Blue Bell Board Must Face Investors' Listeria-Recall Claims

(Bloomberg) -- Blue Bell Creameries' directors must face claims that their mismanagement led to a 2015 listeria outbreak that forced the ice-cream maker to recall all its products and lose millions of dollars in sales.

Investors raised legitimate points in a lawsuit questioning whether Blue Bell's board members did enough to insure the company's plants didn't produce contaminated products, Delaware Chancery Judge Joseph Slights said in a ruling made public Friday.

It's “reasonably conceivable” that Blue Bell officials didn't use “best efforts” to insure their plants complied with cleanliness requirements, the judge wrote. Slights also threw out other claims made by investors.

The ruling comes as Blue Bell is pushing to get back into more U.S. markets. Stores in Indiana, Kentucky and New Mexico recently put Blue Bell products back on their shelves.

The family-run creamery doesn't comment on pending litigation, Jenny Van Dorf, a Blue Bell spokeswoman, said in an emailed statement. The company is based in Brenham, Texas.

Blue Bell shut down its production lines in April 2015 when 10 people were hospitalized after eating listeria-tainted ice cream. Three people died and federal regulators cautioned consumers about eating Blue Bell products.

The company was forced to recall more than seven million gallons of ice cream and other lines of frozen treats. That led to the layoff of more than 1,400 workers. Blue Bell was fined $850,000.

Mary Wenske, who owns a stake in Blue Blue's controlling partnership and represents a trust holding other partnership shares, contends in the Delaware suit that the company's directors turned a blind eye to several-years' worth of reports about “unsanitary practices and conditions” at the plants.

The case is Ms. Mary Giddings Wenske v. Blue Bell Creameries Inc., No. 2017-0699, Delaware Chancery Court, (Dover).

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Joe Schneider

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