Judge Dismisses Claim in Arizona Tea Breakup Suit


Court dismissal of claims between Arizona Iced Tea’s feuding co-founders is expected to speed the breakup of the company which is valued at $4 billion.

Suits and counter suits remain to be settled but the decision by the appellate court after review of an 18-day trial in April is expected to accelerate resolution of the long-standing dispute between co-founders Domenick Vultaggio and John Ferolito.

In this case Vultaggio’s lawyers sought to prove that Ferolito had broken his fiduciary obligations to provide equal financing to Beverage Marketing USA, the privately held company that manufactures AriZona Iced Tea. The alleged lapse included breach of contract, unjust enrichment and breach of fiduciary duty, resulting in $287 million in damages, according to Vultaggio.

It stems from a 2008 action in which Ferolito sued Vultaggio for payment on a $20 million loan Ferolito made to the parent company. According to Reuters, the company countersued, accusing Ferolito of breaking a 1998 agreement to contribute equal financing. It alleged he was attempting to "wage a war" that would force Beverage Marketing into accepting a buyer for his portion of the company.

The state Supreme Court’s appellate division in Brooklyn determined that Nassau County Supreme Court Judge Timothy Driscoll should have granted Ferolito’s request to dismiss the claim.

In dismissing the judgment the panel of four justices wrote that “the parties’ remaining contentions are without merit.”

Left to be unraveled is a separate claim in Manhattan to determine the value of the company and what Vultaggio or third-party suitors must pay to buy out Ferolito’s stake. Ferolito is seeking some $600 million in damages from Vultaggio.

Tata Global Beverages remains an interested party following negotiations with Ferolito later challenged in court.

“According to court filings from Ferolito, he has been trying to sell since the mid-2000s — contributing to the tension between the partners — and potential bidders have offered as much as $2 billion for the 50 percent stake,” reports Reuters.

According to Newsday, Vultaggio’s attorney, Louis M. Solomon of Cadwalader, Wickersham & Taft, did not interpret the Appellate Division’s decision as a complete dismissal of the Nassau County case. The division did not address his client’s allegations that Ferolito had employed numerous tactics to “wage war against the company” to force the company to sell to a third-party. “It doesn’t wipe out the whole case,” Solomon said.

The two men launched the company in 1992 but success brought rancor and they have been clashing the past decade.

Case: JMF Consulting Group II Inc v. Beverage Marketing USA Inc, Supreme Court of the State of New York, Appellate Division, Second Department, No. 2011/09485.

Sources: Newsday, Reuters