Industry wide conspiracy claimed in Ontario egg lawsuit

Thursday, February 16, 2012

by BETTER FARMING STAFF

A new claim in a long-running civil court case alleges an industry-wide conspiracy took place in Ontario’s egg sector.

The claim, filed by Sweda Farms Ltd. of Blackstock Ontario and its related companies, follows a November court decision to merge two cases. Sweda, formerly the province's third largest egg grader and marketer, is owned by Svante Lind. The cases that were merged include one filed in 2005 against the provincial egg board now known as Egg Farmers of Ontario and two staff members at that time and another in 2008 against egg graders Burnbrae Farms Limited and L.H. Gray & Son and related companies and staff.

Gray and Burnbrae deny Sweda’s claims, as does the egg board. Allegations have not been proven in a court of law.

In the Fresh Statement of Claim, Sweda alleges that Egg Farmers general manager Harry Pelissero, the egg board, Burnbrae, L.H. Gray and representatives from the two graders conspired to put Sweda’s brand Best Choice Eggs out of business. Sweda alleges that in the process they violated the federal Competition Act, breeched confidentiality agreements and conspired to fix the price of eggs in Canada and monopolize the industry. The claim also alleges that L.H. Gray and its owner and president Bill Gray destroyed evidence and documents and exploited its dominant position in the province’s egg retailing business by passing off cracked and dirty eggs as Grade A, which would be illegal. Last year, Sweda merged its Best Choice Eggs brand with Ontario Pride Eggs which operated the Monkland egg station since 2009.

The Claim alleges that Pelissero acted without the approval of his board to strain relations between Sweda and at least 15 of its suppliers by invoicing them for marketing levies it said were under-reported and telling them during an investigation that Sweda’s grading procedures were improper. The Claim alleges that at the same time Burnbrae and L.H. Gray solicited egg supply agreements with Sweda’s suppliers, dividing the territory between them geographically.

Sweda is also claiming that the egg board, Pelissero and the two other graders worked together to prevent it from obtaining federal import permits for specialty eggs, such as organic and free range. Import permits are only issued when eggs on the domestic market are not available and Sweda alleges that the two other graders pretended they had the specialty eggs available. Pelissero would “keep the Applications on his desk for several days making the Applications useless to the Plaintiffs to meet its egg requirements,” the document claims. “The Defendant Pelissero did not hold up the other Defendant party Applications thereby favoring the other Defendants and interfering with the ability of the Plaintiffs to compete against the Defendants.”

The document claims Pelissero and the board deliberately overcharged Sweda and knowingly supplied the grader with poor quality, unmarketable eggs while acting as a broker for the company. Moreover, Sweda claims Burnbrae, L.H. Gray and Burnbrae’s division Maple Lynn Foods, deliberately shipped the company unmarketable eggs.

Sweda alleges that two former Best Choice employees, John Klei and the late Johannes Klei conspired with Gray to damage the company’s reputation. A letter written to L.H. Gray and shown to the provincial grocery chain Longo’s Brothers Fruit Markets Inc. in 2006, outlined plans to force Best Choice to sell out or quit grading. The letter also discussed an agreement with L.H. Gray to pay the Kleis $275,000 for their efforts, says the Fresh Statement of Claim.

David Williams, L.H. Gray's lawyer, denies the allegations and emphatically denies claims such as L.H. Gray paying the Kleis to destroy Sweda Farms. L.H. Gray “had a very brief commercial relationship with (the late) Mr. Klei which was completely above board and it had no repercussions on Mr. Lind's business whatsoever,” he says. There is also no evidence L.H. Gray destroyed evidence, he adds. He notes that in a company like L.H. Gray that grades millions of eggs a year, “there is a routine process” for throwing out grading records after a certain period of time. “So what. That happens in every business.”

The company will file a defence against Sweda's claims, Williams says.

Joe Hudson, CEO of Burnbrae Farms said he had not yet seen the new claim. “It’s before the courts so our lawyers are telling us not to comment on anything.

Geoff Spurr, lawyer for Egg Farmers and Pelissero, says they have not yet filed a defence on the fresh claim but when they do, “we will be denying that claim.”

Calls to Laurie Aitchison, lawyer for John Klei and the late Johannes Klei, were not returned. BF