Tuesday 23 April 2019

Aryzta makes fresh bid to limit potential fallout in US legal case

Turnaround: Aryzta CEO Kevin Toland has been spearheading efforts to rejuvenate the baked goods group
Turnaround: Aryzta CEO Kevin Toland has been spearheading efforts to rejuvenate the baked goods group
John Mulligan

John Mulligan

Cuisine de France owner Aryzta has again pushed a US court to limit the period for which a former customer can claim damages, amid allegations by Tennessee-based McKee Foods that it has lost millions of dollars of sales because the Swiss-Irish company couldn't fulfil its orders.

The motion sought by Aryzta comes after McKee Foods recently filed an updated complaint with a Tennessee court in a case that was launched in 2017.

Family-owned McKee, which owns the Little Debbie dessert snack brand in the US, has claimed it has lost and will continue to lose millions of dollars in profits as a result of Aryzta's American plants - which have since been sold - being unable to properly fill orders.

McKee said that as of last month, it has not yet been able to engage another supplier for all of its affected products, or to begin self-manufacturing.

McKee said it terminated its manufacturing contract with Aryzta in 2017 when, it claims, the firm was unable to meet its obligations.

Severe stress was placed on the ability of the plants to manufacture at full capacity after the US Immigration and Customers Enforcement (ICE) agency cracked down on illegal workers. That resulted in about 750 of the staff at two Aryzta plants in Chicago - collectively known as Cloverhill - being forced to leave their roles as they did not have proper work authorisations. The staff had been supplied by a third-party labour provider.

"Both before and after the ICE audits... Aryzta had knowledge - actual and/or constructive - that workers employed at its Chicago and Cicero bakeries were not authorised to work in the United States," McKee Foods has claimed.

Aryzta has denied that claim.

Following the filing of the amended complaint by McKee Foods, Aryzta, whose CEO is Kevin Toland, has again asked the court to limit the period for which McKee can seek damages.

"Because the contract was terminable by either party without cause on 90-days' notice, plaintiff's lost profit damages are, as a matter of law, limited to the 90-day period after which it terminated the contract," it has told the court.

It added: "Rather than abiding by the 90-day notice period, plaintiff terminated the contract 'effective immediately' and then commenced this action, alleging continuing damages, including lost profits, apparently extending indefinitely into the future."

Aryzta has insisted in court documents that its factories were producing more that 70pc of the products McKee had prioritised after the plants lost the hundreds of experienced workers, and more than 50pc of its overall orders.

But McKee Foods has claimed that its importance as a customer in terms of filling orders after the staff losses was second to other Aryzta customers.

"Aryzta failed to allocate its available supply of products in a fair, equitable, and proportionate matter, as required by the agreement," claimed McKee. "In fact, unbeknownst to McKee, Aryzta prioritised production time and resources for Hostess and Bimbo, among other customers, ahead of McKee."

Aryzta has denied the claim.

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