AtlantaFresh Artisan Creamery’s case against Whole Foods Market is moving forward after U.S. District Judge Thomas W. Thrash denied Whole Foods’ motion to throw out a $15 million breach of contract lawsuit, detailed in a nine-page order filed on Wednesday in the U.S. District Court for the Northern District of Georgia. The case alleges the natural grocery chain prematurely and ‘abruptly’ broke a seven-year distribution contract with grass-fed dairy producer AtlantaFresh Artisan Creamery and caused the business to go under. The suit was originally brought by creditors from Asset Recovery Associates LLC in July 2020.
What happened?
The dispute began in 2017, 14-months into a seven year non-binding contract under which Whole Foods agreed to purchase 30,000 gallons of milk from AtlantaFresh per week. At the time, the two companies had been working with one another for almost nine years, with AtlantaFresh supplying Greek yogurt to 180 Whole Foods stores across 20 states.
However, Ron Marks, the founder of AtlantaFresh, previously told BevNET the grocer routinely purchased only one-third of the milk it had promised, despite Marks taking out a $500,000 loan with Whole Foods and another $2 million in debt to expand his operations to meet the contract demands. When the contract was prematurely terminated, Marks was forced to lay off his 32 employees and close down the business.
At the time, Whole Foods said the contract was terminated because of the product’s weak sales despite the grocers efforts to improve the business.
What does this mean for the case?
Whole Foods’ latest attempt to have the case dismissed centered on claims that, as a limited liability company, the deed transferring the rights of AtlantaFresh’s yogurt division to Asset Recovery, was invalid. The dairy company did not originally include $15 million worth of claims relative to its yogurt and dairy business in the list of assets transferred to Asset Recovery. The natural grocery argued that this omission was an attempt by AtlantaFresh to conceal the potential financial recovery of the case from its creditors.
While AtlantaFresh did eventually amend the assets assigned to its creditors and, according to this week’s ruling, submit the appropriate affidavit, Whole Foods has also argued that because AtlantaFresh retained the rights to its business under another pre-existing agreement it could not recover assets for the benefit of creditors. The grocer claims that these points negate AtlantaFresh’s grounds to sue over a breach of contract.
However, Judge Thrash rejected the motion in stating that Whole Foods was unable to provide enough evidence to prove the omission was intentional and that AtlantaFresh only needed to prove that they did amend the list of assets.
“Asset Recovery has invited AtlantaFresh’s creditors — which are the actual beneficiaries under the deed of assignment, not Whole Foods — to request a copy of the lawsuit from its counsel,” Judge Thrash said in the order. “In other words, there has been no attempt to fraudulently conceal this case, and the potential financial recovery from creditors.”
This week’s ruling marks yet another setback for Whole Foods which has consistently argued against the legitimacy of documents rather than the alleged breach of contract. The Amazon-owned grocery chain also argued that the creditors failed to file an assignee affidavit proving they had examined AtlantaFresh’s records while compiling its list of assets, in a timely manner. The judge has also rejected this claim.
While a date has not yet been set for trial, all evidence regarding the case is due by the end of May.