Rat-Plagued Warehouse Winds Down as Family Dollar Faces Lawsuits

By Brendan Case | July 20, 2022
New You can now listen to Insurance Journal articles!

Six months after a Family Dollar distribution center in West Memphis, Arkansas, was fumigated and more than 1,000 rodent carcasses were removed, the rats are back.

David Hernandez spotted three of the animals before 9 a.m. one recent morning. Davisha Silas found some dead rats wrapped up in rugs. Randy Washington said she often finds rodent droppings.

“They didn’t get all of them,” said Quincie Washington (no relation to Randy), a four-year employee of the distribution center, which is located across the Mississippi River from Memphis, Tennessee. “You still smell rat feces and urine.”

The rats befouled products and plagued workers throughout 2021, eventually prompting a safety alert from the US Food and Drug Administration and a recall of goods at Family Dollar stores in six states. The FDA is still investigating. Family Dollar, a unit of Dollar Tree Inc., is facing lawsuits from customers and the Arkansas attorney general.

David Hernandez Photographer: Houston Cofield/Bloomberg

Hernandez, Silas and the Washingtons have also sued, saying the retailer failed to provide decent working conditions. The rat debacle, they and a former manager say, boils down to a company that ignored repeated entreaties from workers and local executives, and prioritized moving goods over the health and safety of its shoppers and employees making $15 an hour.

“All they cared about was getting the products out, which meant more money for them,” Hernandez, 60, said.

Dollar Tree said it’s focused on the well-being of its employees and improving conditions at stores and distribution centers.

“We are committed to providing every associate in every Dollar Tree facility with a safe and healthy work environment,” said a spokesperson for the Chesapeake, Virginia-based retailer.

Pushing for Change

In May, Dollar Tree said it would permanently close the West Memphis warehouse, which opened in 1994. The company determined that the aging facility was incompatible with its goal of “running our business in the most effective and responsible way,” the spokesperson said. The shutdown is expected in October.

Randy Washington Photographer: Houston Cofield/Bloomberg

Employees who have been helping to wind down the West Memphis distribution center said they’ve seen few signs of improvement. Rat sightings are again common at the warehouse, a low-slung building of 850,000 square feet near soybean fields, a FedEx Corp. trucking yard and two interstate highways. To ward off the rodents, workers beep the horn on the vehicles they use to ferry goods around the warehouse.

“That scares them away,” said Randy Washington, 40.

Dollar Tree, meanwhile, is undergoing a broader revamp spurred by an activist investor. Mantle Ridge, a New York hedge fund, revealed a 5.7% stake in the retailer in November and started pushing for management changes.

Mantle Ridge engineered a board shakeup this year in order to boost profit and catch up with rival Dollar General Corp. in market valuation. Newly installed Chairman Rick Dreiling, a former chief executive officer of Dollar General, said his plans target higher earnings as well as better working conditions.

Jeanetta Randolph Photographer: Houston Cofield/Bloomberg

“We’ll be focusing on our people, most importantly our teams, from store and distribution center associates to field leadership,” Dreiling said on an earnings call May 26. While he didn’t directly address the situation in West Memphis, he promised improved conditions at stores and distribution centers, as well as competitive wages and enhanced safety.

Dollar Tree isn’t the only deep-discount retailer accused of poor working conditions in an industry known for slim profit margins. Dollar General, which Dreiling led from 2008 to 2015, has a “long history of federal workplace safety violations,” the US Labor Department said this month in accusing the company of blocking exit routes at a Pennsylvania store and cramming too much merchandise into the aisles. Dollar General didn’t respond to multiple requests for comment.

A rat at the Family Dollar distribution center documented on a worker’s phone. Photographer: Houston Cofield/Bloomberg

Wall Street is betting on Dollar Tree’s overhaul. Shares have surged 50% since Mantle Ridge came into the picture, by far the most on an S&P 500 retail index, which tumbled 25% over the same period. That’s lifted Dollar Tree’s market value to more than $38 billion, compared with Dollar General’s $55.7 billion.

The shares have also gotten a boost from a decision last fall by longtime Dollar Tree CEO Michael Witynski to raise the benchmark price to $1.25 amid higher inflation. Witynski has kept his job but five other C-suite executives recently left the retailer or are in the process of exiting. The company didn’t say why they departed.

Slow to Act

In West Memphis, work at the warehouse has long been punctuated by the rats.

At 9:40 a.m. on March 3, 2021, an Arkansas health official arrived for an inspection. After finding “live and dead rodents,” he ordered the disposal of potentially contaminated food, including 60 pounds of apple sauce and 300 pounds of blueberry muffin mix.

The official returned two and four weeks later, according to inspection reports included in a lawsuit filed by Arkansas Attorney General Leslie Rutledge, and again found live rodents. He ordered Family Dollar to get rid of 200 pounds of macaroni and cheese and 150 pounds of shredded wheat, among other items.

Quincie Washington Photographer: Houston Cofield/Bloomberg

Throughout 2021, warehouse bosses told Family Dollar executives about the infestation on a weekly basis and recommended fumigating the facility, said Kevin Goins, the West Memphis operations manager at the time. Their reply was that shutting the distribution center down for a few days would be too expensive, he said. Goins was terminated around the time the infestation became public.

Family Dollar documented 2,300 rodents captured in 2021, from March 29 to Sept. 17, according to company records cited in an FDA inspection report. In October, dozens of rats were seen scurrying across the warehouse floor during a fire drill.

Around the end of the year, an employee named Robert Bradford recorded himself offering a potato chip to a brownish grey rat sitting on a cardboard box. The video aired the first week of January on local television station WREG. Days later, the FDA showed up unannounced at Goins’s house to grill him about the infestation.

The agency also inspected the warehouse, where it found live rats, dead rats, “a strong odor” of rodent waste and “multiple bags of products” that were gnawed open. Taco-flavored sunflower seeds were spilling out of two bags and were stained with “mammalian urine.” A pallet of chicken-flavored pasta and rice mix had “nesting material and tunneling.”

Davisha Silas Photographer: Houston Cofield/Bloomberg

The warehouse was fumigated on Jan. 13 of this year. In the following days, workers removed about 1,100 rodent carcasses. On Feb. 18, the FDA issued a public safety warning to customers of more than 400 Family Dollar stores in Alabama, Arkansas, Louisiana, Mississippi, Missouri and Tennessee.

Culture vs. Customers

As Dollar Tree forges ahead in its efforts to improve operations, any changes will come too late for the West Memphis employees. Late last month at an Applebee’s near the junction of Interstate 40 and Interstate 55, eight warehouse workers who have left the company gathered to reflect on their experience as operations wound down.

The warehouse still contains large bundles of merchandise that must be disposed of to comply with FDA orders, the employees said, calling up photos of the goods from their phones. There’s no air conditioning despite outdoor temperatures that climbed to triple digits this month.

With the distribution center set to close for good in three months, it may forever be remembered as the warehouse that lost to the rats. Dollar Tree disclosed $34.1 million in inventory markdowns and other costs tied to the recall in its fiscal fourth quarter, with a similar impact in its first quarter. Second-quarter costs are expected to be even higher.

“To me it goes back to culture,” said Chris Burks, a lawyer in North Little Rock, Arkansas, representing workers at the warehouse. “What do you invest in? Are you just interested in acquiring customers?”

Topics Lawsuits

Was this article valuable?

Here are more articles you may enjoy.