B.C. court rules that veggie supplier hit with tainted-food warning can’t sue over mistaken recall

When the Canadian Food Inspection Agency gets raked over the coals it's usually for not moving fast enough in dealing with contaminated products, such as last year's massive E. coli tainted-beef recall.

But what happens if agency pulls the trigger too quickly and a company's products are pulled from the shelves even though they turn out to be safe?

As a recent court decision shows, the consequences for the business, both financially and for its reputation, can be serious. But the agency is not liable for the damage.

The Los Angeles Salad Company has been around since 1939, growing into a major supplier of vegetables. But in August 2007 the California company was thrown into turmoil when the CFIA issued this news release warning that some of its baby carrots sold in Canadian Costco stores may be contaminated with Shigella bacteria.

Shigella, the agency said, can cause serious intestinal illness that could be dangerous for the young, elderly and those with compromised immune systems.

According to the National Post, the warning was based on reports of four cases of Shigellosis in Calgary.

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Costco voluntarily pulled the company's baby carrot products off the shelves and L.A. Salad destroyed its entire stock, including carrots still in the ground.

The CFIA also passed on its warning to the U.S. Food and Drug Administration.

But further investigation of the supposedly tainted carrots turned up no sign of Shigella.

L.A. Salad launched a lawsuit in the B.C. courts, arguing the CFIA's negligence in issuing the erroneous warning damaged its business. Destroying its entire stock of baby carrots cost $1 million and it lost a major American customer, the company claimed.

While all four of the Calgarians infected with Shigella ate the carrots, L.A. Salad's lawyer, Dale Sanderson, argued the CFIA never considered what other Costco-bought products they might have consumed, the Post said.

But the B.C. Court of Appeal has upheld a B.C. Supreme Court decision that the agency did not owe companies like L.A. Salad a "private law duty of care."

In its unanimous decision, released last week, the three-judge Appeal Court panel sided with the CFIA.

Giving a food seller who's suffered damage through the negligence of government no recourse to the courts might run counter to the current popular demand for accountability from decision-makers, the judges said. But they pointed to a 2011 Supreme Court of Canada decision involving a case against the Alberta government on the difficulty of holding government institutions legally liable for their decisions.

"Related to this concern is the fear of virtually unlimited exposure of the government to private claims, which may tax public resources and chill government intervention," the top court said.

"In my view, these remarks reflect a recognition that the legislative branch is better situated than the courts to decide whether compensation should be due in cases such as this," wrote Justice Kenneth Smith, who retired at the end of last year.

In other words, take it up with your MP.

[ Related: U.S. worries about Canadian meat flagged in memo ]

Supporters of the court's decision argue that opening agencies like the CFIA to lawsuits would have a chilling effect on their work, perhaps delaying public warnings while they do more research.

But Sanderson doubts that.

“If they don’t face any liability ever, they can make mistakes and never find out which food product was actually making people sick,” Sanderson told the Post. “There should be an incentive to do a really good job. … I can’t believe the CFIA won’t recall food because they might get sued.”