Chi-Chi’s Seeks Suppliers’ Help With Outbreak Costs

Produce wholesalers sued over tainted green onions

By Scott Hume, Executive Managing Editor -- Restaurants & Institutions, 9/15/2004

The business costs of a single foodborne-illness incident came more sharply into focus as the after-shocks of last year’s hepatitis A outbreak at Chi-Chi’s moved to the courts.

Chi-Chi’s Inc. last month filed suits against three wholesalers it claims were the sources of green onions found to be tainted with hepatitis A. More than 600 customers who dined at its restaurant in Monaca, Pa., in November 2003 were made ill and four died. The Louisville, Ky.-based chain wants suppliers to help defray the costs associated with more than 300 lawsuits filed against it.

Cash-flow problems led Chi-Chi’s to file for Chapter 11 bankruptcy a month before the outbreak. In June 2004, the U.S. Bankruptcy Court judge overseeing Chi-Chi’s reorganization authorized the chain to pay claims totaling $2.2 million. Chi-Chi’s attorney David Ernst last month told MSNBC that the chain had settled more than 130 suits.

Legal proceedings continue although the Chi-Chi’s chain has all but ceased to exist. The company closed more than two dozen units earlier this year, and last month the U.S. Bankruptcy Court in Delaware approved the sale of 76 Chi-Chi’s properties to Outback Steakhouse. The Tampa, Fla.-based company is expected to convert most or all of the sites to its concepts. The Chi-Chi’s brand and liabilities remain with Irvine, Calif.-based parent Prandium Inc.

Chi-Chi’s also is being sent a bill for $146,000 by the Pennsylvania Department of Health, the Pittsburgh Post-Gazette reports. The state agency wants the chain to cover costs incurred by providing globulin shots to 10,000 people potentially infected with hepatitis A during the outbreak.

Similarly, Lake County, Ill., officials last month asked Dallas-based Brinker International to reimburse the county for $32,000 it spent on lab tests following a salmonella outbreak in 2003 at a Vernon Hills, Ill., Chili’s Grill & Bar restaurant. Brinker reportedly has repaid the county for those costs.

A settlement between 49 victims of the food poisoning and Brinker was announced last month. Amount of the settlement was not disclosed. Lake County health officials had traced the salmonella contamination to inadequate Chili’s employee hygiene.