September 26, 2023

After Salmonella Outbreak Sunland Bankruptcy Includes 1,000 Creditors

After causing a 2012 Salmonella outbreak that sickened 42 people in 20 states, Sunland Inc., the nation’s largest producer of organic peanut butter, has filed for Chapter 7 bankruptcy. A 30-page list of roughly 1,000 creditors was among the documents included in he Portales, NM company’s voluntary filing in U.S. Bankruptcy Court in the District of New Mexico October 9.

GavelsThe company listed sales of $54 million for the period ending August 31 2011, $55 million for the period ending August 31, 2012 and $43 million for the period ending August 31, 2013. At the time of filing, Sunland claimed $51.5 million in liabilities and $49.4 million in assets, according to  court documents.

Sunland is also named as the defendant in several civil lawsuits stemming from the outbreak including one seeking a $1 million in damages. In that lawsuit, case number 3:2013-cv-00755 filed March 28 in US District Court in Southern California, Swain Creations Inc. doing business as Jer’s Chocolates alleges breach of contract, breach of implied warranty, fraud, and false advertsing. “The defendants knew or acted in reckless disregard of the fact that the [product] they sold was defective, dangerous, adulterated and misbranded because it was contaminated with Salmonella bacteria,” the document states. The Salmonella outbreak and recall saddled Jer’s with costs associated with product disposal, transportation, warehousing, storage, loss of business and loss of reputation, the suit alleges.

Sunland’s insurer, Great American Alliance Insurance Co. of  Cincinnati, has also filed suit against the company. That suit, case number 1:13-cv-00677-MRB filed September 24 in the Southern District of Ohio Western Division, is about which party is responsible for paying claims brought against Sunland by those who were sickened in the outbreak which touched off more than 250 product recalls for potential contamination including Trader Joe’s, Newman’s Own, Earth Balance, Harry & David, Target’s Archer Farms and Safeway’s Open Nature. The peanut butter also made its way into the National School Lunch program via Smucker’s Uncrustables and bulk drums.

The outbreak wasn’t Sunland’s first brush with food safety troubles. FDA inspectors found the same problems during visits in 2007, 2009, 2011 and 2012:  Salmonella in the plant, pest problems, poor employee food safety practices, poor maintenance of the building and equipment; and improper storage of raw materials including peanuts stored outside where birds pooped on them.

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