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Gregory Packaging wins contractual dispute with Foodbuy

Gregory Packaging, which manufactures juice under the Suncup brand, has won a $9.3m judgment against Foodbuy in US federal court.

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.”

Source: Company Press Release.


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