Suit alleges Ocean Spray gave preferential pricing

02/02/2004 12:00:00 AM
Jim Offner

(Feb. 2) Ocean Spray Cranberries Inc. for the second year in a row finds itself the target of litigation.

More than a year after rival Wisconsin-based Northland Cranberries Inc. had filed an antitrust action against Ocean Spray, the Middleboro, Mass.-based cooperative now is facing a multimillion-dollar lawsuit filed by one of its former employees and his wife, the latter of whom has been a sales agent for the company’s cranberries.

The lawsuit does not specify how much the Nolans are seeking in damages, but their attorney, Bourne, Mass.-based Richard LaFarge, estimated that it could be as much as $10 million.

Jim Nolan, formerly a domestic and international sales manager for fresh cranberries and 24-year employee of Ocean Spray, and his wife, Theresa, president of The Nolan Network, a sales agency and merchandising firm the couple run out of their home, filed their action on Dec. 16 in the Massachusetts Superior Court in Plymouth.

CONSPIRACY ALLEGED

According to court papers, the couple accuse Ocean Spray and four individuals connected with the cooperative of intentional interference with advantageous business relations; civil conspiracy; defamation; unfair and deceptive acts in commerce; breach of the obligation of good faith and fair dealing; and intentional infliction of emotional distress.

Named in the lawsuit, along with the 900-member co-op, are James Lesser, who was Ocean Spray’s group product manager for food, produce and value-added ingredients; Richard O’Brien, ingredient technology group director and general sales manager worldwide; Robert Rosbe Jr., chairman of the board; and Richard Posnysz, board member and chairman of its audit committee.

Ocean Spray spokesman Chris Phillips declined to comment on the matter. The Nolans referred all inquiries to LaFarge.

Ocean Spray has until Feb. 25 to respond, LaFarge said.

Ocean Spray had contracted with The Nolan Network to handle sales and merchandising of the co-op’s fresh cranberries in North America and Europe from 1999-2002. The Nolans contend that Ocean Spray circumvented The Nolan Network to give preferential pricing, first to club-store Costco Inc., in 2000, and then to retailer H.E. Butt, in 2002.

OCEAN SPRAY ALLEGATION

The Nolans accuse Ocean Spray of thereby undercutting its own announced pricing structure under which the The Nolan Network had been selling to C&S Wholesale Grocers, which supplies Natick, Mass.-based BJ’s Wholesale Club. The Nolans also claim Ocean Spray wrongfully accused The Nolan Network of charging C&S too much.

“They (Ocean Spray) were discriminating among buyers from the same class (of retail store),” LaFarge said, citing the Robinson-Patman Act, which prohibits sellers from charging competitng buyers different prices for goods of “like grade and quality.”

Nolan, 57, who worked for The Packer as a field reporter from 1974 to 1977, had been with Ocean Spray from June 1977 to October 2001. In 2001, he retired early from Ocean Spray and went to work for The Nolan Network, which Theresa Nolan had launched in 1987.

The Nolans say that when they brought the issue to the attention of Ocean Spray, their 17-year association with Vancouver, British Columbia-based The Oppenheimer Group, another company for which The Nolan Network sold product, was terminated. The Nolans also say The Oppenheimer Group replaced The Nolan Network as sales agent for Ocean Spray.

But John Anderson, president and chief executive officer of the Oppenheimer Group, said the decision was simply business-based.

“It had gotten to the point where, in some cases, we were competing with each other,”Anderson said.

INCONSISTENT PRICING

The lawsuit alleges that in September 2000, Ocean Spray sent a price announcement to the co-op’s fresh cranberry club store accounts and subsequently on its own offered Costco a “substantially” lower price than the published price of $25 f.o.b. per case that the co-op charged to Costco competitors Sam’s Club and C&S.

“The gist is that Ocean Spray, unbeknownst to the Nolans, was giving Costco a break on the price,” LaFarge said. “Jim and Theresa complained about it being unfair and unethical because (Costco’s) competition wasn’t given a break.”



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