October 12, 2011
Pet owners receive $12.4 million in melamine case
By: Edie Lau
For The VIN News Service
Owners of animals affected by food contaminated with melamine received slightly more than half of the money in a $24-million fund established to settle legal claims stemming from the largest pet food recall in North America.
Like most pet owners affected by the melamine contamination and pet food recall of 2007, Karl Rahder was reimbursed for about half of his claimed expenses under a $24 million class-action court settlement. His cat, Inca, survived, but never regained full vigor. Photo courtesy of Karl Rahder.
The balance of the fund went to lawyers’ fees and expenses, claims administration and public notices.
In all, $12,357,277 was paid on 20,229 claims from the United States and Canada, according to information provided by the claims administrator, the accounting firm Heffler, Radetich & Saitta LLP in Philadelphia.
A total of $27,793,975.36 in claims was judged eligible for compensation. However, the collective payout was significantly less — amounting to 45 cents on the dollar. The claims administrator cited several factors for the reductions: Some claims had been reimbursed before the court action. Some exceeded the $900 limit for undocumented damages. Most significantly, most were reduced pro rata because the fund was not big enough to pay all approved claims in full.
The claims concerned pets that ate cat and dog food tainted with melamine and cyanuric acid. Unscrupulous suppliers in China added the contaminants in trying to inflate the apparent protein levels in wheat gluten and rice protein concentrate. The adulterated ingredients ended up in foods and treats made by 12 different manufacturers, according to court documents.
Discovery of the contamination led in 2007 to the biggest pet food recall in history, involving about 180 brands and some of the most prominent names in the business — Hill’s Pet Nutrition, Mars Inc., Del Monte Pet Products, Nestle Purina PetCare Co., The Iams Co. and Procter & Gamble among them — as well as dozens of retailers, including Wal-Mart, Target, PetSmart, Petco and Costco. The majority of products came from Menu Foods, a Canadian company contracted to manufacture numerous brand-name and private label pet foods.
Tens of thousands of animals ate the poisoned foods, and many became sick, some fatally. The combination of melamine and cyanuric acid forms crystals in the kidneys, potentially leading to renal disease and renal failure.
The scandal led to the criminal prosecution of the American company ChemNutra, Inc., and its owners for their role in importing the tainted ingredients. They pleaded guilty last year to distributing adulterated food and selling misbranded food, both misdemeanors.
On the civil-court side, more than 100 class-action suits arose out of the incident. Those cases were consolidated and addressed by the $24 million settlement. Although court documents and related information are available online, information on how the fund was distributed is not posted publicly.
That’s not unusual, according to Timothy Eble, a class-action expert in South Carolina who was not involved in the pet food case. “Typically the manner in which payments generally will be calculated is available through the court but the amounts actually to be disbursed to any individual would not necessarily be available,” he said.
The VIN News Service obtained details on how settlement funds were disbursed by contacting Russell Paul of Berger & Montague, P.C., of Philadelphia, co-lead counsel for the plaintiffs. Paul, in turn, requested the information from the claims administrator.
Several claimants emailed the VIN News Service to express disappointment with the size of their shares of the settlement. Paul said he, too, has heard from a number of chagrined pet owners. “People want all of their money,” Paul acknowledged.
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Count Elise Maitland of Victoria Harbor, Ontario, among the dismayed. Maitland lost her collie-Labrador mix Michigan to kidney failure after he ate tainted Ol’ Roy canned food with gravy. “The $500 I received did not even pay the vet bill, let alone a new pet,” she fumed. “...I feel we were extremely ripped off.”
Asked if, in retrospect, he thought that the settlement fund was inadequate, Paul replied, “We pushed and pushed and pushed, and feel we got the maximum we could get.”
Paul described the case as extremely complicated. The litigation involved more than 80 lawyers for plaintiffs in two countries, more than two dozen defendants and several appeals that stalled the payout.
“It was three to four years of bitter fighting, from District Court up to the 3rd Circuit (Court of Appeals) and back to the District Court,” Paul said.
Evaluation of claims likewise was complex, he noted. “Each one had to be individually analyzed, and often veterinarians had to be called,” Paul said. “The possibility was rife for fraud.”
Sherrie Savett, who served as co-lead counsel with Paul, added that even the public-communications aspect of the settlement wasn’t simple, involving the placement of notices in multiple periodicals in two countries, and creation and maintenance of the website.
Paul said the fact that plaintiffs did not receive 100 percent of their damages is not unusual in class-action suits.
Eble concurred. “If they got half of their actual damages, that’s actually a pretty good result in a class action,” said Eble, who operates a website intended as a neutral source of information for the public about class-action issues.
“What you’re talking about with 20,000 people, most would have claims that vary from $200 to $3,000, depending on what the specific facts were,” he explained. “They (individually) would not have been able to hire a lawyer to go through discovery and pursue the case for less than the value of the claim.”
Paul said he understands how deeply the contamination afflicted pet owners. “We (collectively) spent thousands of hours uncompensated talking to aggrieved pet owners just because they needed to talk,” he said. “It was a very tragic situation. Tragic. No amount of money can make certain people whole. There are elderly people who lost a pet who are devastated. I spoke to one who is on antidepressants who won’t get another dog because he doesn’t want to outlive it.”
Maitland, a single mother of four, likely represents the feelings of many pet owners when she says she regarded her dog Michigan as family. She adopted him when he was a year old. She was dubious at first about having a dog, but he immediately was so protective of her children — warding off strangers, for example, when the kids were in the car — that Maitland became equally protective of the dog.
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Michigan was 13 when melamine wound up in his Ol’ Roy, a private-label food sold by Wal-Mart. She said the first indication that something was wrong was that Michigan lost control of his bowels. By the second night, he was leaking bloody fluids. Maitland and a friend drove Michigan at 1 in the morning to an emergency clinic 35 to 40 minutes away.
“Just walking into the emergency clinic, right on the spot, it was $500,” she recalled. “I had to borrow that money from my friend that was there. I said, ‘We can’t even get home because my car’s on empty.’ They took $25 off (the bill) so we could get home.”
Maitland ended up with about $1,000 in veterinary expenses from two clinics. When she retrieved Michigan after several days of medical care, it was with the thought that he should die at home. But he didn’t, not right away. He actually regained strength, although Maitland said Michigan never fully healed. He died 14 months after the poisoning came to light.
Maitland submitted a claim for $1,072.87. In August, she received a check for $587.
“I don’t feel like I got anything out of this,” she said. “I feel like it was a four-year wait and I think we all got ripped off.”
Like Maitland, Karl Rahder of Naperville, Ill., received a check this summer amounting to about half of his claim, which totaled more than $1,500.
Rahder’s cat, a traditional sealpoint Siamese named Inca, became sick from eating tainted Iams cat food. Rahder, a writer and teacher on international relations and global affairs, recalled that Inca began vomiting and having diarrhea, stopped eating and became listless around February 2007 — several weeks before the recall began.
Her condition “caused me a great deal of worry,” Rahder said in an interview by email. “I was afraid she was going to starve to death or die from renal failure of some kind. A quick check of various Internet forums revealed that a large number of people were experiencing exactly the same thing and were beginning to panic.”
By the time U.S. Food and Drug Administration (FDA) investigators determined the source of the problem, Inca’s health had deteriorated sharply. She spent four or five days in the hospital “close to death,” Rahder recounted. Inca recovered but has never been the same. “Since then, she has been weaker and more fragile,” Rahder said.
His share of the court settlement arrived this summer. He called the payment “quite welcome” if not entirely gratifying.
“It’s hard to say how satisfied we were with the outcome, considering that the payment was reduced by over half and that it took so long for the issue to be resolved,” he mused. “The larger issues, including toxic additives in pet food and a lack of government oversight, certainly trouble me.”
Since the incident, the FDA has taken steps to more closely monitor pet-food safety. In August, the agency announced the establishment of a Pet Event Tracking Network. PETNet, as it’s nicknamed, is a secure, web-based system by which federal, state and territorial agencies can share information about incidents involving pet food, such as illnesses associated with consumption.
For those who lost animals to the melamine scandal, of course, no reforms or compensation will bring back the pets.
More than half of claims involved animals that were fatally poisoned: 13,242 claimants indicated that their pets died. Another 9,001 indicated that their pets were sick but survived; 1,801 indicated that they took their pets for testing after learning about the recall but the pets did not become sick; and 1,557 claimants did not specify the condition of their pets.
An analyst from the claims administration office noted that the claims likely do not fully represent all the animals that were harmed. “The number of claims received in class actions is usually only a percentage of those parties injured,” he wrote. “Therefore, the number of claims received is probably not the total that were injured.”
Many owners whose pets died felt their animals were irreplaceable, judging from some submissions. According to the analyst, claim submissions — not all of which were approved — totaled more than $569 million. One claim alone was for more than $500 million, “almost all of which represented that claimant’s view about the value of her lost pet,” Savett said.
At the other end of the spectrum, someone submitted a claim for 30 cents. The nature of that claim, as with all the claims, is confidential, Paul said. The median claim was $951.46.
Among approved claims, the largest disbursement was $21,986. The smallest was 33 cents. The median disbursement was $430.
The settlement agreement set limits on payments in certain categories. Payment of eligible but undocumented claims was capped at $900 per claimant. Reimbursements for screening and testing of animals that ate tainted food but proved not to be ill were limited to a total of $400,000. Payments for pet food expenses were limited to $250,000 in aggregate.
According to the claims analyst, most claims fell under the “other economic damages” category. Owing to the number of eligible submissions, those claims were paid at a pro rata share of 52.1 percent. Pet food reimbursement claims were paid pro rata at 49.5 percent. Healthy screening and testing claims were paid at 100 percent. Once all qualified healthy-screening-and-testing claims were satisfied, money remaining in that portion of the fund was applied to qualified claims for other economic damages, Paul said.
Savett said lawyers for the class negotiated liberal claims procedures, such as the allowance of up to $900 in undocumented expenses. Those generous guidelines made more claims eligible for payment, she said — which, overall, ended up reducing the amount of money available for any given claim.
Eble, the class-action expert, said such suits have value beyond the monetary compensation. “They do modify corporate behavior. They do prevent theft,” Eble said. “So many of these cases ... they accomplish a goal to serve a public purpose. You don’t have to worry about getting dog food in the future that is contaminated with melamine because now they know they have to test for it. It’s too expensive not to.”
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