Peanut Corp. of America files Chapter 7 bankruptcy

The parent company of the Plainview peanut processing plant that was shut down with all of its products recalled due to health concerns has filed for bankruptcy protection.

Virginia-based Peanut Corporation of America filed for Chapter 7 bankruptcy protection Friday.

The Plainview plant voluntarily ceased operations Monday after an independent lab in Illinois confirmed granulated peanuts and peanut meal processed here tested positive for the presence of salmonella bacteria.

State health officials issued a formal closure order and recall of everything the plant had produced after finding dead rodents, rodent feces and feathers in a crawl space above the production area Thursday.

The recall reflects Department of State Health Services officials' beliefs that plant conditions posed "an immediate and serious threat to human life or health."

The company has been at the center of an investigation linking PCA's Blakely, Ga., plant to peanut products tainted with salmonella bacteria that has caused an outbreak across 43 states, caused more than 630 people to become ill and may have played a role in nine deaths so far.

Companies filing under Chapter 7 of the U.S. Bankruptcy Code liquidate assets and distribute the proceeds to creditors, as opposed to a Chapter 11 filing that gives a company opportunity to reduce its debts and continue in business.

The Associated Press reported the PCA board considered a Chapter 11 bankruptcy but decided on an outright liquidation. It said in a court filing that the recalls had been "extremely devastating" to the company's financial condition.

The bankruptcy proceeding could be designed to postpone litigation against the company, but lawyers plan to push a judge to allow civil lawsuits to go forward anyway. And many have also filed lawsuits against Solon, Ohio-based King Nut Co. and Battle Creek, Mich.-based Kellogg Co., which they say used the tainted ingredients in their products.

Attorneys are prepared to argue that even if PCA doesn't have enough resources, including insurance and liquid assets to cover the damages, "King Nut and Kellogg will have to step up," Bill Marler, who has filed seven lawsuits against the company on behalf of more than 40 possible victims, told the AP.

In addition to the civil suits facing PCA, the government is considering criminal charges against the company's president, Stewart Parnell.

Parnell last week repeatedly refused to answer questions before the House Energy and Commerce investigations subcommittee, which is seeking ways to prevent another outbreak. But e-mails surfaced indicating he ordered products the company knew were tainted to be shipped anyway.

DSHS Public Information Officer Doug McBride told the Herald he was uncertain if there would be any criminal charges filed in connection with the closing of the Plainview processing plant.