Lawsuit filed over Trader Joe's pretzels
January 23, 2014
by Josh Sosland
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LOS ANGELES — Maxim Marketing Corp., a Los Angeles business, filed a lawsuit against ConAgra Foods, Inc. and Trader Joe’s Co. in a case related to Trader Joe’s peanut butter filled pretzels.
The suit, filed in Los Angeles Superior Court alleged breach of contract, intentional interference with contractual relations and violation of California antitrust law.
“ConAgra and Trader Joe’s have engaged in an unlawful conspiracy to eliminate competition in, and ultimately to monopolize, the peanut butter filled pocket pretzel market,” Maxim said in a 24-page court filing. “To that end, ConAgra and Trader Joe’s breached their agreements with Maxim, and unlawfully stole Maxim’s business.”
In response to a request from Food Business News, a ConAgra spokesperson declined to comment on the specifics of the allegations.
“While we don’t comment on pending litigation, we find this lawsuit to be without merit and intend to vigorously defend this litigation,” said Becky Niiya of ConAgra. “Our long-standing commitment to operating our business in a responsible way means that our customers and consumers can feel good about the high-quality food we make.”
At the heart of the allegations are the peanut butter filled pretzels sold by Trader Joe’s under its store brand label. Maxim said it “pioneered the development of peanut butter filled pretzels” in the late 1980s and began selling the products to customers, including Trader Joe’s. Maxim said Trader Joe’s bought more than “$9 million worth” of the products in the final year the companies did business.
Over the course of a 25-year relationship, Maxim and Trader Joe’s agreed the supplier relationship would be sustained as long as Maxim was able to keep the retailer supplied, the filing said.
Maxim said it contracted in 1995 with Anderson Bakery Co., Inc. to make the pretzels and in the process provided Anderson with confidential manufacturing information developed in a relationship with an earlier contract manufacturer. Maxim said a confidentiality agreement was signed with Anderson under which the manufacturer agreed it would not “indirectly use, disclose, or publish for the benefit of Anderson or any third party” information related to the making or distribution of the product. Maxim said the agreement was binding on Anderson, its agents, representative or assignees.
Anderson was acquired in 1999 by National Pretzels, Inc., which continued manufacturing the Trader Joe’s pretzels for Maxim. National, in turn, was acquired by ConAgra in 2011. With the National Pretzels acquisition, ConAgra owned all of the companies making peanut butter filled pocket pretzels, Maxim alleged.
According to the filing, ConAgra notified Maxim in June 2013 it was terminating its relationship with Maxim effective in October and terminated the relationship in October. Also in October, Trader Joe’s told Maxim it would no longer purchase pretzel products from Maxim.
The filing continued, “Shortly thereafter, defendant ConAgra began selling the peanut butter filled pocket pretzels and other pretzel products — what ConAgra had been manufacturing for Maxim — directly to defendant Trader Joe’s. The products sold by ConAgra to Trader Joe’s are identical to the peanut butter filled pocket pretzels and other pretzel products that Maxim was selling to defendant Trader Joe’s, down to the exact same packaging.”
Maxim alleged it had been cultivating sales opportunities to other customers, and this business was undermined by the ConAgra termination.
In seeking $60 million in the lawsuit, Maxim said its confidentiality agreement with Anderson was binding upon ConAgra. Maxim said Trader Joe’s “has repeatedly and materially breached the parties implied-in-fact contact by buying peanut butter filled pocket pretzels and other related products from Maxim’s contract manufacturer, ConAgra.”