Outbreak, Inc. Co-Founder
FoodTechSource: How did Outbreak, Inc. evolve?
Denis Stearns: We began to field a lot of telephone calls from people wanting us to speak at conferences, such as the IFT conference and the Northwest Food Processors Association conference, to share some of the wisdom weve gained from our experience with litigationthings companies do badly. The more conferences we went to, the more requests we got. So, we decided to create a specific organization as a vehicle.
FTS: Who are some of your corporate clients?
Stearns: In terms of private companies, we were recently down at the Bear Creek Corporation to give a day-long seminar to 200 of their Q/A peoplepeople who work on their manufacturing line. Several of their executives had seen us speak, and they contacted us to come out and give a more in-depth presentation. Weve also been contacted by a number of companies to do consulting work.
FTS: Are you still active in industry-related litigation?
Stearns: Yes, through Marler-Clark. But one of the reasons we decided to form Outbreak was because weparticularly Bruce Clark and myselfwe remain very much involved in the industry side. We tend not to approach these things with the knee-jerk reaction that corporations are bad, that theyre intentionally trying to poison people or whatever. And we use Outbreak as a way to stay in that side of it.
FTS: What exactly do you do as consultants?
Stearns: We found that when we sue companies, they dont have very good systems in place that anticipate litigation. Were not food scientists; there are a lot of consultants out there that help design HACCP programs and will give you advice with respect to specific food safety systems that have to be in place. But we take more of a systems engineer approach. We come in and ask, Do you have a healthy organization? How is information passed along through your organization? Do you know what kind of information is coming into your organization? For example, most large operations dont have someone whose sole job is to keep in touch with the various regulatory agencies. So, when an outbreak does occur, theyre trying to make these relationships on the spot. When its too late. Theyre meeting their local FDA people for the first time when they arrive at the door with their swab test kits.... Its much better to be on a first name relationship with those people when times are good.
Most operations dont have someone whose sole job is to keep in touch with the regulatory agencies. So, theyre meeting their local FDA people for the first time when they arrive at the door with their swab test kits....
FTS: Communication is the key?
Stearns: That was one of the things Bruce and I learned in the Jack-in-the-Box case. Here was a companyFoodmaker, Inc.that had over 1,000 restaurants, but up until the time this E. coli outbreak hit they had no organized way of staying in contact with each states health department. For example, Washington state, a year before the outbreak, had increased the minimum cook temperatures for ground beef, and it had never showed up on Foodmakers radar screen. So they spent the first month of the outbreak insisting no one had ever told them. And of course you go down the food chain, so to speak, to lower managers, and people always turn up who knew about it but somehow it never made it to the upper levels of the corporation. Thats one of the keys to preparing for the prospect of litigation. A lot of the damage companies incur during litigation results from not having thought about what its like to be sued, and they havent put in place the systems to be prepared.
FTS: What is it like to be sued?
Stearns: Its an incredibly invasive experience. I think the worst part of it, especially if youre the president of a small company, or the Q/A director, is finding out the bad news during litigation. Im always amazed that people think they know everything they need to know about their company. What litigation does is put your company under a magnifying glass, and it gives people the benefit of 20/20 hindsight. Which is always dangerous. Little things that might have been ignored along the way dont look so innocent after the fact.
FTS: What do you mean, innocent?
Stearns: The Odwalla case is a very good example. This is a company that probably had an unreasonably high degree of confidence in the safety of their product. I have no doubt that was in good faith. But in the Odwalla case, one of the turning points came when it was revealed that about six months prior to the outbreak they decided to try to retail their juice to the U.S. Army. So, the Army assigned someone to come out and inspect the plant, which is actually a relatively rare occurrenceits surprising how often large scale retailers dont even bother to go look at a plant from which theyre buying millions of dollars in product. But in any case, the Army came and took samples of the juice, which they sent off for microbiological testing; they consulted a number of academics about the potential risks of unpasteurized juicewhats the kind of microbial count you should find in juice that is being manufactured according to GMPs, that sort of thingand what they found alarmed the inspectors. So, the Army decided not to buy from Odwalla, and sent them a letter saying something like, We really dont think that your manufacturing practices are sufficient to guard against contamination of your product, and your micro counts are too high, and were not going to do business with you. Now, that should have been a big wake-up call, but for whatever reason, that letter just got filed. And, of course, when the outbreak occurred six months later there was an effort to keep that letter secret. When it came out it was bad news for the company. So, before the suit, you would want systems in place that would make sure you knew about any bad news. A lot of companies arent set up that way.
FTS: Whats the worst part of being sued?
Stearns: Its incredibly disruptive, not only to a companys morale but also to its productivity. During Jack-in-the-Box, I spent literally weeks at a time in the corporate headquarters going through all their files, hauling away whole file cabinets so I could photocopy them. I spent days at time interviewing everyoneand thats my client, you know? Im taking all their Q/A people away for days at a time to prepare them for depositions....some of those Q/A people were deposed up to ten times. You can get insurance to pay when someone gets hurt by one of your products. It doesnt come out of your pocket. But you cant buy insurance for the lost time your employees are going to spend preparing for depositions and being deposed. Thats money down the toilet. So the only thing you can do to protect yourself against that is to prepare for the prospect of litigation.
FTS: If its the insurance companies who pay, why dont they do what the Army did and perform one-site investigations prior to insuring the client?
Stearns: That is something insurance companies have done in other industries, and since food-borne illness litigation is certainly not going away, I think you are going to see insurance companies that are writing big policies hiring third-party people to come in and inspect.
FTS: Someone other than the government?
Stearns: Yes. That hasnt worked. The meat industry is a perfect example: We have a USDA inspector on site so everything must be fine. I think people are beginning to realize that isnt enough. Even if you just comply with Federal regulations, that doesnt insulate you from liability. Everyone knows that Federal regulations are the lowest common denominator. And yet, when a company gets sued the first thing they usually say is, Well you know we follow the rules. But that doesnt matter. If your product hurts someone, youre liable under the law as its written now. So companies need to be more realistic about this. One of the things that I think saved Jack-in-the-Box was that after the initial shock they really got behind the idea of lets settle these cases, not fight, not drag this out. They put a lot of pressure on insurance companies to settle. And that took three and a half years.
Federal regulations are the lowest common denominator. And yet, when a company gets sued the first thing they usually say is, Well you know we follow the rules. But that doesnt matter if your product hurts someone.
FTS: And now Jack-in-the-Box has recouped; theyre expanding onto the East Coast.
Stearns: I just wish I hadnt worked for them all that time so I could have bought their stock when it was $4 a share. Jack-in-the-Box was a good company then and its a better company now. These things happen to good companies.
FTS: Are you finding that the industry is getting more proactive? Or are you still principally being called in after the fact?
Stearns: Ive noticed a lot of proactive interest from the food companies closest to the consumer, the ones that either create a product or buy a product for immediate retail consumption. Bear Creek is a perfect example. Theyre going to sell a product that goes immediately into the persons hand whos going to eat it. Restaurants are becoming more proactive as well. Where I dont see it is among the vendorsthe people who are supplying ingredients, that kind of thing. Theres still a sense in which they feel insulatedtheyre one or two manufacturing steps away from the actual retail customer. Its my impression they retain something of a bunker mentality. You still see that in the meat industry. They fight the USDAs random sampling for E. coli. Theyre still fighting it. Because if a company tests for E. coli and finds anything at all, it will kick in a USDA recall of everything. The idea is that the more you test the more likely you are to find something. To the average consumer that is so counter intuitive as to be absurd. But I can see where theyre coming from. I think the meat industry needs to have better PR people.
FTS: Why not make the USDA stronger?
Stearns: The USDA needs to be split apart, in my opinion. The USDA is charged with promoting the meat industry as well as regulating the meat industry. Those two functions are both very important but they shouldnt be charged to the same agency. I think the Food Safety Inspection Service (FSIS) should probably be spun off and made independent of the USDA. A lawyer couldnt be in the conflict of interest that theyre in.
FTS: How would you suggest companies prepare for what increasingly seems to be the inevitablethat they will face a recall and/or a lawsuit?
Stearns: I think the most important thing...one of the signs Bruce Clark always shows in his part of the presentation says 12 jurors equals 12 consumers. And I think that sometimes what happens is that companies dont think in terms of how something will look to 12 average consumers until its too late. Its like my grandmother always used to tell me: If you arent willing to do something while Im standing there watching you, dont do it just because Im not there. What they need to do is empower someone in the corporation to be the devils advocate: to ask, how would this look? If this particular memo is shown on a big screen to a jury, what is that jury going to think? Simply put, that kind of process isnt integrated enough into companies. And if you get sued its too late. You cant go back and burn that embarrassing e-mail. You learn your lessons as you go along. That way when you get suedand most companies are going to get sued at some pointit isnt worse than it has to be.
FTS: How is business for Outbreak, Inc.?
Stearns: Part of the problem, to be quite frank, is that business is too good for Marler-Clark.
You learn your lessons as you go along. That way when you get suedand most companies are going to get sued at some pointit isnt worse than it has to be.
FTS: It must be tough to switch sides.
Stearns: So far it hasnt been. So far at least all of the companies weve ended up suing have not taken the progessive attitude of a Jack-in-the-Box. Theyve been in denial. Theyve said it is not their fault, and pointed the finger elsewhere. Theyve said it was an act of God. How can you sue us? So, in a way it was a pleasure to sue them. But if we do our job correctly, most companies come around eventually and the case is settled. What people need to keep in mind is, its insurance company money. Thats why you buy insurance. Some companies take it really personally when you sue them. Youve got to get by that.
FTS: Besides, its not the litigation that produces all of the damaging headlines; its the contamination.