Wednesday 12 December 2018

US firm in court battle to dismiss Aryzta counter-claim

Turnaround strategy: Aryzta CEO Kevin Toland has led a major initiative to bolster the Cuisine de France owner. Photo: INM
Turnaround strategy: Aryzta CEO Kevin Toland has led a major initiative to bolster the Cuisine de France owner. Photo: INM
John Mulligan

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 Swiss-Irish 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.

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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