Latest round to Beyond Meat in bitter legal dispute with former co-packer Don Lee Farms, but case still set to go to trial

By Elaine Watson contact

- Last updated on GMT

Beyond Meat: Ruling 'puts an end to the fictional narrative Don Lee Farms has attempted to use throughout this case that Beyond Meat misappropriated trade secrets...' Image credit: Beyond Meat
Beyond Meat: Ruling 'puts an end to the fictional narrative Don Lee Farms has attempted to use throughout this case that Beyond Meat misappropriated trade secrets...' Image credit: Beyond Meat

Related tags: Beyond meat

Beyond Meat has won the latest round in its bitter four-year legal dispute* with former co-manufacturer Don Lee Farms triggered by the early termination of an exclusive five-year supply agreement between the two parties. But the case is far from over, with a trial date set for May 16, 2022.

In a ruling issued August 27, Los Angeles Superior Court Judge Holly J. Fujie granted Beyond Meat’s motion for summary adjudication on Don Lee Farms’ claims for misappropriation of trade secrets and unfair competition.

As a result, those claims will not proceed to trial, which has been set for May 16, 2022. However, Don Lee Farms’ claims that Beyond Meat breached their contract and that Don Lee was fraudulently induced to continue working remain in dispute.

Don Lee Farms told FoodNavigator-USA this afternoon that, "Beyond Meat failed to mention that the Court ruled fraud claims regarding Beyond Meat’s doctored food safety report and contract claims will proceed to a public trial."

The company added: "Don Lee Farms is eager for and is looking forward to a jury trial of the facts in May."

Beyond Meat: Ruling 'puts an end to the fictional narrative Don Lee Farms has attempted to use throughout this case that Beyond Meat misappropriated trade secrets...'

In the ruling, seen by FoodNavigator-USA, the judge explained that Beyond Meat had presented evidence to prove that the Beyond Meat products manufactured by Don Lee Farms were developed by Beyond Meat before their contractual relationship and that while Don Lee made “slight alterations​” to some procedures, Beyond Meat “maintained final authority over the implementation of all procedures relating to the production of its products.”

According to a press release issued by Beyond Meat: “Although Don Lee Farms had no prior experience manufacturing plant-based meat products, it claimed it owned the procedures for manufacturing Beyond Meat’s proprietary plant-based meat products. The Court has now outright rejected that claim.”

The ruling, it added, “puts an end to the fictional narrative Don Lee Farms has attempted to use throughout this case that Beyond Meat misappropriated Don Lee Farms’ trade secrets to manufacture the Beyond Burger and other products.”

Beyond Meat to ‘vigorously defend against Don Lee Farms’ remaining claims’

Beyond Meat said it would “vigorously defend against Don Lee Farms’ remaining claims against Beyond Meat, which are premised on Beyond Meat’s alleged breach of the parties’ contract and Don Lee Farms’ allegation that it was fraudulently induced to continue working with Beyond Meat despite profiting from the parties’ relationship.”

Beyond Meat also intends to pursue its own claims against Don Lee Farms—including its claim that Don Lee Farms in fact misappropriated Beyond Meat’s trade secrets to create its own line of copycat products (Beyond Meat is seeking millions of dollars in damages from Don Lee Farms and its owners Donald Goodman, Daniel Goodman, and Brandon Goodman).

What is the dispute all about?​

The legal dispute began in May 2017 - three years after the two parties entered into a five-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 - something the judge has just accepted).

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, arguing that members of the senior management team "deliberately altered and excluded important information from their food safety consultant’s report which was then sent to Don Lee Farms."

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, with Beyond Meat confirming recently that it had been told to pay Don Lee an unspecified sum for product that had been shipped.​

‘Unsanitary conditions’

In August 2020, Beyond Meat argued that it had been forced to terminate its supply agreement with Don Lee Farms owing to the “unsanitary conditions at Don Lee Farms' facility, and the inadequate controls and procedures.”

According to an 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.”

However, Don Lee said the goods at issue "were tested for pathogens and passed inspection before shipment​”, noting that the agreed-upon protocol for challenging defective goods was to return them and seek a refund in a timely fashion, something Beyond Meat did not do. 

Read more about the case HERE​.  

*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 shareholder lawsuits dismissed​​

Beyond-Meatballs-Packaging

Beyond Meat was hit with a flurry of shareholder lawsuits in early 2020 after plaintiffs argued that it had not provided sufficiently detailed disclosures about its legal dispute with Don Lee Farms head of its May 2019 IPO.

In an order dismissing the lawsuits (which were consolidated: Larry Tran v. Beyond Meat, Inc. et al 2:20-cv-00963) in October 2020, US District Judge Michael W. Fitzgerald said that the plaintiffs had not sufficiently alleged the falsity of material statements or omissions from Beyond Meat, adding:

"Plaintiffs failed sufficiently to allege that Beyond Meat’s statements affirmatively created an impression of its state of affairs regarding the Don Lee Farms litigation that differed in a material way from the one that actually existed.​​

"Plaintiffs’ allegations are insufficient to meet the heightened pleading requirements of the PSLRA."

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