Blue Bell hasn't seemed to lose its core fan base, but shareholders are less than enthused.
Blue Bell hasn't seemed to lose its core fan base, but shareholders are less than enthused.
Photo by Ruthie Johnson Miller

Two Blue Bell Shareholders Sue Over Listeria Contamination

Most people have gotten over how Blue Bell, the "national ice cream of Texas," was found to be selling listeria-tainted products back in early 2015, but at least two of the company's shareholders are upset enough to turn litigious.

Apparently, humans have an almost infinite capacity to forgive and forget, particularly when there is ice cream involved. It was truly remarkable (and a bit troubling) to see how many Blue Bell fans actually rallied to support the Brenham-based company in the aftermath of revelations about how the company had found listeria in facilities in Brenham; Sylacauga, Alabama; and Broken Arrow, Oklahoma dating back to 2013, according to Food and Drug Administration records, but had failed to get the nasty pathogen out of the facilities or to even test the ice cream to ensure that the listeria did not taint products.

After all, the thinking seemed to go, the company cleaned up the listeria found in its factories within just months of the pathogen being traced back to Blue Bell products in the spring of 2015, and only a few of the hundreds or possibly thousands who ingested the listeria are known to have died, according to the Centers for Disease Control. Such a scandal could have taken the little creamery in Brenham down for good, but Blue Bell fans proved ready and willing to let bygones be bygones and buy the company's ice cream.

However, it is proving to be much more difficult to shake off how this whole mess played out for a pair of Blue Bell shareholders who recently filed lawsuits against the company, its executives and board members accusing all of the above of mismanagement.

They argue, according to the lawsuits filed in Chancery Court in Delaware where Blue Bell Creameries is incorporated, that mismanagement led directly to the listeria outbreak that forced the company to issue a nationwide recall, the first ever issued in more than a century of production, and stop making ice cream for months as they worked to get things in order with the FDA.

The long delay ultimately cost the shareholders money, although the court records do not indicate how much money it cost them. (They don't have to disclose that information since Blue Bell is privately held.) This isn't surprising.

Blue Bell's own FDA records show company employees had been finding evidence of listeria on various surfaces of the plants since at least 2013, but had failed to actually test the ice cream for listeria. In February 2015 an FDA inspector happened to find listeria in a batch of ice cream randomly sampled in North Carolina and traced the listeria back to Blue Bell's plants. But it took three more months for Blue Bell to take the next step and start pulling product off the shelves.

Once the company did issue a recall in April of that year, it was sent into a tailspin, with more than half the workers at the company furloughed while the others were simply laid off. In the end, Fort Worth oilman Sid Bass rescued the company, trading a desperately needed injection of cash for a portion of the company. Since then the company has slowly and steadily lumbered back onto its feet, but it doesn't take a genius to realize that this whole debacle also must have come with a monetary cost.

The end result saw Mary Giddings Wenske, who owns a Blue Bell Class A limited partnership share and is trustee of a trust that holds an unnamed number of shares in the company, alleging in her lawsuit, which was filed in October, that Blue Bell executives and board members "willfully disregarded" their fiduciary duty to investors by allowing the plants to run under "unsanitary practices and conditions." She also calls out the company for having testing and monitoring procedures that were "woefully deficient."

Jack Marchand II, the other angry lawsuit-wielding shareholder, owns 29 shares of common stock and claims Blue Bell fell down on its fiduciary duty by making ice cream in conditions that were sloppy and unsanitary to the point that one man with autoimmune issues ate the listeria-laced ice cream and ended up in the hospital with what he has claimed in court records was listeria-related meningitis. He survived but his health was completely wrecked, as we have noted. Marchand filed his lawsuit in August.

People are still buying Blue Bell ice cream by the gallon and have been happy to forget about the listeria scandal, but there are at least two people who are not having it. They didn't lose their health and their lives were not jeopardized like some of those who actually ate the contaminated ice cream, but they did lose money. It's unclear how much either is seeking in damages. 

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