Purina appeals court decision

Friday, May 14, 2010

by SUSAN MANN

Agribrands Purina Canada Inc. and three others are appealing an Ontario Superior Court decision that requires them to pay more than $2 million for harm caused to a former feed dealership.

An Ontario Superior Court judge ruled in January that Purina, Ren’s Feed and Supplies Ltd., its owner, Walter Rendell Job, and the Estate of Edward James McGrath, must pay more than $2 million in compensation for driving brothers Walter Kasemekas and Raymond Jackson out of business 19 years ago. Purina alone must also pay $30,000 in punitive damages for breaching its dealership agreement with the brothers.

In addition to those monetary awards, Judge Michael G. Quigley dismissed Purina’s claim to collect $72,227.43 from the brothers for inventory and working capital financing it provided when they established their dealership, Raywalt Feed Sales Ltd., in early 1991. After the business failed in January 1992, the Bank of Montreal and Purina brought “power of sale” proceedings against them. Kasemekas lost his home and there was enough equity from the home sale to repay the bank but not Purina.

According to Ontario Court of Appeal records, Purina, Ren’s and the Estate of Edward James McGrath filed appeals in February. No date has been set yet for the appeal to be heard.

Purina president and general manager Charles Lapointe says “we are in fundamental disagreement with many aspects of the judgment. I am not the expert to get into the specifics of that.”

The case is very old, Lapointe explains. “We inherited that from an acquisition we did 10 years ago.”

Lapointe says he doesn’t expect the appeal to be heard soon. “It’s a matter of months or you never know it could be a year or more.”

Kasemekas says he’s happy about the Superior Court decision, but concerned about efforts to appeal it.

In his January decision, Judge Quigley says the brothers proved their conspiracy claims against Purina, Ren’s Feed and Supplies Ltd., Walter Rendell Job and the Estate of Edward James McGrath (of McGrath Farms) “and are entitled to damages on account of those actionable wrongs.”

The brothers established Raywalt as an exclusive Purina horse feed dealership in the Halton Region area with headquarters in Milton. They signed a dealership agreement with livestock and pet feed manufacturer, Purina, in February, 1991 that spelled out their territory and their exclusive rights to that market.

Kasemekas says he started the business to make money but also to leave a legacy to his children. “I used to take my kids to work on Saturdays.”

The key rule in the dealership agreement was “dealers were only permitted to sell Purina agricultural feed products and only in their assigned territories,” Judge Quigley says in his written decision handed down Jan. 6. The trial was held in Milton and Brampton in May 2009.

The Raywalt business failed one year after opening mainly because Purina allowed a former feed dealer (Ren’s Feed and Supplies Ltd.) to continue selling feed in the territory reserved for Raywalt.

Purina cancelled its dealership agreement with Ren’s in July 1990 after it discovered the feed dealer was importing significant amounts of laboratory animal feeds from a competitor and selling them to laboratories at an Ontario university.

Ren’s was the most stable and long-term dealership in the Halton area, selling more than 800 tonnes of horse feed a year, Judge Quigley says in his decision. In fact, Ren’s was Purina’s biggest horse feed dealer. 

Just weeks after Raywalt started up in March 1991, Kasemekas learned Purina allowed Ren’s to continue buying feed at dealers’ costs.

He complained to Purina and it was soon after those complaints that Ren’s struck a deal with a neighbouring dealer (Ted McGrath of McGrath Farms, who is now deceased) to buy horse feeds at dealers’ costs and “sell that feed to its customers at margins that undercut Raywalt,” Judge Quigley says in his decision.

Kasemekas says at the time he didn’t know about the Ren’s-McGrath deal or that Purina allowed the situation to occur. All he knew was that Ren’s was still getting product from Purina and “I was wondering where the hell they were getting it from.”

His regional sales manager at the time spoke to Purina officials but they didn’t do anything about the situation.

Judge Quigley says in his written decision that “Purina consciously permitted Ren’s to operate as a parasite within Raywalt’s territory sucking life blood out of its commercial viability.” The Ren’s-McGrath arrangement was allowed to operate with the blessing of Purina officials as a way to ensure Purina products would continue to be supplied to customers in the Milton area “regardless of the impact on Raywalt,” he adds.

Purina argued Raywalt’s business plan had serious flaws that effectively doomed it to failure regardless of the action or inactions of Purina on its own or with Ren’s or McGrath Farms. But Judge Quigley says in his decision he wasn’t persuaded by that argument and it was contradicted by Purina’s willingness to provide financial support to Raywalt.

Representatives for Ren’s and McGrath Farms testified they didn’t intend to injure Raywalt. But Judge Quigley says in his written decision they “cannot be willfully blind but avoid culpability on the basis no damage could have been foreseen.” BF