Posted in on December 11, 2018
After several years of litigation, and seven days of trial testimony, Bryan Lewis, partner in LJAA’s Commercial Litigation Group, secured an arbitration award not only dismissing plaintiff’s multi-million dollar lost-profits claim in its entirety, but also granting our client’s counterclaims for breach of contract, breach of fiduciary duty, and misappropriation of joint venture funds.
At issue was a short-lived joint venture for the production and sale of turkey burgers and meat kabobs in the supermarket “case ready meat” business. LJAA’s client, a food manufacturing and distribution company, was to provide the funding, equipment, personnel, and distribution network, while its partner was to provide manufacturing and sales expertise. While the kabob business enjoyed immediate success, the turkey burger business was beset with problems that more than canceled the kabob gains. At the end of the first selling season, each side pointed fingers at the other for the turkey burger business breakdown, but it was ultimately our client’s discovery that plaintiff had failed to turn over three supermarket checks, totaling $30,000.00, that doomed the joint venture. When confronted with the missing checks by our client’s CFO, plaintiff claimed he had intentionally “withheld” the monies because he believed his “share” of the joint venture profits had been miscalculated, conveniently to the tune of $30,000.00. Our client was not persuaded, terminated the joint venture immediately, and ceased turkey burger production. Months later, when approached by supermarkets, it resumed kabob production to try to recoup some of its losses.
Plaintiff commenced suit seeking all of our client’s future kabob and burger profits based on a claimed violation of a post-venture non-compete provision; he also claimed he had originated the idea for other meat products that our client subsequently sold, and claimed he was entitled to a percentage of those profits as well. Our client countersued for payment of plaintiff’s 50% share of the losses. The case was won during cross-examination, when LJAA debunked plaintiff’s claim that he retained just three checks, for the $30,000.00 that he believed he was owed, by systematically confronting plaintiff with his personal and corporate bank records. Those records revealed that plaintiff had been virtually broke when he entered into the joint venture; was chronically short of funds during the joint venture; and that he had actually wrongfully deposited over nine supermarket checks, totaling approximately $100,000.00, to cover personal and corporate account overdrafts, laying waste to his claim that he retained the joint venture monies in good faith. Relying on this testimony, the arbitrator found that plaintiff had breached both the joint venture agreement and his fiduciary obligations to his joint venture partner, and that his prior material breaches prevented him from making any claim to our client’s subsequent sales. The arbitrator also found for our client on its claim for repayment by plaintiff of his share of joint venture losses.