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California pretzel company files suit against Trader Joe's

A contract dispute is at the heart of business litigation against ConAgra Foods Inc. and Trader Joe's Co. filed on Jan. 22 in Los Angeles County Superior Court. Maxim Marketing Corp. is accusing the two companies of coming together to break the contract Maxim had to supply Trader Joe's with its pretzels.

The suit claims that ConAgra and Trader Joe's conspired to eliminate the competition to create a monopoly on the peanut-butter-filled pocket pretzel market. Maxim started making its pocket pretzels and selling them to Trader Joe's in 1988. According to the complaint, Maxim was responsible for the marketing, development and sales of the pretzels, but the pretzels were produced by manufacturers under contract including ConAgra.

According to the lawsuit, Maxim entered into a contract with Anderson Bakery Co. in 1995. Anderson Bakery was provided with confidential information about clients and manufacturing. Anderson apparently signed a confidentiality agreement, and National Pretzels purchased the company in 1999. National was then bought by ConAgra in 2011, and the confidentiality agreement would have been transferred in the process.

Last June, ConAgra told Maxim they would no longer be working together, and four months later, Trader Joe's did the same. Maxim's lawsuit says that ConAgra started selling the same peanut-butter-filled pretzels to Trader Joe's a short time after. Maxim claims that this will cause them to lose customers because it gives ConAgra a monopoly on the market and leaves Maxim with no source of supply.

The official complaint accuses the companies of intentional interference with contractual relations and breach of contract and is seeking a jury trial and over $60 million. The hearing has been set for May 21. A contract between businesses is a legally binding agreement, and if it is found that one of the companies broke the terms of the contract, Maxim may stand a good chance of being awarded damages.

Source: Orange County Register, "O.C. pretzel maker sues ConAgra, Trader Joe's" Marni Usheroff, Jan. 24, 2014

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Klein & Wilson

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