ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, May 6, 2013

Yogurt Deal Goes Sour

Greek yogurtInteresting story here on the Wall Street Journal's Market Watch blog.  Interesting because it seems like the case will be very difficult for plaintiff to prove and its damages will be a challenge to calculate with requisite specificity.

The facts, as also reported here on Food Navigator-USA are as follows:

In 2012, Tula Foods introduced its Better Whey of Life premium Greek yogurt line, which is now sold in over 400 stores.  Tula contracted with the Kroger Co., which in addition to its retail stores owns and operate 37 manufacturing plants at which it produced, among other things, Tula's Better Whey of Life yogurts.  According to the complaint, as summarized on the Market Watch blog, becasue Kroger did not produce the yogurt according to Tula's specification (and it allegedly did so knowlingly).  Tula also brings claims against Weber Flavors, which Tula claims failed to properly "treat and process the vanilla bean base" in Tula's yogurt.   As a result, Kroger released "poor-quality unappetizing yogurt on the market."  If that isn't not specific enough for you, the complaint specifies that, as a result of the improperly processed vanilla bean base, Tula found mold growing in its finished yogurt, resulting in a recall.

Just an aside here, for fans of Slings and Arrows, doesn't that slogan (something like, "Tula provides only poor-quality unappetizing yogurt laced with mold") strike you as precisely the sort of ad campaign that Froghammer would have come up with if they were hired to market Better Whey of Life yogurts?


 There is also a misappropriation claim, since Kroger allegedly used Tula's trade secrets to make a competing store brank of Greek yogurt -- but was it of equally poor quality and equally unappetizing?  Surely a jury question there. 

The theory of contract damages will be a challenge, because Tula will have to show that its product would have taken off were it not for the devastating effects on its reputation caused by the alleged breaches and resulting product recalls.  Demonstrating defendants' failure (perhaps intentional failure) to adhere to Tula's specifications will also be a lot of work.  But those allegations will also be very difficult to dismiss without a lot of discovery and perhaps a trial, so the settlement price should be high if the complaint adequately states a cause of action.  Moreover, as Tula is also bringing claims for breach of express and implied warranties, a record of moldy yogurt ought to do the trick.


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