Blue Diamond Accuses Australian Customer of Business Torts

Blue Diamond Growers filed a complaint against Freedom Foods Pty Ltd. for breach of contract-related claims after Freedom Foods allegedly breached the parties’ licensing agreement. The Eastern District of California civil complaint, filed Sept. 25, could bring Freedom Foods, an Australian company, to Sacramento, Calif., for proceedings.

 Blue Diamond is a California corporation and a cooperative of close to 3,000 independent California almond farmers that produces and sells over $1.5 billion in almonds each year worldwide, according to the filing. It contracted with Freedom Foods in a licensing agreement supposedly common for Blue Diamond within foreign markets, “where Blue Diamond generally enters into licensing agreements with local food and beverage companies for the manufacture, sale, and distribution of Blue Diamond products in those foreign markets.”

The parties’ 2011 licensing agreement stated that Freedom Foods would “manufacture, sell, and distribute Blue Diamond’s almond-based beverage products in Australia and New Zealand and, in exchange, Blue Diamond agreed to grant Freedom a license to use Blue Diamond’s trademark, trade dress, and trade name for the foregoing purposes and to sell almond base to Freedom for use in the manufacture of Blue Diamond’s products.”

Blue Diamond contended that Freedom Foods made misrepresentations to obtain a supply of almond base for a private label customer, which was not really a customer, but itself. It reportedly also lied about its use of the almond base “to avail itself of lucrative rebates that were due to Freedom only in connection with its manufacture of true private label products.” With the supply, Freedom Foods supposedly sold almond beverages under another brand name, in competition with Blue Diamond’s retail products, and in violation of the licensing agreement.

When confronted, Freedom Foods reportedly confirmed that it had made and sold other almond-based products. The parties tried to resolve their issues at a January 2019 meeting by entering into an oral forbearance agreement. In the oral agreement, Freedom Foods agreed to modify its behavior, although it was permitted to continue producing beverages under one other brand name restricted to foodservice rather than retail or a combination of channels. Blue Diamond agreed to supply Freedom Foods with almond base for that brand at a discount, and not to sue unless Freedom Foods breached the second agreement, among other things.

Blue Diamond argued that Freedom Foods misrepresented that it intended to fulfill the secondary, oral agreement. The CEO, who led the 2019 meeting, reportedly left the company amidst investigations into “accounting fraud and other financial improprieties.” Thereafter, the complaint explained that “(s)urprisingly, the ongoing fraud investigation did not chasten Freedom’s new management. On the contrary, it doubled-down on the company’s prior pattern and practice of unlawful commercial behavior.” Reportedly, the defendant’s new CEO stated, “without a hint of reticence, that Freedom would conduct itself this way because it was financially advantageous to do so.”

Blue Diamond alleged fraud, breach of contract, specific performance, breach of the covenant of good faith and fair dealing, and declaratory relief. The plaintiff seeks compensatory and punitive damages, declaratory and injunctive relief, and reimbursement of its attorneys’ fees and costs.

Blue Diamond is represented by Hanson Bridgett LLP.