Dispute Between Arizona Tea Partners Escalates in Court


A New York Supreme Court battle pitting Arizona Tea founders John Ferolito and Domenick Vultaggio over the fate of one of the most successful independently owned beverage companies in America will resume Sept. 8.

The co-founders are seeking to resolve a dispute over selling the company sparked by an offer from multi-national Tata Global Beverages. Last month the behemoth once again hinted at its desire to purchase American firms. Court documents show Tata approaching Ferolito about a sale as early as 2007.

Vultaggio and Ferolito have long been at odds over managing the $1 billion brand which employs 1,000 workers and holds a 33.9 percent share of the ready-to-drink tea market, according to trade magazine Beverage Digest. That dispute has led to court filings alleging Ferolito breeched his agreement to co-finance the venture.

Reuters reports that “by 1997, they had come to the realization that there could only be "one captain" to steer the ship. Ferolito ceded day-to-day control over the company to Vultaggio and stepped back to pursue other business and leisure interests.

“That arrangement kept the peace until 2007, when Ferolito started to explore a sale of his shares in the company to Tata Global Beverages Ltd., the world's second-largest tea manufacturer and distributor.

“Tata had valued Ferolito's half of the company at $2.25 billion, and he said a sale to a major company could help AriZona unlock new global markets and expansion opportunities.

“Vultaggio said he was amenable to the talks, until "rumblings" reached him that Ferolito intended to bolster his sale price by selling management rights as well — something Vultaggio considered his under the "one captain" agreement.

“After that the gloves came off, both parties contend. Vultaggio and Beverage Marketing USA Inc, the family of companies that produce and sell AriZona, said in court documents that Ferolito attempted to wage "major war" that would aggravate Vultaggio into agreeing to the Tata sale. Vultaggio also accused Ferolito of withholding loans to the company, in violation of a 1992 agreement.

“Meanwhile, Ferolito said he had discovered examples of "wrongdoing, self-dealing and improper behavior" on Vultaggio's part that justified the withholding of the loans. (Ferolito also denies the 1992 agreement is enforceable.)

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

Source: Reuters