Family Dollar has agreed to pay $42 million after storing food and medicine in a warehouse with a severe rodent infestation

• Family Dollar is paying $41.7 million for storing products in unsanitary conditions at a warehouse in Arkansas.
• The warehouse closed in 2022 after an FDA inspection uncovered a severe rodent infestation.
• The DOJ said it represents the US' largest-ever monetary criminal penalty in a food-safety case.

Family Dollar has agreed to pay nearly $42 million after admitting to storing food, drugs, medical devices, and cosmetics in unsanitary conditions at a distribution center in Arkansas, the US Department of Justice said in a press release.

The warehouse in West Memphis, Arkansas, closed in 2022 after an FDA inspection uncovered huge numbers of dead and alive rodents as well as dead birds.

Family Dollar, which is owned by Dollar Tree, was charged with one misdemeanor count of causing FDA-regulated products to become adulterated while being held under insanitary conditions at the 850,000-square-foot distribution center.

The DOJ said on Monday that the $41.675 million fine and forfeiture was the US' largest-ever monetary criminal penalty in a food-safety case.

Under the plea agreement, Family Dollar admitted that it had begun receiving more reports of mouse and pest issues with deliveries from the warehouse in August 2020. Some stores reported that their shipments from the center included rodents and products damaged by rodents, per the agreement.

Family Dollar admitted that some of its employees were aware that the conditions at the warehouse caused FDA-regulated products to become adulterated in violation of the Federal Food, Drug and Cosmetic Act.

But the company continued shipping FDA-regulated products from the warehouse until January 2022, it admitted. That month, the FDA started an inspection of the facility following a complaint from a customer. The FDA's inspection uncovered live and dead rodents, rodent feces and urine, dead birds, and bird droppings, it said in a press release at the time.

When the FDA fumigated the warehouse in January 2022, about 1,270 rodents were killed, according to the plea agreement. They had been using the warehouse's abandoned conveyor system to "travel freely throughout the facility," per the plea agreement.

The distribution center shipped FDA-regulated products to more than 400 Family Dollar stores, or over 5% of its total store count. On average, the warehouse shipped 1.3 million cases of product worth $32.3 million each month, per the plea agreement.

In February 2022, the company temporarily closed the stores serviced by the warehouse and voluntarily recalled all drugs, medical devices, cosmetics, and food products sold in those stores since January 2021. The warehouse closed later that year.

According to the plea agreement, the facility had operated since 1994, making it Family Dollar's second-oldest distribution center. It was also the least productive.

Family Dollar's payment is made up of $200,000 in fines and $41.475 million in forfeiture money, judged to be the value of the adulterated FDA-regulated products held at the facility.

"Consumers trust that products purchased from retail stores such as Family Dollar are safe," Jonathan D. Ross, US attorney for the Eastern District of Arkansas, said in a statement. "It is incomprehensible that Family Dollar knew about the rodent and pest issues at its distribution center in Arkansas but continued to ship products that were unsafe and insanitary."

"Knowingly selling these types of products not only places the public's health at risk but erodes the trust consumers have in the products they purchase," Ross added.

In a statement sent to BI, Family Dollar noted that it had "cooperated extensively with the DOJ's investigation," including a voluntary product recall on goods shipped from the center.

"While we are not aware of any consumer becoming ill due to conditions at the distribution center, 14 consumer class actions were brought against the company, and we have reached a tentative settlement in those cases without any admission of liability or wrongdoing.

"We look forward to putting the litigation behind us so that we can focus on our business of providing affordable products to our customers, with quality and safety at the heart of what we do."

Dollar Tree CEO Rick Dreiling said in a statement that the retailer had "worked diligently to help Family Dollar resolve this historical matter and significantly enhance our policies, procedures, and physical facilities to ensure it is not repeated."

Family Dollar said in October that it planned to open a "best-in-class" distribution center on the same site in West Memphis by fall 2024. The interior of the old facility would be fully demolished, it said.