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Odwalla Settles 5 E. coli Cases

Victims of '96 Outbreak to Get a Reported $ 15 Million

Juice maker Odwalla Inc., stymied by lawsuits filed after a breakout of bacterial infection caused by its unpasteurized apple juice, has reached out-of-court settlements with the families of five injured children.

Odwalla will establish trusts for each of the five children, and the money may be used for their education or for any future medical problems that may be associated with the infections.

The Half Moon Bay-based company and the plaintiffs agreed not to disclose the value of the five settlements, but the New York Times and the Seattle Post-Intelligencer, citing unidentified sources familiar with the case, reported Odwalla would pay between $ 12 million and $ 15 million to the five families.

The settlements are preliminary as they must be approved by a mediator, Lawrence Irving, the retired federal judge from San Diego who handled negotiations.

The agreements were announced Tuesday, following mediation meetings last week in Seattle. A Seattle lawyer, Bill Marler, represented the five families in the high-profile civil cases, which stemmed from the outbreak of E. coli bacteria infections that began around Halloween in 1996.

Some 70 infections and one death, of a 16-month-old Colorado girl, were reported about that time. Most of the cases occurred in Western states where Odwalla's apple juice is sold. Odwalla promptly recalled its apple juice and began to pasteurize it.

Difficult mediation

The relationship between Odwalla and Marler was acrimonious, and worsened after a news report of an earlier failed mediation session for one of Marler's cases, conducted in San Jose with retired California Supreme Court Justice Edward A. Panelli in April 1997. Marler and attorneys for Odwalla's insurers were far apart, and negotiations appeared derailed.

Tuesday, Odwalla's chief executive officer, Stephen Williamson, said, "Our sympathy will forever be extended to the individuals and families who were affected by this." Odwalla co-founder and Chairman Greg Steltenpohl added, "We are all pleased to have reached a resolution which allows both the families and our company to move forward in a positive way."

Chris Gallagher, a company spokesman, added, "Most importantly, we are pleased that all these children remain in good health."

Said Marler: "The amounts of the settlements will be substantial enough to fully compensate the children and their families for what they went through and may encounter in the future."

He said both Steltenpohl and Williamson were involved in the mediation process. "All of us, including the families, appreciate Odwalla being compassionate and doing the responsible thing by settling these cases," said Marler.

The five injured children whose parents had sued Odwalla are Katherine Wright, 4; Brooke Hiatt, 5; and Michael Beverly, 4, all of Seattle; Amanda Berman, 5, of Chicago; and Brian Dimick, 7, of Washington, D.C.

Kidney damage

All but Wright suffered kidney damage. Berman was the most seriously injured, incurring $ 125,000 in medical bills and requiring 24 days in a hospital and 16 days of kidney dialysis.

The company still is a defendant in three other cases related to the outbreak, said Gallagher, who said he had no comment about them. In all, Odwalla has settled 17 of 20 cases and paid the claims of some 350 people who said they suffered ill effects from the apple juice.

Moreover, the company is negotiating a plea bargain with federal prosecutors examining the outbreak. Last month, Assistant U.S. Attorney Joseph Johns of the Justice Department's Denver office confirmed that negotiations were under way but would not elaborate.

In a copyrighted story, the Seattle Post-Intelligencer, citing unnamed sources, reported that Odwalla was likely to agree to a deal in which it would plead guilty to misdemeanor food safety violations and may pay a $ 1.5 million criminal fine.

The five settlements bode well for Odwalla's recovery, said Jean -Michel Valette, managing director of consumer research for Hambrecht & Quist in San Francisco. "This is clearly a step forward, because of the high visibility of the cases and because of the particularly aggressive posture of the attorney (Marler)," said Valette, who was a director of the company prior to the time it went public in 1994. Odwalla trades as ODWA on the Nasdaq exchange.

A major hurdle

Valette said that if, indeed, the federal case was close to resolution, "Odwalla's problems will largely be left behind."

Odwalla paid all the medical costs of the five plaintiffs and those of other infected people. Following the juice recall, the company implemented a fresh-juice safety and quality assurance program that, the company said, exceeds the U.S. Food and Drug Administration's recently proposed industry requirements.

"We look forward to working closely with government agencies, consumer groups and institutions of research to help prevent food-borne illness and share what we have learned," said Williamson.

Odwalla products are sold in California, Washington, Colorado, Oregon, Texas, New Mexico, Nevada, Arizona, Michigan and Illinois.

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