Odwalla Apple Juice E. coli Outbreak

On October 31, 1996, the Food and Drug Administration (FDA) announced that Odwalla was recalling all of the company's juice products that contained unpasteurized apple juice. The recall was initiated in response to 13 reported cases of E. coli O157:H7 illness that had been linked to the company's unpasteurized apple juice by the Seattle-King County Department of Public Health.

During the course of the public health investigation into the outbreak, a genetically indistinguishable strain of E. coli O157:H7 that had been isolated from case-patients was found in a bottle of unpasteurized Odwalla apple juice. Although subsequent investigation by federal and state agencies was unable to pinpoint the exact source of the E. coli bacteria at Odwalla's Dinuba, California plant, investigators from FDA did find numerous violations of health and safety codes at the Odwalla manufacturing plant, including lack of proper sanitizing procedures and poor employee hygiene. The FDA also found that the plant accepted decayed fruit from suppliers.

The investigation was ultimately expanded to include inspection of apple orchards, produce suppliers, and packinghouses that furnished the central California plant with the apples. None were implicated as the source of the contaminated produce.

When the outbreak was over, one child was dead from complications arising from her E. coli O157:H7 infection, and more than 65 individuals were confirmed infected with the bacteria in the western U.S. and British Columbia. Of these reported cases, more than a dozen developed hemolytic uremic syndrome (HUS), a life-threatening condition that causes the body's major organs - particularly the kidneys - to fail.

As a direct result of the outbreak, Odwalla began pasteurizing its juices. The outbreak also spurred a response by the federal government, which now requires warning labels to be placed on all unpasteurized fruit and vegetable juice containers.

In 1998, Odwalla was indicted and held criminally liable for the 1996 E. coli outbreak. The company pleaded guilty to 16 federal criminal charges and agreed to pay a $1.5 million fine. Today, Coca-Cola Company owns Odwalla.

1. Assume you were one of the managers in the emergency meeting held after the E-coli breakout. Describe 3 STRATEGIC LEGAL options,as indicated in your textbook, that Odwalla could have taken during this meeting. For each option, provide an analysis of the legal and financial implications of each potential decision. (The options: noncompliance, prevention and creation of value).