about food-borne illness responding to claims asserted against them. Unless a food company maintains a high, self-insured retention or has the lawyer of its choosing preselected, its insurer might appoint on the food company’s behalf low-cost defense counsel ill-equipped to respond to the claims and protect the brand.

Commercial General Liability insurance and Products liability insurance commonly maintained by food companies to protect them from the risks of food-borne illness outbreak usually will not cover the damage an outbreak can have on a company’s brand, stock value or sales. Lawyers appointed by insurers may have little understanding of the insured’s business or the impact the outbreak can have on its brand. Unlike in other areas, such as securities litigation, insurers are not as likely to have a panel or preapproved list of experienced food liability lawyers ready to deploy.

What a food company should consider before a food-borne illness outbreak happens:

1. Identify lawyers who are:

A. Familiar with (or will pledge on their dime to learn) the food company's business and brands;

B. Experienced in responding to consumer claims and food-borne illness; and

C. Knowledgeable about potential expert witnesses (about both those that the company will hire and those that plaintiffs will hire).

For companies with active crisis management plans , these lawyers likely have already been identified and included on the crisis management team.

2. Work with your broker, insurance coverage lawyer and preselected defense lawyer(s) to get preapproval of your chosen lawyers and agreement on their fees

For the sake of the business relationship (and self-interest), many insurers may agree to preapproval. Consider seeking preapproval at the time of renewal when a commercial insured may have the most leverage with an insurer.

For those with preapproved defense counsel, please consider sharing your experiences and insights. Comment or email.

Tool For Food Companies and Litigators - New Guidelines for Foodborne Disease Outbreak Response

Council to Improve Foodborne Outbreak Response (“CIFOR”) has published new guidelines designed to help local, state and federal agencies to improve their response to outbreaks. I became aware of this (again) through Ricardo Carvajal, who was a reviewer for the guidelines, and his firm’s FDA Law Blog. I agree with Ricardo that while the guidelines are designed for public agencies they have value for food businesses.

According to CIFOR, “[t]he guidelines are intended to give all agencies a common foundation from which to work and to provide examples of the key activities that should occur during the response to outbreaks of foodborne disease.”

Anticipating how the public health agency will behave will not only assist in crisis management, but it may also prevent the crisis. As discussed previously in this blog, one of the benefits of good crisis management is the ability to reach out and offer assistance to the investigating public health agencies. Keeping current on protocols that we can expect agencies to follow is a good practice.

The guidelines are also of some value to litigators. In the face of an outbreak investigation, they provide tools to assess the merits of the agency investigation. While it is always difficult to challenge a public health agency’s findings (no matter how flawed), the guidelines may help.

What to Do When the Investigators Knock . . .

This week brought news of yet another nationwide Salmonella outbreak from a source not yet identified by government regulators. The last time we had a nationwide Salmonella outbreak for an extended period of time without identification of a definitive source the federal government initially singled out tomatoes imported from Mexico (a huge array of products). In that case, the government was wrong and wreaked financial havoc on many farmers and businesses.

So far, in the current outbreak, nothing more specific than “poultry, eggs and cheese” have been identified as possible sources. Last year’s outbreak involved Salmonella Saintpaul whereas the current outbreak is Salmonella Typhimurium, which is more commonly associated with poultry, eggs and cheese, but could come from almost anything.

That a source has yet to be identified to the media doesn’t mean that state and federal officials aren’t zeroing in on possible sources. Restaurant owners, retailers and food manufacturers should be ready for the regulators when they come knocking.

In the past, I’ve had clients who were worked over aggressively by regulators (especially federal officials) who were investigating a large, nationwide outbreak with an uncertain cause. These officials face enormous pressure from those in Washington and from the public. Federal officials can make demands that threaten an entire business. They can demand credit card receipts, contact information for customers, personal employee information, shutdown of the business and more. Noncompliance might mean the officials will go to the press and advertise that the business is a target of the investigation. Unlike local health officials, who are usually vested in the well-being of local food producers under their jurisdiction, federal officials may care only about the investigation and nothing else.

Any food business should implement its crisis response team the minute it suspects it could be targeted in an investigation like the one that is currently ongoing. Specialists in food safety and foodborne illness investigations, genetic microbiologists, public relations experts, accountants, quality assurance personnel, purchasing personnel and lawyers should be lined up and ready to go. Events may unfold quickly for your business (over the course of a day or even a morning). Everything needs to be done at that moment to assist a business in navigating what may appear to be an impossible crisis.
 

Five New Year's Resolutions

Unfortunately, 2009 does not promise to be any easier than 2008 in protecting your business against food liability claims. Many argue that threats will only increase in the new year. Here are five things you can do to reduce exposure in the coming year:

1. Review Insurance Coverage and Limits Carefully – Both the variety and size of claims are escalating fast. For example, just a couple of years ago consumer claims from non-O157 E. coli, melamine, diacetyl or organic labeling seemed far-fetched, but all are now a grave reality. Federal, state and local governments will continue improving detection techniques since the rash of large, national food-borne illness outbreaks in 2006-08. The Obama administration will likely make increased funding in this area a priority. The odds that your company will be targeted in a nationwide outbreak resulting in claims in the hundreds of millions of dollars are increasing. Because of the exposure, insurance companies now more than ever will be looking for ways to reduce their coverage.

2. Review and Revise Supply Chain Agreements – Aside from insurance, one of the most effective ways to reduce, spread and mitigate risk is to ensure that those in your supply chain provide adequate insurance and indemnity for problems related to their products. But just because your supply agreement happens to mention insurance and indemnity does not necessarily mean those clauses will help when you need them. The only way to ensure that they will be honored and enforced is to ensure that your legal team (experienced in litigating these clauses) drafts these carefully.

3. Reassess Suppliers – Your choice of suppliers may be key to avoiding or reducing risk. Even if you demand sufficient insurance and indemnity from a supplier, a supplier of sufficient size may not be able to access insurance or have assets available to satisfy indemnity obligations. As important as your food safety, HAACP and other programs may be, they are really only as strong as your suppliers’ programs. Careful audit and assessment of your suppliers’ food safety programs is important.

4. Increase Scrutiny Against Fraudulent Imports – Melamine, tainted rice and now “laundered honey” are all good examples of how fraud in the global food chain can dramatically affect unsuspecting U.S. food sellers. [add more advice here?]

5. Review, Update and Rehearse Crisis Management Plans – How your company is prepared to respond to a crisis is a good predictor of how your company will weather the crisis. With the stakes increasing, you need to be prepared to face the worst. Continual review, updating and rehearsal of your crisis management plan is key. Everybody on the crisis management team needs to understand his or her role and be ready for different scenarios.
 

Crisis Management So Simple Even A Pre-Schooler Could Do It. . .

Last week’s ACI conference included a great session on crisis management. David Hermann from the GMA gave a presentation on “Effective Crisis Leadership: 5 Basic Rules You Learned as a Kid.” His presentation reflected a proactive approach and showed ways to build an effective crisis-management plan. Mr. Hermann’s points were as follows:

1. Clean up your mess.


- Take action and assume control of the situation.
- Mitigate your damages.
- Hire independent investigators if needed.
- Respond to the emotional needs of the public.

2. Share.

- Get the facts out before the rumors start.
- Cooperate with regulatory authorities.

3. Tell the truth.

-Honesty is not just the BEST policy, it’s the ONLY policy.

4. Apologize.

- Accept responsibility.
- An apology is not necessarily synonymous with liability.

5. Keep your hands to yourself.

- Resist the urge to “hit back.”
- Blaming others is not conducive to crisis closure.

Who should lead a crisis-management team was another interesting part of the discussion. Several in-house lawyers thought that the CEO should not take the helm. They believed that the team should be headed by another executive, such as the VP, because the CEO may not be as fully immersed and familiar with the product and also has other ongoing responsibilities that will reduce his or her focus on the crisis. 

More on Melamine . . .

I was interviewed recently by Food Innovation Weekly on “Melamine, Recalls and Crisis Management.” This question-and-answer article discusses how the waves of melamine issues circling the globe affect the way a company should think about crisis management. I suspect that we’re not done hearing about melamine contamination and that the scope of fraud has yet to be fully uncovered. Some of the more interesting issues are safe dosage levels, product testing and what companies should or should not disclose to consumers.

Preparation for Melamine Issues- Updating Crisis Management Plans and Insurance Coverage

While largely under the radar in the American press due to the compelling election cycle and historical meltdown in the financial markets, the news out of China concerning melamine has gone from bad to worse. Concern about Chinese dairies has morphed into a global crisis affecting what seems like an infinite number of products tainted with melamine.

Melamine has been intentionally introduced into animal feed, dairy products, pet food and other products because it can make diluted or poor-quality products appear to be higher in protein by elevating the total nitrogen content detected by some simple protein tests. Already, the FDA has identified a wide variety of products affected in the first wave of concerns about Chinese dairy products.

How should a food manufacturer or retailer prepare for a melamine issue? Any food company that imports any food ingredient or product from Asian markets should be concerned, and its first steps should be to update its crisis management plan and rehearse a melamine recall.

Food companies should also review with coverage counsel and their brokers whether they have—or can obtain—insurance coverage for financial exposure from melamine tainted products. Financially, a food company will be affected by a melamine issue in at least three ways: recall costs, loss of business and personal injury/consumer fraud claims. Standard comprehensive general liability (“CGL”) insurance may not cover any of these exposures. Most CGL policies do not cover recall costs. While recall and property insurance policies are available, the coverages offered by these policies also may be problematic.

Even personal injury or consumer fraud claims might be denied by CGL insurers. For example, many CGL policies will only provide coverage for occurances that arise out of events that are “accidental.” “Accident” is commonly defined as “a sudden, unforeseen or unintended event.” Even though a food company may have no knowledge of an upstream supplier’s fraudulent acts, some insurers are sure to argue that claims arising from products intentionally tainted by melamine are not covered.

The insurer's argument denying coverage is not a slam dunk and may not prevail. But, the key is to avoid (or minimize) the dispute with the insurer. To the extent possible, when placing insurance, a food company should obtain a representation or endorsement from its insurer that coverage will be extended to claims arising from melamine-tainted food.

More on Supply Chain Verification and Crisis Management

Food Safety Magazine’s latest issue focuses on “Industry in Crisis Mode.” The issue includes an article by Shaun Kennedy, director of the National Center for Food Protection and Defense (NCFPD). Mr. Kennedy provides a good overview of the elements of a supply chain verification program that any food seller should consider.

Mr. Kennedy acknowledges that costs for third-party audits, fixing supply chain problems, and establishing traceability can be high. To justify costs, he points to the recent experience of Maple Leaf Foods. According to Mr. Kennedy, Maple Leaf Foods incurred “direct costs to the company of over $20 million. The shareholder costs are even greater with its stock price having dropped by over 20% by the end of August since the announcement of the recall, a shift of over $200 million.” These costs do not include anything to compensate possible tort victims or to respond to inevitable products liability litigation (whether merited or not).
 

Forest Through the Trees: Lessons from a Crisis Management Case Study

There was a nice article in the Canadian legal publication Law Times about the aftermath of the Maple Leaf Foods recall. The article praises Maple Leaf Foods for taking quick steps to salvage consumer confidence in the face of a Listeria outbreak across Canada. Specifically, the article discusses how Maple Leaf Foods CEO Michael McCain “immediately took responsibility for the plant outbreak.”

McCain is quoted as saying that “[g]oing through the crisis there are two advisors I’ve paid no attention to. The first are the lawyers, and the second are the accountants . . . . It’s not about money or legal liability, this is about being accountable for providing consumers with safe food.”

Yet the author of the Law Times article interviewed a Canadian corporate communications expert who noted that “McCain likely did listen to legal counsel.” The expert said that McCain’s “statement was an acknowledgment that if limiting legal liability was the main objective of the company’s response, it would be near impossible to restore its reputation.”

“‘The whole reason that Maple Leaf has been successful, and even though the recall has cost them $20 million in product [recalls], [is that] their reputation is intact,’” the expert is quoted as saying.

Finally, the best quote from the article: “[L]awyers need to understand that legal liability isn’t the only factor to consider in a crisis. But that’s not an easy pill for many lawyers to swallow. They believe future litigation is prejudiced if a CEO makes an apology, says [the expert].”

Lessons from Toxic Rice and Chinese Dairies - Threats From Bioterrorism and Supplier Fraud

Manufacturer fraud and bioterrorism should be on the radar screen for any food producer. Apart from the meltdown in the U.S. financial markets and presidential politics, the big news this week is toxic rice from Southeast Asia and melamine-tainted dairy products from China. Both crises were caused by intentional contamination of food products by raw-materials suppliers with the apparent motivation to defraud food manufacturers and sellers.

Both (especially melamine-tainted dairy products) are causing a worldwide health scare and crisis in consumer confidence. Consumers outside of China may not be at serious risk, because the melamine-tainted dairy products are not sold as pure dairy products. Outside of China, Chinese dairy products are used only in small quantities as ingredients in products such as candy and coffee. U.S. and European Union consumers are at risk only when consuming unusually large quantities of these “nondairy” products.

Yet the consumer crisis inside and outside of China could have ameliorated dramatically but for failures in crisis management. Even the presumably government-controlled Chinese press understands this: “Crisis management is closely related to the brand and credibility of an enterprise, but many Chinese enterprises have not developed the capability to react properly when a crisis emerges . . . .”

Consistent with Western principles of crisis management, Chinese experts, according to the Chinese press, opine that “one principle of crisis management is to take a responsible attitude immediately and in a sincere manner, which is of great help for enterprises to rebuild their credibility.”

The press in China points to a company named Sanlu and concludes that “Sanlu, the center of the scandal, provided a bad example of crisis management. When it was first exposed, Sanlu refused to take the blame and passed the buck to innocent dairy farmers, which ignited great anger nationwide. . . . Sanlu didn’t openly admit its products were toxic until Sept. 11. It eventually recalled baby formula manufactured on and before Aug. 6. The scandal led to the fall of chairwoman Tian and the disappearance of all dairy products bearing the brand of Sanlu.” 

Anatomy of a Food-Borne Illness Claim - Part I

Recently, I’ve received several requests for resources explaining the anatomy of a food-borne illness claim. In other words, what events can be expected, and when? What can or should a company (in particular the legal department) do in response to a claim?

Part I – Notice of an Outbreak (and Possible Claims)

 

First off, don’t panic. Your company’s crisis management team (which has been well-rehearsed for this scenario) should convene action upon the first notice of a possible outbreak—even before verification and before claims are apparent. Food safety experts should contact the health departments that may have identified the outbreak. Together with the legal, sales and quality assurance departments, your food safety experts should be involved in a full investigation of the possible outbreak. The earlier the intervention, the greater the possibility of collecting key information that may be useful in determining whether your company is linked to the outbreak and pinpointing other possible sources of the outbreak. Public relations experts should also be consulted at the first possible moment.

 

Checklist for the legal department:

 

  • Log events, actions and communications. This is critical for responding to government agencies and to claims.
  • Record all reported injuries. Collecting information about potential claims early is a key to mitigating those claims and future legal costs.
  • Notify insurers. Insurance companies require prompt notice; insurers may also have assets available for crisis response.
  • Document the investigation. Litigation may be protracted, and a well-documented investigation may be key to the company’s defense.
  • Institute a litigation “hold” on the destruction of any company documents or emails. Don’t turn a bad situation into a nightmare; spoliation claims can take on a life of their own.
  • Retain product samples for future testing. This may be critical to support experts’ opinions at trial and to preserve claims against suppliers.
  • Review and retain vendor/supplier documents. Recovery against suppliers could be as important as or more important than insurance recovery.
  • Assess the merits of a consumer hotline. It could be helpful in disseminating accurate information to consumers (inaccurate or conflicting information can lead to litigation) and in collecting information about the pool of potential plaintiffs.
  • Assess the merits of a consumer/vendor reimbursement program. Like having a consumer hotline, providing immediate reimbursement could help dampen the volume of future plaintiffs.

Stay tuned for Part II – Receipt of the Demand Letter.

Dos and Don'ts for Executives Managing a Crisis

As discussed frequently in this blog, management of an outbreak at its inception determines the course of the crisis (and, in some cases, the fate of the company).

The Globe and Mail, in its ongoing coverage of the Maple Leaf Foods Listeria outbreak, today published a helpful punch list of 15 dos and don’ts for corporate executives managing a food-borne outbreak.

The last two items on the list may be the least obvious but are among the most important:

“14. Do make a list of the five questions you would least like to be asked and be prepared to answer them, since somebody will undoubtedly ask them.
“15. Do set up a rumour control hotline or website if rampant speculation could fuel the crisis.”

A hotline for collecting consumer information and complaints can be valuable. It allows the company not only to get control over and manage misinformation (the point being made in the Globe and Mail), but also to gather information about how many people the outbreak affects and who has fallen ill. Even more important, a hotline may enable the company to direct ill people to appropriate medical treatment, minimizing or even eliminating litigation.
 

Developing A Strategy For Crisis Management

An upcoming panel discussion at the Nutritional Law Symposium in Utah and a call from a reporter about the Maple Leaf Foods issue in Canada have me thinking a lot about crisis management. How a business responds at the outset of an alleged food-borne outbreak determines its fate in many ways.
 

Implementing a strategy from the start is a must to minimize the impact of a crisis. Yet the million- or billion-dollar question is, how do you develop the right save-the-business strategy when events are overwhelming and occurring at light speed? You need to bring together quality assurance, legal and food safety personnel (epidemiologists, microbiologists and other food safety experts) who can respond immediately to find the source of the outbreak and work with public health officials. A business must ascertain at the earliest possible moment the source and scope of the crisis. Once a business understands whether an outbreak is limited to a particular outlet or product line, and how many people might be affected, it can formulate a public relations, recall and legal strategy to limit exposure.

The key is execution. Everyone on the crisis management team must work in sync and understand their roles. And the secret to execution is preparation. Long before a crisis, a team (usually a combination of personnel from outside and inside the business) should be in place, rehearsed and ready. History is full of lessons: Some businesses executed crisis management well and emerged from dire crises stronger than before; others were unprepared, and their brands have long been forgotten.

Good Time To Review Crisis Management Plans

Incredibly, the Salmonella Saintpaul outbreak remains unsolved. First reported onset of illness date was April 10, yet the traceback is still not complete.

Personal injury and economic damage claims await for the FDA and CDC to determine causation. Produce industry, particularly in Mexico, stands to suffer long lasting injury. 

Whether or not your business stands to be impacted (or has been impacted) by the current outbreak, now is a great time to review and rehearse your crisis management plan. I recommend that your team include the following (whether in-house personnel or outside consultants):

  • Scientific - Epidemiology, Microbiology, Infectious Disease - Quantifies risks, assists public health officials and supports litigation;
  • Accounting - Estimates costs of response options and manages system for customer reimbursement;
  • Public Relations - Coordinates all internal and external communications and develops a plan to limit impact to the brand;
  • Quality Assurance - Assists in conducting traceback;
  • Sales and Marketing - Notifies suppliers and buyers, monitors recall effectiveness and coordinates product returns;
  • Legal - Assists with fact investigations, assists coordination with regulatory officials, addresses liability issues, deals with issues of insurance coverage and prepares for litigation;
  • COORDINATOR/TEAM LEADER - selecting a member of the team that can bridge a diversity of disciplines and demonstrate leadership is critical.
Again, most crisis management experts recommend frequent dress rehearsal. Simulating a crisis is the best way to train your team and the only way to determine its strengths and weaknesses. Effective crisis management can mean the difference of millions of dollars (lost sales, destroyed product and personal injuries) and consumer confidence (i.e. the future of your company).