Sickened consumers who sued the peanut processor blamed for a national salmonella outbreak could have trouble recovering damages from Virginia company accounts because assets listed in a bankruptcy filing will likely go to other businesses that bought its products.
Lynchburg-based Peanut Corp. of America filed documents listing nearly $11.4 million in assets and debts of $4.8 million Friday in U.S. Bankruptcy court. However, more than $7 million listed as assets was in insurance that covers the company’s products and will not be used for claims by consumers. Among the uses for that money would be compensating businesses that had bought Peanut Corp. products that were recalled, trustee Roy V. Creasy said.
However, the consumers who filed lawsuits aren’t necessarily out of luck, said a Seattle lawyer who has filed several suits against Peanut Corp. Attorney Bill Marler said he expects his 85 clients to be paid through the company’s personal injury insurance policy, which is separate from the assets tied to the product insurance.
Hartford Casualty Insurance Co. has asked for a ruling on whether its $12 million personal injury coverage of Peanut Corp. includes salmonella claims. Hartford has argued that Peanut Corp.’s actions may have negated its insurance coverage.
Peanut Corp. filed for Chapter 7 bankruptcy last month amid growing fallout from the outbreak, which was sickened more than 650 people, may have caused nine deaths, and led to one of the largest product recalls in U.S. history.
The Food and Drug Administration has said that more than 2,670 peanut products have been recalled.
Companies file Chapter 7 to liquidate their assets and distribute the proceeds to creditors.
The filing Friday by attorney Andrew S. Goldstein listed more than a dozen lawsuits against the company related to the outbreak. It also listed more than 475 businesses with claims against the company.
Marler said he expects claims on behalf of those who were sickened to be paid.
“The personal injury cases will not be shunted aside,” he said.
Marler is hopeful that a mediation process can be worked out to compensate individuals, but said even then the insurance money may not be enough to cover all the losses.
Marler and other food safety lawyers have also lawsuits against Solon, Ohio-based King Nut Co. and Battle Creek, Mich.-based Kellogg Co., which they say used the tainted ingredients in their products. Marler also has sued Peanut Corp.’s president, Stewart Parnell.
The only real estate that Peanut Corp. listed in the court documents was its plant in Blakely, Ga., identified by the FDA as the source of most of the illnesses. Inspectors there found roaches, mold and a leaking roof.
The plant was valued at $2 million, with a $1 million lien. The company also listed $2 million worth of equipment at the plant.
Salmonella also was found in products from Peanut Corp.’s Plainview, Texas, plant. It and a leased Suffolk, Va., blanching operation were listed as having unknown values.
The company reported about $19.7 million in gross income for the fiscal year that ended last Sept. 30.
The FBI is conducting a criminal investigation of the company, and Peanut Corp.’s statement of financial affairs included a $100,000 payment for corporate criminal legal representation.