Blue Bell ice cream Photo: Alizada Studios/Shutterstock.com

A three-lawyer Texas firm that put in an enormous time commitment for a shareholder derivative lawsuit over Blue Bell Creameries' 2015 listeria bacteria contamination will see a seven-figure attorney fee award from the upcoming settlement of the dispute.

Part of the $60 million settlement includes a request for a $9 million attorney fee award for David Wynne and Scott Burdine of Burdine Wynne in Houston, which also worked with local counsel Jessica Zeldin from Andrews & Springer in Wilmington, Delaware.

Blue Bell is based in Brenham, Texas, but the company is organized as a Delaware limited partnership. The case, Wenske v. Blue Bell Creameries Inc., was filed in Delaware Chancery Court.

"We believe we had some strong claims against the controllers at Blue Bell for having caused significant lost profits," explained Wynne, who was co-lead counsel with Burdine for the plaintiffs, who are Blue Bell limited partners. "The total value of $60 million is a strong recovery by any measure."

Wynne noted that the Delaware Court of Chancery still must approve of the settlement, which was finalized April 24 after negotiations in the wake of a December 2019 mediation. Under the settlement, the defendant, Blue Bell Creameries Inc., agreed to cancel the limited partners' $45 million debt for accumulated management fees and expenses, and to pay $15 million to the plaintiffs. The plaintiffs lawyers $9 million fee comes out of this $15 million award.

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"We're happy to try to get this resolved and move on," said Hugh Connor, partner in Kelly Hart in Fort Worth, who represented Blue Bell.

The Centers for Disease Control and Prevention found that listeria bacteria contamination at Blue Bell in 2015 sickened 10 people in Arizona, Kansas, Oklahoma and Texas, and three people died. Listeria infection mostly threatens pregnant women, children, the elderly and people with weakened immune systems. The company in April 2015 recalled all of its products. The Food and Drug Administration found that Blue Bell had evidence as early as 2013 of the listeria contamination but failed to improve its sanitation, reported Texas Lawyer.

The plaintiffs were limited partners of Blue Bell Creameries who sued the ice cream maker's sole general partner, alleging that it failed to operate the company in compliance with a limited partnership agreement, which required the business to be run by sound business practices. The plaintiffs claimed that Blue Bell should have properly cleaned and sanitized production plants, adequately tested for listeria, and corrected the problem, the Delaware Business Court Insider reported. The lawsuit said the company should have followed food-safety guidelines issued by two industry organizations.

The defendant has denied the plaintiffs' allegations and maintained it acted in good faith toward the best interests of the company's limited partners.

Blue Bell moved to dismiss the claims, arguing that outside organizations couldn't set the standard of care upon which the limited partnership agreement depended. The agreement did not define "sound business practices," and the defendant claimed that the plaintiffs' interpretation of the phrase was unreasonable and couldn't be enforced. The company also argued that the agreement only required it to make a good faith effort to adhere to best practices.

Related stories:

Blue Bell's Total Recall a Start, but Many Legal Worries Loom

Contractual Duties to Conduct a Business in Accordance With 'Sound Business Practices'

Chancery Declines to Stay Action in Derivative Lawsuit Involving Special Litigation Committee