The same day San Antonio-based Delta Produce LP and its affiliated company Superior Tomato-Avocado Ltd. filed for Chapter 11 bankruptcy, Delta Produce filed another suit, for $100 million in damages, against San Antonio-based retailer H.E. Butt Co.
The suit alleges monopoly coercion by a power buyer, according to the filing in the U.S. Bankruptcy Court in the Western District of Texas.
“Specifically, H-E-B coerced Delta to enter into an ongoing illegal agreement or series of agreements by which Delta was prohibited from selling produce sold to H-E-B to H-E-B’s competitors even though Delta had more than enough capacity to serve H-E-B and other supermarkets.”
The plaintiffs in the case are Delta Produce LP and Atled Ltd., (Delta spelled backward) and is listed as co-owner of the companies’ 118,000-square-foot facility in San Antonio. According to the filing, Delta produce sold avocados, tomatoes and watermelons to H-E-B.
The suit alleges Delta Produce’s founder Bernard Jensen made a deal with H-E-B’s director of produce to agree to supply HEB exclusively. The deal continued from 1988 through 2011, wherein Delta Produce purchased tomatoes “based upon expectations of H-E-B’s needs. By 1994, H-E-B was purchasing 95% of its mature green tomatoes, roma tomatoes and cherry tomatoes from Delta.”
The deal grew to include avocados and watermelons. Over the next decade, Delta Produce said it added more than $1.75 million in facility upgrades to handle HEB’s growing capacity for produce, and the exclusive sales deals were reiterated numerous times.
As much as 80% of Delta Produce’s business was through H-E-B, according to court documents.
Delta Produce alleges it was approached by H.E. Butt competitors, including Bentonville, Ark.-based Wal-Mart Stores Inc., but it was told to refuse the business or else lose HEB.
Delta Produce declined an offer from a prospective buyer because HEB’s current produce director Hugh Topper said H-E-B would cease purchasing from Delta because the prospective buyer did business with Walmart, according to the lawsuit filing.
The filing says after several attempts to get the restriction lifted, Delta Produce reached an agreement to lift the restriction with Topper in early 2008, but “by the time H-E-B lifted the selling restriction, other retailers who might have otherwise purchased form Delta had established relationships with other sellers.”
Delta Produce reportedly is seeking $100 million in damages. H.E. Butt issued a statement denying the claims, according to an article in the San Antonio Express-News.
The statement said, “H-E-B strongly disagrees that it is to blame for Delta’s poor performance and will vigorously contest Delta’s lawsuit. H-E-B is confident that after a full airing of the facts, Delta’s unproven assertions will be found meritless.”
HEB said in the statement Delta Produce couldn’t keep up with the changing market.
“Delta was a longtime supplier to H-E-B and H-E-B regrets that Delta has been unable to weather the recent economic downturn and changes taking hold in the produce marketplace.”
HEB did not return a request for comment.
Delta Produce’s attorney, Randall Pulman of Pulman, Cappuccio, Pullen & Benson LLP, San Antonio, told the Express-News Delta Produce has assets of about $8 million and liabilities of about $8 million. The company expects to sell its assets, including a fleet of long-haul trucks, to pay its creditors.
As of early January, three companies filed claims against Delta Produce and Superior Tomato-Avocado under the Perishable Agricultural Commodities Act:
• Willson Davis Co., San Antonio, for invoices between Oct. 24 and Dec. 23 totaling $481,058;
• Rio Bravo Produce Ltd. Co. LLC, Edinburg, Texas, for invoices between Oct. 24 and Dec. 27, totaling $71,191;
• Muller Trading Co. Inc., Libertyville, Ill., for a Dec. 16 invoice for $24,573.