grove fresh distributors, inc., ) an illinois corporation, )jpm-law-chicago.com/record/grove fresh v...

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


4. Defendant, Ever Fresh Juice Co., Response to Plaintiff's

Written Interrogatories, March 28, 1983 (excerpts)


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


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")






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)


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




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.



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."



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."



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.

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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,

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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

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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.

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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

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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




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




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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No. 37233 verfresh Juice Co

6600 E. Nine Mile Marren, MI 48091

°ATE 11-10-87

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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

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155 W. Congress Street

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