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Legal Profession Starting
To Look Closer At Ocean Spray

Jim Prevor’s Perishable Pundit, July 7, 2009

As Theresa Nolan awaits a possible appeal from Ocean Spray’s attorneys on the latest award of $2 million, plus interest going back to 2003 and payment of legal fees, one of the more intriguing questions has been whether USDA will elect to start an investigation or, in fact, if it has already started such an investigation.

We’ve been arguing that there is a prima facie case for a violation of the PACA laws. Now some members of the legal community are starting to pick up on our assessment.

Richard Goldfarb, a Harvard attorney with Stoel Rives LLP, wrote a piece entitled Nolan v. Ocean Spray Verdict: The PACA Angle in his firm’s Food Liability Law Blog:

Jim Prevor, the author of the Perishable Pundit blog and a man who has probably forgotten more about the produce industry and its practices than many will learn in a lifetime, has been blogging constantly about the lawsuit brought by Theresa Nolan, her company The Nolan Network and her late husband Jim against Ocean Spray Cranberries, Inc. On May 30, he reported that a jury in Plymouth, Massachusetts, home of Ocean Spray, had brought in a $1 million verdict against Ocean Spray and in favor of the Nolans.

The lawsuit involved marketing practices with fresh cranberries, a minor part of Ocean Spray’s business compared to, say, cranberry juice cocktail. The background to the case is discussed at length in an article by Bill Martin in Jim Prevor’s other publication, Produce Business. As far as I can tell from the news reports, the actual allegation in the lawsuit was a violation of Chapter 93A of the Massachusetts General Laws, This broadly prohibits unfair or deceptive acts or practices in trade or commerce. I’m not a Massachusetts lawyer, but I did a stint as a law clerk for the Massachusetts Appeals Court and my recollection is that Chapter 93A was considerably stronger in application and interpretation than many other states’ mini-FTC Acts, particularly since a private right of action is included essentially without limit.

The core of the allegations related to alleged differential pricing afforded by Ocean Spray to Costco and H.E. Butt in 2000 and 2002, respectively. How this eventually led to the Nolans’ claim is too complicated to discuss here. I am more interested, however, in a suggestion Jim Prevor makes in some of his columns on the case, that the alleged differential pricing and the way it was dealt with might have violated PACA, the Perishable Agricultural Commodities Act.

A key allegation is that C&S Wholesale Grocers, which supplied fresh cranberries to BJ’s Wholesale Club, a competitor of Costco, was told by Ocean Spray, upon complaining about the price advantage allegedly given Costco, “to claim some cranberries it would receive from Ocean Spray were of poor quality and to take a discount from the Ocean Spray invoice.”

If true, there are ways that such treatment could violate PACA or violate the duties that Ocean Spray owed to its growers.

PACA is best-known for creating a statutory trust in favor of unpaid growers of perishable agricultural commodities. It also, however, requires people who deal in those commodities to account accurately for all transactions in those commodities. Thus, the allegation that a buyer was told, in essence, to make a claim that certain cranberries were of lesser quality than they actually were raises the issue of whether some of Ocean Spray’s growers were provided reports on their cranberries that inaccurately represented their quality (if not, one wonders how the auditors would have missed it, since they would have presumably had to match the returns from the pools that included the sales to C&S against the payments from C&S). It’s a reasonable question, though nothing that has occurred to date appears to have answered it.

It is conceivable, of course, that the matter was settled internally without publicity, or that the growers involved considered the issue too small to litigate. Anyone handling fruit or vegetables within PACA’s ambit, though, must be aware that any form of inaccurate reporting can violate the statute.

We appreciate Mr. Goldfarb’s kind words; we had first come across his firm when the Pundit was invited to speak at an exceptional conference entitled “Who’s Minding the Store — the Current State of Food Safety and “How It Can Be Improved.” The conference functioned as a continuing legal education program at Seattle University School of Law and was co-sponsored by Marler Clark, the famed plaintiff’s attorney on food safety issues and Stoel Rives, which typically did work for defendants.

Mr. Goldfarb zooms in on the legal point precisely: If Ocean Spray received claims for “poor quality” and it knew or should have known that these claims were false; its allowing of the claims to “settle” another unrelated matter could have easily resulted in growers receiving incorrect accountings.

Although, as Mr. Goldfarb points out, the matter could have been settled privately or be too small to litigate, it is Mr. Goldfarb’s last line that is most telling:“Anyone handling fruit or vegetables within PACA’s ambit, though, must be aware that any form of inaccurate reporting can violate the statute.”

Under the PACA the wronged party does not have to litigate; in fact, there doesn’t even have to be a damaged party. Many years ago, the Pundit’s family came perilously close to losing our PACA license because it was discovered in a routine audit that we had unintentionally overpaid a grower!

To the PACA, overpaying or underpaying was irrelevant; the law required an accurate accounting, which we had failed to deliver.

We wonder if Ocean Spray did better?

Once again, thanks to Richard Goldfarb and Stoel Rives LLP for picking up on the matter.

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