Virginia judge recommends $12 million settlement in salmonella outbreak tied to peanut company

By Michael Felberbaum, AP
Thursday, August 26, 2010

Judge recommends $12M settlement on bad peanuts

RICHMOND, Va. — A federal judge is recommending approval of a $12 million settlement for those sickened or killed in last year’s salmonella outbreak tied to a Virginia-based peanut processor.

U.S. Magistrate Judge Michael Urbanski in Lynchburg issued his recommendation late Wednesday to pay more than 120 personal injury claims related to the outbreak, including the families of nine people who died and 45 children who were sickened. The settlement must now be approved by a bankruptcy judge.

The outbreak began after an open container of peanut butter at a long-term care facility in Minnesota was found to contain a strain of salmonella in January 2009.

The peanut butter was traced to two plants owned by Lynchburg-based Peanut Corp. of America in Blakely, Ga., and Plainview, Texas. The products from the plants were eventually linked to the nine deaths and illnesses of about 700 people.

Under the brand names Parnell’s Pride and King Nut, Peanut Corp. produced not only peanut butter, but peanut paste, an ingredient found in foods from granola bars and dog biscuits to ice cream and cake. More than 3,490 products were recalled, including some millions of Kellogg’s Austin and Keebler peanut butter sandwich crackers.

Peanut Corp. filed for Chapter 7 bankruptcy to dissolve amid fallout from the outbreak.

The money provided by the company’s insurer, Hartford Casualty Insurance Co., will be distributed based on the extent of victims’ illnesses. Additional undisclosed settlement funds are being paid by Kellogg Co.

The settlements from the insurance money range from $2 million for a West Virginia man, and nearly $1 million in the estate of an Alabama woman, to less than $50,000 for some of the children. Most of the other claims are for less than $100,000.

“All of these families have mounting medical bills, and this happened right at the heat of the economy tanking,” said Houston attorney Ron Simon, who represented some of the victims. “This is going to give them a chance to pay those bills and move on and get closure on what was a very, very traumatic part of their lives.”

An attorney representing Peanut Corp. in its bankruptcy case did not immediately return a telephone message seeking comment.

The judge’s recommendation follows a nearly five-hour hearing last week where the judge questioned three lawyers representing the families and children, trustees in the bankruptcy case and a lawyer for Kellogg.

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