Blue Bell Board’s Scant Listeria Notes Raise Questions in Trial

Blue Bell Creameries Inc. senior leaders on Friday sought to defend the flow of information within the company about ice cream production and the company’s response to sanitation or food safety concerns flagged by inspectors.

Vice Chancellor Nathan A. Cook questioned how detailed their discussions actually were, pointing out that one directors own notes from monthly board meetings in the years leading up to a fatal 2015 listeria outbreak failed to include any references to listeria or US Army concerns about a coliform bacteria that’s usually harmless but can indicate sanitation problems.

“You have quite detailed notes on a great many specific facts concerning the company,” the judge told director Dorothy McLeod MacInerney on the fourth day of testimony at the Delaware Chancery Court in Wilmington. “My sense is that if someone had discussed coliform or Army audits, particularly on a routine basis, then at some point in those many sets of minutes you would have taken a note on that.”

He continued, “That it doesn’t appear anywhere would seem to suggest coliform and Army audits was not a topic of discussion board meetings at least before early 2015.”

MacInenery recalled two meetings where coliform was discussed. “I can’t prove it, but I was there,” she said. “It was not a frequent topic of discussion.”

Senior leaders at the ice cream maker face derivative claims that they failed to adequately monitor operations or ignored “red flags” before a fatal 2015 listeria outbreak that killed three consumers of its ice cream products. The trial is the first of its kind for the Chancery Court as corporate oversight claims that survive a motion to dismiss are typically settled.

Production Line Shutdown

Minutes from weekly production staff meetings were widely distributed, and those meetings routinely detailed how the company would address inspectors’ observations, testified William Rankin, a director who also served as CFO until 2014.

However, those minutes weren’t sent to Blue Bell’s outside directors, though they could request the information, he testified later.

Then-CEO Paul Kruse’s board presentations included manufacturing costs related to sanitation, MacInerney said under questioning by her attorney, Paige Valeski, of Young Conaway Stargatt & Taylor LLP.

Rankin cited a packaging employee’s shutdown of a production line over concerns about allergen contamination as an example of how Blue Bell properly disseminated important food safety information.

He recalled company directors discussing among themselves the first reports of potentially deadly listeria found in their products in mid-February 2015. But are there any minutes showing those discussions during the first board meeting that followed those reports? asked Scott Tucker of Chimicles Schwartz Kriner & Donaldson-Smith LLP, representing the shareholder behind the lawsuit.

“There are none,” Rankin replied, though MacInernery testified that the board discussed the listeria cases “extensively” at two board meetings that month.

Tucker questioned Rankin about why the board relied on management to decide what directors needed to know. The monthly board meetings were only 90 minutes long, and managers were expected to present information “at a high level” but not overwhelming in detail, and directors could inquire for more if they needed it, Rankin said.

Board minutes didn’t always record everything discussed at meetings, or details from every topic discussed, said MacInerney, whose grandfather was a Blue Bell president.

The trial start was delayed Feb. 23 by a blizzard that hit Delaware and much of the Mid-Atlantic. A date for the fifth and final day of trial hasn’t yet been scheduled.

The case is Marchand v. Barnhill, Del. Ch., No. 2017-0586, trial 2/27/26.