The SoyNut Butter Co. has filed for bankruptcy, citing an E. coli outbreak linked to its I.M. Healthy brand peanut butter substitute and manufacturer Dixie Dew Products as the causes for its financial failure.
The Glenview, IL, soy butter company’s president and 90 percent shareholder Stephen Grubb listed some victims of the E. coli outbreak as creditors with “unknown” amounts owed to them in the Chapter 7 filing in U.S. Bankruptcy court in Illinois.
At least 32 people—26 of them children—across a dozen states have been confirmed with the outbreak strain of E. coli O157:H7 found in the soy butter and the manufacturing plant, according to the Centers for Disease Control and Prevention.
Seventeen of the victims are represented by Seattle attorney Bill Marler, who has been practicing in the foodborne illness arena since 1993 when he represented victims in the Jack in the Box hamburger E. coli outbreak.
“The bankruptcy was not unexpected,” Marler said Tuesday. “We expect Dixie Dew to follow suit in the next 30 to 60 days.”
The action in bankruptcy court effectively puts civil cases filed by outbreak victims in state and federal courts on hold, Marler said. Insurance coverage that SoyNut Butter Co. and Dixie Dew Products have, assuming the manufacturer also files for bankruptcy, will total about $12 million and can only be used to compensate outbreak victims, not other creditors, Marler said.
If both SoyNut Butter Co. and manufacturer Dixie Dew Products go bankrupt, retailers who sold the implicated soy nut paste will be liable to outbreak victims, Marler said. Those retailers include Target and Amazon.
“This underscores how important it is that retailers pay attention to where they’re getting their products,” Marler said.
“If a responsible retailer would have looked at Dixie Dew and I.M. Healthy they would have seen what the FDA saw. You can’t just buy stuff and sell it without knowing where it comes from.”