CHARLOTTE, NC— Gregory Packaging, Inc., the manufacturer of juice under the Suncup brand, has won a $9.3 million judgment against Foodbuy, LLC, the largest foodservice Group Purchasing Organization (GPO) in the nation. The case was tried in US District Court for the Western District of North Carolina, and Womble Bond Dickinson attorneys Kurt Lindquist, Russ Ferguson, and Emily Doll represented Gregory Packaging throughout the case and at trial.

The dispute involved a long-standing commercial relationship between the two parties. Like other GPOs, Foodbuy aggregates purchasers of food products to increase volume and maximize negotiating power with suppliers, such as Gregory Packaging. For years, Foodbuy and Gregory Packaging had a relationship in which Gregory Packaging extended preferential pricing to Foodbuy members and also paid directly to Foodbuy a volume allowance rebate for each case of juice sold through Foodbuy’s program.

At the end of the latest agreement between Foodbuy and Gregory Packaging (the Foodbuy Supplier Agreement), Gregory Packaging refused to pay the final four months of volume allowance invoices, alleging that Foodbuy had over-invoiced Gregory Packaging for millions of dollars’ worth of volume allowances over the parties’ five-year form contract, which was based on Foodbuy’s template supplier agreement. Foodbuy then sued Gregory Packaging for the volume allowances, seeking approximately $1 million. Gregory Packaging counterclaimed, alleging the over-invoicing was a breach of the Foodbuy Supplier Agreement.

Following a week-long federal bench trial, the Court agreed that Gregory Packaging had been over-invoiced over the course of the Supplier Agreement and that Foodbuy had wrongfully collected rebates for sales not subject to the Supplier Agreement. The court then awarded Gregory Packaging $9.265 million—$7.06 million in compensatory damages and an additional $2.21 million in prejudgment interest.

Chief Judge Frank D. Whitney of the U.S. federal District Court in the Western District of North Carolina also made findings regarding Foodbuy’s business practices, finding that “Foodbuy simply bills for every case they receive information about from the distributor, and then waits for manufacturers to bring issues to them.”

For example, Judge Whitney found that while “Foodbuy admitted at trial that direct deals” between Gregory Packaging and end-user customers “are excluded from the Foodbuy Supplier Agreement and, thus, a volume allowance is not owed on those cases,” Foodbuy still invoiced Gregory Packaging for a volume allowance rebate on those cases. The Court ruled that “Foodbuy relies on being notified by a supplier that a purchase was made through a direct deal,” and not through Foodbuy, “otherwise, Foodbuy invoices the supplier for that purchase anyway.”

The Court further found that Foodbuy would invoice for a volume allowance rebate on cases that were never sold at all: “Gregory Packaging was sometimes invoiced for distributors to which Gregory Packaging did not sell any products,” Judge Whitney wrote.

Foodbuy claimed in the case that its over-invoicing was permitted under its interpretation of the Foodbuy Supplier Agreement. But the Court rejected that argument, with Judge Whitney writing, “Foodbuy never stated to Gregory Packaging—at any time during the Agreement—that its interpretation was as it interprets the Agreement now—that it was entitled to a volume allowance for every case of juice sold by any entity at any price” despite “numerous opportunities to do so.”

Click here to read the full opinion in Foodbuy, LLC v. Gregory Packaging, Inc., Case No. 3:16-CV-00809 (W.D.N.C.).

Kurt Lindquist is a highly trusted advisor who helps clients with dispute resolution issues in the United States and around the world. A highly experienced trial lawyer, clients come to Kurt for advice and assistance in resolving conflicts concerning commercial matters including licensing agreements, supplier agreements, noncompetition agreements, misappropriation of trade secrets as well as private law commercial disputes and public law issues concerning claims of expropriation and breaches of bilateral investment treaties. He regularly participates as an advocate in international disputes and as an advocate and arbitrator in domestic arbitrations.

A former federal prosecutor, Russ Ferguson represents clients in a broad range of complex litigation matters, focusing both on white collar criminal defense and complex business litigation. His practice includes representing clients at all stages of federal and state litigation, including on appeal. He also guides clients in international arbitration.

Emily Doll focuses her practice on international arbitration and commercial litigation. She has assisted in the representation of clients in all phases of litigation and arbitration, and has experience with investor-state and international commercial arbitrations under the rules of a variety of leading international institutions, including ICSID, PCA, SIAC, SCAI and UNCITRAL.