'Shock and dismay...' Beyond Meat counterattacks in legal spat with ex-co-packer
The legal dispute* began in May 2017 - three years after the two parties entered into a 5-year supply agreement - with Don Lee Farms alleging that Beyond Meat wrongfully terminated the parties’ fixed term contract “under the guise of purported health & safety concerns."
It went on to accuse Beyond Meat of sharing trade secrets with Don Lee's rivals to help them “actively solicit” to replace Don Lee as Beyond Meat’s co-manufacturer “at prices more favorable to Beyond Meat” than those agreed in its supply contract with Don Lee.
Don Lee further alleged that Beyond Meat shared with subsequent co-manufacturers the processes for manufacturing Beyond Meat products (processes which Don Lee claims to have developed… although Beyond Meat says it had come up with the processes itself, years before Don Lee started using them).
Beyond Meat then countersued, alleging that Don Lee breached its supply agreement by failing to address serious food safety concerns.
In March 2019, Don Lee Farms added claims of fraud and negligent misrepresentation against Beyond Meat, which Beyond Meat strongly denies.
Since then, Beyond Meat has suffered some setbacks, with its motion to dismiss the added fraud and negligent misrepresentation claims denied. In January 2020, a judge also said Don Lee had established the “probable validity” of its claim that Beyond Meat owed it money for a small batch of unpaid invoices, although a trial judge has not yet ruled on the merits of the case (a trial date is set for June 2021).
'Shock and dismay'
In the latest filing (August 11, 2020), Beyond Meat goes into far more detail than in previous filings, arguing that it had been forced to terminate its supply agreement with Don Lee Farms owing to the “unsanitary conditions at DLF’s facility, and the inadequate controls and procedures.”
According to its amended complaint,** Beyond Meat had agreed to move certain operations to Don Lee Farms’ facility in Mansfield, Texas in 2016, but discovered to its “shock and dismay” that the plant “was not remotely situated for Beyond Meat’s needs” and did not meet “basic food quality standards.”
Pathogens including Salmonella and Listeria were only “caught by Beyond Meat’s rigorous quality controls and safety testing,” added Beyond Meat, which described Don Lee's Mansfield facility as "woefully unsafe."
'A baseless complaint'
Instead of compensating Beyond Meat for the "expensive unsaleable product" it manufactured, Don Lee Farms "filed a baseless complaint inexplicably claiming Beyond Meat had somehow wrongfully terminated the Supply Agreement (despite the gross health hazards at DLF’s facilities that DLF failed to remedy) and misappropriated DLF’s trade secrets (despite DLF never having manufactured the products Beyond Meat had developed years before)," said the Aug 11 complaint.
Don Lee Farms later launched a series of products including its 'Better Than Beef Burger,' that "ultimately failed to capture the taste and texture of Beyond Meat’s scientifically designed plant-based meat," but still benefited from Beyond Meat’s "confidential and proprietary information," alleged Beyond Meat.
"Not satisfied with merely stealing Beyond Meat’s ideas and trade secrets, DLF (and Goodman Foods) brazenly leveraged Beyond Meat’s registered trademarks to profit off Beyond Meat’s competitive standing in the plant-based meat market.”
Beyond Meat: Don Lee Farms 'brazenly leveraged' our registered trademarks
To this day, alleged Beyond Meat, which had its access to the Mansfield plant revoked in June 2017, "some of Beyond Meat’s expensive equipment remains in the Mansfield facility, and on information and belief is being used by Don Lee Farms."
Don Lee Farms: 'The court has granted our application for a Right to Attach Order'
In a statement sent to FoodNavigator-USA responding to Beyond Meat's August 11 amended complaint, Don Lee Farms said: “Ask Beyond Meat to publicly release their doctored third party food safety report, including the omitted portions discussing food safety issues at Beyond Meat’s facility."
In its August 11 complaint, Beyond Meat in turn, said Don Lee "misrepresented the nature of the report [which it alleges Don Lee leaked to a Bloomberg reporter in April 2019 just before the IPO] to smear Beyond Meat’s reputation, falsely suggesting that Beyond Meat and its employees had improperly altered the report [when] nothing could be further from the truth."
Don Lee Farms' statement added: "Let Beyond Meat explain why they are saying our claim is frivolous when the Court already granted our application for a Right to Attach Order and issued a Write of Attachment after finding that the Application established a probability of success on the merits for the breach of contract claim presented to it.
"Have Beyond Meat explain why they are being sued by multiple shareholders, including for breach of fiduciary duties and unjust enrichment and why company insiders have been selling stock. We welcome Beyond Meat to designate all their documents as public and let people and, most importantly, their shareholders see for themselves.”
In its latest SEC filing, Beyond Meat says it's "in the process of litigating this matter and intends to vigorously defend itself and its current and former employees against the claims and to prosecute the Company’s own claims."
*The case is Don Lee Farms vs Savage River Inc (d.b.a. Beyond Meat) Case #: BC662838 in Los Angeles County Superior Court, CA.
**Beyond Meat's latest amended complaint, filed on August 11, accuses Don Lee Farms, its parent Goodman Food Products, Inc. and its owners and employees, Donald, Daniel, and Brandon Goodman of defrauding Beyond Meat, misappropriating its trade secrets, and infringing its trademarks.
Beyond Meat seeks attorneys' fees, damages, and an injunction preventing Don Lee Farms from "further using or disseminating Beyond Meat’s confidential and proprietary information and trade secrets, including in selling its own plant-based product lines."
- Click here to read more about the litigation in Beyond Meat's latest 10Q filing.
In a statement supplied to FoodNavigator-USA in February, Beyond Meat said: “At Beyond Meat, we are known for our rigorous product standards. That is why we stopped working with Don Lee Farms in 2017.
“We simply couldn’t get Don Lee Farms to meet our standards, no matter how many times we tried. Rather than risk the industry learning of their repeated safety shortcomings, Don Lee Farms sought to change the narrative by filing a baseless lawsuit against Beyond Meat.
“We are currently in the process of litigating this matter and intend to vigorously defend ourselves against the claims.”
