Signage for Joriki Beverages in Toronto on Jan. 8. The Canadian company that processed plant-based milk linked to a deadly listeria outbreak has permanently closed all four of its plants.Cole Burston/The Canadian Press
The owner of a factory tied to Canada’s deadly listeria outbreak in plant-based milks last year has been told to preserve documents and not take any steps that could erode the value of its assets, as the companies involved face two potential class-action lawsuits.
Joriki Inc., which operated a factory in Pickering, Ont., that public health officials linked the outbreak to in July, has also been told not to take any steps that could diminish its insurance coverage.
The warnings are contained in a letter sent by dairy giant Danone Canada, which contracted Joriki to manufacture almond, oat, cashew and other alternative milks under the Silk brand. The demands are among the first salvos in what is expected to be a lengthy legal battle stemming from the listeria outbreak, which sickened at least 20 people and killed three.
Public health officials announced a nationwide recall on July 8 of Silk and Great Value brand plant-based milks after people began turning up in hospital emergency rooms with serious illnesses that were later diagnosed as listeriosis. The bacteria was traced to products made at Joriki’s Pickering facility, forcing production to be halted and millions of cartons pulled from shelves.
The letter from Danone is in response to Joriki filing for protection from creditors in late December. Joriki said its operations were struggling financially prior to the outbreak and the recall pushed its business into insolvency.
Danone told Joriki in the letter to inform its insurers about potential forthcoming claims.
“Danone has and will continue to suffer damages as a result of the recall of the product,” Danone lawyer Christopher Hubbard wrote. “Please ensure that Joriki’s insurers are promptly notified of Danone’s claims and demands, that all relevant documents are preserved, and that no steps are taken which may have the effect of depreciating Joriki’s assets or eroding its insurance coverage.”
According to court filings, Joriki owes creditors more than $209-million, and has about $2-million cash remaining.
A Globe and Mail investigation last year found the Canadian Food Inspection Agency had not examined the Pickering facility for several years before the listeria outbreak occurred. The last time a CFIA inspector conducted an on-site visit of the facility was in 2019, but that was for consumer complaints involving mould in products and did not involve checking for listeria, the federal agency said.
When The Globe asked the CFIA when it had last formally inspected the Pickering facility for listeria, the agency could not provide a date.
The Globe investigation found the CFIA had adopted an algorithm-based system to prioritize inspections, which determined how often, or not, a facility would be examined. The algorithm didn’t flag the Pickering facility as a high priority, which meant it never got inspected.
The algorithm relies mostly on data supplied by companies themselves, The Globe found, and that information is often not verified by the CFIA, according to current and former inspectors. After The Globe’s investigation was published, federal Health Minister Mark Holland ordered the CFIA to review the algorithm-based system. The process will examine gaps in how the algorithm was designed, and how it should be overhauled.
Joriki has tried to sell the contents of the Pickering factory, including machinery and equipment, but could not find a buyer. It is now planning to auction them off. Equipment at the company’s three other facilities, in Toronto, Delta, B.C. and Pittston, Pa., is also up for sale.
Danone’s letter signals it could seek recourse from Joriki’s insurance provider to cover any losses.
Danone declined comment on Joriki’s move to seek creditor protection, and on the class-action lawsuits. “These matters are before the courts and we cannot provide any further details at this time,” Danone Canada spokeswoman Jennifer Vincent said in an e-mail.
Two proposed class-action lawsuits have been launched against Danone Inc., parent company of Danone Canada, and other parties related to the matter, including one by Vancouver law firm Slater Vecchio LLP, and another by Montreal law firm LPC Avocats.
Joriki’s decision to seek bankruptcy protection now looms over the court process. However, Saro Turner, a lawyer with Slater Vecchio in Vancouver, said the company’s application under the Companies’ Creditors Arrangement Act doesn’t alter his firm’s proposed class-action suit, which is awaiting certification and hadn’t yet named Joriki.
Mr. Saro said Danone would be a primary defendant in any potential legal action, even with Joriki declaring itself insolvent.
“It’s ultimately their brand, their advertising, their distributing,” Mr. Turner said in an interview. “It’s got your logo on it, you’re responsible.”
Mr. Turner said the case is an important one for food safety in Canada.
“Canadians need a reliable, safe food supply, and they need to know that the manufacturers of the products that we put in our bodies – any kind of product – whether it’s Silk milk, or some other beverage, or some other product we use, are reliable,” Mr. Turner said.
“They’ve got to be prudent, they’ve got to be diligent, they’ve got to meet the standard of care. And if they don’t, well they should expect to get sued because Canadians won’t stand for that,” Mr. Turner said. “It creates a deterrent effect.”
Joey Zukran, a lawyer with LPC Avocats in Montreal, said Joriki’s CCAA application has no effect on the Quebec class action. “It has zero bearing on the case because Danone Inc. is the main culprit and the main one we’re going after for liability,” Mr. Zukran said, adding that the publicly traded French company has a market capitalization of €45-billion. “We don’t need Joriki’s assets or payment to make everybody whole.”
The Quebec class action has not been certified and the next scheduled step is a judicial mediation. In an affidavit filed as part of the CCAA process, Joriki chief financial officer Michael Devon said the company and its representatives “do not intend to participate in that mediation although understand their insurers may choose to do so.”
Mr. Zukran declined to comment on the status of the mediation as the process is confidential, but said the lawsuit is about holding large, publicly traded companies accountable. “We want adequate compensation for the victims,” he said.