Rizo-Lopez Foods: 10-Year Listeria Outbreak Ends in Bankruptcy

Rizo-Lopez Foods, Inc.—a Hispanic cheese manufacturer in the Western United States with a 35-year operating history and nationwide distribution of Mexican-style fresh cheeses—filed for chapter 11 bankruptcy on September 15, 2025, after a listeria contamination period that resulted in 26 illnesses, 2 deaths, an FDA consent decree prohibiting manufacturing, and over $70 million in pending commercial claims. The Modesto, California-based company, which at its peak produced 40 million pounds of cheese annually under brands including Tio Francisco, Don Francisco, and Rizo Bros, sought chapter 11 protection after 16 months of suspended operations. Six weeks after filing, the debtor moved to convert the case to chapter 7 liquidation.

Founded in 1990 by brothers Edwin and Ivan Rizo in San Francisco's Mission District, Rizo-Lopez Foods grew to operate a 130,000-square-foot facility employing more than 320 people at its height. The FDA linked the company's queso fresco and cotija cheese products to a multi-year listeria outbreak spanning June 2014 to December 2023, and stated that the company's corrective actions were inadequate. The October 2024 Department of Justice consent decree prohibited manufacturing until compliance was verified, even after limited production resumed in August 2025. Sargento Foods holds a $59 million co-packing claim and Wells Fargo Bank holds approximately $10.2 million in secured debt. The case includes a motion to convert to chapter 7 liquidation.

From Mission District Startup to Modesto Manufacturing

Rizo-Lopez Foods expanded from a San Francisco operation to a Modesto manufacturing facility over 35 years. The company operated in the Hispanic cheese market.

Company origins. Edwin and Ivan Rizo founded Rizo-Lopez Foods in 1990 in San Francisco's Mission District, beginning cheese production in 1991. The brothers built the business on family recipes for Mexican-style cheeses, cremas, and chorizos, growing from a local operation to a manufacturer with nationwide distribution. The company's flagship Tio Francisco brand is one of its primary labels.

Modesto expansion. In 2012, the company relocated to a 130,000-square-foot facility at 880 S. Carpenter Road in Modesto, California in Stanislaus County. The Central Valley location provided access to California's milk supply, as the state produces approximately 18% of the nation's dairy output and over 2.5 billion pounds of cheese annually. At peak operations, the Modesto facility employed more than 320 people and produced approximately 40 million pounds of cheese and 10 million pounds of creams annually.

Brand portfolio. The company marketed Hispanic-style fresh cheeses and dairy products under multiple brand names targeting different market segments and distribution channels:

Products included queso fresco, cotija (Mexican grating cheese), oaxaca, panela, requeson, ricotta, yogurt, sour cream, and chorizo. These high-moisture fresh cheeses are among the product categories most susceptible to listeria contamination.

Market position. Rizo-Lopez served the approximately $3.2 billion U.S. Hispanic cheese market, which was growing at approximately 6.5% CAGR driven by the expanding Hispanic population and mainstream adoption of Mexican cuisine. California is the largest regional market for Hispanic cheeses. Queso fresco, the largest product segment in the market, was also a primary product for Rizo-Lopez.

The 10-Year Listeria Outbreak

The FDA investigation identified a contamination period spanning nearly a decade. The CDC investigation linked Rizo-Lopez products to 26 illnesses and 2 deaths over a period stretching from mid-2014 through late 2023.

Outbreak timeline. The CDC documented listeria illnesses linked to Rizo-Lopez products from June 2014 through December 2023. The outbreak caused 26 illnesses across multiple states including California, Arizona, and Texas, with 23 hospitalizations and 2 deaths attributed to listeria from the company's products.

Detection. In late 2023, Hawaii state officials discovered Listeria monocytogenes in a sample of Rizo-Lopez's aged cotija cheese through routine sampling. In January 2024, the company initiated a voluntary recall of cotija cheese. On February 2, 2024, the FDA linked the company's products to the decade-long outbreak strain through whole-genome sequencing analysis.

Expanded recall. On February 5, 2024, Rizo-Lopez expanded its voluntary recall to include all cheese, yogurt, and sour cream products with sell-by or best-by dates through February 6, 2024. Products had been distributed nationwide through retail stores and food service customers.

Listeria risk profile. Listeria monocytogenes causes approximately 1,600 illnesses and 260 deaths annually in the United States, with a fatality rate of 20-30%. High-risk populations include pregnant women (for whom listeria can cause miscarriages and stillbirths), newborns, elderly individuals, and immunocompromised persons. High-moisture fresh cheeses like queso fresco are particularly susceptible to contamination because listeria can grow at refrigeration temperatures, and traditional production methods may not include pasteurization. Food safety research has identified Hispanic-style fresh cheeses as higher-risk products for listeria contamination. The FDA cited Current Good Manufacturing Practice violations and stated that Rizo-Lopez's corrective actions were inadequate.

FDA Enforcement and Consent Decree

The FDA's regulatory response progressed from inspection to warning letter to consent decree over eight months, ultimately prohibiting manufacturing operations.

FDA inspection and warning letter. FDA inspected the Modesto facility from January 29 to February 9, 2024, during the period immediately following the expanded recall. On February 16, 2024, FDA issued a warning letter citing violations of Current Good Manufacturing Practice regulations. The warning letter identified Listeria monocytogenes in ready-to-eat products and in the processing environment. FDA characterized the company's corrective actions as inadequate.

The warning letter cited specific violations related to environmental controls, sanitation procedures, and preventive controls required under the Food Safety Modernization Act, which shifted FDA's focus from responding to contamination to preventing it. The FSMA framework requires food facilities to implement hazard analysis and preventive controls, and enhanced FDA's authority to access records and order recalls.

Consent decree. On October 8, 2024, the Department of Justice filed a consent decree in the U.S. District Court for the Eastern District of California. The decree imposed restrictions:

Operations suspension. The consent decree triggered a 16-month suspension of operations from February 2024 to August 2025. During this period, the company could not produce or sell any products, could not fulfill customer orders, and could not generate any revenue from its core business. The company received written approval to resume plant operations on May 19, 2025, and restarted limited production on August 5, 2025.

Consent decree implications. FDA consent decrees require companies to fund independent expert oversight, implement compliance programs, and operate under continuing court supervision. Even after meeting initial requirements, companies may face ongoing monitoring obligations. The Rizo-Lopez bankruptcy filing came just over a month after production resumed.

Financial Collapse and Commercial Claims

The listeria crisis affected Rizo-Lopez's financial position through direct losses, customer defection, and litigation exposure. The company faced a combination of write-offs, lost revenue during the shutdown, and commercial claims that exceeded the company's asset value.

Immediate financial impact. The recall and operations suspension created immediate losses across multiple categories:

The accounts receivable write-off reflected customers who disputed or refused payment for products subject to the recall. The finished goods inventory write-off represented product that could not be sold due to the recall. Together, these exceeded $10 million in write-offs, in addition to the 16 months of suspended operations.

Major commercial claims. The company's largest customers pursued damages for recall-related losses, breach of contract, and product liability:

The Sargento claim alone exceeded the company's total asset value. Sargento, one of the largest cheese companies in the United States, had contracted with Rizo-Lopez for Hispanic cheese production under a co-packing arrangement—a common practice in the specialty cheese industry that allows major brands to offer products without building dedicated production capacity.

Trade debt. Beyond the large commercial claims, the company owed approximately $6.1 million to 261 vendors and $990,000 to 587 customers. These trade creditors represented the everyday suppliers and buyers whose claims, while individually smaller, reflected the broader supply chain disruption caused by the recall.

Secured debt. Wells Fargo Bank, N.A. holds approximately $10.2 million in secured debt against the company's real property and equipment. The company defaulted on debt covenant requirements during the operations suspension. Wells Fargo's secured position gives it priority over commercial claimants in any distribution.

Insurance limitations. Food recall insurance and product liability coverage can be insufficient for major contamination events. The average cost of a food recall exceeds $10 million, and pathogen-related recalls typically cost more than other types. Third-party liability from co-packing arrangements—like the Sargento relationship—can multiply recall costs beyond a company's insurance limits.

Chapter 11 Filing and Motion to Convert

The Rizo-Lopez bankruptcy filing was intended to address litigation exposure and restart operations under court protection, but the debtor filed a conversion motion within six weeks.

Chapter 11 filing. Rizo-Lopez filed chapter 11 on September 15-16, 2025, in the Eastern District of California. The company listed assets between $10 million and $50 million and liabilities between $50 million and $100 million—a substantial negative net worth driven primarily by the commercial claims and potential consumer liability. The filing invoked the automatic stay, halting the pending litigation in Wisconsin and Oregon federal courts.

DIP financing. Founder Edwin Rizo agreed to provide up to $3.76 million in DIP financing to fund continued operations through the bankruptcy process. Both the U.S. Trustee and Wells Fargo objected to the DIP motion, though interim cash collateral orders were entered allowing limited operations to continue.

Professional retentions. The debtor retained the following professionals:

The retention of Hyman, Phelps & McNamara as special counsel for FDA and regulatory matters reflected continuing compliance obligations under the consent decree. The consent decree remained in effect regardless of bankruptcy status, meaning the company would need to maintain regulatory compliance throughout any reorganization effort.

An Unsecured Creditors Committee was formed and retained GlassRatner Advisory & Capital Group as financial advisor and Motunrayo D. Akinmurele as counsel.

Motion to convert. On October 27, 2025—six weeks after the chapter 11 filing—the debtor filed a motion to convert the case from chapter 11 to chapter 7 liquidation. Edwin Rizo's supporting declaration cited multiple factors:

• Inability to secure sufficient financing for reorganization beyond the owner-provided DIP
• Pending commercial litigation exceeding any realistic recovery or settlement scenario
• Cancelled global mediation due to insurance participation issues, eliminating a potential path to resolution
• Continued operational challenges under the consent decree, which imposed ongoing compliance costs

The conversion motion sought liquidation rather than reorganization. The commercial claims include Sargento's $59 million claim.

Contested matters. Prior to the conversion motion, the case featured several contested matters reflecting creditor concerns about the reorganization effort:

The administrative expense objection was ultimately dismissed.

Food Safety and Bankruptcy Intersection

The Rizo-Lopez case shows how food safety enforcement and bankruptcy proceedings intersect.

Regulatory obligations continue. Unlike many prepetition obligations that the automatic stay halts, consent decree requirements remain fully enforceable during bankruptcy. The debtor must continue compliance efforts, fund independent oversight, and meet court-ordered deadlines regardless of its financial condition.

Personal injury claims. Consumer claims for listeria-related illness present a distinct category of obligation. While the automatic stay halts litigation, personal injury claims are entitled to priority treatment and may not be dischargeable in the same manner as contract claims. The Rizo-Lopez case faced potential consumer claims totaling $72.6 million from an estimated 5,000-6,000 affected customers.

Asset value pressures. Food company restructurings can involve asset value erosion when operations are suspended, particularly when high borrowing costs and unfavorable lease agreements compound operational challenges.

Industry Context and Implications

The Rizo-Lopez bankruptcy occurred during a period of food company financial distress and enhanced regulatory enforcement.

Food company bankruptcy trends. Food company bankruptcy filings increased in 2024 and 2025, driven by rising ingredient costs, labor expenses, supply chain disruptions, and margin compression. Food safety recalls have caused financial damage to affected companies, with insurance costs for food manufacturers increasing.

Enhanced surveillance. The FDA's ability to detect and link contamination events has improved with whole-genome sequencing technology. Outbreaks that might previously have gone undetected or remained unsolved are now traceable to specific facilities.

Hispanic cheese market. The $3.2 billion Hispanic cheese market remains fragmented with many small and regional producers. Food safety concerns have impacted consumer confidence in the category.

California dairy industry. California's dairy industry contributes $23.2 billion annually to the state economy, supporting over 150,000 jobs, with the Central Valley serving as the production heartland.

Key Timeline

Frequently Asked Questions

Why did Rizo-Lopez Foods file for bankruptcy?

The company filed chapter 11 after a listeria contamination period that resulted in 26 illnesses and 2 deaths, an October 2024 FDA/DOJ consent decree that prohibited manufacturing, 16 months of suspended operations, and over $70 million in pending commercial claims from major customers including Sargento Foods and Reser's Fine Foods.

What caused the listeria outbreak at Rizo-Lopez?

The FDA investigation found Listeria monocytogenes in ready-to-eat products and in the processing environment at the company's Modesto facility. The contamination persisted from June 2014 through December 2023. The FDA cited violations of Current Good Manufacturing Practice regulations and characterized the company's corrective actions as inadequate.

How many people were affected by the Rizo-Lopez listeria outbreak?

The CDC documented 26 illnesses across multiple states including California, Arizona, and Texas, with 23 hospitalizations and 2 deaths attributed to listeria from Rizo-Lopez products. The outbreak spanned from June 2014 to December 2023.

What is a consent decree and how did it affect Rizo-Lopez?

A consent decree is a court order requiring companies to take specific corrective actions, typically used when companies have persistent violations. The DOJ consent decree filed October 8, 2024 prohibited Rizo-Lopez from manufacturing or distributing FDA-regulated food products until an independent sanitation expert verified compliance with enhanced monitoring, training, and facility improvements. The decree shut down operations for 16 months.

What products were recalled by Rizo-Lopez Foods?

The company recalled all dairy products—cheese, yogurt, and sour cream—sold under brands including Tio Francisco, Don Francisco, Rizo Bros, Rio Grande, Food City, El Huache, La Ordena, San Carlos, and Campesino. Products included queso fresco, cotija, oaxaca, panela, and requeson cheeses distributed nationwide through retail and food service channels.

What is the current status of the Rizo-Lopez bankruptcy case?

On October 27, 2025—six weeks after filing—the debtor moved to convert the case from chapter 11 to chapter 7 liquidation. The motion cited inability to secure sufficient financing for reorganization, pending litigation exceeding potential recovery, and continued challenges under the consent decree.

Who are the largest creditors in the Rizo-Lopez bankruptcy?

Sargento Foods holds the largest claim at approximately $59 million for breach of a co-packing agreement. Wells Fargo Bank holds approximately $10.2 million in secured debt against real property and equipment. Other major claimants include Reser's Fine Foods ($3.7M), Castle Importing ($4.7M), Pacific Cheese ($3.8M), and Amy's Kitchen ($3.0M).

Can Rizo-Lopez resume production and restructure?

The company received FDA approval to resume operations on May 19, 2025, and restarted limited production on August 5, 2025. The chapter 7 conversion motion states that the company cannot sustain operations given the litigation exposure and the financial impact from the 16-month shutdown.

How does this case compare to other food safety bankruptcies?

The Rizo-Lopez bankruptcy involves a 10-year listeria outbreak, regulatory enforcement, commercial claims, and a 16-month operations shutdown.

What happens to food safety liabilities in bankruptcy?

Food safety claims can affect bankruptcy proceedings. While the automatic stay halts litigation, personal injury claims and regulatory compliance obligations may not be dischargeable in the same manner as contract claims. The consent decree remains in effect regardless of bankruptcy status, and consumer claims remain a liability. Product liability insurance may be insufficient for major contamination events.

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