Peanut Company at Center of Salmonella Scare Files for Bankruptcy Protection

A Congressional House Committee began looking into a salmonella outbreak at the Peanut Corporation of America Wednesday, however the owner of the company has refused to testify. Video by AP
By Nick Miroff and Lyndsey Layton
Washington Post Staff Writers
Saturday, February 14, 2009

Peanut Corporation of America, the company at the center of the nationwide salmonella scare, has filed for Chapter 7 bankruptcy protection and will begin liquidating its assets as legal claims pile up against it.

"Given that PCA is under criminal investigation, I'm not surprised they've gone bankrupt," said Bill Marler, a Seattle-based lawyer representing 47 clients who are suing the company, including family members of two victims who died after reportedly consuming peanut products tainted with salmonella.

Companies that Lynchburg, Va.-based PCA supplied with peanut products have also gone to court against it, and PCA's insurer, Hartford Casualty Insurance, has filed a lawsuit in an effort to limit its liability.

PCA's products have been linked to nine deaths and 636 cases of food poisoning in 44 states, and more claims expected to follow. Records released during congressional hearings last week showed the company continued to ship its products even after they tested positive for deadly bacteria.

Federal investigators are probing the company's processing facilities in Georgia, Texas and Virginia, as well as its owner, Stewart Parnell. "PCA was hoping to be able to reorganize, but the events and actions of the last several weeks led it to conclude that wouldn't be possible," said Andrew Goldstein, the company's bankruptcy attorney. "This will give rise to the orderly liquidation of the company's assets."

The bankruptcy filings show that the company carries debt with between 100 and 199 creditors and faces between $1 million and $10 million in liabilities. Company assets are listed at being worth between $1 million and $10 million.

"Some time in the next 15 days, we'll file something more specific, but that information is still being developed," Goldstein said.

The bankruptcy filing will slow the flood of lawsuits against the company but will not prevent individuals who have been sickened from filing claims, said Marler, who specializes in suits involving food-borne illnesses. "It just puts everything on hold," he said, adding that he would move to lift the stay of litigation on Monday so that new claims against PCA could be made.

"Until the stay is lifted, they can't be sued," Marler said.

PCA carried $24 million worth of personal liability insurance for the period of the alleged contamination, Marler noted, and those funds cannot be used to pay suppliers or other companies that have had been hit with millions of dollars in product recall costs. More than 2,000 food products tied to PCA's peanuts have been taken off the market in one of the largest food recalls in U.S. history.

Marler said his clients are also suing King Nut and Kellogg, which used PCA products in their own foods.

Staff researcher Madonna Lebling contributed to this report.

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