Mediation has led to a settlement agreement in principle for the Toronto pet food maker among the companies hit hardest by last year’s pet food scare involving Chinese melamine.
Menu Foods announced Tuesday that the parties to a multi-district lawsuit by pet owners in both the U.S. and Canada have reached a “comprehensive, cross-border agreement in principle between the parties, addressing all major terms of settlement.”
The deal, which still must be finalized and approved by the U.S. District Court for New Jersey as well as by Canadian courts, is scheduled to be filed with the U.S. District Court on May 1, the company said. Filing in an as-yet unnamed Canadian court is to take place “in a similar time frame.”
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Menu Foods is just one of the defendants named in the suit by pet owners. Menu Foods, its product liability insurer and the other defendants will fund the settlement.
The potential for an agreement doesn’t change the dollar amount for Menu Foods’ costs associated with such a major product recall. Those costs are still expected to run around C$55 million, as the company said in its 2007 annual report last month.
Once a settlement agreement is finalized, the settlement fund’s administrator will give notice to pet owners with details on how to file claims. Pet owners with potential claims shouldn’t contact the company regarding this agreement, Menu Foods said Tuesday.
The company was among several pet food makers that recalled product in the spring of 2007. In Menu Foods’ case, the recall began in March that year following indications that some cuts-and-gravy dog and cat foods it made for in-store brands and other companies may have been affecting the renal health of some animals in the U.S.
Menu Foods said a Chinese supplier of wheat gluten, a protein ingredient used in many pet foods, had spiked its gluten with melamine and other compounds to “artificially inflate” the ingredient’s protein levels. The compounds were able to slip past standard industry testing, the firm said.
The recall, and a loss of sales from which the company said it is now beginning to recover, led the Menu Foods Income Fund to a $62 million loss in fiscal 2007.
