MAPLE LEAF CASE STUDY: AN EXAMPLE OF CRISIS MANAGEMENT

October 20, 2009.

 

Colin P. Stevenson —

INTRODUCTION
The first part of this paper provides an interested outsider’s perspective on Maple Leaf’s strategy to minimize its business and reputational damage. The paper will also deal more generally with current issues in the food processing industry in North America and the fact that consumers today are no safer than they were a year ago. Finally, this paper will consider some of the issues faced by plaintiffs’ counsel if they are to work effectively with multiple legal teams in a national and highly visible class action.

THE EVENTS OF AUGUST 2008
In mid August 2008 it was apparent there was a national public health tragedy involving food contamination. The Public Health Agency of Canada (PHAC) and the Canadian Food Inspection Agency (CFIA), which are federal agencies, were receiving reports of people becoming sick and dying from listeriosis nationwide. Although the source was not immediately identified, attention was soon focused on Maple Leaf Food’s establishment #97B in Toronto.

Maple Leaf Foods issued a “voluntary” recall. In other words, Maple Leaf Foods acted before a mandatory recall order was issued by CFIA. The recall was limited to 23 ready-to-eat packaged meat products. The first recall was issued on August 17, 2008. The plant was closed for what was anticipated to be four days. Maple Leaf Foods said:

“We have taken a much broader approach to the recall than the actual testing has indicated we need to.” (Schedule #1)

This was quickly proved incorrect. Further testing established that the range of contaminated products was broader than the public was originally advised. The voluntary recall was expanded on various occasions over the next few weeks until all 220 products produced since June 1, 2008 had been recalled. A summary of the final list of recall notices is attached (Schedule #1A).

The various recall notices can be found here. Apart from the immediate human tragedies of the 22 or so deaths and multiple serious illnesses, and the role of Maple Leaf Foods, the media focused on laxer government regulation in Canada as opposed to the U.S. By 2006, long before the Maple Leaf Foods outbreak, the U.S. Department of Agriculture (USDA) was insisting on daily inspection of food processing plants and testing of finished products for Listeria. The Globe and Mail, on August 29, 2008, reported that both the food processing industry and the Canadian Government had been frustrated with the U.S. precautions. The newspaper also disclosed that prior to the 2008 tragedy the CFIA had agreed to the industry’s request to end a 20 year practice of issuing reports on facilities and ranking them relative to their contamination records (Schedule #2). At the same time, acknowledging that Maple Leaf Foods met relevant USDA standards because it exported to the U.S., the Globe and Mail reported that higher U.S. standards were not enough to prevent the outbreak of listeriosis.

Meanwhile, public health advertisements were published explaining the symptoms of listeriosis and advising that Canada has one of the world’s safest food supplies (Schedule #3). This was also the position taken by Maple Leaf Foods. It is a claim which is open to very serious debate. For example, on September 16, 2009 a Canadian Medical Association Journal editorial slammed Ottawa for undermining public health safeguards (Schedules #3A and #3B).

At about the same time the media was dredging through Maple Leaf Foods’ prior regulatory issues; even those irrelevant to the Toronto based outbreak and in a concurrent article (Schedule #4) the Mayor of Walkerton was quoted as follows:

“Governments should have learned from the mistakes that led to the tragedy in Walkerton. I am completely shocked that (Prime Minister Stephen) Harper has opted to make the same mistakes nationally that led to our disaster. Food security should never be placed on the chopping block in the name of cost cutting.”

Maple Leaf Foods attributed the contamination in some of its products to the accumulation of bacteria deep within its meat-slicing equipment. Maple Leaf Foods, however, then found itself in a public debate with the slicer manufacturer which claimed their machinery was totally safe (Schedule #5). Mr. McCain insisted that Maple Leaf Foods had followed all required sanitization procedures. This part of the story quickly disappeared from the headlines. Presumably neither Maple Leaf Foods nor the slicer manufacturer were going to benefit by pointing fingers at each other in public. It is interesting to note that on April 29, 2009 CTV reported that federal inspection records had revealed that Maple Leaf Food’s records at this time had not properly recorded the history of cleaning of its meat-slicing equipment.

Meanwhile, throughout August and early September the death toll mounted almost daily. The elderly and those with compromised immune systems were the ones at significant risk. Maple Leaf Foods had supplied a large number of elder care and similar institutional facilities. There was no convenient way to screen those at risk and there was a 70 day incubation period. The public was very agitated.

The only way to diagnose listeriosis is to isolate Listeria monocytogenes from blood, cerebrospinal fluid, or stool. A sample of cerebrospinal fluid is removed from the spinal cord using a needle and syringe. This procedure is commonly called a spinal tap. The amniotic fluid (the fluid which bathes the unborn baby) may be tested in pregnant women with listeriosis. This sample is obtained by inserting a needle through the abdomen into the uterus and withdrawing fluid.

Ultimately, Maple Leaf Foods’ establishment #97B remained closed for months, extensively cleaned and machinery in part replaced.

One question which was not initially answered because the litigation was quickly settled and the then available regulators’ reports did not disclose the answer, is whether Maple Leaf Foods’ testing program had identified Listeria problems in establishment #97B sometime prior to the recall notices, or whether the testing program was inadequate and failed to detect the deadly ingredients.

Subsequent reports (CTV April 20, 2009) suggest that Maple Leaf Foods’ records compiled prior to August 2008 had identified the beginnings of the listeriosis outbreak. For some reason Maple Leaf Foods did not act immediately.

Needless to say the initial press coverage initially focused on the deaths. Customer reaction was swift. Maple Leaf Foods’ president, Michael McCain, later acknowledged that sales of all products with the Maple Leaf Foods logo initially shrank by up to 50%.

MAPLE LEAF FOODS’ RECALL
When the recall was complete Maple Leaf Foods had recalled about 668,000 kg. of meat processed at establishment #97B, where some products had tested positive for Listeria. Maple Leaf Foods never really had any choice in their “voluntary” decision to recall the meat products. Meat from the factory had tested positive for a potentially lethal bacterium and deaths were attributed to the outbreak. Presumably if Maple Leaf Foods had not recalled the meat CFIA would have ordered it to do so. The voluntary nature of the recalls were not material, however, in changing or softening the media response. It is clear, however, that the media’s point of view did change and Maple Leaf Foods started to garner some sympathy as a direct result of Michael McCain’s apologies in news conferences and later in television commercials. Mr. McCain said his company took responsibility for the outbreak.

MICHAEL McCAIN’S APOLOGY
Video message (apology) from Maple Leaf Foods, August 23, 2008:

“My name is Michael McCain. As you may know Listeria was found in some of our products. Even though Listeria is a bacteria commonly found in many foods and in the environment we work diligently to eliminate it. When Listeria was discovered in the product we launched immediate recalls to get it off the shelf. Then we shut the plant down. Tragically our products have been linked to illnesses and loss of life. To Canadians who are ill and to the families who have lost loved ones I offer my deepest sympathies. Words cannot begin to express our sadness for your pain. Maple Leaf Foods is 23,000 people who live in a culture of food safety. We have an unwavering commitment to keeping your food safe with standards well beyond regulatory requirements. But this week our best efforts failed and we are deeply sorry. This is the toughest situation we’ve faced in 100 years as a company. We know this has shaken our confidence in us. I commit to you that our actions are guided by putting your interest first.”

The next day Mr. McCain said he had not listened to two groups of advisors, the lawyers and the accountants.

The press response turned the corner. The initially hostile media now reported more on the harsh economic impact of the recall on the company and the personal toll on the devastated Mr. McCain.

Ontario’s Apology Act was not then in force. The press confirmed that Mr. McCain was making his apology against the advice of his legal advisors. While we do not know what legal advice he got, we do know that while Maple Leaf Foods said it would take responsibility, it made no legal commitment in the press conferences or advertisements. (It did give refunds to customers who returned the products to the company. Of course, almost everyone with any Maple Leaf product in their fridge by that point had dumped it in the garbage.)

As will be discussed below, however, the company did want to settle the multitude of class actions which had sprung up across the country. The effect of the apology on the litigation was probably zero. The effect on the media appears to have been considerable. The apology was probably little solace to those who were sick or died. It may have been of more interest to investors and other corporate stakeholders.

Maple Leaf Foods also probably benefitted to a certain degree when the media story inadvertently got hijacked by Agriculture Minister Gerry Ritz in an August 30 conference call when, in commenting on the political fallout, he stated:

“This is like a death by a thousand cuts. Or should I say cold cuts.”

When told about a recent death in PEI, the Minister referred to the Liberal MP and shadow agricultural critic when he stated:

“Please tell me its Wayne Easter.”

Needless to say, the Listeria crisis dominated the headlines but the focus at this time shifted to ministerial incompetence. The Minister soon had a different story:

“My comments were tasteless and completely inappropriate. I apologize unreservedly.”

At this time Maple Leaf Foods was sticking to its media game plan which was arguably somewhat confusing in that, on the one hand, they accepted responsibility and vowed to learn from the experience while, on the other hand, they touted the Canadian food regulatory system as world class. Thus, Michael McCain in this time frame made both the following statements (see Schedule #6):

“We have learned from the tragic experience and we can and will do more.” and
“I continue to believe very strongly that Canada has one of the best food safety systems in the world.”

THE IMPACT OF GOOD PRESS
In a media interview on October 29, 2009 (Schedule #7), Michael McCain admitted that Maple Leaf Foods had been engaged in continuous consumer reporting, i.e., polling. It appears the polling was concerned not with health issues but with corporate economic concerns. Mr. McCain stated:

“Recent information would suggest that 80% of our customers would buy products in the very near future, and we are seeing improvements in that every week.”

Mr. McCain went on to note that while sales initially shrank by 50%, by this time, two months later they were now only down only 15%. Mr. McCain felt that the company’s transparency in dealing with the crisis helped win back customers and stated:

“We felt that was the responsible thing to do at the time and we knew it would have a very substantial financial consequence. . . our belief is that over time by behaving responsibly, we will be respected and possibly rewarded by customers.”

The Toronto Star article on October 30, 2008, noted that Mr. McCain thought it would not be unprecedented to expect a full brand recovery within six to twelve months (see Schedule #8).

One analyst who had a “speculative buy” rating on Maple Leaf shares was quoted as saying that customers realized the outbreak had been contained and were returning to the deli aisle. Mr. Gibson stated:

“If you’ve ate smoked meat your whole life and never gotten sick, you know its pretty safe . . . the only reason I don’t have a screaming buy on the shares is because there is an outstanding class action lawsuit and even though its years away you don’t really know what will happen there.”

So customers were coming back but investors were staying away (the October 30, 2008 article in thestar.com notes that Maple Leaf shares were 32% lower than before the August 17, 2008 recall at establishment #97B). Thus, it would appear the class actions needed to be settled for reasons connected with market value, quite apart from any other reasons which may have been articulated.

It certainly appears that after the apology media coverage focused more on the financial impact on Maple Leaf Foods than on the human tragedy of the illnesses and deaths. (The Globe and Mail (ROB) (Gordon Pitts), published an excellent article “The Testing of Michael McCain” which dealt to a certain extent with all these issues (Schedule #9).) At that point Michael McCain still maintained that Maple Leaf Foods was not slow in responding to the crisis (see p. 4 of Schedule #9) and claimed they acted with lightening speed.

OTTAWA’S OWN INVESTIGATION
The federal government and Parliament both got in on the act. The government initiated its own investigation not in respect of Maple Leaf Foods specifically but in respect to how to prevent such events in the future and appointed Sheila Weatherill to investigate the listeriosis crisis. Meanwhile an investigation by a separate House of Commons’ subcommittee failed to make much headway when the Conservatives decided to await the report from the Weatherill investigation. The Opposition tabled two dissenting reports calling for a public inquiry into the outbreak and greater autonomy for the PHAC. The Opposition recommendations included working closely with the U.S. on food-safety standards, publishing inspection reports and providing adequate resources and training to food inspectors. It should be noted that Michael McCain testified at the Committee. He even engaged in a public relations campaign before his appearance (see April 14, 2009 Globe and Mail article; Schedule #10).

Beforehand Maple Leaf had already administered a coup de grâce when it appointed a chief food safety officer and touted that this was not only a first for the company but potentially for the industry. McCain stated that he welcomed higher levels of monitoring and testing for food safety, as long as there was a level playing field.

Various other listeriosis reports have also been released. Reports by the Ontario Government, Health Canada, the CFIA and PHAC all acknowledged poor coordination amongst the various governments and agencies had put Canadians’ health at risk.

THE WEATHERILL REPORT
Sheila Weatherill’s report was released on July 21, 2009 with 57 recommendations (http://www.listeriosis-listeriose.investigation-enquete.gc.ca/index_e.php?s1=rpt&page=tab). It has been reported that Weatherill and her team conducted more than 100 interviews in their six month investigation. The report concluded that the listeriosis outbreak had not been taken seriously enough at the outset. Maple Leaf Foods failed to notice the problem of Listeria contamination on its meat-slicing machines. Over-extended government inspectors also failed to identify the outbreak. Once the reports of illnesses started to mount, the outbreak was not immediately treated as a severe emergency.

“It took close to three weeks before senior executives in all key organizations became fully engaged in the event.”

Furthermore, Weatherill concludes that Maple Leaf Foods did not report (indeed, at that time it did not have to do so) information about contamination which had been detected as early as March 2007, more than a year before the first death. At the same time Maple Leaf Foods was producing larger packages of sodium-reduced deli meats for sale to hospitals and long term care homes which compounded the problem.

The Weatherill report also stated that (Schedule #11):

“Many of the issues—and even some of the recommendations generated by this Investigation—have been raised in previous reports on food safety in Canada. Recommendations are only words on paper until they are acted on. As food borne illnesses are now the largest class of emerging infectious diseases in the country, and listeriosis is a serious disease with deadly consequences for vulnerable groups, governments cannot afford to ignore these findings.”

Michael McCain, in response, finally admitted (Schedule #12):

“We thought at the time that we had a strong food safety program and we did not. Had we known then what we know now, we may have saved 22 lives.”

André Picard of the Globe and Mail, however, had a different and better view the next day when he wrote (Schedule #13):

“Yet, the root of the problem was not two dirty meat slicers but rather a culture— in government and private enterprise alike—in which food safety was not a priority but an afterthought.”

His conclusion, consistent with that of Ms Weatherill:

“Actions, not words.”

THE U.S. EXPERIENCE
Fatal food contamination occurs frequently in North America. Recalls are increasingly frequent. The L.A. Times on August 7, 2009, reported that Beef Packers Inc. was recalling 800,000 pounds of ground beef because of salmonella. The Globe and Mail on August 5, 2009 reported Maple Leaf Foods’ recall of nine varieties of hot dogs after they tested positive for Listeria.

In mid-February 2009 about 650 people in 44 states and Canada were infected with salmonella. Nine deaths were attributed to the outbreak. After intense investigation the source was traced back to a peanut processing plant in Georgia owned by the Peanut Corporation of America (PCA). More than 2,000 peanut products were recalled. The investigation involved the USDA, the Food and Drug Administration (FDA), the Centers for Disease Control and Prevention and public health officials in multiple states. The FDA report, Department of Health and Human Services, Food and Drug Administration Inspectional Observations Form FDA483 (February 5, 2009) is available at www.fda.gov.

The Americans went one step better than the Canadians and held congressional hearings and the FDA’s Office of Criminal Investigations conducted an investigation of PCA.

The Consumers Union has made various recommendations in the wake of the congressional hearing on peanut butter and salmonella. Consumers Union urges mandatory testing, reporting and annual inspections as well as an overhaul of the FDA, CU (February 11, 2009), available at www.consumersunion.org.

Unlike Maple Leaf Foods which settled its class actions and restored its market share, PCA filed for bankruptcy in mid-February 2009.

GENERAL ISSUES IN THE FOOD PROCESSING INDUSTRY
In 2007, 150,000 people across North America became ill because of salmonella. The complexity of the food processing industry is such that it took from February 2007 until June 2007 to identify the one ConAgra plant (in Marshall, MO) which was responsible, although the specific source of contamination was never identified. The New York Times (May 15, 2009) argues that corporations that supply processed foods are increasingly unable to guarantee the safety of their ingredients. In the ConAgra case the offending frozen pot pie contained more than 25 ingredients, but ConAgra was never able to pinpoint which ingredient carried salmonella.

The New York Times reports that the supply chain for ingredients in processed foods is so complicated in our global society that some companies do not even know who is supplying their ingredients. Even if the supplier is known, the ultimate food processor often does not know what efforts have been made to screen for and remove contamination from the ingredients.

Food processing companies have tried to pass responsibility for food safety to the consumer by increasingly complex instructions on packets. Consumers now are sometimes told to avoid microwaves and cook only with conventional ovens. Consumers are also told to use food thermometers to ensure the product has been cooked to the required temperature.

The New York Times notes, however, that many consumers do not know the wattage power on their microwave ovens, whether such ovens should even be used, and many consumers do not own food thermometers. Furthermore, the New York Times own attempts to cook various frozen meals to the required 165 ̊ temperature were unsuccessful, in that the pies heated to only 144 ̊ before the crust was burnt.

Food processing companies are under pressure to reduce costs. Inadvertently or otherwise this may impose greater risks on the consumer. The New York Times also reported on the concept that ingredients should have their own “passports” so that, in the event of a disease outbreak, companies are able to trace the contamination back to the source. Such proposals, however, have met with resistance from various food industry groups.

The recent salmonella outbreak attributable to PCA and peanuts also shows that the problem is not just associated with frozen foods but also impacts dry foods which have sometimes been considered safe from such problems. The August 5, 2009 Globe and Mail article on the Maple Leaf Foods hot dog recall quotes Professor Holley of the University of Manitoba who says that (Schedule #14):

“There certainly are ways the safety can be improved. We’re as vulnerable today as we were this time last year.”

THE ROLE OF THE REGULATORS
The various reports may lead to a greater number of inspectors and inspections. With the greater risk associated with so-called convenience foods and the global food processing industry, the question is whether it is enough.

On the question of proper compensation, not all food processors will have proper insurance and it is clear that the CFIA and other regulators will not readily be found liable if they are ineffective. The Court of Appeal for Ontario in Eliopoulis v. Ontario (2006), 82 O.R. (3d) 321 (the West Nile case), dismissed the claim against the Ontario Government in negligence for failing to prevent the outbreak of the West Nile virus on a pleadings motion. The court found that Ontario’s Health Protection and Promotion Act, R.S.O. 1990, c. 87, did not establish sufficient proximity to found a claim. See also Attis v. Canada (2008), 93 O.R. (3d) 35 and Drady v. Canada, (2008) O.J. No. 3772.

Thus, the regulators are essentially immune from liability in respect of consumers.

It is also true that claims by the industry for negligent investigation which causes them economic loss seem to have little prospect for success. See River Valley Poultry Farms Ltd. v. Canada (2009), 95 O.R. (3d) 1 (Ont. C.A.) distinguishing Adams v. Borrel, (2008) NBJ No. 327 (N.B. C.A.).

WORKING WITH MULTIPLE LEGAL TEAMS
In a high profile national class action there is no doubt the plaintiffs’ lawyers must move quickly for various reasons:

1. They must investigate of the merits of the case to determine if the case is worthwhile. This may require testing to be initiated.
2. They must ensure the preservation of evidence. This will at least involve letters to possible defendants requiring documents and samples to be preserved.
3. It is important to stay ahead of the defendants and defendants’ counsel who, as can be seen here, will be working hard to ensure their “message” dominates the headlines, the court of public opinion and, perhaps indirectly, the courts themselves.
4. There is, of course, the potential conflict with other plaintiffs’ firms who believe that they should control or dominate or at least participate in the litigation. An important consideration in compiling a legal team is selecting the jurisdictions in which claims should be commenced. There is still uncertainty with respect to how national class actions will develop in the Province of Québec. The “first to file” rule still dominates in Québec. The population of Québec is such that whoever commences the first action there will control 25% of the population and approximately 25% of most claims on a national basis. There is no doubt that Québec counsel must be involved. Whether counsel are involved in other provinces will depend on the nature of the claim and the issues. In Maple Leaf Foods, claims were initiated across the country and two main counsel groups coalesced.
5. It seems inevitable that similar circumstances will arise in future claims. Some counsel will agree to a consortium and there will likely be competing consortia. Consequently, it is imperative to move the action forward as efficiently, effectively and expeditiously as possible.
6. One must immediately retain the best experts, both to advance your case against the defendants and also to show that your consortium has the preferable litigation strategy. For similar reasons, the statement of claim must be drafted to include all relevant defendants and the most preferable causes of action, without being over broad and prejudicing the prospects for certification.

You must assume that there will be a carriage motion. That motion should be brought as soon as possible. It is almost inevitably an advantage to the plaintiff class that the action move forward expeditiously. Secondly, in the rare circumstance where the defendants wish to settle quickly (as in Maple Leaf Foods) it is imperative that carriage issues be determined quickly and the main action not delayed to the detriment of the class and to the prejudice of the defendants.

Ontario death confirmed in listeriosis outbreak
ctvtoronto.ca
Updated: Wed. Aug. 20 2008 8:16 PM ET
The Public Health Agency of Canada has confirmed that one person in Ontario has died from the strain of listeriosis that may be related to a bacteria outbreak at a Toronto Maple Leaf Foods plant.
Neither the Agency, nor the provincial ministry of health, could comment on the identity or location of the deceased.
Maple Leaf Foods says the plant will be closed for four days as the company investigates an outbreak of listeria monocytogenes and expands a recall of its packaged meats.
The company has recalled 23 packaged meat products, including sliced cooked turkey breast, roast beef and salami.
Though listeria has not been found in all of the 23 products now on recall, the company is recalling items that share a production line with the tainted meats. See the full list of recalled products below
“We have taken a much broader approach to the recall than the actual testing has indicated we need to,” Maple Leaf representative Linda Smith told CTV Toronto.
Smith told CTV Newsnet that the products that were recalled came from two specific production lines at its Toronto plant.
She said they were dismantling those lines to do a comprehensive cleaning.
About 380 employees at the plant are affected by the temporary closure. Employees will be receiving a supplemental half-day of food safety training.
Smith said there are ten staff devoted to food safety at the facility and the plant undergoes external audits several times a year.
“Clearly in this case our standard has not been held,” she said.
The recall is related to an ongoing investigation into a listeriosis outbreak being conducted by the Public Health Agency of Canada.
Seventeen cases of listeriosis have been confirmed: 13 in Ontario, two in British Columbia and one each in Saskatchewan and Quebec.
However, there 16 more suspected, but unconfirmed, cases of listeriosis in Ontario.
The cause of the outbreak remains unknown and a link has not been made between the affected products and any human illness.
“We’ll work until we can find the source or until the outbreak is completed,” Canadian Food Inspection Agency recall officer Garfield Balsom told CTV Newsnet.
On Sunday, Maple Leaf issued a recall of its Sure Slice roast beef and corn beef products, which are produced at the Toronto plant, after they tested positive for low levels of listeria.
The products that are part of the recall have been distributed to nursing homes, delis and
The Maple Leaf Foods’ Toronto plant, which has been temporarily closed, is seen on Wednesday, Aug. 20, 2008.
Maple Leaf Foods representative Linda Smith speaks to CTV Toronto about the recall on Wednesday, Aug. 20, 2008.
Dr. Vinita Dubey, associate medical officer of health with Toronto Public Health, speaks with CTV Toronto on Wednesday, Aug. 20, 2008. restaurants across Canada, including McDonald’s and Mr. Sub.
McDonald’s has temporarily removed its turkey BLT sandwich from its menu while the investigation into the cause of the bacteria outbreak continues.
However, Balsom said the recalled meats should all have been removed from sale by mid- afternoon Wednesday.
Exposure to the listeria bacteria can lead to listeriosis, particularly in the elderly, the very young, pregnant women or those with weakened immune systems.
“I strongly advise the public, especially those at high risk for listeriosis, such as the elderly, pregnant women and those with weak immune systems, to make sure they avoid consuming these products,” Dr. David C. Williams, Ontario’s Chief Medical Officer of Health, said in a statement. “I have also asked all public health units to advise emergency rooms in their jurisdictions to be on alert for cases.”
Symptoms of listeriosis include nausea, vomiting, cramps and fever.
“Food that’s contaminated with listeria doesn’t always look like it’s spoiled and the bacteria can also proliferate when it’s in the fridge,” said Dr. Vinita Dubey of Toronto Public Health. “So it’s important for individuals to make sure they heat their food, especially cold cuts and deli meats, properly.”
The recalled products were produced from June 2 onward.
The 23 products have an establishment number of 97B and have best before dates ranging from Sept. 30 to Jan. 1, 2009.
With files from CTV Toronto’s Galit Solomon and The Canadian Press
The complete list of affected products, including individual product codes and best-before dates: