Bankruptcy court awards soy nut butter E. coli victims $11.25 million

The U.S. Bankruptcy Court for Northern Illinois today is expected to award the remainder of insurance coverage held by I.M. Healthy and Dixie Dew to victims of 2017’s E. coli O157: H7 outbreak involving the two companies.

Epidemiologic, laboratory, and traceback evidence indicated that I.M. Healthy brand Soy Nut Butter manufactured by Dixie Dew was the likely source of 32 infections of E. coli O157: H7 in 12 states during the spring of 2016. Illnesses started on dates ranging from Jan. 6, 2017, through Feb. 15, 2017. More than 80 percent of the victims were children.

Both I.M. Healthy and Dixie Dew filed for Chapter 7 Bankruptcy. The Court took control of insurance liability proceeds from the two companies that totals $11.25 million.

Twenty-six people who were victims of the I.M. Healthy/Dixie Dew outbreak filed claims with the court, which appointed a trustee to evaluate the applications. Gus A. Paloian has served as the trustee since the bankruptcy was filed on May 12, 2017. The values of the claims ranged from $25,000 to $25 million individually, based on the severity of the E. coli illnesses, for a total of $70 million.

The bankruptcy court paid out $6 million to claimants in October 2018 on a pro-rata basis. Today it is expected that the court will order the balance, $5.25 million to be disbursed by the court on Jan. 10 this year.

Once the bankruptcy court rules, the 26 claimants will continue litigation against the supply chain and retailers who sold the product, according to Bill Marler, the Seattle food safety attorney representing the plaintiffs.

Nine of the I.M. Healthy/Dixie Dew outbreak victims were known to have developed hemolytic uremic syndrome, a type of kidney failure. The victims were also young, with 81 percent under age 18. Younger people are most susceptible to the most severe injury from E. coli O157 infections.

Soy Nut was a marketer of Soy Nut Butter, a nut-free substitute for peanut butter.  Dixie Dew was its independent third party manufacturer, based in Erlanger, KY.

The Centers for Disease Control and Prevention and the Food and Drug Administration linked the soy nut butter to the E. coli outbreak in March 2017. The I.M. Healthy Original Creamy Soy Nut Butter was first recalled on March 3, 2017 and that recall was expanded March 10, 2017.

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