A Florida-based import-export company has filed for Chapter 7 protection in bankruptcy court, listing more than $204 million in liabilities from litigation over its role in the import from China of powdered milk contaminated with melamine. In re Exim Brickell, LLC, No. 13-28502 (U.S. Bankruptcy Ct., S.D. Fla., filed August 3, 2013). Exim Brickell, LLC declared $300 in office furniture as its only asset. According to a news source, the 2008 tainted Chinese milk scandal, which affected hundreds of thousands of children in that country and killed six, resulted n verdicts and legal fees against the company as a result of litigation involving a Venezuelan company that recently won an appeal in their breach of contract dispute. See Law360, August 7, 2013.

In a related development, a new milk contamination scandal has developed
in China over whey protein concentrate potentially contaminated with the C.
botulinum bacterium. The dairy farm near Tangshan purportedly linked to the
contaminated ingredient is managed by New Zealand’s Fonterra—a global
dairy giant with revenues of about $16 billion—which announced that some
of the ingredients used in infant formula and sports drinks tested positive
for the bacteria. Producers in the supply chain immediately acted to stop
sales and recall affected products. Fonterra has reportedly informed eight
customers about the problem, which involves whey protein produced during
the past year, but apparently refused to reveal who they are or what products
and countries are affected. Botulism, although rare, can be a fatal paralytic
illness caused by a nerve toxin.

Information about the contamination is slowly accumulating in media reports.
New Zealand’s Ministry for Primary Industries has indicated that Nutricia
used some of the tainted ingredient in its Karicare® line of infant formula and
warned parents not to use it. Students at a New Zealand high school reportedly
consumed protein drinks with the affected whey protein, supplied to the
school in February. Minister of Health Tony Ryall reportedly said that illness
was highly unlikely and the students are not at risk. Chinese officials called
on milk powder producers to better manage their operations and said that
any companies with quality or safety problems would be “severely” punished.
Chinese consumers have apparently paid a premium for New Zealand milk
products because of the country’s reputation for good manufacturing
practices. China has also reportedly scrutinized milk powder producer pricing
practices and this week fined six companies, including Fonterra, $110 million
for price-fixing and anti-competitive behavior. See Associated Press, August 8,
2013; Reuters, August 9, 2013.


Issue 493

About The Author

For decades, manufacturers, distributors and retailers at every link in the food chain have come to Shook, Hardy & Bacon to partner with a legal team that understands the issues they face in today's evolving food production industry. Shook attorneys work with some of the world's largest food, beverage and agribusiness companies to establish preventative measures, conduct internal audits, develop public relations strategies, and advance tort reform initiatives.