Closing Arguments Heard in AriZona Tea Feud

NEW YORK, New York

World Tea NewsA Long Island judge heard closing arguments Tuesday in a $287 million dispute between the co-founders of AriZona Iced Tea, the successful Nassau County-based tea brand.

Thomson Reuters reports that during the contentious, 18-day bench trial, Domenick Vultaggio accused his longtime business partner John Ferolito of breaking their agreement over the ownership of Beverage Marketing USA Inc., AriZona's parent company.

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A lawyer for Vultaggio said Ferolito breached a 1998 promise to co-fund the company equally, in an attempt to "wage a war" on AriZona as he was trying to sell his 50 percent stake.

"Mr. Ferolito saw an opportunity to bring the company to its knees," attorney Louis Solomon told Nassau County Supreme Court Justice Timothy Driscoll.

Vultaggio and Ferolito founded AriZona Iced Tea in 1992. As the company's success grew in the mid-1990s, the two began to butt heads, first over management styles and then over Ferolito's attempts to sell his shares for as much as $2 billion, according to court filings.

In 2008, Ferolito sued Vultaggio and Beverage Marketing in Nassau County Supreme Court, seeking payment on a $20 million loan Ferolito had made to Beverage Marketing.

That action prompted a countersuit by Beverage Marketing and Vultaggio accusing Ferolito of breaching the 1998 contract –allegations that Ferolito disputed. The alleged agreement was never put into writing, Ferolito said. What's more, Vultaggio had faked a "cash crunch" as an excuse to seek the extra money, said Ferolito.

"There was no obligation to fund because there was no agreement to fund, and, absent an agreement, New York law does not impose such duty on any corporate shareholder," Ferolito's attorney, Nicholas Gravante, said outside the courtroom Tuesday.

World Tea NewsIn 2009, Ferolito reached an agreement with Vultaggio on the $20 million loan, withdrew his lawsuit and moved for summary judgment on Beverage Marketing's counterclaims. Nassau County Justice Timothy Driscoll ruled against summary judgment in September 2009, sending the countersuit to trial.

Driscoll will decide whether BMU should receive as much as $287 million in damages it said it has suffered as a result of Ferolito's refusal to co-fund the company.

Driscoll asked for additional briefs from both parties by July 3. He said he expects the Appellate Division, Second Department will have ruled by then on Ferolito's appeal of the order denying it summary judgment.

Source: Thomson Reuters News & Insight

Footnotes: The case is JMF Consulting Groups II Inc. v. Beverage Marketing USA Inc., in the Supreme Court of the State of New York, Nassau County, No. 011005/2008. For Ferolito: Nicholas Gravante of Boies Schiller & Flexner. For Vultaggio: Louis Solomon of Cadwalader Wickersham & Taft.