Posted on May 15, 2019 by Sustainable Food News

Organic beverage giant sues ex-exec over lost Costco biz

SunOpta alleges former vp broke non-compete

SunOpta Inc. has filed a lawsuit in federal court to “put a stop” to alleged misconduct by its former vice president, Bryan Mandel, and to recoup damages it suffered after losing a portion of its juice business with Costco Wholesale Corp.

The lawsuit was filed Monday in federal court in Delaware (Case #: 1:19-cv-00894), just two days after SunOpta filed a separate lawsuit against another former vice president over the alleged theft of trade secrets.

In March 2015, SunOpta acquired Mandel’s Citrusource LLC for $13.3 million plus earn-out payments based on an agreed-upon formula.

Citrusource was in the business of sourcing and selling citrus juices and producing private label and branded beverages, including not-from concentrate and from concentrate juice products sold to the retail market in gallon, carafe and multipack formats and in wholesale bulk format.

As part of the deal, Mandel signed on with SunOpta as its vice president of citrus sales with a $200,000 base salary. According to SunOpta, he also “promised not to compete against SunOpta or solicit customers for a period of five years.”

One of Citrusource’s most significant customers was Costco. “Mandel worked closely with [Costco] for many years to maintain the relationship,” the lawsuit states.

Mandel left SunOpta in July 2018. However, SunOpta said in its lawsuit that it recently “discovered that, despite his contractual promises,” Mandel and others formed in May 2018 a beverage wholesale company called National Private Label LLC, which “directly competes with SunOpta.”

Mandel is listed as CEO, and Esteban Sierra, a SunOpta employee until April 2018, is listed as the point of contact for NPL, which was registered to do business in California by Mandel’s brother, Dan, the lawsuit states.

In April 2016, Dan Mandel had registered a company called Western Citrus LLC to do business in California, and Sierra is also listed as a representative and contact point for Western Citrus, according to the lawsuit.

“On information and belief, Dan Mandel does not have expertise in the wholesale-beverage business. Bryan Mandel has been involved in the wholesale-beverage business for several years, though,” the lawsuit states. “On information and belief, Mandel also is involved with Western Citrus, directly or indirectly.”

SunOpta said Costco is among its “significant juice customers and was a significant customer of Citrusource.”

“In late 2018, Costco informed SunOpta that a portion of its orange-juice business was being awarded to a new vendor. In February and March 2019, SunOpta learned that Western Citrus was the vendor awarded a portion of the Costco orange-juice business that had previously been SunOpta’s business.”

SunOpta said Mandel’s conduct “constitutes a breach of the agreements with SunOpta. It also negates any earn-out obligations that may be owed under the [sale agreement regarding Citrusource LLC].”

The lawsuit also states that “NPL’s conduct constitutes tortious interference with those agreements,” and that NPL has caused damage to SunOpta “in an amount greater than $75,000, the specific amount of which shall be determined at trial.”

SunOpta is asking the court to award it compensatory damages for all injuries suffered as a result of the wrongful conduct that are compensable in money damages, and that it no longer need to pay Mandel any earn-outs from the Citrusource deal.

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