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Pundit’s Mailbag —
Protecting Ocean Spray’s
Attorney/Client Privileges

Jim Prevor’s Perishable Pundit, June 12, 2007

Our extensive coverage of the issues raised by the lawsuit between Jim and Theresa Nolan, as well as their company, The Nolan Network, with Ocean Spray included a piece entitled Ocean Spray May Have More To Lose Than Lawsuit, which concluded with a suggestion that it might behoove Ocean Spray to make public a special report it had commissioned to investigate the dispute in question:

There is a quick way that might resolve all this without a trial. When this situation started to heat up, Ocean Spray commissioned a special investigation conducted by a big-time law firm.

If Ocean Spray had retained a management consulting firm to do the investigation, the results of the report would already be public record through the lawsuit. But because Ocean Spray had a law firm write the report, it can claim attorney-client privilege and refuse to reveal the findings.

Yet, clearly, in an issue that has caused such controversy it would behoove Ocean Spray to clear its name by waiving attorney-client privilege and making public the results of the report.

It seems doubtful that growers and retailers alike, all of whom are being denied access to this document, are going to conclude that it exonerates Ocean Spray. That may be unfair but, by simply publishing the report, Ocean Spray could reassure the industry that it is being upfront about this entire matter.

Now we receive a letter from a well respected PACA attorney warning of the consequences of Ocean Spray taking the action we suggested:

In the “Pundit” of June 8, 2007, you made this comment:

“Yet, clearly, in an issue that has caused such controversy it would behoove Ocean Spray to clear its name by waiving attorney-client privilege and making public the results of the report.”

At the risk of being condemned for being too legalistic, this PACA lawyer must alert you to something. Courts take a pretty dim view of attempted selective waivers of attorney-client privilege. If Ocean Spray should do what you suggest, then it would risk waiver of its attorney-client privilege as to all communications related to this matter.

Depending on the particular state and forum, it is quite possible that the law of privilege of the relevant jurisdiction would not allow Ocean Spray to just release the communications which serve its public relations purposes while continuing to withhold other communications.

Ocean Spray may have some real problems but following your suggestions would most likely compound them. Produce industry members should think of what the consequences would be if all of their communications with their lawyers were opened up to the public.

— Craig Stokes
Craig A. Stokes
Santos Stokes, LLP

Craig is, of course, correct, and there are risks for Ocean Spray in releasing the report. Yet we would contend that Ocean Spray’s primary risk in this litigation is not to the plaintiffs. The Nolans are two people, and one may have lost his job, the other her business, as a result of Ocean Spray’s actions.

To some extent, that is the core of the lawsuit and, in a sense, what the court will determine. Yet the damages to the Nolans are discrete and limited. We see far bigger liabilities in payments likely to be demanded by Ocean Spray’s retail accounts.

If someone like Sam’s Club decides to press not only for a refund on its overpaying for cranberries but also starts to look at being compensated for the damage to its reputation caused by its not being competitively priced, and you multiply that by all the other retailers that compete with H.E.B., we suspect a liability many times what the Nolans would receive, even if they win a complete victory in court.

There is also the possibility of regulatory consequences. We’ve written before about how, to us, the logic of the case seems to imply that it was possible individual cranberry growers were getting short-changed by Ocean Spray.

First, it is alleged that Ocean Spray was providing differential prices to different customers for identical product shipped at the same time, but no mention is made of how the less expensive orders were allocated among growers. This raises all kinds of issues of favoritism that the USDA might not find acceptable as a way of treating growers.

Second, it is alleged that Ocean Spray advised C&S to resolve this dispute over preferential pricing by telling it to claim poor quality on fresh cranberries that were sold at a later date and, in all probability, were produced by different cranberry growers. If this happened, wouldn’t it, in effect, be reducing the returns of innocent cranberry growers? How can this conform to PACA regulations?

Third, the whole issue of Ocean Spray so aggressively attempting to get business from H.E. Butt and Costco raises the question of motivation. We don’t see anything in the documents in which Ocean Spray management was ever warned that without these two customers the fresh cranberries would go unsold. Indeed it seems like the fresh sales team didn’t want to do these deals. So who did? And why? We don’t know.

We do know that juice and processed product is the vast majority of Ocean Spray’s business. This raises at least the theoretical possibility that some high-up executives at Ocean Spray could have decided to use the fresh business to make a deal on processed product. If such an arrangement was entered into, the USDA could view it as a subterfuge that had the effect of reducing the returns of fresh cranberry growers. This would raise PACA problems as well.

Finally, Ocean Spray is a consumer products company with a brand to protect. The longer this trial gets dragged out, the more likely some consumer publication will find the story and highlight the human interest angle: The story, fair to Ocean Spray or not, will likely be portrayed as a lifetime employee and his wife, widely liked and respected, tossed aside when their presence became inconvenient to a big corporation.

The consumer media will pluck out the allegations of improper conduct against Ocean Spray and ask what protections employees have against businesses that want their employees to do disreputable things.

We don’t disagree with Craig, but we wonder if the smart thing to do here isn’t to settle with the Nolans to get this off the radar screen and, assuming the report exonerates Ocean Spray, share that publicly so as to help rebuild confidence.

Of course, in the background of all this is that when Ocean Spray elected to have a law firm do this investigation, its executives were surely mindful that the effect of deciding to have a law firm write the report was to keep it confidential. If the top people at Ocean Spray expected a report to completely exonerate the company and its employees, the executives could have had a business management consultant or a corporate ethics consultant write the report. Then releasing the report would not raise any issues regarding attorney/client privilege.

Many thanks to Craig for his careful reading and willingness to keep us all focused on the legal implication of the acts we take.

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