No Peanut Butter for the Needy

Sunland, Inc. is a peanut-processing plant that made peanut butter under a number of different labels for different retails—one of those retailers was Costco.  Sunland, Inc. filed Chapter 7 Bankruptcy after there was a link to salmonella at its plants.  The bankruptcy trustee in this case, Clarke Coll, sold the product to Costco.  The peanut butter was extensively tested and found free of salmonella.  Even with these results, Costco rejected the merchandise as “not merchantable” because of leaking peanut oil. 

Costco refused to sell the product and agreed to its destruction, even though it was found completely safe.  The trustee attempted to have Costco donate the food to a food bank or provide it to prison institutions.  Costco would not agree to either of these options, stating the only possible option was destruction. 

The peanut butter is estimated to be worth $2.6 million, and it will cost the estate roughly $60,000 to haul it to a landfill.

While reading this case, I was curious as to why the corporation filed Chapter 7 bankruptcy.  As we learned in class, a corporation can not be discharged in Chapter 7.  Is that why the estate was required to pay the $60,000 for the landfill?

I don’t typically read internet comments but in this case I did.  The majority of people blamed Costco dumping all this peanut butter on "hot shot attorneys".  People were frustrated that this money could go to a good use, but due to the potential for lawsuit Costco had to dump all the peanut butter.  I was surprised to see how peanut butter could lead to an issue that riled people up on the internet. 

http://www.npr.org/2014/03/28/295547140/cases-of-edible-peanut-butter-dumped-after-bankruptcy-dispute