In the complaint,* filed in the Los Angeles County Superior Court on January 27, Don Lee (which entered into an exclusive 5-year supply agreement with Beyond Meat in late 2014), claims it raised “significant concerns” in early 2016 over safety protocols at Beyond Meat, which supplied extrudate to Don Lee for further processing and packaging into finished products including burgers, chicken strips and beefy crumbles.
According to Don Lee, Beyond Meat CEO Ethan Brown “affirmatively represented to Don Lee Farms that he would work towards resolving those issues” and retained a third-party food safety consultant to audit his manufacturing facility, who then issued a report to its executives citing “various concerns.”
Next, alleges the complaint, Beyond Meat “altered the report by, among other things, deleting significant provisions of it” before sending it to Don Lee in order to assuage its concerns, such that Don Lee agreed to amend their supply agreement and expand the relationship.
In May 2017, Beyond Meat terminated the parties’ fixed term contract, claiming that Don Lee products were "contaminated with salmonella and other foreign objects" (claims Don Lee denies), breaching their contract.
Don Lee then sued Beyond Meat, alleging breach of their contract (which ran through 2019) and misappropriation of trade secrets; Beyond Meat then countersued, alleging that Don Lee had in turn breached their contract by failing to deal with food safety issues.
Don Lee: Beyond Meat shared our trade secrets to solicit competitors to replace us at a lower price
While Beyond Meat had signed an NDA agreeing not to share Don Lee’s proprietary processes for turning Beyond Meat’s extrudate into finished products, Don Lee argues that “Beyond Meat plans to and/or has been using and disclosing such trade secrets to actively solicit DLF’s competitors to replace DLF as Beyond Meat’s exclusive supplier at prices more favorable to Beyond Meat than those contained in the exclusive supply agreement.”
Beyond Meat went on to “use and disclose such trade secrets to ProPortion, in their combined efforts to successfully, but unlawfully, replace DLF as Beyond Meat’s exclusive supplier,” alleges the complaint.
“We believe we were justified in terminating the supply agreement with Don Lee Farms, that we did not misappropriate their alleged trade secrets, that we are not liable for the fraud or negligent misrepresentation alleged in the proposed second amended complaint, that Don Lee Farms is liable for the conduct alleged in our cross-complaint, and that we are not liable to ProPortion for any indemnity, contribution, or repayment, including for any damages or attorney’s fees and costs.
“We are currently in the process of litigating this matter and intend to vigorously defend ourselves against the claims.”
Beyond Meat 10Q filing, Nov 12, 2019
Beyond Meat: ‘Don Lee Farms sought to change the narrative by filing a baseless lawsuit’
Beyond Meat - which has just been hit with a shareholder lawsuit** accusing it of securities fraud following a “precipitous decline” in its share price – told FoodNavigator-USA that it would vigorously defend itself vs Don Lee’s claims.
“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.”
Setbacks for Beyond Meat
While the case is still proceeding through the courts, Beyond Meat suffered a setback in May 2019, when the judge denied its motion to dismiss fraud and negligent misrepresentation claims filed in a second amended lawsuit in March 2019.
It then suffered a further setback last month, when a judge found Don Lee Farms had “established the probable validity” of its breach of contract claims, although it has not ruled on the ultimate case on the merits. (A trial date is set for February 2021.)
In its latest (third amended) complaint, Don Lee Farms (a leading supplier of plant-based meat products to retailers including Costco, Whole Foods, Albertsons and Aldi) seeks compensatory damages, punitive and exemplary damages, and attorneys’ fees.
It also seeks a declaration that Beyond Meat was not entitled to terminate its supply agreement with Don Lee on the grounds alleged, coupled with injunctive relief prohibiting use or disclosure of Don Lee’s trade secrets.
Attorney: These are very detailed allegations
Kevin Bell, partner at Arnall Golden Gregory LLP, said the allegation that Beyond Meat intentionally omitted material information from a food safety consultant’s report is far more serious than the alleged breach of contract.
“These are very detailed allegations," he told FoodNavigator-USA. "If Beyond Meat altered a food safety report, that’s beyond significant, forget about breach of contract, you’re talking about allegations of fraud in a food company, about public safety issues.”
Read more about the litigation HERE.
*The case is Don Lee Farms vs Beyond Meat Inc, ProPortion Foods LLC, Mark Nelson, Jessica Quetsch, Anthony Miller, and Does 1-10 Case #: BC662838 in Los Angeles County Superior Court, CA.
** The case is Larry Tran et al vs Beyond Meat Inc, Ethan Brown, and Mark Nelson Case: 2:20-cv-00963 filed in the US district court central district of California, January 30, 2020.
