US firm in court bat­tle to dis­miss Aryzta counter-claim

Irish Independent - Business Week - - FRONT PAGE - John Mul­li­gan

TEN­NESSEE-BASED McKee Foods has sought to have a counter-claim made against it by Cui­sine de France owner Aryzta thrown out of court, ar­gu­ing it’s “with­out foun­da­tion”, as the pair en­ter the sec­ond year of a ma­jor le­gal bust-up.

McKee has sued Aryzta in the United States for al­legedly fail­ing to fill or­ders prop­erly, while Aryzta has counter-sued McKee for hav­ing ter­mi­nated the pair’s con­tract, claim­ing the US firm did so with­out giv­ing proper no­tice.

Last year, a labour crack­down un­der­taken by the US im­mi­gra­tion author­i­ties saw al­most 800 work­ers at two man­u­fac­tur­ing fa­cil­i­ties in Illi­nois – col­lec­tively known as Clover­hill – that were then owned by Aryzta, be­ing forced out the door be­cause they did not have proper worker au­tho­ri­sa­tions.

The staff, most of whom had worked at the fa­cil­i­ties for years, had been sup­plied by a third-party em­ploy­ment agency and Aryzta had been un­aware of their de­fi­cient em­ploy­ment cre­den­tials.

The loss of the work­ers cre­ated a ma­jor chal­lenge for the Aryzta fa­cil­i­ties, which man­u­fac­tured prod­ucts for clients in­clud­ing fam­ily-owned McKee Foods.

The Ten­nessee firm has claimed it will lose mil­lions of dol­lars in prof­its as a re­sult of Aryzta’s al­leged in­abil­ity to fill McKee’s or­ders.

Aryzta has since sold the Clover­hill busi­ness at a sub­stan­tial loss.

Aryzta has claimed that McKee did not have the right to uni­lat­er­ally ter­mi­nate its man­u­fac­tur­ing con­tract with the Swis­sIr­ish firm last year, ar­gu­ing that the Ten­nessee com­pany should have given 90 days’ no­tice.

Aryzta has claimed that it has suf­fered “sub­stan­tial dam­ages” as a re­sult of McKee’s ter­mi­na­tion of their con­tract.

But McKee has ar­gued in court doc­u­ments that it did not have to give 90 days’ no­tice as the agree­ment be­tween it and Aryzta had been al­legedly breached.

Turn­around strat­egy:

Aryzta CEO Kevin Toland has led a ma­jor ini­tia­tive to bol­ster the Cui­sine de France owner

How­ever, Aryzta has pre­vi­ously ar­gued that it did not breach the agree­ment, and that none of the al­leged breaches would have been suf­fi­cient to per­mit its im­me­di­ate ter­mi­na­tion with­out no­tice.

McKee Foods has claimed oth­er­wise. “McKee’s ter­mi­na­tion of the agree­ment was, on its face, based on Aryzta’s ad­mit­ted fail­ure to sup­ply the prod­ucts which McKee had or­dered,” it has told the court.

It added: “No other breach is al­leged, nor does the coun­ter­claim al­lege that Aryzta com­plied with its obli­ga­tions un­der the agree­ment.”

It has said in court fil­ings that Aryzta’s claim of breach of con­tract against McKee “fails as a mat­ter of law”.

“Aryzta, as the ‘first to breach’, can­not re­cover dam­ages,” the US firm has in­sisted.

Aryzta, whose CEO is Kevin Toland, has em­barked upon a ma­jor, multi-year turn­around strat­egy de­signed to re­store the for­tunes of the trou­bled com­pany.

It re­cently com­pleted a near €800m eq­uity raise, in a move that was op­posed by many share­hold­ers, in­clud­ing its largest, Cobas As­set Man­age­ment.

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