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UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
) GROVE FRESH DISTRIBUTORS, INC., )
an Illinois corporation, )
) Plaintiff, )
) No. 89 C 1113
vs. )
) EVERFRESH JUICE CO. ) Judge Zagel
and HUGO POWELL, )
) Defendants. )
GROVE FRESH'S STATEMENT OF UNCONTESTED FACTS
THAT SHOULD BE DEEMED ADMITTED
PURSUANT TO RULE 11 AND RULE 37(a)(2)(A)
DATED: April 22, 1991
M)
Table of Contents i
Table of Names iv
List of Exhibits vii
Citation Conventions 2
STATEMENT OF UNCONTESTED FACTS
I. Basic Corporate Information 3
A. John Labatt, Ltd. and John Labatt, Inc 3
B. Labatt's Everfresh Division 3
C. Holiday Juice, Ltd 3
D. Everfresh Juice Co 6
E. Flavor Fresh 9
F. Peninsular Products 10
G. Eau Claire Packing Company 11
H. Haddad's Estate 12
II. Litigation and Investigations Concerning
Everfresh's Adulteration of Orange Juice Prior
to the Labatt Acquisition: 1976-1986 13
A. The 1976 FDA Investigation 13
B. The 1976 Suit By Purity Products 15
C. The 1983 FDA Investigation 18
D. The 1982 and 1986 Suits By Purity Products 19
III. Labatt's Acquisition of Everfresh 22
A. The Split In Ownership Of The Everfresh
Trade Mark 22
B. The Business Plans And Conditions Leading
Up To Labatt's December 1986 Acquisition
of Everfresh 23
C. Kotwicki's Exclusion From The Negotiations
For Labatt's Acquisition Of Everfresh From The Aliens 26
D. The Terms of the Acquisition 28
E. The Integration Of All North American
Operations Into A Single Organization
Headquartered In Franklin Park, Illinois 30
F. Bruce Fraser's False Assertions That
Holiday Juice Is A Separate Organization With No Facilities In Illinois 34
IV. Litigation and Investigations Involving Everfresh and Holiday Juice Subsequent to the Labatt Acquisitions 36
A. The Litigation Against Everfresh 36
B. The Litigation Against Holiday Juice 36
C. The Juiceland Lawsuit 38
D. The Tests by Outside Laboratories 39
E. Duane Bosch's Complaint to the FDA, And
His Complaint Under The Michigan
Whistleblower's Protection Act 39
V. The Technology That Affects The Shelf Life Of
Orange Juice 40
A. "Hot Pack" And "Cold Pack" 41
B. Diethyl Pyrocarbonate (DEPC) 42
VI. Everfresh's Manufacturing and Pricing Practices 45
VII. Everfresh's Use of DEPC 49
A. Dr. Fred Kohlbach, IDEA, Ltd. and
Bio Trade, Ltd 49
B. The Anonymous Letters to the FDA 52
C. Duane Bosch's Whistleblower Complaint and
Complaint to the FDA 53
D. Labatt Knew No Later Than February 1989 That
Everfresh Had Been Adding DEPC to its Orange
Juice 56
E. Everfresh's November 1987 Purchase
from Bio Trade, Ltd 58
VIII.The Circumstances Surrounding Kotwicki's Separation
From The Labatt Organization 59
A. The Differences Between The Holiday Juice
Formulas And The Everfresh Formulas 59
B. Mitch Allen's Resistance To Kotwicki's Efforts
To Make Formulations Uniform 60
C. Kotwicki's Resignation And Subsequent Events 62
IX. The Labatt/Everfresh "Investigations" Into
Orange Juice Adulteration At The Everfresh Division...65
A. Powell' s Alleged Investigation 65
B. The Appier/Murray Investigation 67
C. The Story Labatt/Everfresh Reported to the FDA...70
D. Everfresh's Admissions of Adulteration: 1983
to 1988 74
X. Defense Counsel Have Consciously Avoided
Interviewing Witnesses Who Have Knowledge Of
Adulteration at Warren 74
A. Though Labatt Had Contractual Rights To
Demand Information About Adulteration From
Albert Allen, Mitch Allen And Michael Kanan,
Labatt's Attorneys Chose Not To Exercise
Those Rights 74
B. Defense Counsel Chose Not To Obtain Information
About Adulteration From Robert Heritier 77
XI. Bruce Fraser, Dean Kitts, George Taylor And David
Murray Had Knowledge Of Everfresh's Adulteration
Prior To January 1989 79
ii
mt
XII. Procedural History of Grove Fresh's Efforts to
Discover the Ingredients In Everfresh's Misbranded
Juice 83
XIII.Everfresh's Obstruction Of Discovery 87
A. The False Answers To Interrogatories 87
B. The Failure To Conduct The Investigations
Required by the Rules of Discovery 89
C. The Instuctions Not To Answer Deposition
Questions 91
D. The False Deposition Testimony By Everfresh
Employees 94
E. Everfresh Blockaded Grove Fresh's Access
To Michael Petric, A Key Witness 95
XIV. Grove Fresh's Settlement with Flavor Fresh 97
XV. Grove Fresh's Efforts To Obtain Discovery 105
iii
Table of Nnea
Name Paragraph No.
Albert Allen 5-6, 16, 18, 20-22, 47, 70-71,
77-79, 82-84, 91-92, 94, 168,
198, 203-205, 209, 252, 254,
257A-258, 260, 262-263, 265,
273-274, 287
Michael "Mitch" Allen 22, 60, 84, 209-210, 248,
254-255, 257-258, 263, 287
William Appier 234-37, 242, 245,
246-47, 267
James Benton 27
Bio Trade Ltd 167, 169, 195, 228, 288, 300
Boden Products ("BPI") 2, 79-81, 86, 98-102, 105
Duane Bosch 122-123, 174-176, 185,
187-188, 190, 217, 222-223,
228-230, 287, 289
Dr. Max Bubb 162 , 166
Glen Davis 149, 152-153, 185, 191-192,
219, 230, 232-233, 248, 250,
287
Dykema, Gossett 217-218, 249
Eau Claire Packing Co 35-37
W. James Emmerton 287
Flavor Fresh Foods 26-29, 306-310, 313-316, 319
Bruce Fraser 10-11, 82, 88, 91, 109,
115-116, 118, 121, 205,
212-215, 270-271, 274-275, 287
Walter Gazo 193, 219, 248, 250
Ray Gill 246-247
Susan Guss 123, 149, 153, 185, 228-229,
287
Leonard Haddad 5-6, 15, 17-18, 21, 24, 38-39,
70-71, 163, 198
Robert Heritier 60, 248, 259-269
IV
0\ (■■■■■\
Holiday Juice 2, 4-14, 21, 25, 28, 32, 39,
70-78, 84-85, 98-102, 105-110,
112-113, 119, 198, 202,
206-207, 209-210, 215-216,
290, 307-308
Home Juice/Illinois 17-18, 21, 27, 39, 84, 114,
116, 150, 198
Jeff Jackson 149-150, 198-199
Charles Jamail 5, 9
Juiceland 119-121, 216-217, 249, 252,
289
Michael Kanan 23, 111, 158, 221, 223-227,
254, 256-258, 272-274, 287
Dean Kitts 12, 233, 235, 237-238, 240,
243, 287
Dr. Fred Kohlbach 39-40, 161, 163, 167-168, 170,
195, 228, 288
Daniel Kotwicki 4, 8, 25, 83-84, 93, 112,
115-118, 121, 204, 206-210,
212-220, 248, 250-251, 287
Dr. Crossley Lougheed 238-240
James Marshall 27, 32, 163, 168, 319
McDermott, Will & Emery 39, 218, 234-235, 240-243,
246-249, 267, 308, 311-318A
Mary McDonald 211, 276, 298-299
Bruno Moser 24, 43-44, 47, 149, 151-152,
185, 211, 276, 287, 300
David Murray 191, 193-195, 210, 226-227,
230-233, 237-240, 246-247, 276
Peninsular Products 29-34
Michael Petric 219, 224-227, 230-233, 248,
250, 287, 301-305A
Hugo Powell 152, 213-214, 221, 224-227,
230, 246, 252, 281, 285, 287,
292-293, 301
Bruce Prillwitz 82
/■■■A
Purity Products, Inc 49, 51, 56, 90, 95, 111,
112-113, 114-118, 205,
215-216, 252, 264, 289-290,
300
Ken Rosenthal 215, 235, 237, 242, 246, 287
Mervin Shumate 244-247, 297-299
Julian Solotorovsky 304-305A
Martin J. Stutsman 251
George Taylor 82, 88, 91, 205, 213, 226,
230, 275
John Taylor 246
John Walker 157, 287
Doug Wells 157, 287
Gerald Wolberg 19, 47
Cheryl Yannello 223, 305A
Edward Zakoor 5
James Zakoor 296, 303
VI
fit)
List of Exhibits Contained in Appendices to Statement of Facts
appendix I
Pleadings
1976 Purity Products Litigation
1. Answers and Objections by Everfresh Juice Co. to Inter
rogatories of Purity Products, September 7, 1976 (excerpts)
2. Answers and Objections by Everfresh Juice Co. to Inter
rogatories of Purity Products, Inc., February 10, 1977
(excerpts)
3. Admission Under Rule 36, September 28, 1977
1982 Purity Products Litigation
4. Defendant, Ever Fresh Juice Co., Response to Plaintiff's
Written Interrogatories, March 28, 1983 (excerpts)
1986 Purity Products Litigation
5. Defendant, Ever Fresh Juice Co., Response to Plaintiff's
Written Interrogatories, October 9, 1986 (excerpts)
6. Settlement Agreement and General Release, September 8, 1987
1988 Purity Products Litigation
7. Settlement Agreement, August 10, 1988
Juiceland Litigation
8. Complaint in Metro Institutional Food Service v. Holiday
Juice Ltd. et al. (Cir. Ct. of Wayne Co., Michigan, 88-
808154-CK), April 4, 1988
Duane Bosch Litigation
9. Complaint in Duane Bosch v. Ever Fresh Inc., et al. (Cir.
Ct. of Wayne Co., Michigan), January 11, 1989
Grove Fresh Litigation
10. Interrogatories (to Everfresh Juice Co.), February 11, 1989
11. Plaintiff's: (1) Emergency Cross-Motion to Compel Answers to
Outstanding Discovery by March 5, 1990 and (2) Response to
Defendants' Motion for Pretrial Conference, February 28,
1990
vii
12. Response to Planitiffs First Amended Set of Interrogatories
and First Request For Documents, February 22, 1990
13. Affidavit of Hugo Powell, April 10, 1990
14. Plaintiff's Motion To Enforce Agreement Concerning Dis
covery, April 18, 1990
15. Supplemental Response To Plaintiff's First Amended Set Of
Interrogatories, April 24, 1990
16. Defendants' Preliminary Response To Plaintiff's Motion To
Enforce Agreement Concerning Discovery, April 19, 1990
17. Order Granting Plaintiff's Motion To Enforce Agreement Con
cerning Discovery Is Granted, April 20, 1990
18. Objections and Answers to Plaintiff's Requests to Admit,
July 31, 1990
19. Everfresh Inc.'s Response To Plaintiff's Motions To Compel
Discovery Regarding Affiliates, September 21, 1990 (vol. 5,
146)
20. Rule 30(b)(6) Notice of Deposition of Everfresh Juice Co.,
October 2, 1990
21. Further Response To Certain Of Plaintiff's Requests To Ad
mit, October 5, 1990
22. Affidavit of William D. Appier, dated January 17, 1991
23. Further Response to Certain of Plaintiff's Discovery Re
quests, January 25, 1991
Correspondence
24. Letter from Lazar P. Raynal to John P. Messina, dated Oc
tober 26, 1990
25. Letter from Scott Turow to John Messina, dated November 6,
1990
26. Letter from John P. Messina to Julian Solotorovsky, dated
November 9, 1990
27. Letter from Dorothy B. Zimbrakos to Lazar P. Raynal, dated
November 26, 1990
28. Letter from Dorothy B. Zimbrakos to Lazar P. Raynal, dated
January 24, 1991
viii
Appendix II
Affidavits
29. Affidavit of Duane A. Bosch, April 9, 1991
30. Declaration of John Dollarbeare, April 4, 1991
31. Affidavit of William L. Goldbeck, April 9, 1991
32. Affidavit of Dr. Paul Fellers, April 5, 1991
33. Affidavit of John P. Messina, April 17, 1991
Deposition Excerpts
34. Deposition of Patrick Crowley (8-10, 23-27, 55, 59-61, 69, 72-73, 81-83)
35. Deposition of James Boden, July 9, 1990 (42, 44-45, 52-54,
71, 74-75, 80-84, 125-126, 128-129, 132, 145-146, 148, 160-
164, 184-185, 190-191)
36. Deposition of James Zakoor, October 15, 1990 (47-49, 60, 93-95, 101-102, 158-159, 161-162, 169-170, 186-187)
37. Deposition of Michael Allen, March 7, 1991 (8-9, 17, 21,
23-25, 30)
38. Deposition of Robert Heritier, February 27, 1991 (4-10, 13-
19, 24-25, 30-32, 34-41, 45, 47-50, 66-72, 76-77, 104-105,
143, 147-148, 150-151, 155, 167-168)
39. Deposition of Bruno Moser, November 28, 1990 (3, 8, 13, 20-
21, 24-28, 30-32, 39-40, 50, 60, 63-64, 77-79, 88-89)
40. Deposition of James R. Marshall, September 20, 1990 (11, 17,
24, 26, 39-49, 62, 96-97, 146-47)
41. Deposition of John Walker, November 27, 1990 (3-6, 15-22,
25-29, 31, 42, 68-69, 72-74, 79-81, 86-88, 95)
42. Deposition of Douglas Wells, November 27, 1991 (3-4, 24-25,
37-38, 52-53)
43. Deposition of Susan Guss, November 28, 1990 (4-6, 12-13, 20-23, 78)
44. Deposition of Hugo Powell, April 26, 1990 (21-22, 38-58, 69, 73, 77-78, 82-85, 89-90, 139, 148-151)
45. Deposition of David Murray, December 11, 1990 (4, 10-11,
16-19, 34, 67-78, 80-83, 92-98, 80-83, 123-128)
46. Deposition of Bruce Hesbon, December 5, 1990 (19, 29, 112-
113, 115, 132)
ix
47. Deposition of Mervin Shumate, December 13, 1990 (6-15, 22, 26-27, 31, 35-36, 44)
48. Rule 30(b)(6) Deposition of Hugo Powell, December 15, 1990
(8-9, 27-29, 53-55, 63)
49. Deposition of Judith Silverman, August 8, 1990 (4-5, 9-10, 13-18, 22-25)
50. Deposition of Michael Godzik, December 6, 1990 (33-34, 79-80, 90-91)
51. Deposition of Cheryl Yannello, December 7, 1990 (11-12, 30)
Appendix III
ltd
52. Memorandum by Donald C. Healton, Regional Food and Drug
Director, dated December 23, 1976
53. Regulatory Letter from Alan Hoeting to Gerald Wolberg, dated
February 2, 1976
54. Letter from Bruno Moser to Alan Hoeting, dated February 10,
1976
55. Section 305 Notice of Hearing, dated September 15, 1976
56. Memorandum by Mervin Shumate, April 28, 1978
57. Anonymous Letter to the FDA Detroit District Office,
postmarked January 13, 1983 and FDA Complaint/Injury Report,
DET 1536, dated January 14, 1983
58. Anonymous Letter to U.S. Customs Enforcement Officer,
postmarked March 30, 1983; Anonymous Letter to FDA, dated
July 13, 1983; and Anonymous Letter to FDA, dated December
27, 1984
59. FDA Complaint/Injury Follow-up Report, DET 1536, dated Oc
tober 28, 1983
60. Bosch FDA Affidavit dated November 29, 1989
61. Memorandum from K. McConnell to R. Korsakas, dated November
30, 1988
62. FDA Sample Report 89-440-711, dated April 12, 1989
63. Excerpts from FDA Inspection and Sample Collection Reports
of Everfresh Juice Co. [Control No.'s 113020, 113036,
113038, 113110]
64. FDA Memorandum of Meeting, dated May 5, 1989
65. FDA Memorandum of Meeting, dated June 21, 1989
66. Excerpts from Food Additive Petition No. 2A0675, Chas.
Pfizer & Co., (1961)
67. Excerpts from Food Additive Petition No. 7H2082, Metachem
Inc., (1966)
Documents ret Dr. Fred Kohlbach
68. Letter from Robert Brookman to J.W. Bijvanck, dated August
5, 1982; Letter from Robert Brookman to Jack Rammel, dated
September 8, 1982; and Letter from Robert Brookman to Jack
Rammel, dated September 22, 1982
xi
69. Excerpt from Trade Register of Nijmegen, Holland and Letter
from Winnibald Moojen to Willis Buck, dated April 5, 1991
70. Memorandum to Board of Directors, Home Juice Co., from Dr.
Fred Kohlbach, February 27, 1980
71. Letter from Ernst Widmer to Willis Buck, dated March 27,
1991
72. Letter from Henry Lang to John Rammell, dated February 9,
1979
73. Letter from Dr. Fred Kohlbach to Richard Walker, dated March
19, 1979)
74. Letter from Dr. Fred Kohlbach to John Rammell, dated March
28, 1982
75. Letter from D. M. Bubb to Marie Haddad, dated January 31,
1979
76. Letter from Ernst Widmer to Willis Buck, dated April 8, 1991
and excerpt from Register of Trade of Commerce of Leich-
tenstein
77. Letter and Technical Bulletins from Bio-Trade, Ltd, March
19, 1991, with translation
Other Documents
78. Form 1-Corporations Information Act for Holiday Juice Ltd.,
dated February 8, 1988
79. Agreement between Grove Fresh and Eau Claire Packing Company
dated as of October 10, 1985
80. Order of Discharge of Haddad Estate, April 21, 1983
81. Ontario Ministry of Consumer and Commercial Relations
Memorandum to File, dated February 6, 1989
82. Excerpt from 19 Encyclopedia Britannica, Food Processing, p.
393-403 (15th ed. 1986)
83. The Merck Index, Monographs 8008, 8953 (11th ed. 1989)
84. Lynx Security Report LI/2691.2
85. Affidavit of William D. Appier, dated January 17, 1991
86. Biographical Profile of Heritier, Prillwitz and Nance,
Martindale-Hubbell, 1990
87. Food Recall Notice from Peninsular Products, dated March 22,
1991
xii
88. Summary Charts for Everfresh/Michigan and Everfresh/Canada
Officers and Directors, 1987-1990
89. Everfresh Juice Co. Fact Sheet
90. Everfresh Juice Co. Press Release dated June 21, 1990
91. Everfresh Juice Co. Press Release dated June 21, 1990
92. Excerpts from P.J. Fellow, Food Processing Technology; Prin
ciples and Practice (London 1988)
93. Excerpts from C. Varsel, "Citrus Juice Processing as Related
to Quality and Nutrition," in Citrus Nutrition and Quality.
S. Nagy and J. Attaway, ed., 1980)
94. G. Lofroth and T. Gejvall, "Diethyl Pyrocarbonate: Formation
of Urethan in Treated Beverages," in Science, p. 1248 [Vol.
174, December 1971
95. Appeal to Referee and Notice of Hearing dated January 31,
1989
96. Letter from Cheryl Yannello to Deborah A. Tonelli, dated
January 10, 1989
97. Excerpts from N. Low and K. Swallow, "Detection of Beet
Medium Invert Sugar Addition to Orange Juice by High Perfor
mance Liquid Chr omat ography ■• and A.R. Brause, et al.,
"Detection of Adulteration in AJ and OJ by Chemical Matrix
Method"
98. Summary Chart of Discovery Motions Brought by Plaintiff in
Case No. 89 C 1113
xiii
99. Holiday Juice Ltd. Shareholders' Resolutions, September 27,
1983 (Control No.'s L 1601-2)
100. Corrected Affidavit of Charles Jamail dated March 7, 1991
101. 1983 Everfresh Batch Sheets
102. 1987 Everfresh Batch Sheets (excerpts)
103. Memorandum by Bruce Prillwitz, dated October 20, 1986
104. Letter of Intent dated November 4, 1986 at RH 86
105. Excerpts from M. Allen Employment Agreement, December 10,
1986
106. M. Allen Agreement Not to Compete, December 10, 1986
107. Excerpts from M. Kanan Employment Agreement, December 10,
1986
108. M. Kanan Agreement Not to Compete, December 10, 1986
109. Excerpts from Employment Agreements for A.M. Allen, J. Allam
and T. Serchuk (at RH 283, 304, 325)
110. Excerpts from A. Allen Consulting and Non-Compete Agreement,
dated December 10, 1986
111. Income Statement dated August 5, 1985
112. Excerpt from Stock Purchase Agreement of Boden Products,
January 26, 1986
113. Excerpt from Stock Purchase Agreement of Everfresh Juice
Co., December 10, 1986
114. Excerpts from Holiday Juice Ltd. Comprehensive Business
Plan, 1985F - 1987F ("the 1984 Business Plan")
115. Excerpts from Holiday Juice Ltd. Comprehensive Business
Plan, 1986F - 1988F ("the 1985 Business Plan")
116. Excerpts from Holiday Juice Ltd. Comprehensive Business
Plan, 1987F - 1989F ("the 1986 Business Plan")
117. Excerpts from Holiday Juice Ltd. Comprehensive Business
Plan, F88 - F90 ("the 1987 Business Plan")
118. Excerpts from Everfresh, Inc. Comprehensive Business Plan,
F89 - F91 ("the 1988 Business Plan")
119. Affidavit of R. Bruce Fraser, dated December 18, 1990
xiv
120. Letter from H. Friedman to D. Kotwicki, dated July 14, 1987,
Control No. 10019727
121. Memorandum from M. Kanan to D. Kotwicki, dated October 28,
1987
122. Memorandum from M. Kanan to D. Kotwicki, dated February 11,
1988
123. Memorandum from D. Kotwicki to R.B. Fraser, dated February
22, 1988
124. Memorandam from D. Kotwicki to R.B. Fraser, dated June 29,
1988
125. Memorandum from D. Kotwicki to R.B. Fraser, dated August 7,
1988
126. Memorandum from D. Kotwicki to R.B. Fraser, dated October 5,
1988
127. Memorandum from Walter Gazo to Michael Petric, dated October
27, 1988
128. Final Report, Procedures Audit-Holiday Juice Ltd., dated
February 29, 1988
129. Settlement Agreement in Grove Fresh Distributors v. Flavor
Fresh Foods, et al. (89 C 1114), March 28, 1990
130. Documents Produced by Everfresh re: Bio-Trade, Ltd., Control
No.'s 10027809-18
131. Excerpts from Everfresh General Q.C. Duties for All to Per
form (Control No.'s 10019249, 19248, 19250, 19251, 19252,
19255, 19253, 19254, 19256)
XV
Citation Conventions
The Appendix to this Statement is in four volumes. Appendix
I contains pleadings, motions and discovery requests filed in
this case and in related cases ("App. I"). Appendix II contains
affidavits and excerpts from depositions ("App. II*1). Appendix
III contains business records and documents, and materials from
the United States Food and Drug Administration. ("App. Ill").
Appendix IV contains items that would otherwise be included in
volume 3 but which have been designated as confidential by the
defendants ("App. IV").
Much of the information in Section I, below, is from annual
reports filed with the secretaries of state in Michigan
("Michigan Annual Reports") and Illinois ("Illinois Annual
Reports"); and Labatt's annual reports to shareholders ("Labatt
Annual Report 198_"). Because the information from these sources
is not controversial, and because these sources are voluminous,
copies of these sources are not included in the Appendix.
STATEMENT OF UNCONTEBTED FACTS
Plaintiff Grove Fresh Distributors, Inc. ("Grove Fresh"), by
its attorneys, submits this statement of uncontested facts in
support of the following motions: Grove Fresh's Motion For An
Evidentiary Sanction Regarding Everfresh's Use of Diethyl
Pyrocarbonate and Grove Fresh's Motion For An Evidentiary Sanc
tion Concerning Everfresh's Scapegoat Defense.
f")
I. Basic Corporate Information
A. John Labatt, Ltd. and John Labatt, Inc.
1. John Labatt, Ltd. ("Labatt") is a Canadian holding com
pany with numerous subsidiaries engaged in the food and beverage
processing industry. Labatt's subsidiaries are engaged in
various businesses in Canada, the United States and Europe. John
Labatt, Inc. ("JLI") is a wholly-owned subsidiary of Labatt. JLI
is a holding company incorporated under the laws of California,
with headquarters in New Jersey.
B. Labatt's Everfresh Division
2. Everfresh Juice Company is an operating division of
Labatt. This division was created over a three-year period
through Labatt's acquisitions of four different juice-processing
businesses. The four businesses were: Holiday Juice Ltd. of
Windsor, Canada (acquired in September 1983); Boden Products,
Inc. of Franklin Park, Illinois (acquired in January 1986); Ever
Fresh Juice Co. of Warren, Michigan (acquired in December 1986);
and Wagner Juice Co. of Cicero, Illinois (acquired in July 1987).
3. On the respective dates that Labatt acquired each of
these four businesses, only two (Holiday Juice Ltd. and Everfresh
Juice Co.) processed a substantial volume of orange juice and
other pure fruit juices. The other two businesses (Boden
Products, Inc. and Wagner Juice Co.) specialized in the manufac
ture of juice-based drinks and beverages. (App. 11-34, Crowley
Dep. 55; App. 11-35, Boden Dep. 52-54)
C. Holiday Juice, Ltd.
4. As of May 1977, Holiday Juice, Ltd. ("Holiday Juice")
was a Canadian corporation1 engaged in the manufacture and dis-
I'-')
tribution of fruit juices. As of May 1977, the president and
chief executive officer of Holiday Juice was Daniel Kotwicki
(•'Kotwicki").
5. As of May 1977, the shareholders of Holiday Juice were
Leonard Haddad, Albert Allen, Edward Zakoor, Charles Jamail
("Jamail11), and Daniel Kotwicki ("Kotwicki"). (App. IV-100, Cor
rected Affidavit of Charles Jamail dated March 7, 1991, par. 3;
See also. May 26, 1977 Put Agreement, marked as Exhibit 2 in the
Appendix of Exhibits to Complaint in Case No. 90 C 5009)
6. In April 1978, Allen sold his interest in Holiday Juice
to Haddad, thereby giving Haddad control over Holiday Juice. In
December 1978, Haddad died. In May, 1979, the other Holiday
Juice shareholders purchased Haddad's interest from his estate.
7. In September 1983, Labatt acquired 100% of Holiday
Juice's shares. Holiday Juice became an "operating division" of
Labatt. (John Labatt Annual Report 1984, pp. 2, 4, 13)
8. Kotwicki was president and a director of Holiday Juice
on the date that Labatt acquired the company. Kotwicki continued
as president and director until November 16, 1988, the effective
date of his resignation. See paragraphs 214-216, below.
9. Jamail was an officer an director of Holiday Juice on
the date of acquisition. He continued as an officer and direc
tor until his retirement in June 1990.
1. In January 1989 Holiday Juice changed its name to Everfresh,
Inc., but remained a Canadian corporation separate from the
Michigan entity with the same name. In other papers filed in 89
C 113 and 90 C 5009, the Canadian entity is referred to as
"Everfresh/Canada. Here, for the sake of clarity the Canadian
entity will be referred to throughout as "Holiday Juice."
10. Bruce Fraser is Labatt's Vice-President, Corporate
Planning and Development. He has held this office since at least
1984. He has been an officer of Labatt since at least 1984. In
1989, Fraser took on the additional title of Vice-president,
Labatt Food Company. (John Labatt Annual Report 1984, p. 41; John
Labatt Annual Report 1986, pp. 52-53; John Labatt Annual Report
1987, p. 47; John Labatt Annual Report 1989, p. 41)
11. Fraser negotiated Labatt's acquisitions of Holiday
Juice and Everfresh Juice Co of Warren, Michigan. He has been a
Holiday Juice director from September 1983 to the present. (John
Labatt Annual Report 1984, p. 41; John Labatt Annual Report 1986,
pp. 52-53; John Labatt Annual Report 1987, p. 47; John Labatt An
nual Report 1989, p. 41; App. 11-36, Zakoor Dep. 60; App. IV-99,
Holiday Juice Ltd. Shareholder's Resolutions, dated September 27,
1983)
12. Dean Kitts was Labatt's General Counsel from at least
1983 until his retirement in June 1990. He was a Holiday Juice
director from September 1983 to the date of his retirement.
(App. IV-99, Holiday Juice Ltd. Shareholder's Resolutions, dated
September 27, 1983; App. 111-78, Form 1-Corporations Information
Act for Holiday Juice Ltd., dated February 8, 1988)
13. Holiday Juice has owned the Canadian rights to the
"Everfresh" mark since 1977. During the early to mid-1980s,
Holiday Juice developed the Everfresh mark into the leading brand
of orange and grapefruit juices in Canada. See paragraphs 75-76,
below.
14. The United States' rights to the mark were owned by
Everfresh Juice Co. of Warren, Michigan. During the 1980s,
Holiday Juice co-packed2 10 ounce bottles of orange juice for
Everfresh. In December 1986, Labatt acquired Everfresh Juice Co.
of Warren, Michigan and integrated its operations with those of
Holiday Juice. In January 1989, Holiday Juice changed its cor
porate name to Everfresh, Inc. See paragraphs 82, 87-97, 106,
below.
D. Everfresh Juice Co.
15. Everfresh Juice Co. was incorporated under the laws of
the state of Michigan in 1952 ("Everfresh"). The original name
of the corporation was Home Juice Co. The original officers were
Fred M. Gilaty and Leonard M. Haddad. The original directors in
cluded Gilaty and Haddad. Initially, the controlling shareholder
was Haddad. (Michigan Annual Report for Home Juice Co., 1952)
16. Albert A. Allen became a vice-president and director of
Everfresh in 1956 or earlier. He became president in 1961 and
continued as president until June 1972. (Michigan Annual Reports
2. "Co-packing" is an arrangement whereby a company supplies
concentrate and packaging materials to another company, which
then reconstitutes the concentrate, packages it into ready-to-
serve juice, and delivers the product according to the directions
of the originating packer.
Co-packing can be a solution to any one of several different
business problems. If the originating packer is operating at
capacity and still cannot satisfy the demand for its products, a co-packing arrangement allows it to increase its production
volume without investing in new equipment. As another example,
if the originating packer lacks the equipment to make a certain
type or size of product (for example, a 10 ounce hot pack orange
juice), a co-packing arrangement allows it to add that type or
size to its product line, again without investing in new equip
ment.
'■■■■}
for Home Juice Co., 1956, 1961, 1964, 1968-1970, 1973; App. II-
37, M. Allen Dep. 8-9)
17. In 1956, Haddad caused the incorporation of another en
tity called Home Juice Co. under the laws of Illinois ("Home
Juice/Illinois"). The original officers and directors of this
entity were Haddad, his wife Marie Haddad and William Finneran.
(Illinois Annual Report for Home Juice Co., 1957)
18. In 1972 Everfresh was merged into a wholly-owned sub
sidiary of Home Juice/Illinois. Prior to the merger, Haddad was
the sole shareholder of Home Juice/Illinois. As a result of the
merger, Albert Allen became a shareholder of Home Juice/Illinois.
On the date of the merger Albert Allen became president and a
director of Home Juice/Illinois. He continued as president until
April 1978. (Illinois Annual Reports for Home Juice Co., 1973-
1978; App. 11-37, M. Allen Dep. 17; App. 11-38, Heritier Dep.
17-18)
19. Gerald Wolberg became a vice president of Everfresh in
1972. He became president and chief executive officer in late
1973. He continued as president until November 1976, when he
resigned. (Michigan Annual Reports for Ever Fresh Juice Co.,
1973-77)
20. Albert Allen took over as Everfresh's president from
1976 until 1980. Albert Allen was a director of Everfresh from
1961 to at least May 1988. (Michigan Annual Reports for Home
Juice Co., 1961, 1964, 1968-1970, 1973-88)
21. In April 1978, Everfresh was spun off into an independ
ent corporation. Albert Allen was the controlling shareholder of
the new corporation. In consideration for receiving all of the
/■■■■)
shares in the newly independent corporation, Allen conveyed his
interests in Home Juice/Illinois and Holiday Juice
to Haddad. (See, Indemnification Agreement, dated April 14,
1978, marked as Exhibit 4 in the Appendix of Exhibits to Com
plaint in Case No. 90 C 5009)
22. Albert Allen's brother, Michael Allen, usually known as
Mitch Allen, first became an officer of Everfresh in 1970. He
was a vice president from about 1973 to about 1980, when he be
came president and chief executive officer. He held these of
fices until about the fall of 1987, when he resigned. He also
served as a director from about 1977 to 1984. (Michigan Annual
Reports for Home Juice Co., 1972-1987)
23. Michael Kanan first became an Everfresh officer in 1964
or earlier, and he continued as an officer until 1969. In 1978,
after Albert Allen acquired control of Everfresh, Kanan again be
came an officer as well as a director of Everfresh. He continued
as a director until 1983. He continued as an officer until he
was terminated in March 1989. (Michigan Annual Reports for Home
Juice Co., 1964, 1968-69, 1978-89)
24. Bruno Moser was born in Yugoslavia in 1919. He
emigrated to the United States in about 1954. He started working
at Everfresh in 1960 or 1961, when it was still known as Home
Juice, and when Haddad and Gilaty were in control. (App. 11-39,
Moser Dep. 3, 8, 13). Moser was Director of Quality Control
during the 1960s, 1970s and early 1980s. He was also an officer
of Everfresh from 1968 to 1970. (App. 1-1, Answer to Inter
rogatory 13, No. H76-620, September 7, 1976; Michigan Annual
Reports for Home Juice Co., 1968-1970)
25. Kotwicki was a vice-president of Everfresh from 1976 to
1978. Kotwicki was also an officer of Holiday Juice beginning in
about 1977. See paragraphs 8-9, above. Holiday Juice was lo
cated in Windsor, Ontario, just across the border from
Everfresh's Detroit plant. Kotwicki severed his ties to
Everfresh in 1978. Kotwicki had nothing further to do with
Everfresh7s operations until December 1986, when Labatt acquired
Everfresh. See paragraphs 82-97, below. (Michigan Annual Reports
for 1976-78)
E. Flavor Fresh
26. Flavor Fresh Foods Inc. ("Flavor Fresh") is an Illinois
corporation with its principal place of business in Chicago.
Flavor Fresh is engaged in two segments of the beverage business.
(a) Flavor Fresh is a distributor of juices and
beverages, including products marketed under the "Flavor
Fresh" label.
(b) Flavor Fresh is also a blender of con
centrates. In the orange juice business, different
batches of concentrated orange juice may possess differ
ing characteristics, such as degree of sweetness,
acidity, color and flavor. Commercial concentrates of
ten require the blending of concentrate from several
sources in order to obtain a uniform product. Flavor
Fresh does such blending.
(App. 11-40, Marshall Dep. 40)
27. The shareholders in Flavor Fresh are James Benton (51%)
and James Marshall (49%). Both Marshall and Benton were formerly
employed at Home Juice/Illinois. (App. 11-40, Marshall Dep. 11,
17)
28. In about 1979, Flavor Fresh entered into a contract
with Holiday Juice under which Holiday Juice made hot pack orange
juice and other beverages under the Flavor Fresh label. This ar
rangement continued until 1990. (Marshall Dep. 26) ["Hot pack11 is
defined below at paragraph 127]
29. Beginning in 1980 and continuing to the present, Flavor
Fresh entered into a contract with Peninsular Products (discussed
below in paragraphs 30-34) under which Peninsular Products made
cold pack orange juice and other beverages under the Flavor Fresh
label. ["Cold pack" is defined below at paragraph 127] (App.
11-40, Marshall Dep. 24, 26)
F. Peninsular Products Company
30. Peninsular Products Company ("Peninsular Products"),
formerly known as Heatherwood Farms, is a Michigan corporation
based in Lansing. Peninsular Products conducts business under
the names Orchard Groves and Heatherwood Farms. (Michigan Cer
tificates of Assumed Name dated December 21, 1978, and February
21, 1979)
31. In the early to mid-1980s, Peninsular Products, doing
business as Orchard Grove, co-packed chilled orange juice for
Everfresh. (App. 1-4, Response to Interrogatory No. 6, March 26,
1983)
32. During the late 1980s, Marshall and Flavor Fresh were
buying orange juice concentrate from Holiday Juice at wholesale.
Flavor Fresh blended the concentrate and resold it to Peninsular
Products. The price of the product that Peninsular Products was
10
making from the concentrate blended by Flavor Fresh and Marshall
was "approximately 80 cents to $1.00 a case cheaper
than" Holiday Juice's price. (App. IV-121, Memorandum from M.
Kanan to D. Kotwicki, dated October 28, 1987; App. IV-122,
Memorandum from M. Kanan to D. Kotwicki, dated February 11, 1988;
App. 11-40, Marshall Dep. 39-40, 45-46)
33. Peninsular Products also packed orange juice for Grove
Fresh until September 1990. Grove Fresh terminated Peninsular as
a supplier because it had reason to believe that Peninsular was
adulterating its products.
34. In March 1991, Peninsular Products was forced to make a
nationwide recall all of its orange juice. The recall notice
stated that "these juice products may not comply with the stan
dards of identity [for orange juice] and ... these products may
contain a chemical preservative that is unapproved for use in
beverages." (App. 111-87, Food Recall Notice dated March 22,
1991)
6. Eau Claire Packing Company
35. Eau Claire Packing Company ("Eau Claire") is a Michigan
corporation engaged in the business of processing fruit juices
and drinks. Since about 1984, Eau Claire has packed orange juice
from concentrate for Grove Fresh.
36. Cecil Troy is Grove Fresh's principal shareholder. In
about 1984 or 1985, Troy purchased about 5% of Eau Claire's
stock, for a purchase price of $10,000. In about January 1989,
Eau Claire was acquired by Erly Industries, Inc. In connection
with that transaction, Troy sold his stock to Erly Industries,
Inc. for about $5,000.
11
37. In October 1985, Grove Fresh entered into a written
agreement with Eau Claire whereby Eau Claire was appointed the
exclusive and sole distributor of Grove Fresh-brand juices out
side the Chicago metropolitan area. The agreement is for a
period of ten years. The agreement provides for royalty payments
to Grove Fresh at rates of $.10 to $.20 per case. (App. 111-79,
Agreement Between Grove Fresh and Eau Claire Packing Company
dated as of October 10, 1985)
H. Haddad's Estate
38. Leonard Haddad died on December 3, 1978. His estate
was probated in the Circuit Court of Cook County. Estate of
Leonard M. Haddad. No. 78P 9754. The administrators of the es
tate were his widow and Lake Shore National Bank. The estate was
closed in April 1983. (App. 111-80, Order of Discharge, April 21,
1983) The bulk of the estate was demised to Harris Trust and
Savings Bank as trustee of the Leonard M. Haddad Trust. McDer-
mott, Will & Emery served as counsel to Harris Bank during the
probate of the estate.
39. At the time of his death Haddad was a shareholder in
numerous closely-held corporations, including Home
Juice/Illinois, Holiday Juice, and H.J. Foods International, a
Swiss corporation. One of the other two shareholders in H.J.
Foods International was Dr. Fred Kohlbach. See paragraphs 161-
169, below.
40. During the course of the probate, McDermott, Will &
Emery learned about H.J. Foods International. They dealt with
Kohlbach in connection with the valuation of the estate's inter
est in H.J. Foods International, and they corresponded with an
12
attorney representing the affairs of the Swiss corporation's
Dutch subsidiary. (App. 111-68, Letter from Robert Brookman to
J.W. Bijvanck, dated August 5, 1982; Letter from Robert Brookman
to Jack Rammel, dated September 8, 1982; and Letter from Robert
Brookman to Jack Rammel, dated September 22, 1982)
II. Litigation and Investigations Concerning Everfresh's Adul
teration of Orange Juioe Prior to the Labatt Acquisition: 1976-1986.
A. The 1976 FDA Investigation
41. On February 2, 1976, the FDA issued a Regulatory Letter
to Everfresh. The letter concerned orange juice from concentrate
packed by Everfresh under the Mr. Pure label. The letter alleged
that a sample of Mr. Pure orange juice from concentrate that had
been collected and analyzed by the FDA contained approximately
300 mg/liter of a preservative, sodium benzoate, in violation of
the standards of identity for orange juice. The letter requested
that Everfresh correct the violation. (App. 111-53, Regulatory
Letter from Alan Hoeting to Gerald Wolberg, dated February 2,
1976)
42. The FDA had collected the sample of Mr. Pure orange
juice in response to an October 1975 trade complaint received by
the FDA in Baltimore, Maryland. (App. 111-52, Memorandum by
Donald C. Healton, Regional Food and Drug Director, dated Decem
ber 23, 1976)
43. Everfresh's initial response to the Regulatory Letter
came from Bruno Moser, vice-president for quality control. In a
letter dated February 10, 1976, Moser denied that Everfresh
deliberately added preservatives to its orange juice from con
centrate :
13
Our formula does not include any preservative of
any kind, although we do make various fruit drinks which
are preserved with sodium benzoate.
I would be very interested to obtain a copy of your
analysis and the method by which you determined the con
tent of sodium benzoate. ... I believe that it would be
helpful to be able to conduct a similar analysis in our
laboratory, since it is possible that a preservative is
in the concentrate that we purchase from different
processors.
(App. 111-54, Letter from Bruno Moser to Alan Hoeting, dated
February 10, 1976; emphasis added)
44. On March 4, 1976, about three weeks after Moser denied
that Everfresh's formula called for preservatives, the FDA in
spected the Everfresh plant. The FDA collected samples of orange
juice from concentrate packed under the Mr. Pure label. The
samples were from a 5,000 gallon batch formulated on March 3,
1976. The labels recited a "pull date" of June 4th, indicating a
90-day shelf life. (FDA Form 464, Sample Collection Report No.
76-21-410, marked as Exhibit 8 in the Appendix of Exhibits to
Complaint in Case No. 90 C 5009)
45. It is impossible to achieve a shelf-life of 90 days for
cold-pack orange juice without adding a preservative to the mix.
See paragraphs 124-135, 159, below. In test reports dated in
April and May 1976, the FDA concluded that Mr. Pure orange juice
from concentrate contained substantial levels of sorbate and
sodium benzoate. (See FDA Form 464, Sample Collection Report No.
76-21-410, marked as Exhibit 8 in the Appendix of Exhibits to
Complaint in Case No. 90 C 5009)
46. Criminal investigations under the Food, Drug and Cos
metics Act are governed by Section 305, 21 U.S.C. Sec. 335, which
provides:
14
(/■■A f-iA fA f*A r«!1 f:tJ\ /'■■> /■■■■)
Before any violation of this Act is reported by the
[FDA] to any United States attorney for institution of a
criminal proceeding, the person against whom such
proceeding is contemplated shall be given appropriate
notice and an opportunity to present his views, either
orally or in writing, with regard to such contemplated
proceeding.
47. On September 15, 1976, the FDA sent Everfresh a notice
of hearing pursuant to Section 305. The notice stated that the
FDA was planning to bring criminal proceedings against the cor
poration and three of its officers: Albert Allen, Bruno Moser and
Gerald Wolberg. The subject of the notice was the use of un
declared preservatives in orange juice from concentrate. (App.
111-55, Section 305 Notice of Hearing, dated September 15, 1976)3
48. On June 17, 1977, the FDA transmitted a six count in
formation concerning its investigation of Everfresh to the U.S.
Attorney for the Eastern District of Michigan because of its
"flagrant and continuing disregard for the requirements of the
law and regulations." The U.S. Attorney's Office exercised its
discretion not to prosecute, on the ground that Everfresh's use
of a preservative, though unlawful, was only an economic crime
and not a public health hazard. The FDA concluded its investiga
tion in March 1978. (App. 111-56, Memorandum by Mervin Shumate,
April 28, 1978)4
B. The 1976 Suit By Purity Products
3. In the documents produced by the FDA pursuant to Grove
Fresh's Freedom of Information Act, the names of the individual
officers are blocked out. Their identity was disclosed to Grove Fresh in June 1990 by an attorney who represented one of the four respondents.
4. Mervin Shumate later left the FDA and became a private con
sultant. In April 1989, Labatt and Everfresh hired him to assist
them in making their presentations regarding adulteration to the FDA in 1989. (See paragraphs 244-247, below)
15
/■■■■■)
49. One of Everfresh's competitors in the Baltimore-
Washington, D.C. area is Purity Products, Inc. Over a ten-year
period from 1976 to 1986, Purity Products sued Everfresh three
times for selling adulterated orange juice. Purity Products.
Inc. v. Ever Fresh Juice Co.. No. H 76-620 (D. Md.); Purity
Products. Inc. v. Ever Fresh Juice Co.f No. Y 82-3253 (D. Md.);
Purity Products. Inc. v. Ever Fresh Juice Co.. No. JFM 86-963 (D.
Md.)
50. The first suit was filed on April 28, 1976. The com
plaint alleged that Everfresh and its then parent corporation,
Home Juice Co., were distributing adulterated orange juice under
both the Everfresh and Mr. Pure labels. The complaint alleged
that juice sold under both labels was adulterated with an un
declared preservative.
51. The claim in the 1976 suit was limited to adulteration
with preservatives. The suits that Purity Products filed in 1982
and 1986, on the other hand, included claims that Everfresh's
orange juice was adulterated with pulpwash and added sugar. No
such claims were asserted in the 1976 suit because the tests for
detecting pulpwash and added sugar had not yet been perfected as
of 1976. See paragraph 200, below.
52. Everfresh was represented in the 1976 case by the Bal
timore law firm of Piper & Marbury and the Washington, D.C. law
firm of Covington & Burling.
53. Initially, Everfresh denied that it was intentionally
adulterating orange juice with preservative. In answers to in
terrogatories dated August 30, 1976, Everfresh took the same
position as it had taken in the letter of February 10, 1976, from
16
?■■■!)
Moser to the FDA. See paragraph 43, above. Everfresh's inter
rogatory answers made the following assertions:
Potassium sorbate may, in the past, have been
present in certain lots of the products that are the
subject of this action. If it was present, its presence
was due to sporadic failures of quality control. These
products ordinarily did not contain potassium sorbate or
any other preservative, and any presence of such sub
stance was contrary to corporate policy and intention.
The exact composition of EverFresh 100 percent
orange juice from concentrate is as follows: con
centrated orange juice plus water....
The exact composition of Mr. Pure 100 percent
orange juice from concentrate is as follows: con
centrated orange juice plus water....
(App. 1-1, 1976 Answers to Interrogatories 3, 11, 12; September
7, 1976; emphasis added)
54. Two weeks after Everfresh swore that "any presence of
[a preservative] was contrary to corporate policy and intention,"
the FDA served Everfresh and three of its officers with a notice
of a hearing under Section 305 of the Food, Drug, and Cosmetic
Act, stating the FDA's intent to institute criminal proceedings.
The notice identified 21 samples of orange juice that contained
preservatives in violation of applicable regulations. See
paragraph 47, above.
55. After the FDA served the Section 305 notice, Everfresh
abandoned the defense that the presence of preservatives was ac
cidental and unintentional. Everfresh first stated this change
in position in answers to interrogatories dated in February 1977.
(App. 1-2, Answer to Interrogatory No. 45, No. H76-620, February,
10, 1977)
17
56. After abandoning the "accident*1 defense, Everfresh
refused to provide any discovery to Purity Products as to the
presence of preservatives in Everfresh's orange juice from con
centrate. Purity Product pressed to compel discovery on the sub
ject of preservatives. In an effort to moot the discovery dis
putes, and also to avoid making statements or producing documents
that would facilitate the pending criminal investigation,
Everfresh offered to stipulate to the presence of preservatives
in its orange juice. On September 28, 1977, Everfresh made the
following admission:
Pursuant to a request for admission under Rule 36
..., defendant EverFresh Juice Co. admits that all
orange juice from concentrate sold through the Baltimore
branch of Everfresh Juice Co. in the period October 1,
1973, to April 29, 1976, contained preservative at ef
fective preservative levels.
(App. 1-3, Admission Under Rule 36, September 28, 1977, No. H76-
620)
57. Everfresh settled the 1976 suit on or about December 2,
1977. (Grove Fresh does not know the terms of settlement.)
C. The 1983 FDA Investigation
58. In 1983 and 1984, a competitor of Everfresh complained
to the FDA that Everfresh was using a cold-fill sterilizer known
as DEPC (diethyl pyrocarbonate) to extend the shelf-life of
cold-packed orange juice. (App. 111-57, Anonymous Letter to FDA
Detroit District Office, postmarked January 13, 1983 and FDA
Complaint/Injury Report, DET 1536, dated January 14, 1983)
59. In response to the allegations in the anonymous letter,
the FDA collected several samples of orange juice packed by
Everfresh. However, the FDA suspended its investigation because
18
it did not have available a suitable methodology for detecting
the presence of urethan, the carcinogen that is
produced when DEPC decomposes. See paragraphs 170-173, below.
D. The 1982 and 1986 Suits By Purity Products
60. Identical sets of interrogatories were propounded to
Everfresh in the 1982 and 1986 cases. The responses to inter
rogatories in the 1986 case were based on the answers to the in
terrogatories in the 1982 case. (App. 111-38, Heritier Dep. 104-
05) In preparing the responses in the 1986 case Everfresh's
counsel interviewed Mitch Allen and no one else. Everfresh's
counsel prepared the responses in the 1986 case based on the in
formation provided by Mitch Allen. (App. 11-38, Heritier Dep.
13-14, 150-51)
61. Interrogatory No. 1 in both the 1982 and 1986 cases
asked:
State whether you deny the presence of sugar in the
product that is the subject of this action. If you do
so deny, state all the facts upon which you will rely to
support such denial
The answers to this interrogatory were virtually identical in
1982 and 1986:
1982 Response; Defendant, Ever Fresh Juice Co.
(Ever Fresh), denies the presence of sugar in the
product that is the subject of this action. The fact
upon which Ever Fresh relies is the absence of sugar in
its manufactured orange juice product, the subject mat
ter of this litigation. Ever Fresh has no knowledge of
any facts which would support a conclusion of sugar in
its manufactured orange juice product.
1986 Response; Defendant, Ever Fresh Juice Co.
("Ever Fresh"), denies the presence of sugar in the
product that is the subject of this action. The fact
upon which Ever Fresh relies is that there is no
manufacturing procedure or process which calls for the
addition of sugar to its orange juice product. Further more, Ever Fresh has no knowledge of any facts which
19
would lead it to believe that sugar has been added to
its manufactured orange juice product.
(App. 1-4, 1982 Responses to Interrogatories, March 28, 1983;
App. 1-5, 1986 Responses to Interrogatories, October 9, 1986)
62. Interrogatory No. 5 in both the 1982 and 1986 cases
asked:
If you contend that the product contains no sugar
and meets the standards of identity required of orange
juice from concentrate, then state the basis for your
contention and attach copies of documentation supportive
of that contention, including test results, quality con
trol and analysis.
The responses were identical in both 1982 and 1986:
Response: Everfresh has no knowledge of any facts
that justify a conclusion that sugar has been added to
its manufactured orange juice product
(App. 1-4, 1982 Responses to Interrogatories, March 28, 1983;
App. 1-5, 1986 Responses to Interrogatories, October 9, 1986)
63. Interrogatory No. 8 in both the 1982 and 1986 cases
asked:
If you contend that you did not falsely represent
the product, state all facts upon which you rely:
The responses in the two cases were as follows:
1982 Response: Defendant relies on the fact that
sugar is not added to the orange juice product, the sub ject of this litigation. In addition, Defendant relies on the personal knowledge of its corporate employees
that Everfresh's product is not falsely represented.
1986 Response: [T]his question has been previously
answered in Interrogatory Number Five.
(App. 1-4, 1982 Responses to Interrogatories, March 28, 1983;
App. 1-5, 1986 Responses to Interrogatories, October 9, 1986)
64. In the 1982 case, Interrogatory No. 15 asked:
Have you adopted any changes in the method of per
forming any manufacturing process involved in the
production of orange juice products or any change in the method of labeling or marketing since receiving
20
(.-\ f.-A /«i f-»i f«\ '-■) '■ ) '■■)
knowledge of Plaintiff's claim? If so, state the
changes that were made and your reasons for making the
changes.
Interrogatory No. 16 in the 1986 case asked essentially the same
questions. In both cases, Everfresh answered "none."
(App. 1-4, 1982 Responses to Interrogatories, March 28, 1983;
App. 1-5, 1986 Responses to Interrogatories, October 9, 1986)
65. Interrogatory No. 26 in 1982 and Interrogatory No. 27
in 1986 asked the same question:
State the name of the person who ordered sugar in
the product, state the firm or the person supplying the
sugar, the dates and amounts of sugar purchased during
the time in question.
In both cases, Everfresh answered: "No employee of Everfresh has
ordered sugar for use in Defendant's orange juice product."
(App. 1-4, 1982 Responses to Interrogatories, March 28, 1983;
App. 1-5, 1986 Responses to Interrogatories, October 9, 1986)
66. In this case, Everfresh has admitted that in the years
1983 through 1988, "Everfresh ... manufactured orange juice that
did not comply with federal Food, Drug & Cosmetic Act
regulations." Everfresh has also admitted that "the labels on
[its] orange juice bottles ... stated that the bottles contained
orange juice made from concentrate and water, and the labels did
not state a more exhaustive or detailed description of
ingredients." (App. 1-18, Objections and Answers to Plaintiff's
Requests to Admit, July 31, 1990; App. 1-23, Further Response to
Certain of Plaintiff's Discovery Requests, January 25, 1991)
67. Batch sheets for the period March 14 to May 3, 1983,
show that the ingredients that were not declared on the labels of
Everfresh's so-called orange juice included pulpwash, sugar,
21
citric acid, and potassium citrate [App. IV-101, 1983 Everfresh
Batch Sheets, Control No.'s 10021157-211203]
68. Batch sheets for the period March through September
1987, show that the ingredients that were not declared on the
labels of Everfresh's so-called orange juice included pulpwash,
sugar, grape juice concentrate, citric acid, ascorbic acid, an-
tifoaming chemicals and other chemical additives. These sheets
show that while the 1986 Purity Products suit was still pending,
and while their interrogatory answers falsely disclaimed adul
teration, Everfresh manufactured about 2.1 million gallons of
adulterated orange juice. (App. IV-102, 1987 Everfresh Batch
Sheets, Control No.'s 10006383-6984)5
III. Labatt's Acquisition of Everfresh
A. The Split In Ownership Of The Everfresh Trade Mark.
69. Everfresh began using "Everfresh11 as a tradename for
pure orange juice and other beverages in April 1970. Over the
following years, Everfresh marketed orange juice under the
Everfresh mark in at least 14 states and the District of Colum
bia. (See Agreement and Plan of Merger between Home
Juice/Michigan and Home Juice/Illinois dated June 28, 1972)
However, Everfresh did not apply to register the name with the
United States Patent and Trademark Office until February 1984.
The registration application was granted in June 1986.
70. In 1977, Holiday Juice began using the Everfresh mark
in Canada. At the time, both Holiday Juice and Everfresh, the
owner of the mark in the United States, were controlled by Haddad
5. There are 601 batch sheets from 1987. App. IV-102 contains a representative sampling of these sheets.
22
and Albert Allen. On July 4, 1977, Holiday Juice filed an ap
plication to register the "Everfresh" mark with the Canadian
Registrar of Trade Marks. The registration application was
granted on December 14, 1979. During the 1980s, the Everfresh
brand became one of the leading brands of fruit juices in Canada.
(App. IV-114, 1984 Business Plan, p. 1; App. IV-118, 1988 Busi
ness Plan, p. 145)
71. In April 1978 Allen and Haddad split up their business
operations. Allen kept the Everfresh corporation in Michigan and
retained control over the Everfresh mark in the United States.
Haddad kept Holiday Juice and retained control over the Everfresh
mark in Canada. See paragraphs 6, 21, above.
B. The Business Plans And Conditions Leading Up To
Labatt's December 1986 Acquisition Of Everfresh.
72. After Labatt acquired Holiday Juice in 1983, Holiday
Juice's management annually prepared business plans outlining the
company's goals for three-year periods. The first business plan
was prepared in the spring of 1984 for the fiscal years running
April 30, 1985-1987 ("the 1984 Business Plan"); the second busi
ness plan was prepared in the spring of 1985 for the fiscal years
running April 30, 1986-88 ("the 1985 Business Plan"). (Excerpts
from these plans are reproduced at App. IV-114, and App IV-115,
respectively)
73. When Labatt acquired Holiday Juice in 1983, Holiday
Juice was operating in markets in both the United States and
Canada. In Canada, Holiday Juice sold items under three dif
ferent brand names: Everfresh, Holiday Juice and Mr. Pure. (App.
IV-114, 1984 Business Plan, pp. 1, 2)
23
74. In the United States, 80% of Holiday Juice's business
was concentrated in two states: Michigan and Illinois. Since
Holiday Juice could not use the Everfresh brand in the United
States, Holiday Juice developed the "J.Z." brand for U.S. sales.
(App. IV-114, 1984 Business Plan, pp. 1, 2; App. 11-36, Zakoor
Dep. 169-70)
75. In 1984 and 1985, Holiday Juice and Labatt became con
cerned over the entry of the Citrus Hill brand into the Canadian
market. "Citrus Hill" is the premium orange juice brand of Proc
ter & Gamble, a company based in the United States. In order to
defend Holiday Juice's market position against inroads by Procter
& Gamble, Holiday Juice and Labatt decided "to build a consumer
franchise for Everfresh brand" by changing all of the Holiday
Juice-brand items and Mr. Pure-brand items to the Everfresh
brand. (App. IV-115, 1985 Business Plan, pp. 5, 10)
76. One of the major goals fixed by the 1984 Business Plan
was to expand sales volume in the United States. However,
Holiday Juice's Windsor plant was reaching the limits of produc
tion capacity; management estimated that it would reach capacity
in less than two years. Management concluded that in order to
expand into the United States' market, it would need either to
acquire an existing business or build another plant. (App. IV-
114, 1984 Business Plan, pp. 6-7)
77. In late 1984, in an attempt to expand Holiday Juice's
presence in the United States and at the same time acquire the
United States' rights to the Everfresh brand name, Labatt con
tacted Albert Allen about buying Everfresh. Labatt offered to pay
24
(Sa!|
$6,000,000 for Everfresh. Allen rejected the offer. (App. II-
38, Heritier Dep. 36-37)
78. The 1985 Business Plan was prepared in the spring of
1985. Even though Allen had just rejected Labatt's purchase of
fer, the 1985 Business Plan nevertheless continued to fix as a
goal "build[ing] a consumer franchise for Everfresh brand," and
"strengthen[ing] Everfresh brand name.11 At the time, Holiday
Juice's right to use the Everfresh mark was still limited to
Canada. (App. IV-115, 1985 Business Plan, pp. 5, 10)
79. After Allen rejected the offer, Labatt pursued other
opportunities in the United States. In November 1985, Labatt of
fered to buy Boden Products, Inc., of Franklin Park, Illinois
("BPI") for approximately $7,000,000. BPI's shareholders ac
cepted. The transaction closed in January 1986. In the BPI
transaction, Labatt required the sellers to represent and warrant
that "[a]11 product labeling is in all material respects in con
formity with the applicable laws." (App. IV-112, Stock Purchase
Agreement for Boden Products, Inc., dated January 26, 1986, Sec
tion 3.15)
80. BPI was primarily a maker of drinks; pure juices were a
small and insignificant part of its business. Moreover, BPI did
not have high-speed equipment for bottling 10 ounce hot pack
juice. Accordingly, Labatt decided to make $10,000,000 in capi
tal improvements at the BPI plant in Franklin Park. The decision
to make this capital investment was part of the economic analysis
underlying the decision to purchase BPI. (App. 11-34, Crowley
Dep. 23-24, 55)
25
81. The improvements to the BPI plant began shortly after
acquisition and were completed during the second quarter of 1987.
The improvements increased BPI's capacity to 35 million cases of
product a year. At the date of completion, however, BPI had
booked annual business of only 7 to 8 million cases. (App. II-
35, Boden Dep. 44-45, 184-85)
C. Kotwicki's Exclusion From The Negotiations For Labatt's
Acquisition Of Everfresh From The Aliens.
82. In October 1986, Labatt again contacted Albert Allen
about buying Everfresh. Labatt made a formal presentation of its
proposed terms at a meeting on October 17, 1986. The Labatt rep
resentatives who made the presentation were Bruce Fraser,
Labatt's Vice-President for Corporate Planning and Development,
and George Taylor, Labatt's executive vice-president and Fraser's
supervisor. The Everfresh representatives were Albert Allen and
Bruce Prillwitz. (App. IV-103, Memorandum by Bruce Prillwitz,
dated October 20, 1986)
83. At the insistence of Albert Allen, Kotwicki did not at
tend the presentation. In fact, Allen threatened to kill the
sale if Kotwicki learned about the proposed purchase price prior
to closing. According to a memorandum of the October 17th meet
ing prepared by Allen's attorney:
Al Allen made it clear that Dan Kotwicki should not
be apprised of the purchase price. If information con
cerning this sale were to be on the street, then Al
would immediately withdraw from any sale.
And while Al Allen agreed to give Labatt access to Everfresh's
books and records so that a "due diligence" review could be con
ducted, he insisted that "Mr. Kotwicki would not be permitted to
26
have access to the accounts receivable or customer list." (App.
IV-103, Memorandum by Bruce Prillwitz, dated October 20, 1986)
84. Allen's objections to Kotwicki stemmed from either or
both of two reasons. First, there was a long history of
animosity between Kotwicki and Mitch Allen, Albert's brother and
the president of Everfresh. The animosity dated back to at least
the 1970s, when Everfresh (where Mitch Allen then worked) was a
subsidiary of Home Juice/Illinois (where Kotwicki then worked).
The animosity between these two individuals led to a rivalry be
tween the Holiday Juice organization and the Everfresh organiza
tion (App. 11-35, Boden Dep. 71, 128-29; App. 11-36, Zakoor Dep.
158-59)
85. Second, Holiday Juice management (as distinguished from
Fraser, Taylor and Labatt management) was opposed to the proposed
acquisition for business reasons. Holiday Juice management
believed that the acquisition did not make good business sense
because it would give Labatt three plants within an area of 250
miles — Windsor, Detroit and Chicago. Holiday Juice's day-to
day management believed that there were not enough customers to
keep all three plants operating at capacity. (App. 11-36, Zakoor
Dep. 161-62)
86. In fact, at the moment that Labatt was proposing to ac
quire Everfresh it was investing $10,000,000 to upgrade the BPI
plant in Franklin Park to a capacity of 35 million cases per
year. At the time, the Franklin Park plant only had 7 to 8 mil
lion cases of booked business, leaving an overcapacity of 27 to
28 million cases. The acquisition of Everfresh would increase
27
<■**■
overcapacity by 10 to 12 million cases. (App. 11-34, Crowley
Dep. 23-24, 55; App. 11-35, Boden Dep. 184)
87. The only strategic reason for buying Everfresh was to
get the United States' rights to the Everfresh mark, so as to
create a North American brand name, instead of merely a Canadian
brand name. (App. 11-36, Zakoor Dep. 161-62)
D. The Terms of Acquisition
88. The first topic covered at the October 1986 presenta
tion by Fraser and Taylor was price: Labatt proposed to purchase
the company for $10,000,000.6 This offer was 66% more than the
$6,000,000 offer that had been made in late 1984. There had been
no significant changes in Everfresh's financial position between
late 1984 and October 1986 that would explain a 66% increase in
the offering price. Sales for fiscal year 1985 were $18,751,230;
sales in fiscal 1984 had been $17,761,759. (App. IV-103,
Memorandum by Bruce Prillwitz, October 20, 1986, p. l; App. IV-
111, Income Statement dated August 5, 1985)
89. The increase in Labatt's offering price reflected
reflected the premium that Labatt was willing to pay in order to
control the Everfresh brand name throughout North America.
90. In addition to price, the meeting covered about 15
other subjects. One of the subjects covered was potential
6. At closing, the consideration actually allocated to the pur chase of stock was $8,000,000. The balance of the consideration
was paid in other ways, including approximately $1,471,240 in bonuses and salaries to 5 long-time employees who were not
shareholders: Michael Allen, Michael Kanan, Ted Serchuk, Albert
M. Allen and Joseph Allam. (App. IV-104, Letter of Intent dated
November 4, 1986, par. 10; App. IV-105, M. Allen Employment
Agreement, par. 3; App. IV-107, M. Kanan Employment Agreement,
par. 3; App. IV-109, Employment Agreements at RH 283, 304, 325)
28
liabilities. Everfresh told Labatt about the potential liability
for adulterating orange juice, as alleged in the pending suit by
Purity Products. (App. IV-103, Memorandum by Bruce Prillwitz, Oc
tober 20, 1986, p.3) The allegations of this suit were, in fact,
true. See paragraphs 60-68, above.
91. Another subject was board approval. Fraser and Taylor
told Allen that the acquisition would be subject to the approval
of Labatt's board of directors. (App. IV-103, Memorandum by
Bruce Prillwitz, October 20, 1986, p.4-5)
92. Albert Allen agreed in principle to Labatt's proposal.
He proceeded to negotiate the broad terms of the deal with
Labatt. On November 4, 1986, he and Labatt executed a letter of
intent outlining the broad terms of the transaction. In addi
tion, the letter gave Labatt the right to inspect "all informa
tion, books and records pertaining to the ... business ... and
operations of Everfresh." (App. 11-38, Heritier Dep. 143, 34-35;
App. IV-104, Letter of Intent dated November 4, 1986, Par. 2)
93. The inspection authorized by the letter of intent was
in the nature of a "due diligence" review, which is an investiga
tion by a buyer in order to satisfy the buyer that the transac
tion is legal, appropriate, and meets the terms of the under
standing of the parties. Labatt conducted such a review prior to
the closing on December 10, 1986. Kotwicki had no role in the
due diligence investigation. (App. 11-38, Heritier Dep. 168)
94. Albert Allen disclosed to Labatt all facts material to
the transaction, and all facts necessary to be disclosed in order
to avoid any misrepresentations. There were no subjects relating
to the stock purchase agreement that Albert Allen directed any of
29
*:■)
his attorneys to keep confidential. (App. 11-38, Heritier Dep.
49-50, 66-72, 76-77)
95. Unlike the Stock Purchase Agreement for BPI, the Stock
Purchase Agreement for Everfresh does no£ contain any representa
tions or warranties concerning Everfresh's compliance with food
laws. There were no such representations and warranties because
on the date of acquisition the 1986 Purity Products suit was
pending, and the allegations of adulteration in that suit were
true. (Compare App. IV-112, BPI Stock Purchase Agreement Section
3.15 with App. IV-113, Everfresh Stock Purchase Agreement Section
3.11. See also paragraphs 60-68, above.)
96. In the usual situation, final acquisition documents are
not submitted to the Labatt board for approval. (App. 11-34,
Crowley Dep. 81-83) Thus, the Stock Purchase Agreement for BPI
did not contain any provision requiring formal board approval of
the closing documents prior to closing.
97. Labatt did not view the acquisition of Everfresh as the
usual situation. Section 13.11 of the final agreement states:
"This Agreement is subject to the review and approval of the
Board of Directors of John Labatt Limited and shall be submitted
by Buyer to such Board not later than December 4, 1986." The
Agreement was in fact submitted to the Board, which approved the
acquisition papers, including the omission of warranties and rep
resentations as to Everfresh's compliance with applicable laws on
product labeling. The transaction closed on December 10, 1986.
(App. IV-113, Everfresh Stock Purchase Agreement, p. 34)
E. The Integration Of All North American Operations Into A
Single Organization Headquartered In Franklin Park, Il linois.
30
P1
98. When Labatt first acquired Holiday Juice in 1983, it
designated Holiday Juice as an operating division of John Labatt,
Ltd. (1984 Labatt Annual Report, p. 10) As Labatt acquired BPI,
Everfresh and Wagner, the acquired companies were viewed by
Labatt, not as stand-alone entities, but rather as subordinate
organizations that were to be folded into the Holiday Juice or
ganization. This view is reflected in the language of the busi
ness plans that Labatt required Holiday Juice to prepare an
nually.
99. Thus, the 1986 Business Plan7 speaks of Boden Products,
Inc. as a subordinate entity, stating that "[i]t is expected that
Boden will contribute significantly to Holiday's sales and
profits." One of the "priority objectives" identified by the
Plan is "to assimilate [the] Boden acquisition." One of the
"long-term strategies" identified by the Plan is "to integrate
Holiday/Boden sales and marketing." The Plan asserts that
"tp]roper assimilation of Boden is key to [Holiday Juice's] ex
panded sales and profitability in the U.S." (App. IV-116, 1986
Business Plan, pp. 2, 11, 68, 79)
100. The primacy of Holiday Juice is likewise reflected in
the Holiday Juice Ltd. Comprehensive Business Plan F88-F90 ("1987
Business Plan"). This Plan is dated March 2, 1987, about three
months after the acquisition of Everfresh. The Plan speaks of
Everfresh as a subordinate entity, stating that the "acquisition
of Everfresh Juice Co. ... provides Holiday with an established
7. The 1986 Business Plan is dated March 7, 1986, just six
weeks after the acquisition of BPI. This plan covers fiscal
years 1987-89.
31
... distribution system and a major opportunity for increased
growth." The Plan states that the "[t]hrust of F88
Operating Plan" includes "expanding use of the existing Boden
and Everfresh U.S. broker network [to] launch the entire Holiday
product line into the U.S. market." The Plan actually refers to
BPI and Everfresh as "subsidiaries," noting that "Holiday and its
subsidiaries currently do not purchase market audit data for the
United States." (App. IV-117, 1987 Business Plan, pp. 2, 3, 79)
[emphasis added] See also App. 11-35, Boden Dep. 132 ("From an
operating point of view, we ri.e.. BPI in Franklin Park] reported
to Labatt through Holiday Juice.11)
101. The Business Plans repeatedly refer to the ultimate
goal of folding BPI and Everfresh into the Holiday Juice operat
ing organization. Thus, the 1987 Business Plan states that one
of the key objectives of the preceding fiscal year was "full in
tegration of Hoiiday/Boden/Everfresh sales/marketing" organiza
tions, and that integration was scheduled for "completion [in]
May, 1987." The 1987 Plan further states that "integration of
Holiday, Everfresh and Boden operations will lead to continued
sales and profit growth." (App. IV-117, 1987 Business Plan, p.
70, 33)
102. BPI and Everfresh are actually owned by John Labatt,
Inc. ("JLI"), a California corporation, whereas Holiday Juice, a
Canadian corporation, is owned directly by Labatt, which is also
a Canadian corporation. JLI exists as a holding company for the
sake of reporting and paying taxes to the United States on opera
tions in the United States. (App. 11-34, Crowley Dep. 24-27)
32
103. Labatt's operating divisions in the United States
report their financial results directly to Labatt in Toronto.
Even though the United States' operations are, technically speak
ing, owned by JLI, the financial results of U.S. operations are
not filtered through JLI. JLI does not separately report finan
cial results for the U.S. operations that it owns, other than to
report taxes. (App. 11-34, Crowley Dep. 24-27)
104. In 1987, in a further step to integrate the entities,
Labatt's Human Resources department assembled a corporate staff
which includes the President, Vice President Operations,
Vice President Administration and Planning, Technical Director, Director of Engineering and a Vice President
Marketing (to be hired). This staff will oversee the
operations of the three profit centers. Holiday. Boden.
and EverFresh.
(App. IV-117, 1987 Business Plan, p. 2)
105. In April 1988, BPI and Everfresh were merged into a
single corporation. The surviving entity is now called
Everfresh, Inc., a Michigan corporation. In January 1989,
Holiday Juice's name was changed to Everfresh, Inc. This name
change was part of Labatt's long-term plan for building the
Everfresh trademark into "strong proprietary brand franchises in
North America." (See. Agreement and Plan of Merger for Everfresh
Inc., dated April 21, 1988; App III, Ontario Ministry of Consumer
and Commercial Relations Memorandum to File, dated February 6,
1989; Everfresh, Inc. Comprehensive Business Plan F89-F91, pp.
12, 36, 38, 53)
106. In 1988, in a further move to integrate North America
operations, Labatt moved Holiday Juice's corporate headquarters
to the facility in Franklin Park, Illinois, that had been ac-
33
quired from BPI. (App. IV-118, Everfresh, Inc. Comprehensive
Business Plan F89-F91, p. 177)
107. The facts set forth above in paragraphs 98-106 were
succinctly summarized in a "Fact Sheet" distributed by Labatt's
Public Relations agent in June 1990:
Everfresh Juice Co., headquartered in Franklin
Park, Illinois, is the North American fruit and beverage subsidiary of John Labatt, Ltd. of Canada, a $5.4 bil lion food and beverage giant publicly traded on the Toronto stock exchange....
John Labatt Ltd. entered the juice business in 1983
with the acquisition of Holiday Juice Ltd. of Windsor,
Ontario. Over the next three years, Labatt purchased
three U.S. beverage companies: Wagner, Boden and
Everfresh. In 1988, the four companies became Everfresh
Juice Co., now a major producer and marketer of fruit
juices ... and alternative beverages in North America.
Utilizing 11 manufacturing facilities throughout
North America, Everfresh Juice Co. owns three production
facilities in Windsor, Ontario; Warren, Mich.; and
Franklin Park, 111.
(App. 111-89, Everfresh Juice Co. Fact Sheet)
F. Bruce Fraser's False Assertions That Holiday Juice Is A
Separate Organization With No Facilities In Illinois.
108. Grove Fresh's interrogatories and document request to
Everfresh include requests for information about Holiday Juice.
Everfresh has steadfastly refused to produce any information
about Holiday Juice in this case,8 claiming that discovery from
an "affiliate" such as Holiday Juice is beyond the scope of this
suit.
8. The information about Holiday Juice in this Statement of
Facts comes largely from public records and from a limited amount
of discovery from Labatt in Grove Fresh's RICO case, No. 90 C 5009 (N.D.I11.)
34
I* 0*
109. On August 22, 1990, Grove Fresh moved to compel dis
covery concerning Holiday Juice. Everfresh opposed the motion,
arguing that discovery from Holiday Juice was "irrelevant to the
subject matter of the pending lawsuit." (App. 1-19, Everfresh
Inc.'s Response To Plaintiff's Motions To Compel Discovery
Regarding Affiliates, September 21, 1990, p. 10) In further op
position, the defense filed an affidavit from Bruce Fraser dated
September 21, 1990. Paragraph 2u of the affidavit states:
"Holiday Juice. Ltd." is the former name of a
Canadian corporation now named Everfresh, Inc. Everfresh, Inc. of Canada is owned by John Labatt
Limited and is a corporation separate from the U.S. cor poration named Everfresh, Inc. Everfresh, Inc. of Canada does not have any facilities in the United states,
(boldface added)
Fraser's affidavit is false. Holiday Juice's headquarters have
been located in Franklin Park, Illinois, since March 1988. See
paragraphs 106-107, above.
110. On August 28, 1990, Grove Fresh filed a RICO complaint
against Labatt, Holiday Juice, Everfresh and others. In December
1990, Labatt moved to dismiss on, among other grounds, lack of
personal jurisdiction. In support of this motion, Labatt filed
an affidavit from Fraser which falsely asserts that Holiday Juice
is a separate, free-standing organization:
4. These Everfresh entities, and Labatt sub
sidiaries generally, maintain considerable operating in dependence from the Labatt parent entities and are
self-standing entities with control and dominion over their operations.
5. Everfresh/Michigan and Everfresh/Canada effec tively operate autonomously within the diverse and ex tensive Labatt group of companies, just as those en tities did before they were acquired by Labatt. Before Everfresh/Michigan and Everfresh/Canada were acquired by
JLI and Labatt, respectively, they were free-standing,
independent companies, and much of that operational
35
IE*!
autonomy has continued upon acquisition under the decentralized Labatt corporate structure.
(App. IV-119, Affidavit of R. Bruce Fraser, dated December 18,
1990)
IV. Litigation And Investigations Involving Everfresh And Holiday Juice Subsequent To The Labatt Acquisitions
A. The Litigation Against Everfresh
111. When Labatt acquired Everfresh on December 10, 1986,
Purity Product's adulteration suit was still pending. Sge.
paragraphs 60-68, above. The suit was settled about nine months
after the acquisition, in or about September 1987, for $70,000.
The settlement papers were executed by Michael Kanan, Everfresh's
executive vice-president and chief financial officer. The
settlement was reported to Labatt. (App. 11-34, Crowley Dep.
72-73) Everfresh failed to disclose this lawsuit in answer to
Grove Fresh's interrogatory requesting information about all com
plaints about adulteration against Everfresh.
B. The Litigation Against Holiday Juice
112. In July 1987, an attorney representing Purity Products
sent a letter to Kotwicki at Holiday Juice alleging that Holiday
Juice was distributing adulterated orange juice. The letter also
gave notice of Purity Product's intent to sue for unfair competi
tion. (App. IV-120, Letter from Howard Freidman to Daniel Kot
wicki, dated July 14, 1987)
113. On January 7, 1988, Purity Products filed suit against
Holiday Juice. The complaint charged that Holiday Juice manufac
tured orange juice from concentrate, which it distributed under
the "JZ" label, that contained pulpwash, beet sugar and un
declared preservatives. (See. Complaint in Purity Products. Inc.
36
(to,
v. Holiday Juice Ltd.. et al. [Dist. of Maryland, N-88-41], Par.
8, 13, marked as Exhibit 23 in Appendix of Exhibits to Complaint
90 C 5009)
114. On the same date, Purity Products also filed suit
against American Citrus Products Co., d/b/a Home Juice Co. The
complaint alleged that Home Juice was selling adulterated orange
juice. Both Holiday Juice and Home Juice retained the Chicago
law firm of Burditt, Bowles, Radzius & Ruberry to defend them
against Purity Products' claims. (Complaint in Purity Products.
Inc. v. American Citrus Products Corp.. et al. [Dist. of
Maryland, N-88-40], marked as Exhibit 24 in Appendix of Exhibits
to Complaint in Case No. 90 C 5009)
115. On February 22, 1988, Kotwicki sent a memo to Bruce
Fraser notifying him of the Purity Products lawsuit. Kotwicki
reminded Fraser that the new suit was similar to "actions that
Purity has filed against EverFresh on three previous (prior to
acquisition) occasions.11 (App. IV-123, Memorandum from D. Kot
wicki to R.B. Fraser, dated February 22, 1988)
116. Home Juice settled with Purity Products in about June
1988. In a memorandum dated June 29, 1988, Kotwicki told Fraser
that Home Juice had settled with Purity Products. Kotwicki
recommended that Holiday Juice should also settle because settle
ment would be "in the best interests of our entire organization."
(App. IV-124, Memorandum from D. Kotwicki to R.B. Fraser, dated
June 29, 1988)
117. On July 25, 1988, Purity Products made a settlement
demand of $500,000. A few days later, after discussions and ne-
37
gotiations between Kotwicki and Ivan Goldstein, Purity Products'
principal, the settlement demand was lowered to $300,000.
118. Kotwicki reported these discussions to Fraser on a
memorandum dated August 7, 1988. Kotwicki requested settlement
authority of $300,000. (App. IV-125, Memorandum from D. Kotwicki
to R.B. Fraser, dated August 7, 1988) Fraser authorized Kotwicki
to settle for up to $300,000. Kotwicki ultimately settled the
case for $250,000. The settlement was executed on August 10,
1988. Prior to execution Kenneth Rosenthal reviewed the papers.
Rosenthal is general counsel to John Labatt, Inc., Labatt's hold
ing company for businesses in the United States. (App. 1-7,
Settlement Agreement, August 10, 1988; App. 11-35, Boden Dep.
148)
C. The Juiceland Lawsuit
119. During the 1980s Holiday Juice entered into a distribu
tion agreement with Metro Institutional Food Services, Inc. doing
business as Juiceland. In or about March 1988, Juiceland sued
Holiday Juice and Everfresh for numerous claims, including breach
of the distribution agreement, negligence, breach of warranty,
fraud and misrepresentation. Paragraphs 17 and 19 of the first
amended complaint alleged that Everfresh was selling adulterated
orange juice:
17. That upon samples being opened and tested by
the Plaintiff, it became aware in the latter part of
1987 and the early part of 1988 that these products pur
chased had been adulterated, misbranded, mislabeled,
misadvertised, misleading in character and had valuable constituent ingredients missing.
19. That the Defendant herein did perpetrate the
acts of altering their product by adding ingredients,
adulterating the product, omitting value ingredients,
38
,..,
having their labels printed with false and misleading statements and advertising.
(App. 1-8, Complaint in Metro Institutional Food Services v.
Holiday Juice. Ltd.. et al. [cir. Ct. of Wayne Co., Michigan,
88-808154])
120. Everfresh settled Juiceland's claim in March 1990.
Everfresh has refused to disclose any of the settlement terms.
Everfresh failed to disclose this lawsuit in answer to Grove
Fresh's interrogatory requesting information about all complaints
about adulteration against Everfresh.
D. The Tests by Outside Laboratories
121. In October 1988, Kotwicki sent Fraser lab reports of
orange juice analyses that had been commissioned by Everfresh.
These reports analyzed Everfresh's own products as well as those
of its competitors, including Juiceland and Flavor Fresh. Kot
wicki stated in a cover memo that "both Everfresh and Fresh n'
Pure brand products indicate that they contain pulp wash." (App.
IV-126, Memorandum from D. Kotwicki to R.B. Fraser, dated October
5, 1988)
E. Duane Bosch's Complaint to the FDA, And His Complaint
Under The Michigan Whistleblower's Protection Act.
122. Duane Bosch was a quality control technician who worked
at Everfresh from July 3, 1988 to October 29, 1988, when he was
discharged for alleged insubordination. In November 1988, Bosch
filed a complaint with the FDA alleging that Everfresh was adul
terating orange juice with a preservative imported from Germany
called Oleum 320/IDEA. See paragraphs 174-190, below. Everfresh
failed to disclose Bosch's complaint to the FDA in answer to
39
Grove Fresh's interrogatory requesting information about all com
plaints about adulteration against Everfresh.
123. In January 1989, Bosch filed a lawsuit for wrongful
discharge under the Michigan Whistleblower's Protection Act
against both Everfresh and his immediate supervisor, Susan Guss.
Bosch alleged that he had been fired because he had raised ques
tions about Everfresh's practice of adding an illegal preserva
tive to orange juice. Bosch settled his case with Everfresh in
October 1989. See paragraphs 174-175, below. Everfresh failed to
disclose this lawsuit in answer to Grove Fresh's interrogatory
requesting information about all complaints about adulteration
against Everfresh.
V. The Technology That Affects The Shelf Life Of Orange Juice
124. The principal causes of food spoilage include growth of
microbes, such as bacteria, yeast and mold; enzyme activity; and
oxidation (App. 111-92, P.J. Fellow, Food Processing Technology:
Principles and Practice, p. 360 (London 1988)) [hereafter cited
as "Fellows"]
125. "Shelf life" is a term in the food processing industry
that refers to the period during which a food remains wholesome
by preservation techniques which inhibit microbiological or
biochemical changes and thus allow time for distribution and home
storage. (App. 111-92, Fellows, pp. 360-61)
126. "Commercially sterile" is a standard in the food and
beverage processing industry which indicates that bacteria, yeast
and mold have been inactivated and the presence of these microbes
reduced. In other words, commercially sterile means that
microbes have been reduced to the point were the particular
40
product can attain a reasonable retail shelf life. (App. 11-32,
Fellers Affidavit par. 3)
A. "Hot Pack" And "Cold Pack"
127. There are two basic methods for packaging ready-to-
serve orange juice from concentrate for the retail market:
(a) hot packing; that is, hermetically sealing heat-
processed juice in sterile containers, such as sterilized
glass bottles, to be stored at room temperature;
(b) cold packing; that is, packing pasteurized chilled
juice in polystyrene or fiberboard containers to be stored
in refrigerated display cases.
128. The pasteurization of chilled juice packed in plastic
or fiberboard is a relatively mild heat treatment. However, the
shelf life of pasteurized juice is only extended by a few weeks
as compared with several months with more severe heat steriliza
tion. (App. 111-92, Fellows, p. 219)
129. Consumers generally express a preference for chilled
foods because they view them as healthier and fresher. Chilled
orange juice has been one of the fastest growing market segments
in the juice industry. (App. 111-93, C. Varsel, "Citrus Juice
Processing as Related to Quality and Nutrition," p. 238 in Citrus
Nutrition and Quality. S. Nagy and J. Attaway, ed., 1980)
[hereafter cited as "Varsel"]
130. Chilled ready-to-serve orange juice from concentrate is
pasteurized by the High Temperature Short Time (HTST) process
where the juice is heated to between 175 and 180 degrees
Farenheit for approximately a half-second. The juice is then
cooled and filled into polystyrene or fiberboard containers.
41
This process does not damage the flavor and texture of the juice.
(App. III-93, Varsel, p. 238)
131. The optimum storage temperature for chilled ready-to-
serve orange juice from concentrate is between 30 to 38 degrees
Fahrenheit. Microbes still present in the pasteurized juice
will grow when the juice is stored at temperatures above the op
timum range. (App. 11-32, Fellers Affidavit par. 6)
132. Most retail display cases for chilled products are
maintained at temperatures between approximately 39 to 45 degrees
Fahrenheit (4.4 and 7.2 degrees Centigrade). (App. 111-93, Var
sel, p. 239)
133. Under the best of conditions, chilled ready-to-serve
orange juice from concentrate has a shelf life of approximately 5
to 6 weeks. (App. 111-93, Varsel, p. 239; App. 11-32, Fellers Af
fidavit par. 8)
134. Bottled orange juice is pasteurized at a higher tem
perature than chilled juice. The glass containers are filled hot
and the hot juice serves to sterilize the container. Bottled
orange juice is an example of aseptic packing. (App. 111-93, Var
sel, p. 239-240; App. 11-32, Fellers Affidavit par. 9)
135. Because the hot-pack bottles are vacuum sealed, ready-
to-serve orange juice in bottles can be stored at room tempera
ture and has a shelf life of up to one year. (App. 11-32,
Fellers Affidavit par. 10)
B. Diethyl Pyrocarbonate (DEPC)
136. DEPC is a clear, water white liquid with a fruity ester
type odor. (App. 111-66, Food Additive Petition No. 2A0675,
Chas. Pfizer & Co., p. 3 (1961) ["Pfizer Petition"]. DEPC was
42
r
isolated and identified by Boehm and Mehta at the University of
Berlin in 1938. Initially, it was used to enhance
the sparkling and effervescent properties of champagne. It was
not until 1955 that DEPC's antimicrobial activities were dis
covered. (App. 111-66, Pfizer Petition, p. 19) DEPC can range
in color from clear to faint yellow. (App. 11-31, Goldbeck Af
fidavit par. 6)
137. DEPC breaks down into its constituent compounds when it
is exposed to water. When DEPC is added to an aqueous solution,
it breaks down into its constituent compounds within 24 hours.
(App. 111-67, Food Additive Petition No. 7H2082, Metachem Inc.,
(1966) ["Metachem Petition"], p. 5) DEPC is extremely sensitive
to oxygen and moisture in the air. Once exposed to air, DEPC
will decompose in about 2 weeks. (App. 11-31, Goldbeck Affidavit
par. 4)
138. DEPC is an "antimicrobial." The antimicrobial ac
tivities of DEPC were discovered by research scientists at Far-
benfabriken Bayer AG ("Bayer"), which is located in Leverkusen,
Germany. In the late 1950s Bayer began limited production of
DEPC for experimental purposes as Ue 5908. Bayer applied for
patents in Germany and the United States in 1956 and 1957,
respectively. The United States Patent Office issued patent no.
2,910,400 on October 27, 1959.
139. In the early 1960s DEPC was approved as a food additive
in several countries in Europe and South America. Following ap
proval for its use by a number of countries, Bayer began full-
scale commercial production in August 1962 under the registered
43
trade name Baycovin. (App. 111-67, Metachem Petition, p. 2, 15-
18)
140. DEPC was approved for use as a food additive in wine,
beer and fruit juice-based beverages in the 1960s. See 28 Fed.
Reg. 2900 (1963) (approved for used in still wines); 32 Fed. Reg.
3819 (1967) (approved for use in malt beverages); 33 Fed. Reg.
12,229 (1968) (approved for use in fruit-based beverages, but not
in pure fruit juices).
141. The action of DEPC is analogous to heat treatment. Its
effect has often been described as "cold sterilization.11 (App.
111-67, Metachem Petition, p. 3).
142. Beverages which are "cold-sterilized" with DEPC need at
most only flash heat-treatment. Fruit juices treated in this
manner can have a superior flavor and are generally indistin
guishable from the natural products. (App. 111-67, Metachem Peti
tion, p. 10)
143. DEPC is an alternative to in-bottle sterilization or
prior sterilization followed by aseptic filling. (App. 111-67,
Metachem Petition, p. 4)
144. In 1971, scientists in Sweden concluded that while DEPC
was decomposing, it could combine with ingredients naturally oc
curring in orange juice to form urethan, a carcinogen. (App.
111-94, G. Lofroth and T. Gejvall, "Diethyl Pyrocarbonate: Forma
tion of Urethan in Treated Beverages, in Science, p. 1248 [Vol.
174, December 1971])
145. As a result of these studies, DEPC was banned as a food
additive by the FDA in August 1972. 39 Fed. Reg. 149 (August 2,
1972), codified at 21 C.F.R. Sec. 189.140 (1990).
44
fa
VI. Everfresh's Manufacturing and Pricing Practices
146. Everfresh has admitted that in the years 1983 through
1988 inclusive, it adulterated orange juice with pulpwash, beet
sugar, and a variety of chemicals and other additives. See
paragraph 66-68, above. The nature and scale of adulteration to
which Everfresh has admitted required the active involvement of
Everfresh employees in quality control and marketing.
147. The quality of food can only be evaluated in relation
to a standard. (App. 111-82, 19 Encyclopedia Britannica, Food
Processing, p. 394 [15th ed. 1986]) According to the industry
standard for orange juice from concentrate, the only permissible
ingredients in such product are orange juice concentrate and
water. The product that Everfresh labeled as "100% pure orange
juice from concentrate" deviated from the industry standard in
that the Everfresh product contained non-standard ingredients
such as added pulpwash, beet sugar, chemical additives, and
chemical preservatives. (App. 1-13, Powell Affidavit par. 3)
148. The quality control department within a beverage
processing company defines and formalizes standards and is
responsible for keeping deviations from these standards within
predetermined limits. It must also assure that the final product
meets all specifications, complies with relevant laws and regula
tions, and reaches the consumer in satisfactory condition. (See
App. 111-82, 19 Encyclopedia Britannica, Food Processing, p. 394
[15th ed. 1986])
149. During the period from 1975 to 1989, the persons who
had primary responsibility for quality control at Everfresh were
45
Jeff Jackson, Bruno Moser, Glen Davis, and Susan Guss. Their
respective roles are described below in paragraphs 150-153.
150. Prior to April 1978, the formulas that were used at
Everfresh originated with Home Juice/Illinois, its parent
corporation.9 The formulas were developed by Jeff Jackson, who
was in charge of Quality Control at Home Juice/Illinois. (App.
11-39, Moser Dep. 20-21, 24; App. 11-40, Marshall Dep. 62; App.
11-41, Walker Dep. 5-6)
151. Moser was in charge of quality control at Everfresh
from at least the early 1970s up until April 1978. In April
1978, Everfresh was spun off as an independent company controlled
by Albert Allen. Jeff Jackson, who had worked for Allen at Home
Juice/Illinois, left that company and followed Allen to
Everfresh. After Jackson moved to Everfresh, Moser reported to
him. Jackson retired in the early 1980s. (App. 11-39, Moser Dep.
24-26)
152. Glen Davis began working at Everfresh in the late
1970s. He worked under Moser and Jackson. He became Director of
Quality Control in about 1983. He was discharged by Hugo Powell
in April 1989. (App. 11-39, Moser Dep. 27-28, 30-31; App. 11-44,
Powell Dep. 139)
153. Susan Guss began working at Everfresh in October 1986.
Her first job was as a Laboratory Technician. She was promoted
to Quality Control Manager in June 1988. After Glen Davis was
9. From 1972 to April 1978, Everfresh was a wholly-owned sub
sidiary of Home Juice/Illinois. Prior to 1972, Everfresh and
Home Juice/Illinois had common shareholders, and they folowed
common business practices; however, there was no formal relation
ship of parent-subsidiary. See paragraphs 15-21, above; see also
App. 11-39, Moser Dep. 20-21.
46
fired, she took over his position as Director of Quality Control.
(App. 11-43, GUSS Dep. 4-6, 12-13)
154. Everfresh's Production Department makes up the schedule
for juices and drinks made on a given day. The information on
the schedule includes the label for the juice, and whether the
product is for Canada or the United States. The Production
Department bases the schedule on information from the Shipping
Department. The Shipping Department gets the information from a
running inventory and from the Sales Department. (App. 11-43,
Guss Dep. 20-23; App. 11-42, Wells Dep. 52-53; App 11-41, Walker
Dep. 16-18)
155. The Production Schedule does not specify the formula to
be used. Rather, the Quality Control Department supplies the
formulas to the compounders who mix the raw ingredients.
156. Everfresh manufactures juice from concentrate in
batches ranging in size from 2500 gallons to 10,000 gallons. The
manufacturing process involves four distinct phases:
(a) Mixing: First, the compounders mix the in
gredients and transfers the mix to a raw juice tank,
where the ingredients are mixed. The blending and
mixing takes between one to two hours, depending on the
size of the batch and whether the concentrate is
"metered" or from drums.
(b) Testing: After a batch has been blended and
mixed, the Quality Control Department tests the batch
for brix, acid and oil.
47
r'
(c) Pasteurizina: if the batch meets the formula
standards, it is released to the pasteurizer for heat
treatment.
(d) Bottling; Once a batch has been heat treated,
it is transferred to a bottling line and either packed
immediately in sterilized glass bottles ("hot pack"), or
else cooled down and then packaged in plastic containers
("cold pack").
(Walker Dep. 18-22, 25-29, 31, 95; Guss Dep. 23)
157. The persons holding the following positions necessarily
knew that Everfresh was adulterating orange juice:
(a) The Quality Control Directors who were respon
sible for developing and adjusting the formulas for
adulterated juice and who ordered the necessary in
gredients. During the period 1975 to 1989, such persons
included Bruno Moser, Jeff Jackson, and Glen Davis.
(b) The Quality Control supervisors who were
responsible for distributed formulas to the compounders.
During the period 1975 to 1989 such persons included, in
addition to those named in (a), Susan Guss.
(c) The compounders who received formula sheets
which described the product as "pure orange juice" but
which listed ingredients such as pulpwash, beet sugar,
preservatives and other chemicals and non-orange addi
tives. During the period 1975 to 1989, such persons in
cluded John Walker, Doug Wells, and Lewis Hurliman.
158. Everfresh sets the price of its products by adding up
the cost of ingredients, and the costs attributable to manufac-
48
turing, labor and overhead, and then incorporating a certain per
centage gross markup over these total costs. Michael
Kanan was in charge of setting prices. Because the setting of
prices requires a knowledge of the ingredients in the juice,
Kanan had actual knowledge of Everfresh's adulterating orange
juice with ingredients other than orange juice concentrate and
water. (App. 1-1, 1976 Answer to Interrogatory 17, September 7,
1976; App. 11-35, Boden Dep. 80-84)
VIZ. Everfresh's Use of DEPC
159. During the 1980s Everfresh's chilled orange juice was
marketed with 90 day pull dates; that is, Everfresh's chilled
juice was represented to have a shelf life of 90 days, or ap
proximately 13 weeks. (App. 111-63, Excerpts from FDA Inspection
and Sample Collection Reports of Everfresh Juice Co. [Control
No.'s 113020, 113036, 113038, 113110]) Cold packed chilled
orange juice has a maximum shelf life of 5 to 6 weeks (35 to 42
days) if prepared and stored under optimal conditions. (App.
11-32, Fellers Affidavit par. 8) Thus, a 90-day shelf life for
chilled juice can only be achieved through the use of a preserva
tive or a cold-fill sterilizer.
160. Extending the shelf life of chilled orange juice
creates a significant marketing advantage. (App. IV-115, 1985
Business Plan, p. 5; App. 11-35, Boden Dep. 190-91)
A. Dr. Fred Kohlbach, IDEA, Ltd. and Bio Trade, Ltd.
161. Fred Kohlbach is a citizen of Germany. Kohlbach has
been in the orange juice business since about 1955. Kohlbach has
been involved with the Home Juice Co. since 1967. (App. 111-69,
Excerpt from Trade Register of Nijmegen, Holland and Letter from
49
Winnibald Moojen to Willis Buck, dated April 5, 1991; App. III-
70, Memorandum to Board of Directors, Home Juice Co., from
Dr. Fred Kohlbach, February 27, 1980)
162. IDEA, Ltd. is a Swiss corporation that was established
in 1969 or earlier. IDEA was originally named "Juice Corporation
AG" but changed its name to IDEA in September 1973. IDEA in
itiated liquidation proceedings in approximately 1987 and was
dissolved in 1989. At the time of its dissolution, Dr. Max Bubb
was the sole director. (App. 111-71, Letter from Ernst Widmer to
Willis Buck, dated March 27, 1991)
163. Kohlbach has been the sole or controlling shareholder
in IDEA since at least 1969. (App. 111-72, Letter from Henry Lang
to John Rammell, dated February 9, 1979; App. 111-73, Letter from
Dr. Fred Kohlbach to Richard Walker, dated March 19, 1979)
164. In May 1969, Leonard Haddad, Kohlbach and Marshall
formed Home Juice International, Ltd., a Swiss corporation that
engaged in the orange juice business in Europe. Kohlbach's
shares were held by his company IDEA, Ltd. (App. 111-72, Letter
from Henry Lang to John Rammell, dated February 9, 1979; App.
111-73, Letter from Dr. Fred Kohlbach to Richard Walker, dated
March 19, 1979)
165. Sometime later, Home Juice International changed its
name to HJ Foods International AG, Chur. At the bottom of this
entity's letterhead is the phrase: "Diese Gesellschaft gehort zur
HOME JUICE Firmengruppe," which translates to: "This corporation
is part of the HOME JUICE group of companies." (App. 111-74, Let
ter from Dr. Fred Kohlbach to John Rammell, March 28, 1982; App
111-84, Lynx Security Report LI/2691.2)
50
166. Attesta Treuhand Und Verwaltungs is a company operated
by Dr. Max Bubb which serves as trustee and financial manager for
other companies. After Haddad's death, Attesta served as trustee
for Haddad's interest in H.J. Foods International. Attesta is
located at the same address in Chur, Switzerland as H.J. Foods
International and both companies share the same phone number.
(App. 111-75, Letter from D. M. Bubb to Marie Haddad, dated
January 31, 1979; App. 11-30, Declaration of John Dollarbeare,
dated April 4, 1991, par. 4)
167. Bio Trade, Ltd. is the successor company to another
company known as IDEA, Ltd., which was registered in the Prin
cipality of Liechtenstein in November 1973. IDEA, Ltd. changed
its name to Bio Trade in January 1987. Bio Trade is located in
Vaduz, Liechtenstein. Kohlbach is the proprietor of this company
and Bubb is on the board of directors. Bio Trade is in the busi
ness of marketing bottling and aseptic processing equipment. It
also markets chemical additives used in the beverage industry.
(App. 111-76, Letter from Ernst Widmer to Willis Buck, dated
April 8, 1991 and excerpt from Register of Trade of Commerce of
Liechtenstein; App. 111-77, Letter from Bio Trade, Ltd, March 19,
1991, with translation; App. 11-30, Declaration of John Dollar
beare, par. 6, 11)
168. Kohlbach is a friend and business associate of Albert
Allen and James Marshall. (App. 11-38, Heritier Dep. 45; App.
11-40, Marshall Dep. 47) At a deposition on September 20, 1990,
Marshall was instructed not to answer any questions about Fred
Kohlbach. (App. 11-40, Marshall Dep. 47-49)
51
169. During the 1980s, Everfresh purchased cold-fill
sterilizers from Bio Trade, according to documents that were not
produced to Grove Fresh until April 5, 1991. (App. IV-130,
Everfresh Bio Trade Documents)
B. The Anonymous Letters to the FDA
170. In January 1983, an anonymous letter writer began cor
responding with several government agencies concerning
Everfresh's use of DEPC. The writer stated that the DEPC was
being brought through customs disguised as a cleaning agent. The
writer alleged that Kohlbach was the supplier of Everfresh's
DEPC.10 (App. 111-57, Anonymous Letter to the FDA Detroit Dis
trict Office, postmarked January 13, 1983 and FDA
Complaint/Injury Report, DET 1536, dated January 14, 1983)
171. The writer sent a separate letter in March 1983 to the
U.S. Customs Office in Detroit informing them that Everfresh was
importing a banned cold-fill sterilizer (described as a DEPC
derivative) from overseas and declaring it to be a sanitizing
agent. (App. 111-58, Anonymous Letter to U.S. Customs Enforcement
Officer, postmarked March 31, 1983)
172. The writer sent at least 2 other letters to the FDA in
July 1983 and December 1984. Copies of July 1983 letter were
also sent to the U.S. Customs Bureau and the Florida Department
of Citrus. The December 27, 1984 letter claimed that Everfresh
chilled orange juice had a 90 day shelf life. (App. 111-58,
10. The anonymous letter was obtained pursuant to a Freedom of
Information Act request to the FDA. The FDA redacted the name of
the alleged supplier from the anonymous letter. However, the
FDA's Complaint/Injury Report, DET 1536, dated January 14, 1983
(App. 111-57) states that the alleged supplier named in the let
ter is "doctor Fred Kohlbach."
52
Anonymous Letter to FDA, dated July 13, 1983 and Anonymous Letter
to FDA, dated December 27, 1984)
173. In March and August 1983, the FDA collected samples of
Everfresh juice to test for the presence of urethan, which is the
carcinogen that is formed in orange juice after DEPC decomposes.
In December 1983, the FDA put the investigation on hold. The FDA
suspended the investigation because it was uncertain of the
method for testing for urethan in orange juice. (App. 111-59,
FDA Complaint/Injury Follow-up Report, DET 1536, dated October
28, 1983)
C. Duane Bosch's Whistleblower Complaint and Complaint to the FDA
174. Duane A. Bosch worked at Everfresh as a quality control
technician from July 5, 1988 to October 29, 1988, when he was
discharged for alleged insubordination. In January 1989, Bosch
filed a complaint in state court under the Michigan Whistleblower
Act. Bosch alleged that he had been discharged because he had
complained about Everfresh's adulteration of orange juice. (App.
11-43, Susan Guss Dep. 13, 78; App. 11-29, Affidavit of Duane A.
Bosch dated April 1991 ["1991 Bosch Affidavit11] 14, 28; App. 1-9,
Complaint in Duane Bosch v. Ever Fresh Inc.. et al.. (Cir. Ct. of
Wayne Co., Michigan)
175. Everfresh settled Bosch's Whistleblower complaint in
October 1989 for an undisclosed sum of money. (App. 1-29, 1991
Bosch Affidavit par. 29)
176. On November 21, 1988, Bosch notified the FDA in Detroit
that Everfresh had been covertly importing a secret chemical ad
ditive from Europe which it surreptitiously added to its orange
53
I) f)
juice product. (App. 111-60, Affidavit dated November 29, 1988
["the Bosch FDA Affidavit"])
177. The secret additive was labeled as "Oleum 320 IDEA" and
allegedly was sold to another Labatt company in Canada. The
secret additive was then brought into the United States through
the Port of Detroit, and packed in blue, five-gallon containers.
The containers were delivered to Everfresh. (App III, Bosch FDA
Affidavit par. 1-2)
178. "Oleum" is the commercial name for fuming sulfuric
acid, which is a colorless or slightly colored, viscous liquid,
emitting choking fumes of sulfur trioxide. Fuming sulfuric acid
is a concentrated form of sulfuric acid. (App. 111-83, The Merck
Index, Monograph 8953 (11th ed. 1989)
179. Sulfuric acid is a clear, colorless, odorless oily li
quid. Sulfuric acid is highly corrosive and must be handled with
great care. It is corrosive to all body tissues. Inhalation of
concentrated vapor may cause serious lung damage. Skin contact
may produce severe necrosis. Ingestion may cause severe injury
and death. (App. 111-83, The Merck Index, Monograph 8953 (11th
ed. 1989))
180. Sulfuric acid and fuming sulfuric acid are used in the
manufacture of fertilizers, explosives, dyestuffs, other acids,
parchment paper, glue, purification of petroleum, and pickling of
metal. Id.
181. Aldrich Chemical Co. of Milwaukee distributes oleum.
As of April 5, 1991, Aldrich's price for oleum, depending on the
grade, was between $125.80 and $135.00 per kilogram. (App. II-
31, Goldbeck Affidavit par. 10)
54
I'")
182. When the containers labeled "oleum 320" arrived at
Everfresh, the labels were removed, and the containers were
stored in a padlocked refrigerated trailer located behind the
manufacturing facility. Food coloring was then added to the con
tainers to disguise the original appearance of the additive. The
secret additive was then removed from its original containers and
placed in glass jars and stored in the quality control
refrigerator until used. (App. 111-60, Bosch FDA Affidavit par.
3, 7, 10 and 13)
183. The five gallon containers had a label printed in Ger
man which read, in part, as follows:
Fullung mit Gefahrgut
hur gem. D/BAM 91214
The text of this label translates as follows: "Contents are haz
ardous, only in accordance with... " (App. 111-61, Memorandum
from K. McConnell to R. Korsakas, dated November 30, 1988; App.
111-84, Lynx Security Report LI/2691.2, par. 5)
184. Pure concentrated DEPC is irritating to the eyes,
mucous membranes and skin. (App. 111-83, Merck Index, Monograph
8008)
185. During the time that Bosch was employed at Everfresh,
only three Everfresh employees had access to oleum 320. Those
three employees were Susan Guss, Quality Control Manager; Glen
Davis, Quality Assurance Manager; and Bruno Moser, Supervisor.
(App. 111-60, Bosch FDA Affidavit par. 4, 6)
186. The purpose of the secret additive was to prolong the
shelf life of orange juice that was packed in plastic containers.
The additive was added to juice marketed under the labels
55
"Everfresh" and "Fresh n' Pure". The secret additive was also
added to juice that Everfresh packed for another company.
(App. 111-60, Bosch FDA Affidavit par. 8-9)
187. Oleum 320 was shipped to Everfresh in five-gallon con
tainers. Before Bosch was fired, he obtained several samples of
oleum 320 and put them in 10 ounce glass containers. In the
process of transferring the liquid from one container to another,
the liquid was exposed to the air. (App. 111-60, Bosch FDA Af
fidavit par. 10)
188. Bosch delivered samples of oleum 320 to the FDA on
November 29, 1988, four weeks after he had been discharged. The
FDA tested the liquid for DEPC on April 3, 1991, but the results
were inconclusive. (App. 111-62, FDA Sample Report 89-440-711,
dated April 12, 1989)
189.. DEPC breaks down into its constituent compounds
when it is exposed to water. When DEPC is added to an aqueous
solution, it breaks down into its constituent compounds within 24
hours. When DEPC is exposed to moisture in the air, it breaks
down into its constituent compounds within two weeks. See
paragraph 137, above. (App. 11-31, Goldbeck Affidavit par. 4)
190. The samples of oleum 320 that Bosch delivered to the
FDA on November 29, 1988, had been exposed to the air at least 4
weeks earlier. Thus, by the time the samples were delivered to
the FDA, the DEPC had broken down and was no longer detectable.
D. Labatt Knew No Later Than February 1989 That Everfresh
Had Been Adding DEPC to its Orange Juice
191. In February 1989, David Murray, Labatt's Technical
Director interviewed Glenn Davis at Everfresh's plant in Warren,
56
*■■■■>>
Michigan. See paragraphs 238-240, below. Davis told Murray that
along with beet sugar, grape juice and pulpwash, Everfresh had
also added a preservative to its orange juice. Davis told Murray
that the preservative came into the plant through different
routes and under different names. Davis said that one of the
names was "Oleum, IDEA." (App. 11-45, Murray Dep. 92-94)
192. Davis asked the Warren accountant-administrator to look
for files and documents that referred either to Oleum or IDEA.
The following documents were located: one computer print-out of
purchased ingredients and a purchase order. (App. 11-45, Murray
Dep. 94-96) These documents were not produced to Grove Fresh un
til April 5, 1991.
193. At a later meeting in Windsor, Ontario with Walter
Gazo, the Windsor QC director, Murray asked the identity of the
preservative. Murray gave the following account of this meeting:
QUESTION: Since then have you learned anything further
about the preservative that Davis discussed with you that
day?
ANSWER: if you are asking whether I know what the
preservative is, I don't. But ves. I have learned more about the preservative and what it might be.
QUESTION: What have you learned?
ANSWER: It was reported in our Windsor meetings, the
ones that Babinski [another Labatt auditor] had, and the
follow up to those meetings with Walter Gazo [the Quality
Control Manager at the Windsor plant]. When we suggested
names to them — okay, we used a series of names, one of
those names was DEPC, whether he had ever heard the word before, and his response was, "Well, yes. I've heard someone called this once DEPC."
(App. 11-45, Murray Dep. 97-98) [emphasis added]
194. On May 5, 1989 and June 21, 1989, Murray attended meet
ings with the FDA at which Labatt and Everfresh disclosed infor-
57
mation about the adulteration practices at the Everfresh divi
sion. No one from Labatt or Everfresh told the FDA about the in
formation that had been gathered concerning DEPC. (App. 111-64,
FDA Memorandum of Meeting, dated May 5, 1989; App. 111-65, FDA
Memorandum of Meeting, June 21, 1989)
E. Everfresh's November 1987 Purchase from Bio Trade, Ltd.
195. On April 5, 1991, Everfresh produced to Grove Fresh,
for the first time, documents which had first been requested in
Grove Fresh's December 1989 document request and which Grove
Fresh repeatedly requested again after David Murray testified
about them in December 1990. These documents indicated that
Everfresh has made purchases from Bio Trade, Ltd., a company
operated by Dr. Fred Kohlbach. See paragraphs 109-118, above.
The documents consist of an invoice and shipping documents from
November 1987 for 10 jerry cans11 of IDEA 300/50 CIP Cleansing
and Aseptisizing Compound. Everfresh paid approximately $198.00
per kilogram for this imported material, for a total purchase
price of $39,682. (App. IV-130, Everfresh Bio Trade Documents,
Control NO.'S 10027809-18)
196. The U.S. Customs Declaration Form relating to this
shipment describes the material as "pesticides.11 (App. IV-130,
Everfresh Bio Trade Documents, Control No.'s 10027810)
197. The documents produced by Everfresh on April 5, 1991,
also include a computer print-out of raw material inventory.
This print-out includes an entry for "Oleum 320-IDEA." (App. IV-
130, Everfresh Bio Trade Documents, Control No.'s 10027818)
11. Webster's Third New International Dictionary defines a "jerry
can" as a 5 gallon fluid container.
58
VIII.The Circumstances Surrounding Kotwicki's Separation From The Labatt organization.
A. The Differences Between The Holiday Juice Formulas And The Everfresh Formulas.
198. Prior to April 1978, Holiday Juice and Everfresh were
both controlled by Leonard Haddad and Albert Allen, who were the
controlling shareholders in Home Juice/Illinois. See paragraphs
5-6 18, above. Holiday Juice and Everfresh began adulterating
orange juice prior to April 1978. Both companies used the same
formula, one that had been developed by Jeff Jackson of Home
Juice/Illinois. (See. First Amended Complaint, par. 100-102, and
Exhibit 6, Grove Fresh Distributors. Inc. v. John Labatt. Ltd..
et al.. No. 90 C 5009 (N.D.I11.)
199. The formulas that were used at Everfresh between 1978
and 1988 were developed from the formulas that Jeff Jackson had
introduced at Everfresh in the mid-1970s. (App. 11-39, Moser
Dep. 63-64)
200. During the 1970s there was no generally recognized
tests for detecting the presence of added pulpwash in orange
juice. The Florida Department of Citrus developed a pulpwash
test that was given interim official status by the Association of
Official Analytic Chemists ("AOAC") in June 1985. The test is
known in the industry as the Petrus Method. The AOAC's cer
tification of the Petrus Method is presently limited to orange
juice packed according to Florida's more stringent standards of
identity. (See. Evans Packing Co. v. Pent, of Agriculture and
Consumer Services. 550 S.2d 112, 120 [1st Dist Ct. of Appeals,
Florida])
59
/ii^
201. During the 1970s, tests for detecting added cane sugar
in orange juice were becoming available. By the early 1980s,
these tests had become widely accepted by industry experts. As a
result, the practice of adulterating orange juice with cane sugar
declined. Cheaters in the industry started using beet sugar in
stead of cane sugar. Tests for detecting beet sugar have become
available only within the last few years. (App. 111-97, Excerpts
from N. Low and K. Swallow, "Detection of Beet Medium Invert
Sugar Addition to Orange Juice by High Performance Liquid
Chromatography" and A.R. Brause, et al., "Detection of Adultera
tion in AJ and OJ by Chemical Matrix Method")
202. As the tests for pulpwash and cane sugar evolved,
Holiday Juice and Everfresh made adjustments in the original Home
Juice formula. Holiday Juice developed a formula that combined
pulpwash at relatively low levels (10% to 15%) with beet sugar,
citric acid, amino acids and other chemicals. (App. 1-13, Powell
Affidavit par. 3; App. IV-127, Memo from Walter Gazo to Michael
Petric, October 27, 1988)
203. Prior to December 10, 1986, when it was still owned by
Albert Allen, Everfresh relied on a combination of white grape
concentrate, pulpwash, and beet sugar. (App. IV-102, 1987
Everfresh Batch Sheets)
B. Mitch Allen's Resistance To Kotwicki's Efforts To Make
Formulations Uniform.
204. At the insistence of the Aliens, Kotwicki had been ex
cluded from the negotiations for Labatt's acquisition of
Everfresh. He was also excluded from the due diligence review of
Everfresh's manufacturing practices. Consequently, Kotwicki did
60
not know the particulars of Everfresh's formulas until after the
transaction closed. See paragraphs 83-85, above.
205. Fraser and Taylor, on the other hand, knew the par
ticulars of Everfresh's adulteration formulas. Albert Allen had
disclosed these formulas to Fraser and Taylor in connection with
his disclosures about the Purity Products suit, and in connection
with the "due diligence" review of Everfresh's manufacturing
practices. Because of these disclosures, Albert Allen was not
required to represent and warrant that Everfresh's products com
plied with applicable laws and regulations regarding labeling.
See paragraphs 90-97, above.
206. After the closing, Kotwicki discovered that Everfresh's
formulas for adulterated orange juice were materially different
from Holiday Juice's. The differences in formulas conflicted
with Labatt's goal of making Holiday Juice's products uniform
throughout North America. (App. 11-35, Boden Dep. 163-64; App.
IV-117, 1987 Business Plan, p 3)
207. In early 1987, Kotwicki took steps to make the formulas
at all three plants uniform. Kotwicki "wanted to get down to one
set of formulas for all locations ... because [the Holiday Juice
plants] were cross-supplying like items from the Franklin Park
and the Warren facility, and for Franklin Park to send an item
and then send the same item out of Warren and have it taste dif
ferent was not advantageous to the company." (App. 11-35, Boden
Dep. 163-64; see also Boden Dep. 190-91)
208. Eliminating white grape concentrate from the Warren
formula would affect taste. It would also affect cost and price.
At the time, white grape concentrate cost between $5 and $6 per
61
gallon. Orange juice concentrate cost about $8 per gallon.
(App. 11-46, Hesbon Dep. 112-13) To avoid jarring cus
tomers with sudden changes in taste and price, Kotwicki sought to
make the change-over at Warren gradually.
209. Mitch Allen did not like Kotwicki. He did not do what
Kotwicki asked. Kotwicki sought to have Allen terminated, but
Fraser would not permit it, at least not initially. Allen's
refusal hurt Kotwicki's authority in the Holiday Juice organiza
tion. (App. 11-35, Boden Dep. 71, 146)
210. In an attempt to bring Allen into line, and also to
further uniform standards at all three plants, Kotwicki asked
David Murray, Labatt's Technical Director, to conduct a proce
dures audit of the Holiday Juice plants. Kotwicki discussed this
decision with all of the Holiday Juice managers, and they con
curred. Kotwicki made this request in mid-1987. However, Labatt
did not act on the request until after Mitch Allen had resigned
in about September 1987. The procedures audit began in January
1988 and was completed with a report dated February 29, 1988.
(App. 11-35, Boden Dep. 160-64; App. IV-128, Final Report, Proce
dures Audit-Holiday Juice Ltd., dated February 29, 1988)
211. Mary MacDonald was in charge of the procedures audit.
In January 1988, she met with the quality control staff at War
ren, including Bruno Moser. Moser testified that she told the
quality control group: "We had to take out the white grape sugar
and that was discussed, not to do it like that anymore..." (App.
11-39, Moser Dep. 79)
C. Kotwicki's Resignation And Subsequent Events.
62
212. Kotwicki felt that he did not have the authority to
hire and fire within the division that he thought he needed. In
August 1988 he told Bruce Fraser that he was resigning. (App.
11-35, Boden Dep. 145-146)
213. Fraser told George Taylor about Kotwicki's plans to
leave the company. In September 1988, Taylor contacted Powell
about taking over Everfresh. Powell accepted the offer in Sep
tember or October 1988. (App. 11-44, Powell Dep. 21-22)
214. Kotwicki's resignation became effective on November 16,
1988, although he was paid until the end of the year. Powell
came to Everfresh on January 16, 1989. Fraser was the interim
chief executive officer. (App. 11-35, Boden Dep. 42)
215. As of the effective date of Kotwicki's resignation, the
following facts were known by Bruce Fraser:
(a) The Purity Products suit against Holiday Juice
had been settled three months earlier, in August 1988.
Holiday Juice paid $250,000 to settle that suit. The
settlement papers had been reviewed and approved by Ken
neth Rosenthal, general counsel to John Labatt, Inc.
Fraser knew of these facts as they occurred, and cer
tainly by November 16, 1988.
(b) A condition of the Purity Products settlement
was that Holiday Juice's products be tested regularly by
and independent laboratory. (App. 11-35, Boden Dep.
74-75) By October 1988, the results of these tests were
available to Fraser, Rosenthal and Kotwicki. These
tests showed that Holiday Juice's orange juice contained
pulpwash. See paragraphs 112-118, 121, above.
63
,fi»
216. On the effective date of Kotwicki's resignation, the
Juiceland suit was still pending. See paragraphs 119-120, above.
Labatt proposed that Kotwicki enter into a consulting agreement
for a monthly stipend in order to assist in the defense of the
Juiceland suit. When Labatt made this proposal it was fully
aware of the fact and amount of the Purity Products settlement,
and it was aware of the tests from outside laboratories showing
pulpwash in Holiday Juice products. Kotwicki agreed.
217. Everfresh's counsel in the Juiceland suit was Nancy Ed
munds of Dykema, Gossett, in Detroit. Dykema, Gossett also rep
resented Everfresh in the Bosch Whistleblower case.
218. In about April 1989, Edmunds asked Kotwicki if he would
meet with attorneys from McDermott, Will & Emery to discuss the
Grove Fresh litigation. Kotwicki agreed to such a meeting. The
meeting was held at Dykema, Gossett and lasted about one-half
hour. The lawyers from McDermott, Will & Emery told Kotwicki
that Everfresh and Kotwicki were on "different sides.*1 The
lawyers did not ask Kotwicki whether officers or directors of
Labatt knew about the manufacture of adulterated orange juice.
219. The lawyers from McDermott, Will & Emery also inter
viewed Michael Petric, Walter Gazo and Glen Davis. The lawyers
did not ask any of these three persons whether officers or direc
tors of Labatt knew about the manufacture of adulterated orange
juice.
220. In May 1989, Labatt, Everfresh and the lawyers met with
the FDA in Washington, D.C. They told the FDA that Everfresh had
been adulterating orange juice; that Kotwicki was the senior-most
corporate official who knew about the adulteration; that Kotwicki
64
f
had created a fraudulent set of books and records to conceal the
adulteration from Labatt; and that they
had terminated payments to Kotwicki under a consulting agreement.
See paragraphs 251-252, below.
IX. The Labatt/Everfresh "Investigations" Into orange Juice
Adulteration At The Everfresh Division.
A. Powell's Alleged Investigation
221. Powell became president of Everfresh on January 16,
1989. He spent the first couple of weeks on the job interviewing
his managers. On Friday, January 20, 1989, he interviewed
Michael Kanan, Everfresh's executive vice-president and chief
financial officer. (App. 11-44, Powell Dep. 69, 73)
222. Prior to this meeting Duane Bosch had complained to the
FDA that Everfresh was adding oleum 320/IDEA to its orange juice,
and submitted an affidavit in support of his charges. See
paragraphs 174-177, above. Bosch had also filed a claim for un
employment compensation with the Michigan Employment Security
Commission. (App. 111-95, Appeal to Referee and Notice of Hear
ing dated January 31, 1989)
223. Everfresh objected to Bosch's claim for unemployment
compensation, alleging that he had been fired for insubordina
tion. Bosch retained an attorney to represent him before the
Employment Security Commission. On December 29, 1988, Bosch's
attorney wrote to Michael Kanan, Everfresh's Executive Vice-
President, and alleged that Bosch had been discharged in retalia
tion for objecting to the use of oleum 320/IDEA in orange juice.
Kanan turned the letter over to Cheryl Yannello, Everfresh's
Director of Human Resources, for reply. Yannello denied the al-
65
legations. (App. 111-96, Letter from Cheryl Yannello to Deborah
A. Tonelli, dated January 10, 1989)
224. Powell started work at Everfresh six days after
Yannello's reply to Bosch's attorney. In the January 20th meet
ing between Kanan and Powell, Kanan told Powell that he should
ask Michael Petric, Everfresh's technical director, about whether
Everfresh's orange juice conformed to FDA standards. (App. II-
44, Powell Dep. 69, 73)
225. After hearing what Kanan had to say, Powell accelerated
his interview of Michael Petric. Powell interviewed Petric on
Saturday, January 21, 1989. Petric admitted that Everfresh had
made orange juice that did not conform to FDA standards. (App.
11-44, Powell Dep. 73, 77-78)
226. On Sunday, January 22, 1989, Powell flew to Toronto so
as to meet first thing on Monday morning, January 23, with George
Taylor, his immediate supervisor in the Labatt organization.
Powell met with Taylor and told him what he had learned from
Kanan and Petric. Powell asked Taylor for the assistance of the
John Labatt quality control department to audit the manufacturing
practices at Everfresh. At Taylor's request, David Murray,
Labatt's director of technological development, contacted Powell.
Powell asked Taylor to conduct an audit of Everfresh's manufac
turing practices. (App. 11-44, Powell Dep. 82-85)
227. Powell himself did not conduct any further investiga
tion beyond his meetings with Kanan and Petric on January 20-21.
After Murray and his staff completed their audit in March 1989
(See paragraphs 238-24 0, below), Murray gave Powell an oral
report of his findings. Murray and his team prepared a detailed
66
written report of the audit, but they were instructed to withhold
the report from all Everfresh employees, including Powell. (App.
11-44, Powell Dep. 89-90; App. 11-48, 12/15/90 Rule 30(b)(6) Dep.
63; App. 11-45, Murray Dep. 123-26; App. 1-22, Affidavit of Wil
liam D. Appier, dated January 17, 1991, par. 8 ["Appier
Affidavit"])12
B. The Appier/Murray Investigation
228. On or about January 27, 1989, Bosch filed suit against
Everfresh and Susan Guss in the circuit court of Wayne County.
Bosch asserted claims under the Michigan Whistleblower's Protec
tion Act. Bosch alleged that he had been fired for voicing the
view that Everfresh should not add oleum 320/IDEA to its orange
juice. Oleum 320/IDEA is the liquid ingredient that Everfresh
imported from Bio Trade, Kohlbach's Liechtenstein company. See
paragraphs 167-169, above. (App. 11-31, Goldbeck Affidavit par.
14)
229. On January 27, 1989, Bosch served the Whistleblower
complaint on Guss by certified mail. On January 30, 1989, Bosch
served the Whistleblower complaint on Everfresh's registered
agent, also by certified mail. (App. 11-31, Goldbeck Affidavit
par. 14)
230. In early February, 1989 — shortly after Bosch's com
plaint would have been received by Everfresh — George Taylor
asked David Murray to call Powell. Murray contacted Powell, who
12. Everfresh purported to file the Appier Afidavit under seal
and refused to serve Grove fresh with a copy. However, Everfresh
did not seek or obtain leave of court to file the affidavit under seal. The Appier Affidavit was therefore placed in the public file by the Clerk of Court. Grove Fresh obtained its copy of the affidavit from the public file.
67
told Murray of Everfresh's problems with adding undeclared in
gredients to orange juice. Murray asked for and received
Powell's permission to contact Michael Petric and Glen Davis.
(App. 11-45, Murray Dep. 67-68)
231. Murray made a telephone call to Petric and asked him a
series of questions about Everfresh's non-compliance. At that
time, Petric only confirmed to Murray that Everfresh had diluted
its orange juice and that it had on a few occasions added sugar.
(App. 11-45, Murray Dep. 70)
232. Murray next called Davis. Davis confirmed what Petric
had told him, but he went further, indicating that Everfresh had
added sugar and extra water much more frequently. (App. 11-45,
Murray Dep. 71-72)
233. On or before February 7, 1989, Murray met with Dean
Kitts, Labatt's General Counsel, at Kitts' office in London, On
tario. Murray related what he had learned from Petric and Davis.
(App. 11-45, Murray Dep. 73-74)
234. On February 7, 1989, Labatt contacted the law firm of
McDermott, Will & Emery for advice on how to handle the problem
of fruit juice adulteration at Everfresh. William D. Appier,
Esq., a partner in McDermott, Will & Emery's office in
Washington, D.C., took charge of the matter. Appier's practice
is concentrated in matters before the FDA. Appier has repre
sented Labatt in various FDA-related since 1985. (App. 1-22, Ap
pier Affidavit par. 1)
235. The nature and scope of the problem was defined for
McDermott, Will & Emery by Dean Kitts, General Counsel of John
Labatt, Ltd., and Ken Rosenthal, General Counsel to John Labatt,
68
t$)
Inc. Kitts and Rosenthai told Appier that "a former CEO of
Everfresh, Inc. had added unlabeled ingredients to orange
juice by the company.11 (App. 1-22, Appier Affidavit par. 2-3)
236. On February 9, 1989, Appier sent Labatt a letter out
lining the facts and issues as he then understood them. Appier
recommended "that there be a thorough investigation of the mat
ter, which in [Appier's] opinion was required by relevant FDA
regulations." (App. 1-22, Appier Affidavit par. 5-6)
237. On February 14, 1989, Appier and one of his associates,
Gaile L. McMann, participated in a telephone conference call with
Kitts, Rosenthal, and David Murray. The point of the call was to
discuss the investigation that Appier had recommended and to
review the facts as then known to McDermott, Will & Emery. (App.
1-22, Appier Affidavit par. 6; App. 11-45, Murray Dep. 75-78)
238. Following this conference call and another separate
meeting with Kitts, Murray met with Dr. Crossley Loughheed and
told him to prepare his audit team for an immediate three-site
inspection. (App. 11-45, Murray Dep. 80)
239. Within a day or two of the February 14th conference
call, Murray and his staff made simultaneous, unannounced inspec
tions of the Everfresh facilities in Franklin Park, Illinois,
Warren, Michigan, and Windsor, Ontario. Each inspection lasted
two days. Each of the auditors wrote up a separate report of his
inspection. (App. 11-45, Murray Dep. 80-83)
240. Dr. Crossley Loughheed took the three reports and
transformed them into a single report that was addressed to
McDermott, Will, & Emery. Murray sent this report to Kitts, who
69
fift,
in turn transmitted it to McDermott, Will & Emery. (App. 11-45,
Murray Dep. 128)
241. Grove Fresh filed its complaint against Everfresh on
February 10, 1989. On February 16, 1989, McDermott, Will & Emery
was informed of Grove Fresh's suit, and was retained to defend
the new suit. (App. 1-22, Appier Affidavit par. 6)
242. On February 21, 1989, Appier sent Rosenthal a letter
instructing that "the report of the investigation should be
provided to [McDermott, Will & Emery], with no copies retained by
Everfresh or Labatt.11 (App. 1-22, Appier Affidavit par. 7)
C The Story Labatt/Everfresh Reported to the FDA
243. Kitts transmitted the report to McDermott, Will & Emery
on February 21 or 22, 1989.
244. Mervin Shumate was an employee of the FDA for 31 years.
He began his career with the FDA in 1955 as an investigator in
the Minneapolis district. By the time of his retirement in
January 1986, he was the FDA's Director of the Office of Enforce
ment for the Associate Commissioner for Regulatory Affairs. From
about 1973 until his retirement in January 1986, he was the
senior official that would approve any regulatory action on be
half of the FDA. He is currently self-employed as a
consultant.(App. 11-47, Shumate Dep. 9-10, 26, 31)
245. Shumate was retained by Appier in April 1989. Based on
his knowledge of the FDA, Shumate suggested that a meeting be ar
ranged between Everfresh representatives and officials of the
FDA. (App. 11-47, Shumate Dep. 26-27, 44)
246. Shumate attended two meetings with his former FDA col
leagues on Everfresh's behalf. The meetings took place in May
70
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and June of 1989. The purpose of the first meeting was to inform
the FDA of Everfresh's past problems with non-compliance as to
FDA standards for pure orange juice, and to report on how such
problems were being corrected. Everfresh's then president, Hugo
Powell, actually made the presentation with the assistance of
David Murray. Also present at the meeting were Bruce Weitzman
and William Appier of McDermott, Will & Emery; Kenneth Rosenthai,
Labatt in-house counsel; and John Taylor and Ray Gill of the FDA.
(App. 11-45, Murray Dep. 16-19)
247. Shumate attended a second meeting with FDA officials
and Everfresh representatives in June 1989. Also present at the
meeting were Appier, Murray, Ray Gill and a representative from
the Center for Food Safety and Nutrition. The purpose of this
meeting was to present Everfresh's orange juice sample testing
program. Test reports of samples of Juiceland orange juice were
presented to the FDA at this meeting. (App. 11-47, Shumate Dep.
35-36)
248. McDermott, Will & Emery received the report of the
Labatt auditors on February 22, 1989. Between that date and the
date of the first meeting with the FDA (May 5, 1989), McDermott,
Will & Emery conducted its own investigation. During this period
they interviewed Kotwicki, Petric, Davis and Gazo. They did not
interview Mitch Allen or Robert Heritier. (App. 11-38, Heritier
Dep. 32; App. 11-37, M. Allen Dep. 21; App. 1-22, Appier Af
fidavit par. 8)
249. During this period McDermott, Will & Emery also con
sulted with attorneys at Dykema, Gossett, the Michigan law firm
representing Everfresh in Metro Institutional Food Services. Inc.
71
f'A
v. Holiday Juice. Ltd. et al. (Cir. Ct. of Wayne Co., Michigan,
88-808154) (the "Juiceland litigation")
250. In April 1989, Everfresh discharged Petric, Davis and
Gazo. They also terminated payments under a consulting agreement
then owing to Kotwicki.
251. On May 5 and June 21, 1989, Everfresh and Labatt met
with the FDA. Although they did not mention Kotwicki by name,
the report to the FDA referred to the "president of Everfresh
[who] apparently left the firm in early 1989." As reflected in a
memorandum prepared by Martin J. Stutsman, an FDA officer, the
Labatt contingent gave the following account of their internal
investigation:
The president of Everfresh apparently left the firm
in early 1989. Subsequently, Labatt discovered that the
president and 3 employees had been systematically adul
terating orange juice sold in this country with
pulpwash, sugar and a mix of chemical substances. The
composition of the chemical mixture was a closely held
secret among the former president and several others.
The mixture was intended to conceal the adulteration by
causing the product to appear normal in the usual tests
for adulteration. A completely false set of books was
fabricated to conceal the adulteration from Labatt.
After discovering these facts, Labatt terminated
payments to the former president and fired a number of
quality control individuals who were apparently in on the scheme.
(App. 111-65, FDA Memorandum of Meeting dated June 21, 1989, p.2)
252. In an affidavit dated April 10, 1990, Powell summarized
the results of the audit insofar as they were reported to the
FDA. Powell's account of the adulteration practices at Everfresh
omits any mention of the Aliens, who owned and operated the com
pany from April 1978 through December 1986, and who then control
led operations for the next eight months or so. It also omits
72
any mention of the 1986 Purity Products suit or the 1988
Juiceland suit:
2. In January 1989, ... I learned that under
Daniel F. Kotwicki's control, the Company had prepared amounts of orange juice from concentrate in a manner
contrary to the manner that I believe should have been used.
3. Specifically, I was told that ... in 1986,
1987 and some portion of 1988, Daniel F. Kotwicki had
the company prepare orange juice not only from con
centrate, water and orange oils, but also with some ad
ditional orange pulpwash and liquid sugar. ... Mr.
Kotwicki [also] had the Company bolster the orange
juice's levels of vitamin C, potassium, citrate and amino acids. In addition. I have been told that for
some of the orange juice packaged in plastic bottles
during part of that time. Mr. Kotwicki had the Company
add a preservative. [^1
4. I have been told that Mr. Kotwicki may have
had the Company begin this manner of preparing orange
juice as early as some time shortly after the acquisi tion of the Franklin Park, Illinois facility on January 21, 1986, and some time shortly after the acquisition of
the Warren, Michigan facility on December 10, 1986. ...
6. I have been told that Mr. Kotwicki implemented
this manner of preparing orange juice through certain
individual Company employees in Franklin Park, Illinois
and Warren, Michigan. I ordered the termination of the
employment of those employees in early 1989
7. In May, 1989, I made a presentation to the
United States Food and Drug Administration, disclosing
these matters I had learned, and explaining the steps
taken by the Company to be sure that there can be no recurrence.
8. As far as I can determine, the only complaints
that the Company received concerning the manner in which orange juice was prepared was a lawsuit filed in
Maryland in 1988 by attorney Jeffrey C. Hines, with
Purity Products as plaintiff, and the litigation filed in Illinois in 1989 by attorney Jeffrey C. Hines, with Grove Fresh as plaintiff, (emphasis added)
13. This apparently refers to the "unknown" preservative that
was in a packaged labeled "Oleum 320." See paragraphs 174-190, above.
73
(App. 1-13, Powell Affidavit, dated April 10, 1990)
D. Everfresh's Admissions of Adulteration: 1983 to 1988
253. Everfresh has limited its responses to discovery to the
period 1983 to the present. Everfresh has admitted that in each
of the years from 1983 to 1988, product which it labeled as "100%
pure orange juice" contained pulp wash, liquid sugar, and pre
servatives. (App. 1-21, Further Response To Certain Of
Plaintiff's Requests To Admit, October 5, 1990; App. 1-23, Fur
ther Response to Certain of Plaintiff's Discovery Requests,
January 25, 1991; App. 1-13, Powell Affidavit par. 3)
X. Defense Counsel Have Consciously Avoided Interviewing Wit
nesses Who Have Knowledge Of Information About Adultera
tion at Warren
A. Though Labatt Had Contractual Rights To Demand in
formation About Adulteration From Albert Allen,
Mitch Allen And Michael Kanan, Labatt's Attorneys Chose Not To Exercise Those Rights.
254. Among the conditions to the closing of the Stock Pur
chase Agreement between Labatt and Albert Allen were the execu
tion of employment contracts and covenants not to compete by and
between Everfresh and Labatt, on the one hand, and Mitch Allen,
Michael Kanan, and Albert M. Allen, on the other. (App. IV-104,
Letter of Intent dated November 4, 1986, par. 10)
255. As part of the acquisition, Labatt entered into two
five-year agreements with Mitch Allen.
(a) One of the agreements was an employment agree
ment. Paragraph 3 of this agreement provides for two
forms of compensation, salary and bonus.
(i) The salary was payable only for as long
as Mitch Allen was actively employed, or for two
74
years, whichever was greater. Pursuant to this
agreement, Mitch Allen continued as chief operating
officer until sometime in the fall of 1987, when he
resigned.
(ii) Paragraph 3(b) of the employment agree
ment also provides for the payment of a quarterly
bonus of $18,750. These quarterly bonuses are pay
able over a five-year period. The final payment is
due on January 31, 1992. (App. IV-105, M. Allen
Employment Agreement, p. 3)
(b) The other agreement was a covenant not to com
pete. Paragraph 2 of this agreement provides for a pay
ment of $56,250 in each of 20 quarterly periods over
five years. The quarterly payments total $225,000 per
year, and $1,125,000 over five years. (App. IV-106, M.
Allen Agreement Not to Compete, p. 2)
256. Also as part of the acquisition, Labatt entered into
two, five-year agreements with Michael Kanan.
(a) One of the agreements was an employment agree
ment. Paragraph 3 of this agreement provides for two
forms of compensation, salary and bonus.
(i) The salary was payable only for as long
as Kanan was actively employed, or for two years,
whichever was greater. Pursuant to this agreement,
Kanan continued as executive vice-president until
March 1989, when he was terminated.
(ii) Paragraph 3(b) of the employment agree
ment also provides for the payment of a quarterly
75
bonus of $3,750. These quarterly bonuses are pay
able over a five-year period. The final payment is
due on January 31, 1992. (App. IV-107, M. Kanan
Employment Agreement, p. 3)
(b) The other agreement was a covenant not to com
pete. Paragraph 2 of this agreement provided for a pay
ment of $11,250 in each of 20 quarterly periods over
five years. The quarterly payments total $45,000 per
year, and $225,000 over five years. The final payment
is due on January 31, 1992. (App. IV-108, M. Kanan
Agreement Not to Compete, p. 2)
257. Other than title and the amount of compensation, Mitch
Allen's and Michael Kanan's employment agreements were the same.
Paragraph 6 concerns "Inventions," a defined term that includes"
methods, know-how, [and] processes" that relate to Everfresh's
juice-processing. This paragraph states that such Inventions are
the exclusive property of Everfresh and requires the employee,
when requested, to "disclose promptly and in writing to the Com
pany all Inventions within the scope of this Agreement."
Paragraph 6 further requires the employee to "execute all docu
ments ... and do all other acts necessary to assist in the
preservation of all the company's interests arising under the
Agreement." The paragraph specifically provides that "[t]he
Employee's obligations under this Section 6 shall survive any
termination of this Agreement." (App. IV-105, M. Allen Employment
Agreement, December 10, 1986, par. 6; App. IV-107, M. Kanan
Employment Agreement, December 10, 1986, par. 6)
76
257A. Albert Allen entered into a consulting and non-
compete agreement with Labatt. This agreement provides for an
nual compensation of $104,000. Paragraph 8 imposes on Albert Al
len the same obligations as those set forth in paragraph 6 of the
employment agreements of Mitch Allen and Michael Kanan. (App.
IV-110, Consulting and Non-Compete Agreement, dated December 10,
1986, par. 3, 8)
258. Defense counsel did not interview Mitch Allen. (App.
11-37, M. Allen Dep. 21) Even though Kanan and Albert Allen have
knowledge of adulteration at Warren (See paragraphs 90-94, 158,
above), there is no evidence that defense counsel has ever inter
viewed them. The Allen brothers and Kanan should have been iden
tified in interrogatory answers as having had knowledge of adul
teration.
B. Defense Counsel Chose Not To Obtain Information About
Adulteration From Robert Heritier
259. Robert Heritier is a member of the Michigan bar. From
1957 through 1964, he worked in the Tax Department at Arthur An
derson & Co. in Detroit. (App. 11-38, Heritier Dep. 4-6)
260. Heritier first met Albert Allen in 1961 or 1962. At
the time, Everfresh (then known as Home Juice) was a client of
Arthur Anderson & Co., which assisted Everfresh in the prepara
tion of tax returns and financial statements. (App. 11-38,
Heritier Dep. 4, 8)
261. Heritier left Arthur Anderson & Co. in 1964 and estab
lished a firm for the private practice of law. He has been en
gaged in the private practice of law ever since. Presently, the
77
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name of his firm is Heritier, Prillwitz & Nance. (App. 11-38,
Heritier Dep. 7-8)
262. Albert Allen and Everfresh became clients of Heritier's
law firm in the spring of 1978. Heritier represented Allen in
the transaction whereby Everfresh was spun off from the Home
Juice Co. as an independent entity. After this transaction, Al
bert Allen was the sole shareholder of Everfresh. (App. 11-38,
Heritier Dep. 14-19)
263. Albert has a younger brother, Michael Allen, who goes
by the name "Mitch." Heritier first met Mitch in 1978, when
Everfresh became a client. At the time, Mitch was an officer of
Everfresh. (App. 11-38, Heritier Dep. 9)
264. Heritier represented Everfresh in the 1982 and 1986
suits brought by Purity Products, although he did not file ap
pearances as trial counsel. Heritier personally investigated the
allegations of both complaints, and he also drafted answers to
interrogatories in both cases. (App. 1-4, 1982 Answer to Inter
rogatory No. 18; App. 1-5, 1986 Answer to Interrogatory No. 18;
App. 11-38, Heritier Dep. 104-105)
265. On December 10, 1986, Albert Allen sold his interest in
Everfresh to JLI Juice Co., a wholly-owned subsidiary of John
Labatt, Inc. After this sale, Heritier has continued to repre
sent Albert Allen personally. Heritier and his firm render tax,
business and investment advice to Albert Allen. (App. 11-38,
Heritier Dep. 4-5, 9)
266. Heritier continued to represent Everfresh after Decem
ber 10, 1986, when it was acquired by Labatt. Heritier repre
sented Everfresh in matters pending on the date of closing, in-
78
eluding the Purity Products suit. He also represented Everfresh
in several new matters. He or his firm rendered legal services
to Everfresh in 1987, 1988, 1989, and 1990. (App. 11-38,
Heritier Dep. 24-25; 38-41; 147-48) In the firm's biographical
listing in the Martindale-Hubbell Directory for 1990, Everfresh,
Inc. was listed as one of 15 representative clients. (App. III-
86, Biographical Profile of Heritier, Prillwitz and Nance,
Martindale-Hubbell, 1990)
267. Heritier first spoke to Weitzman in about February
1991. He has never met or spoken to any of the other attorneys
at McDermott, Will & Emery who represent Everfresh (i.e.. Appier,
David Stetler, and Lazar Raynal). Nor has he ever met or spoken
to Joseph Duffy, Labatt's attorney. (App. 11-38, Heritier Dep.
30-32)
268. Since February 1989, no one representing Everfresh has
asked Heritier to assist in the investigation of the allegations
in Grove Fresh's complaint. (Heritier Dep. 155)
269. Since December 10, 1986, no officer, agent or attorney
of Labatt has contacted Heritier on the subject of Everfresh's
practices regarding the manufacture of orange juice. (App. II-
38, Heritier Dep. 167)
XI. Bruce Fraser, Dean Kitts, George Taylor And David Murray Had
Knowledge Of Everfresh's Adulteration Prior To January 1989
270. Bruce Fraser is Labatt's vice president for corporate
development. He is the Labatt officer who supervises the opera
tions of the Everfresh division. The Everfresh division came
into being in September 1983, when Labatt acquired Holiday Juice,
Ltd. From September 1983 to the present, Fraser has been an of-
79
ficer and director of at least one of the corporations in the
Everfresh division. He was actively involved in the nego
tiations for Labatt's acquisitions of all four of the juice-
processing businesses that have been folded into the Everfresh
division. See paragraphs 10-11, 82, 98-108, above.
271. Fraser had actual, contemporaneous knowledge of the
practices in the Everfresh division whereby orange juice from
concentrate was made with non-orange ingredients such as beet
sugar, pulpwash, chemical preservatives and other chemical addi
tives. Fraser's knowledge came from the following, among others:
(a) discussions with Kotwicki concerning levels of
adulteration at Holiday Juice and Everfresh;
(b) the disclosures about the Purity Products
adulteration suit made to Fraser and George Taylor at
the meeting of October 17, 1986, when Fraser and Taylor
offered, on behalf of Labatt, to purchase Albert Allen's
stock in Everfresh for $10,000,000;
(c) discussions with Allen's counsel concerning
Allen's unwillingness to represent and warrant that
Everfresh's products conformed to all applicable laws
concerning labeling;
(d) discussions with Mitch Allen and Kotwicki
about settling the March 1986 Purity Products adultera
tion case, which was ultimately settled in about Septem
ber 1987;
(e) discussions with Kotwicki about the January
1988 Purity Products adulteration suit against Holiday
Juice, which was settled in August 1988 for $250,000;
80
(f) discussions with Kotwicki about the Juiceland
adulteration suit, which was filed in March 1988 and
settled in 1990; and
(g) discussions with Kotwicki and David Murray in
or about October 1988 concerning tests by outside
laboratories showing that Everfresh's orange juice con
tained pulpwash.
See paragraphs 82-87, 90, 111-121, above.
272. Dean Kitts was a vice president and director of Holiday
Juice from September 1983 until his retirement in June 1990. He
was also a vice president of Everfresh from the date Labatt ac
quired it on December 10, 1986 until his retirement in June 1990.
273. Kitts was also an officer and director of JLI Juice
Co., the Michigan corporation that was formed in November 1986
for the sole purpose of acquiring Albert Allen's stock in
Everfresh. JLI Juice was merged into Everfresh in March 1987.
274. Kitts had actual, contemporaneous knowledge of the
practices in the Everfresh division whereby orange juice from
concentrate was made with non-orange ingredients such as beet
sugar, pulpwash, chemical preservatives and other chemical addi
tives. Kitts' knowledge came from the following, among others:
(a) his review of the terms under which Labatt
purchased Albert Allen's stock in Everfresh, including
Allen's refusal to represent and warrant that
Everfresh's products conformed to all applicable laws
governing labeling of juice products; and
(b) conversations with Fraser regarding the sub
jects outlined in paragraph 271 (a)-(g), above.
81
fify
275. George Taylor is Labatt's Executive Vice-President and
a Labatt director. (1990 Labatt Annual Report, pp. 44-45) In the
Labatt hierarchy, Fraser reports to Taylor. Taylor had actual,
contemporaneous knowledge of the practices in the Everfresh divi
sion whereby orange juice from concentrate was made with non-
orange ingredients such as beet sugar, pulpwash, chemical pre
servatives and other chemical additives. Taylor's knowledge came
from the following, among others:
(a) his attendance at the meeting of October 17,
1986, where Allen's attorney disclosed the allegations
of adulteration in the then pending Purity Products
litigation;
(b) his review of the terms for Labatt's purchase
of Albert Allen's stock in Everfresh, including Allen's
refusal to represent and warrant that Everfresh's
products conformed to all applicable laws governing
labeling of juice products; and
(c) conversations with Fraser and Kitts regarding
the subjects outlined in paragraphs 271 (a)-(g), above.
276. Murray had actual, contemporaneous knowledge of the
practices in the Everfresh division whereby orange juice from
concentrate was made with non-orange ingredients such as beet
sugar, pulpwash, chemical preservatives and other chemical addi
tives. Murray's knowledge can be inferred from the following
facts:
(a) Murray is the Director of Technical Affairs
for Labatt. in about 1986, he developed a staff to con
duct regular audits of manufacturing practices at the
82
various Labatt subsidiaries. His staff included Mary
MacDonald. (App. 11-45, Murray Dep. 4, 10-11, 34)
(b) According to the documents produced by the
defense, the last time the Warren plant used white grape
concentrate in its orange juice was in late December
1987. On January 12, 13, 18 and 19, 1988, MacDonald
conducted an audit of all three plants in the Everfresh
division. During her visit to the Warren plant, she in
terviewed Bruno Moser. According to Moser, MacDonald
said:
We had to take out the white grape sugar and that
was discussed, not to do it like that anymore,
we're going to do it this way and so on. ... She
said the formula is to be changed and all the in
gredients will not be put in." (App. 11-39, Moser Dep. 79; see also Moser Dep. 77-78))
(c) There are two possible ways in which MacDonald
could have learned about the Warren plant's use of white
grape juice in the formulation for orange juice: either
Murray himself already knew and told her prior to her
visit to the Warren plant, or else MacDonald learned
about it in the course of the audit. If MacDonald did
not learn about the use of white grape juice until the
audit, it is reasonable to infer that she disclosed this
fact to Murray when reporting to him on the results of
her audit.
XII. Procedural History of Grove Fresh's Efforts to Discover the Ingredients In Everfresh's Misbranded Juice
277. On or about February 10, 1989, along with the com
plaint, Grove Fresh served defendants with a set of inter
rogatories. Nos. 2 and 24 of this set sought information regard-
83
ing all of the ingredients in Everfresh's orange juice. (App.
1-10, Interrogatories, February 11, 1989) The defendants did not
answer these interrogatories. On July 27, 1989, Grove Fresh
served deposition notices. In August, 1989, the defense obtained
a stay of discovery pending a ruling on the motion to dismiss.
On November 27, 1989, the court granted in part and denied in
part the motion to dismiss.
278. On December 1, 1989, Grove Fresh served its first
amended set of interrogatories and its first document request.
Interrogatory no. 5 asked whether Everfresh had adulterated
orange juice during the period beginning January 1, 1983. Inter
rogatories 7, 8 and 9 asked:
7. If the answer to interrogatory no. 5 is "yes,"
describe the formula used to manufacture the adulterated
orange juice. If more than one formula was used,
describe each such formula, and state the period of time
during which it was used.
8. For each of the ingredients ... in the for
mulas described in the answer to interrogatory no. 7,
give the following information:
(a) the identity of the vendors from whom you
purchased such ingredients, and
(b) the purchase price of each ingredient.
9. Identify all documents that refer or relate to
your adulteration of orange juice.
Document Request No. 4 asked for "[a]11 documents identified in
your answer to Interrogatory No. 9." Request no. 5 asked for
"[a]11 documents that refer or relate to the formulas identified
in your answer to Interrogatory No. 7." (App. 1-12, Response to
Plaintiff's First Amended Set of Interrogatories and First Re
quest For Documents, February 22, 1990)
279. On February 22, 1990, Everfresh gave the following com
posite answer to Interrogatories 5 through 10:
84
Defendant repeats its objection to Interrogatory
No. 1 [14] as part of its objection to Interrogatory Nos. 5-10, and further objects to plaintiff's definition
(c)•[ ] In order to minimize further disputes,
however, defendant states that during the time Daniel
Kotwicki was president of Everfresh, Inc., orange juice
from concentrate was prepared in a manner different from
that under the management that replaced Mr. Kotwicki.
Everfresh also refused to produce any documents. Its entire
response to the document request was: "Defendant repeats the ob
jections and responses set forth to plaintiff's interrogatories
as its objections and responses to plaintiff's document
requests." (App. 1-12, Response to Plaintiff's First Amended Set
of Interrogatories and First Request For Documents, February 22,
1990)
280. The parties met for a 12k conference on March 20, 1990.
Among other things, Everfresh withdrew its objections to inter
rogatories 1, 5, 7, 8 and 9, and all of its objections to the
corresponding document requests. Everfresh agreed to answer the
interrogatories and produce documents by April 9, 1990.
281. Instead of answering the interrogatories, Everfresh
served Grove Fresh with a two and one-half page affidavit from
Hugo Powell. Grove Fresh objected to the response as a breach of
the agreements reached at the 12k conference. In reply
14. Interrogatory No. 1 asked the defense to "[i]dentify every
person who is or was an officer, director or shareholder of
Everfresh." The defense objected to the interrogatory as
"confusing and ambiguous and beyond the proper scope of discovery."
15. This definition stated in pertinent part: "The terms
'adulteration' or 'adulterate,' when used in reference to
products that are labeled and sold as orange juice products,
means the manufacture of such products with ingredients other
than those permitted by the standard of identity under the ap plicable federal laws and regulations. ..."
85
Everfresh, in a letter dated April 16, 1990, stated that in lieu
of any interrogatory answers, it would exercise the option
of Rule 33(c) to produce business records instead. The letter,
however, did not specify the documents from which the answers
could be ascertained, as required by Rule 33(c).
282. On April 20, 1990, Grove Fresh moved for an order to
compel answers to the interrogatories. At the hearing Everfresh
asserted that its offer to produce documents was a sufficient
answer. The court rejected this contention. The court directed
the defense to provide the specification required by Rule 33(c)
and admonished the defense that
[Considering the past history of this matter, if you
have doubts in your mind as to weighing whether some
thing ought to be more specific or more general, I would
resolve it in terms of being more specific and identify
ing those documents that respond to individual inter
rogatories rather than more general.
(4/20/90 Tr. at 9.)
283. On April 30, 1990, Everfresh served supplemental
answers to the pending interrogatories, including the one con
cerning ingredients. The supplemental answer regarding in
gredients was false. See paragraph 288, below.
284. On October 2, 1990, Grove Fresh served a Rule 30(b)(6)
deposition notice on Everfresh. Paragraphs 6 through 21 asked
for a witness to testify concerning the ingredients and the pro
cedures followed in making adulterated juice at the Warren plant,
and the sources of supply for the ingredients in the adulterated
juice at Warren.
285. Hugo Powell was designated to testify on behalf of
Everfresh concerning the subjects in the Rule 30(b)(6) deposition
86
notice. Powell testified that he had no personal knowledge of
the ingredients in the adulterated juice made at the Warren
plant, or of the procedures followed in making adulterated juice
at the Warren plant, or of the sources of supply for the in
gredients in the adulterated juice at the Warren plant. He also
testified that he had made no inquires to determine what informa
tion on these subjects was available to the corporation. See
paragraphs 290-293, below.
XIII. Everfresh's obstruction Of Discovery
A. The False Answers To Interrogatories
286. On December 1, 1989, Grove Fresh served Everfresh with
an amended set of interrogatories. No. 5 asked whether Everfresh
"adulterate[d] orange juice at any time during the period from
January 1, 1983 to the present. No. 6(b) asked: "If the answer
to interrogatory no. 5 is "yes," ... identify every past or
present officer, director and employee of Everfresh who has any
knowledge of the adulteration ...." (App. 1-12, Response to
Amended Interrogatories, February 22, 1990)
287. On April 30, 1990, Everfresh gave the following answer
to interrogatory no. 6: "Daniel Kotwicki, Michael Petric, Glen
Davis, and Hugo Powell to the extent stated in his Affidavit."
This answer was false in the following respects:
(a) it failed to name at least four past officers
and directors who had knowledge of Everfresh's adultera
tion: Albert Allen, Mitch Allen, Michael Kanan.
(b) it failed to name at least five past or
present employees who had knowledge: Susan Guss, Bruno
Moser, Duane Bosch, Doug Wells, and John Walker.
87
(c) it failed to name at least four incumbent of
ficers and directors who had knowledge: Bruce Fraser,
Dean Kitts, W. James Emmerton, and Ken Rosenthal.
288. Interrogatory No. 7 asked Everfresh to describe the
formulas used to adulterate orange juice. Interrogatory No. 8
then asked:
For each of the ingredients (including water and 100%
orange juice concentrate) in the formulas described in
the answer to interrogatory no. 7, give the following
information:
(a) the identity of the vendors from whom you
purchased such ingredients, and
(b) the purchase price of each ingredient.
Everfresh responded to this interrogatory by offering to produce
accounts payable records. Everfresh also specifically named 26
different vendors. This response was false in the following
respects:
(a) None of the documents referred or related to
"oleum 320;"
(b) Neither Bio Trade, Ltd. nor IDEA, Ltd. nor
Fred Kohlbach was among the 26 vendor names specifically
listed in the narrative answer to the interrogatory.
(App. 1-15, Supplemental Response to Amended Interrogatories,
April 24, 1990)
289. Interrogatory no. 10 asked:
State whether you have received any complaints
about the presence of sugar, or any other adulterant, in
orange juice from concentrate you have manufactured. If your answer is "yes," identify the source, date and na ture of each complaint, in complete detail.
Everfresh gave the following answer:
As stated in paragraph 8 of Hugo Powell's af
fidavit, as far as can be determined, the only com-
88
plaints that the company has received concerning the
manner in which orange juice was prepared was a lawsuit
filed in Maryland in 1988 by attorney Jeffrey C. Hines,
with Purity Products as plaintiff, and the litigation
filed in Illinois in 1989 by attorney Jeffrey C. Hines,
with Grove Fresh as plaintiff.
This answer was false in at least three respects:
(a) it failed to disclose the 1986 Purity Products
case (see paragraphs 60-66, 111, above);
(b) it failed to disclose the 1988 Juiceland case
(see paragraphs 119-120, above); and
(c) it failed to disclose Duane Bosch's 1988 com
plaint to the FDA (see paragraph 122 above); and
(d) it failed to disclose Duane Bosch's 1989 com
plaint under the Michigan Whistleblower's Protection
Act. (see paragraph 123 above).
(App. 1-15, Supplemental Response to Amended Interrogatories,
April 24, 1990)
B. The Failure To Conduct The Investigations Required By
The Rules Of Discovery
290. On October 2, 1990, Grove Fresh served Everfresh with a
deposition notice under Rule 30(b)(6). Four of the subjects
listed in the notice were:
(a) The negotiations leading to Labatt's acquisi
tion of Everfresh, including any discussions about rep
resentations and warranties by the sellers regarding
compliance with labeling laws;
(b) The names of every Labatt or Holiday Juice of
ficer, director, employee or agent who had knowledge of
the pendency of Purity Products. Inc. v. Everfresh Juice
89
Co.. No. JFM 86-963 (D. Md.) either before or after the
acquisition;
(c) The identity of every Labatt or Holiday Juice
officer, director, employee, or agent of JLI Juice Co.
who investigated the allegations of adulteration made in
the Purity Products suit; and
(d) The steps taken by Labatt or Holiday Juice
after the date of acquisition to ensure that Everfresh
did not manufacture adulterated orange juice. (App.
1-20, Rule 30(b)(6) Notice of Deposition of Everfresh
Juice Co., October 2, 1990)
291. Everfresh refused to make the designation required by
Rule 30(b)(6). On November 15, 1990, Grove Fresh presented a mo
tion to compel discovery with respect to the Rule 30(b)(6)
Notice. The court granted this motion on November 15, 1990.
292. In response to the court order of November 15, 1990,
Everfresh designated Powell as its Rule 30(b)(6) witness. In
response to this designation Grove Fresh wrote to Everfresh as
follows:
Although you are free to designate whomever you want, in
prior sessions of his deposition Mr. Powell demonstrated
that he had virtually no knowledge of the subjects
listed in the October 1990, 30(b)(6) notice. Therefore,
we expect that he will have educated himself beyond what
he has known in the past in order to competently answer
each of the areas designated in our 30(b)(6) notice and
to fulfill Everfresh's obligation thereunder.
(App. 1-27, Letter from Dorothy B. Zimbrakos dated November 26,
1990)
293. Powell appeared for the deposition on December 15,
1990. Powell testified that he had first seen the 30(b)(6)
90
(A f!\ (fa (®*\ fits, /Si)
Notice only the day before, December 14th, during a meeting with
Bruce Weitzman, Everfresh's counsel. He testified that, other
than attending this meeting, he had done nothing to prepare for
the deposition. He had not made any inquiries of any Labatt or
Everfresh personnel concerning the subjects itemized in the
30(b)(6) Notice. (12/15/90 Rule 30(b)(6) Deposition of Hugo
Powell, 8-9)
C. The Instructions Mot To Answer Deposition Questions
294. Between August and December 1990, Grove Fresh deposed
13 witnesses who were present or former employees or agents of
Everfresh. At one point or another, defense counsel instructed
12 of these 13 witnesses not to answer questions on grounds other
than privilege. The subjects on which inquiry was blocked in
cluded the following:
(a) a witness's salary (App. 11-39, Moser Dep.
32);
(b) Everfresh's business practices prior to
February 1986, and orange juice formulas in use prior to
February 1986 (App. 11-39, Moser Dep. 39-40, 89; App.
11-42, Wells Dep. 37-38; App. 11-41, Walker Dep. 42,
72-74; App. 11-46, Hesbon Dep. 19, 29, 115);
(c) the business operations of Holiday Juice (App.
11-50, Godzik Dep. 33-34, 79-80; App. 11-51, Yannello
Dep. 11-12);
(d) the identity of the independent auditor of the
parent corporations (App. 11-50, Godzik 90-91);
91
(e) whether Holiday Juice ever sold orange juice
concentrate at wholesale to anyone other than James Mar
shall of Flavor Fresh (App. 11-46, Hesbon Dep. 132);
(f) questions which used the term "adulterate"
(App. 11-48, Rule 30(b)(6) Powell Dep. 27-29);
(g) in the case of a witness who consented to tes
tify under Rule 30(b)(6) but who lacked personal
knowledge of the subjects listed in the Rule 30(b)(6)
notice, that witness's understanding of his obligations
to make inquiries about the listed subjects. (App. II-
48, Rule 30(b)(6) Powell Dep. 26-27; 34-36);
295. The defense also invoked the attorney-client privilege
as the basis for instructing witnesses not to answer questions.
Two of the witnesses who were given such instructions were
hourly-wage employees who belong to a union and are obviously
outside the control group. (App. 11-42, Wells Dep. 3-4, 24-25;
App. 11-41, Walker Dep. 3-6, 15, 42) Other questions related to
foundational facts not subject to the privilege:
(a) whether a witness's fees were being paid by
Everfresh (App. 11-36, Zakoor Dep. 93-95; App. 11-51,
Yannello Dep. 30);
(b) the identity of the witness's attorney (App.
11-49, Silverman Dep. 22-23);
(c) the subject matter of an alleged attorney-
client relationship (App. 11-36, Zakoor Dep. 101-02);
and
92
(d) whether a purported client paid fees to an at
torney for alleged legal advice (App. 11-36, Zakoor Dep.
102).
296. During early to mid-1990, Labatt put the Everfresh
division up for sale. At the deposition of James Zakoor, a
former Everfresh officer, Grove Fresh asked the witness the names
of companies who had considered purchasing the business.
Everfresh objected on the grounds of relevance. Grove Fresh ex
plained that if Labatt made any statements about the litigation
to prospective buyers, such statements would constitute admis
sions that might be probative of issues in the case. Moreover,
since Everfresh was no longer up for sale, there was no apparent
need to keep the content of such discussions confidential.
Nevertheless, Everfresh's counsel instructed the witness not to
answer on grounds of relevance. (App. 11-36, Zakoor Dep. 47-49)
297. Mervin Shumate is a former FDA official. He was
retained by Labatt in the Spring of 1989 for the limited purpose
of arranging meetings with the FDA. After those meetings were
completed, he ceased his consulting work for Labatt. Shumate is
not an attorney. (App. 11-44, Powell Dep. 148-51)
298. Shumate was deposed in Washington, D.C. on December 13,
1990. He was represented at the deposition by McDermott, Will &
Emery.
299. The defense in this case has made an issue of the term
"adulteration." They have asserted that the term "adulteration"
is inapplicable to the facts of this case. (See, e.g.. App. II-
44, Powell Dep. 38-58; App. 11-48, Rule 30(b)(6) Powell Dep. 27-
29; App. 1-24, Letter from Lazar Raynal to John Messina, dated
93
('A
October 26, 1990) Shumate had 31 years of experience at the FDA,
including 2 years as Director of the Office
of Enforcement. (App. 11-47, Shumate Dep. 9-10) He is knowledge
able about the meaning of the term "adulteration." Nevertheless,
McDermott, Will & Emery instructed him not to answer at least ten
questions concerning the meaning of the term "adulteration."
(App. 11-47, Shumate Dep. 6-8, 10-15, 22)
D. The False Deposition Testimony By Everfresh Employees.
300. Bruno Moser testified at a deposition on November 28,
1990. He testified falsely in at least three respects:
(a) Moser denied that he had ever heard of Purity
Products, and he denied knowing that Everfresh had been
sued in previous years for adulteration. (App. 11-39,
Moser Dep. 60) In fact, Moser is specifically iden
tified as one of the persons who assisted in investigat
ing the allegations in the first of the three Purity
Products suits. And a fair reading of Everfresh's
answers to interrogatories in the 1982 and 1986 suits is
that Moser, as one of Everfresh's quality control super
visors, assisted in the defense of those cases as well.
(App. 1-2, 1976 Responses to Interrogatories, Par. 33.
See App. 1-4, 1982 Responses to Interrogatories, Par.
8, 24; App. 1-5, 1986 Responses to Interrogatories, Par.
8, 24)
(b) Moser denied knowing about oleum. He also
claimed not to know what DEPC is other than that it is a
chemical. (App. 11-39, Moser Dep. 50) But the Bio Trade
documents produced in April 1991 show that the invoices
94
for Everfresh's purchases of DEPC (i.e.. the product at
Everfresh that was referred to as oleum 320/IDEA) was
mailed from Switzerland to the attention of Moser.
(c) Moser denied knowing that Everfresh had used a
preservative. (App. 11-39, Moser Dep. 88) But the
product that Everfresh ordered from Bio Trade was a pre
servative, and Moser was aware of this product and its
intended use because he handled the paperwork for it.
App. IV-130, Everfresh Bio Trade Documents)
E. Everfresh Blockaded Grove Fresh's Access To Michael
Petric, A Key Witness
301. Michael Petric was Technical Director at Holiday Juice.
He was one of the three employees who was fired by Hugo Powell
after the Labatt audit. Petric is a Canadian citizen. He
resides in Ontario, Canada.
302. On September 20, 1990, John P. Messina called Petric
and identified himself as Grove Fresh's attorney. Messina
stated that Grove Fresh needed to talk to Petric either at a
deposition or in an informal interview. Petric stated that he
had already discussed the possibility of a deposition with an at
torney. He stated that he could not afford to retain an attorney
to represent him at a deposition. He agreed to be interviewed by
telephone on a periodic basis. He identified the days and times
when it would be convenient to have extended conversations. In
this initial conversation Petric answered questions relating to
the lawsuit for about 30 minutes. On September 29, 1990, he
answered questions about the lawsuit for about 45 minutes. (App.
11-33, Messina Affidavit par. 9-11)
95
303. Everfresh first learned about Grove Fresh's conversa
tions with Petric on October 15, 1990, during the deposition of
James Zakoor. Zakoor was an officer of Holiday Juice from about
1983 until his resignation effective August 31, 1990. He is a
friend of Petric's. Near the end of the deposition the witness
testified about a recent conversation with Petric in which Petric
described his telephone interviews with Messina. According to
Zakoor, Petric said that Messina had theorized that Zakoor had
been forced to resign by Everfresh. (App. 11-36, Zakoor Dep.
186-187) Weitzman, Everfresh's attorney, later characterized
Zakoor's testimony as establishing that Messina, in the inter
views with Petric, had slandered Everfresh:
MR. WEITZMAN: Also on the record, it appears that you have
been making false and defamatory statements about my client.
I ask that you cease and desist, and we will discuss further
how we can determine who you have made those statements to
and what the appropriate relief is.
(App. 11-36, Zakoor Dep. 192-93)
304. On Wednesday, October 17, 1990, Grove Fresh received a
letter from Julian Solotorovsky, Esq., of Kelly, Drye & Warren.
The letter stated in its entirety as follows:
Please be advised that I represent Michael Petrik
[sic]. Please do not contact Mr. Petrik. Should you
have any desire to contact Mr. Petrik, you must do so
through me at the above address.
305. On November 9, 1990, Grove Fresh offered to provide
Petric with a covenant not to sue in exchange for his coopera
tion. Grove Fresh offered to pay for Petric to travel to Chicago
so that an interview could take place in the presence of counsel.
Solotorovsky rejected the offer. (App. 1-26, Letter from John
Messina to Julian Solotorovsky, November 9, 1990.
96
305A. Grove Fresh has attempted to find out who is paying
the fees of Petric's attorney. Grove Fresh subpoenaed
Solotorovsky for the limited purpose of learning the identity of
Petric's benefactor. Solotorovsky retained another attorney,
Scott Turow, to resist Grove Fresh's subpoena. Turow asserted
that the identity of Petric's benefactor was privileged. (App.
1-25, Letter from Scott Turow to John Messina, dated November 6,
1990) To avoid a protracted motion practice, Grove Fresh agreed
to enter and continue the subpoena to Solotorovsky and to depose
an Everfresh employee about whether Everfresh was indemnifying
former employees for attorney's fees. At a subsequent deposition
of Everfresh's Director of Human Resources, the witness was in
structed not to answer questions about Everfresh's indemnifica
tion practices. (App. 11-51, Yannello Dep. 30)
XIV. Grove Fresh's Settlement with Flavor Fresh
306. On February 10, 1989, Grove Fresh filed a three-count
complaint against Flavor Fresh, alleging that Flavor Fresh sold
adulterated orange juice in violation of the Lanham Act, RICO,
and the common law of unfair competition.
307. Attached to Grove Fresh's complaint were test reports
concerning "hot pack" orange juice which, as Grove Fresh later
found out, had been packed for Flavor Fresh by Holiday Juice.
Holiday Juice had been packing Flavor Fresh's bottled orange
juice since 1979. See paragraph 28, above.
308. As of January 1989, Holiday Juice had changed its name
to Everfresh. Since Holiday Juice/Everfresh had packed the juice
that gave rise to Grove Fresh's complaint against Flavor Fresh,
Holiday Juice/Everfresh agreed to undertake the defense of Grove
97
Fresh's claims. Accordingly, on March 20, 1989, Holiday
Juice/Everfresh's attorneys, who were from the Chicago law firm
of McDermott, Will & Emery, filed appearances in case nos. 89 C
1113 and 89 C 1114 on behalf of Everfresh and Flavor Fresh,
respectively.
309. On September 28, 1989, Judge Bua granted a motion to
dismiss the RICO count against Flavor Fresh, but he denied the
motion to dismiss the other two claims. Eventually, the case was
set for a two-week trial beginning March 19, 1990.
310. On November 27, 1989, Grove Fresh served Flavor Fresh
with interrogatories, document requests, and a Rule 30(b)(6)
Notice of Deposition. In addition, Grove Fresh served a Rule
30(b)(6) subpoena and Notice of Deposition on Everfresh relating
to the juice that Holiday Juice/Everfresh had packed for Flavor
Fresh. These four requests covered virtually all of the informa
tion that Grove Fresh would need in order to present its case
in-chief in the Flavor Fresh trial set for March 19, 1990.
311. At the defense's request, the return date on Grove
Fresh's discovery was continued while settlement discussions were
pending. Settlement talks collapsed in late January 1990. In a
letter dated January 26, 1990, Grove Fresh gave the defense writ
ten notice that it expected answers to the interrogatories and
document requests by February 25, 1990.
312. As of February 25, 1990, the defense had not responded
to Grove Fresh's written discovery. On February 26, John P. Mes
sina, Grove Fresh's counsel, called Bruce Weitzman to arrange for
a 12k conference. Weitzman was the lead attorney for Flavor
Fresh for purposes of discovery. He agreed to meet on Tuesday,
98
February 27, 1990 at 2 p.m., but he failed to show. Instead, the
following occurred:
(a) At noon on February 27, Weitzman called Mes
sina and stated that he wanted to try to settle the case
without going through discovery. Messina stated that he
was open to further settlement discussions, but that
Grove Fresh would not agree to any further suspension of
discovery. Messina outlined to Weitzman the terms on
which Grove Fresh would resume settlement discussions:
these terms included a minimum amount of discovery from
the defense.
(b) Weitzman stated that he would get back to Mes
sina with a response, but he never did. Nor did
Weitzman show up for the 12k conference that had been
scheduled for 2 p.m. that day.
(c) At about 4:45 p.m. on February 27, Messina
"faxed" a short letter to Weitzman requesting a 12k con
ference the following morning at 10 a.m. At about 5:05
p.m., Messina left his office for a meeting on another
matter.
(d) Messina returned to his office at about 6:10
p.m. and found a package from Weitzman that had been
delivered after 5:05 p.m. The package included a notice
of motion for the scheduling of a pretrial conference,
and notices for the depositions of Mr. Cecil Troy, Grove
Fresh's president, and for Grove Fresh's accountant.
These notices were the very first discovery requests
99
(A
served by the defendants in the 12 months since the case
had been filed in February 1989.
(e) Weitzman appeared at Messina's office at 10
a.m. on February 28. Weitzman demanded a date for Mr.
Troy's deposition; Messina agreed to produce Mr. Troy
for a deposition on Monday, March 12, 1990.
(f) Messina then asked Weitzman for dates on which
the defense would produce witnesses in response to the
Rule 30(b)(6) notices that had been served on Flavor
Fresh and Everfresh three months earlier, in November
1989. Weitzman refused to produce any such witnesses
until after he completed the deposition of Mr. Troy on
March 12.
(App. 1-11, Plaintiff's (1) Emergency Cross-Motion to Compel
Answers to Outstanding Discovery by March 5, 1990 and (2)
Response to Defendant's Motion for Pretrial Conference, February
28, 1990)
313. At a hearing on March 1, 1990, Flavor Fresh presented
its motion for the scheduling of a settlement conference, and
Grove Fresh presented its motion for a protective order seeking
discovery. Judge Bua set the case for a settlement conference on
March 7, 1990; he entered and continued Grove Fresh's motion on
discovery.
314. The settlement conference went forward, but no settle
ment was reached. On March 8, 1990, Judge Bua conducted a hear
ing and granted Grove Fresh's pending motion for a protective or
der on discovery. Immediately after this ruling, David Stetler,
trial counsel for Flavor Fresh/Everfresh, made the following
100
(■ ̂
proposal: Flavor Fresh would pay an unspecified amount of cash to
settle claims relating to orange juice packed by companies other
than Holiday Juice/Everfresh. Claims relating to orange juice
packed by Holiday Juice/Everfresh would be reserved for litiga
tion in the case pending before Judge Zagel, no. 89 C 1113.
315. Stetler's proposal was acceptable in principal to Grove
Fresh. The parties spent several weeks negotiating the specific
terms of the agreement. The recitals in the Settlement Agreement
spelled out Grove Fresh's willingness to settle so long as it
could pursue the claims against Holiday Juice/Everfresh in the
case before Judge Zagel:
WHEREAS, Grove Fresh is willing to settle that por
tion of the Flavor Fresh Case that relates to "Flavor
Fresh" orange juice packed by entities other than
Everfresh, so long as: (a) Grove Fresh can pursue in ...
the pending Everfresh Case, all claims arising out of
"Flavor Fresh" orange juice packed by Everfresh; and ...
WHEREAS, the orange juice packed by Everfresh under
the "Flavor Fresh" label is also in issue in the
Everfresh Case;
Grove Fresh's right to pursue the claims for orange juice packed
by Holiday Juice/Everfresh was again spelled out in paragraph 2
of the body of the settlement agreement:
The dismissal of the Flavor Fresh Case shall not
bar Grove Fresh from pursuing in other litigation, in
cluding the pending Everfresh Case, claims it may have
against Everfresh arising out of the "Flavor Fresh"
orange juice packed by Everfresh....
(App. IV-129, Settlement Agreement, dated March 28, 1990)
316. Paragraphs 9 and 10 of the settlement agreement con
tained explicit provisions for discovery in the Everfresh case
pending before Judge Zagel. Paragraph 9 spelled out the dis
covery that Flavor Fresh was required to provide to Grove Fresh.
101
r
Paragraph 10 spelled out the discovery that Holiday
Juice/Everfresh was required to provide to Grove Fresh:
On March 20, 1990, Grove Fresh's counsel and
Everfresh's counsel met pursuant to local General Rule
12k to resolve Everfresh's objections to Grove Fresh's
First Amended Interrogatories to Everfresh (the "Interrogatories," a copy of which is attached hereto as
Exhibit D) and Grove Fresh's First Document Request to Everfresh (the "Document Request," a copy of which is
attached hereto as Exhibit E). Subject to the under
standings reached at this meeting, which are set forth
in a letter from Grove Fresh's counsel to Everfresh's counsel dated March 21, 1990, Everfresh has agreed as follows:
(a) to serve Grove Fresh with amended answers
to the Interrogatories by Monday, April 9, 1990;
(b) to produce for inspection and copying all
documents responsive to the Document Request by
Monday, April 9, 1990; and
(c) to produce, on or before April 26, 1990
one or more officers, directors, agents, or other
persons who consent to testify on behalf of
Everfresh concerning the subjects set forth in the
two Notices of Deposition served on or about Decem
ber 1, 1990, copies of which are attached hereto as
Exhibits F and G.
(App. IV-129, Settlement Agreement, dated March 28, 1990)
317. During settlement negotiations, Stetler told Messina
that Kotwicki was the senior-most executive who had known about
and directed adulteration at Holiday Juice/Everfresh. Stetler
stated that Hugo Powell, Kotwicki's successor, had conducted a
thorough investigation into Kotwicki's activities. Stetler
stated that Powell would be produced as the designated witness at
the Rule 30(b)(6) deposition that was the subject of paragraph
10(c) of the Settlement Agreement. (App. 11-3 3, Messina Affidavit
par. 1-7)
102
318. On April 12, 1990, Grove Fresh presented a motion to
dismiss the Flavor Fresh case with prejudice, pursuant to the
terms of the Settlement Agreement.
318A. Stetler's statements that Powell was a knowledgeable
witness induced Grove Fresh to execute the Settlement Agreement
dated as of March 28, 1990. Grove Fresh relied on Stetler's
statements when it executed the Settlement Agreement, and when it
presented the stipulated motion to dismiss with prejudice on
April 12, 1990. (App. 11-33, Messina Affidavit par. 8)
319. In September 1990, Grove Fresh exercised its right un
der paragraph 9 of the Settlement Agreement and deposed James
Marshall individually and as the witness designated to testify on
behalf of Flavor Fresh pursuant to Rule 30(b)(6) notice. The
witness's counsel instructed Marshall not to answer questions on
the following subjects:
(a) Grove Fresh's lawsuits against both Flavor Fresh
and Everfresh allege that the defendants add beet sugar and
pulpwash to orange juice. Nevertheless, Marshall was in
structed not to answer the following question:
Have you ever heard that from time to time processors
or packers in the United States add pulpwash con
centrate to orange juice concentrate and call the
resulting product pure orange juice?
No claim of privilege was made to support this instruction.
(b) Flavor Fresh is a blender of concentrates. During
the relevant period it has supplied concentrate to Holiday
Juice/Everfresh. (App. 11-35, Boden Dep. 125-126)
Nevertheless, Marshall was instructed not to answer ques
tions about these blending activities. He was also in-
103
structed not to answer specific questions as to whether he
ever added beet sugar or pulpwash to orange juice con
centrate and resold the resulting product as pure orange
juice. These instructions were not supported by any claim
of privilege. (App. 11-40, Marshall Dep. 41-44; 47; 96-97;
146-147)
(c) During the relevant time period, Marshall and
Flavor Fresh were buying orange juice concentrate from
Holiday Juice at wholesale and re-selling it to Peninsular
Products. According to a memorandum produced in case no. 89
C 1113 (the case in which Marshall was being deposed), the
price of the "Flavor Fresh" product that Peninsular Products
was making from the Holiday Juice concentrate "is ap
proximately 80 cents to $1.00 a case cheaper than we are
selling in the marketplace." The clear import of the memo
was that Flavor Fresh and Peninsular Products were adul
terating the concentrate that was being supplied by Holiday
Juice. (App. IV-121, Memorandum from M. Kanan to D. Kot-
wicki, dated October 28, 1987)
Despite the obvious relevance of the subject matter,
Marshall was instructed not to answer any questions about
the sale of orange juice concentrate to Peninsular Products.
He was also instructed not to answer questions as to his
knowledge of whether Peninsular Products adds beet sugar and
other undeclared ingredients to orange juice. (App. 11-40,
Marshall Dep. 45-46, 146-147)
The relevance of Grove Fresh's inquiry became all the
more apparent six months later, in March 1991. On March 22,
104
(93*1 <8»l Ife}
1991, Peninsular Products, which does business under the
names Orchard Grove and Heatherwood Farms, was forced to
make a nationwide recall all of its orange juice because
"these juice products may not comply with the standards of
identity of those products and ... these products mav con
tain a chemical preservative that is unapproved for use in
beverages." (App. 111-87, Food Recall Notice dated March 22,
1991)
(d) Marshall was instructed not to answer any ques
tions about Fred Kohlbach other than that they were friends
and business associates. As Grove Fresh learned only later,
Kohlbach had supplied Everfresh with a contraband preserva
tive during most of the 1980s. See paragraphs 161-169,
above. (App. 11-40, Marshall Dep. 47-49)
(e) Marshall was instructed not to answer the ques
tion, "Have your ever bought adulterated orange juice?"
(App. 11-40, Marshall Dep. 46)
XV. Grove Fresh's Efforts To Obtain Discovery
320. Since April 1990, Grove Fresh has been forced to bring
37 discovery motions in Case No. 89 C 1113 to obtain information
and the true facts. Of these 36 motions, 15 have been granted, 5
have been granted in part, and 13 are still pending.
(App. 111-98, Summary Chart of Grove Fresh Discovery Motions)
105
„,.,
DATED: April 21, 1991 GROVE FRESH DISTRIBUTORS, INC.
(One of its Attorneys
John P. Messina, Esq.
135 South LaSalle Street
Suite 1960
Chicago, Illinois 60603-4303
(312) 630-1105
- and -
Warren S. Radler, Esq.
Dale R. Crider, Esq.
Dorothy B. Zimbrakos, Esq.
RIVKIN, RADLER, BAYH, HART & KREMER
30 North LaSalle Street
Suite 4300
Chicago, Illinois 60602
(312) 782-5680
106
Everfresh
Balancing Human Needs With Natural Products
From EverFresh.
■ c
B*-«: believes that balance is important in everything wedo.To protect and enrich our environment, this literature is primed on recycled paper with soy-basec -G
FOR IMMEDIATE RELEASE
CONTACT: Judi Silverman
Kate Mitchell
Janet Diederichs & Associates
312/346-7886
EVERFRESH JPICE CO.
FACT SHEET
COMPANY HISTORY
Everfresh Juice Co., headquartered in Franklin Park, 111., is the
North American fruit and beverage subsidiary of John Labatt Ltd.
of Canada, a $5.4 billion food and beverage giant publicly traded
on the Toronto stock exchange. John Labatt Ltd. includes Labatt
Brewing Company, Labatt Broadcast Group, Labatt Food Company and part-ownership of the Toronto Blue Jays.
John Labatt Ltd. entered the juice business in 1983 with the
acquisition of Holiday Juice Ltd. of Windsor, Ontario. Over the
next three years, Labatt purchased three U.S. beverage companies:
Wagner, Boden and Everfresh. In 1988, the four companies became
Everfresh Juice Co., now a major producer and marketer of fruit
juices, fruit drinks, mineral water and sparkling alternative
beverages in North America.
PRODUCTS
Everfresh Juice Co. has two maj or brands: Everfresh, which
accounts for 80 percent of the business, and Rich 'n Ready. The
Everfresh line includes 100 percent pure juices, fruit drinks,
mineral waters and the company•s newest product — Everfresh Sparkling Mineral Water With Pure Fruit Juice. Everfresh has been
the number one brand in Canada since 1959.
-more-
EF1C000
FOR IMMEDIATE RELEASE
CONTACT: Judi Silverman
Kate Mitchell
Janet Diederichs & Assoc.
312/346-7886
EVERFRESH SPARKLING MINERAL WATER WITH PURE FRUIT JUICE
PRODUCT FACTSHEET
PRODUCT DESCRIPTION
Everfresh Sparkling Mineral Water With Pure Fruit Juice is an all
natural blend of 70 percent fruit juice and 30 percent mineral water.
Everfresh has no added sweeteners, preservatives, colors, caffeine,
sodium or other additives. It has less added carbonation and higher mineral content than many leading sparkling waters.
PRODUCT FLAVORS
Everfresh Sparkling Water With Pure Fruit Juice is available in
seven flavors: Red Raspberry, Summer Peach, Strawberry Kiwi, Pink
Grapefruit, Orange Passion Fruit, Cran-Raspberry and Wild
Blackberry. The product line also includes Everfresh Sparkling Mineral Water.
QUALITY CONTROL
Preparation begins with clean, clear mineral water that has been purified through an ozonation process and filtered through charcoal. The finest, purest juice concentrates are then carefully blended with the mineral water and pure, natural flavors.
The water is tested according to EPA standards and the quality of Everfresh juices exceeds FDA regulations.
Every product batch is sampled and carefully analyzed for flavor,
color and specified physical or chemical standards. Once approved,
the products are chilled, mixed with pure carbon dioxide, bottled
and capped.
-more-
EF1C000
Product Factsheet/Add One
QUALITY CONTROL (Conf d.)
A special pasteurization process ensures product purity and shelf
stability without damaging the delicate fruit flavors in
Everfresh's proprietary formulations.
NUTRITIONAL INFORMATION (per 10-ounce serving)
Calorie counts for the flavors range from 136 to 160. The product
is low in sodium (4.5 to 11 mg. range) and high in potassium (323
to 439 mg.). Carbohydrates range from 34.3 to 39.4 grams and
calcium counts range from 26 to 32 milligrams. All flavors contain
vitamins A and C.
PRODUCT SIZES
Everfresh Sparkling Mineral Water With Pure Fruit Juice is
available in single 10-ounce glass bottles, four-packs of 10-ounce
bottles and tamper-evident 23-ounce bottles.
AWARDS
Everfresh Sparkling Mineral Water With Pure Fruit Juice was named
1989 Grocery Product of the Year by CANADIAN GROCER magazine; the
sole representative for 1989 Beverage of the Year by Sial in Canada; and first runner up for 1989 International Beverage of the
Year by Sial in the Paris world finals.
# # #
Janet Diederichs §*Associates, Inc. ■-^^.wu^n.*>■„„< (Jiii ago. Illinois
JL'.M
/•}/\:.il
June 21, 1990
Mr. P.J. Bednarski
CHICAGO SUN-TIMES
401 N. Wabash
Chicago, IL 60611
Dear Mr. Bednarski:
Everfresh Juice Co. 's Franklin Park plant is running 24-hours a day
to keep up with consumer demand for a product that will make its
American debut at Taste of Chicago June 27-July 4.
Everfresh Sparkling Mineral Water With Pure Fruit Juice, an all
natural blend of 70 percent fruit juice and 30 percent mineral
water, has had phenomenal success in Canada where it was
introduced last August. We've sent you a sample to taste.
Now it is taking on U.S. competitors in an arena flooded with
products that may confuse consumers with product claims. All
products are not alike.
With case sales increasing seven-fold since January 1990, Everfresh
is projecting a four-fold sales increase by the end of the year.
Everfresh Juice Co.'s total 1989 sales were $200 million.
Everfresh could be covered in a variety of ways:
o Seven-fold Increase In Sales: Exploding consumer demand for
alternative beverages drives new product's success.
o Consumers Beware: Trendy packages and location in 'upscale'
sections of stores or delis may imply that products are all
natural. They're not. Consumers should read the labels for
added sweeteners, preservatives, colors and caffeine.
o Changing Drinking Habits: Statistics show that alcohol
consumption is decreasing, especially among young adults.
Alternative beverages are becoming the drinks of choice.
o Franklin Park Hub of Production: Evefresh's Franklin Park
manufacturing plant supplies the entire North American
market with Everfresh sparkling products.
I have enclosed our media kit for your review. I will call you soon
to see if you would like to schedule an interview.
Kate Mitchell
Account Executive
.■/Memberofthe PubfirRtlaiinni {■.xelit/iige. Im . vithoftiees iror/t/irii/e.
Company Factsheet/Add One
MANUFACTURING/DISTRIBUTION
Utilizing 11 manufacturing facilities throughout North America,
Everfresh Juice Co. owns three production facilities in Windsor,
Ontario; Warren, Mich.; and Franklin Park, 111.
Its products are marketed through an extensive network of
distributors, brokers and the Everfresh Juice Co. sales force.
Everfresh has 75 percent distribution in Canada and is aggressively
increasing its U.S. penetration, debuting its new Everfresh
Sparkling Mineral Water With Pure Fruit Juice in Chicago and select
U.S. markets this summer.
SALES FIGURES
In 1989, Everfresh Juice Co. reported more than $200 million in
annual sales. Since 1985, the company has experienced a 25 percent
annual growth rate.
Everfresh Juice Co. has a 33 percent market share of total chilled
fruit juices in Canada. Its newest product, Everfresh Sparkling
Mineral Water With Pure Fruit Juice, has increased case sales seven-fold since January 1990.
COMPANY EXECUTIVES
Hugo Powell President and Chief Executive Officer
Gorden Putz Vice President of Marketing
James Pratt Vice President of Operations
CORPORATE HEADQUARTERS
Everfresh Juice Co.
3333 N. Mount Prospect Rd.
Franklin Park, 111. 60131
708/833-8440
###
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INVOICE
No. 37233 verfresh Juice Co
6600 E. Nine Mile Marren, MI 48091
°ATE 11-10-87
TERMS: NET 10 DAYS
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freight pick up and delivery service $30.00
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6600 East Nine Nile Road
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Vaduz, October 30, 1987
INVOKE No. 30633
We ship to you by air-freight, freight collect,
10 jerry cans IDEA 300/50 CIP Cleansing and Aseptisizing Coepound
each 20,00 kg ■ total 200,00 kg net
price per kilo SFrs 275.--
Payable after receipt of aerchandise net, no discount.
Customs tariff No. 3811.807
Made 1n Switzerland
SFrs 55*000.-
BIO TRADE im stfmuae
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Forwarder:
VG Nahrgang Co.
155 W. Congress Street
Detroit, Michigan
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