Earlier this week, a group of Beyond Meat’s shareholders filed a consolidated amended shareholder derivative complaint against the company’s board of directors for an alleged violation of the company’s code of conduct, specifically portions that emphasize “honest and ethical business conduct,” and the expectation for the board of directors to “act with honesty and integrity.” The shareholders, who include Eric Weiner, Kimberly Brink, and Melvyn Klein, have also demanded that the issue be resolved via trial by jury.
According to the new filing, Beyond Meat is a well-known provider of plant-based food products, products that until recently have been manufactured, packaged and processed by Don Lee Farms (Don Lee). Don Lee adopted protocols for producing the company’s products regarding metrics like “ingredient amounts, mixing times, and equipment layouts.” In 2016, Don Lee hired a food auditor to inspect some of Beyond Meat’s facilities, and the auditor subsequently filed a report which “reflected the consultant’s findings of contamination.” From this point, the plaintiffs allege that Beyond Meat and its board of directors coordinated in an effort to “doctor, alter, and exclude pertinent safety information.”
Following the auditor report, the plaintiffs claim that Beyond Meat began searching for a new co-manufacturer, all the while making every effort to conceal this from Don Lee. When negotiations with a new company, CLW Foods (CLW), had finished, Beyond Meat sent Don Lee “a Notice of Breach alleging various food safety violation in Don Lee’s Texas facility.” They followed this action by terminating their agreement with Don Lee and shifted all manufacturing to CLW and another company, ProPortion. Don Lee followed suit soon after.
The plaintiffs contend that both of the new co-manufacturers were aware of the wrongfully terminated agreement and were “up and running within weeks,” using a nearly identical process to Don Lee despite having little to no prior experience manufacturing plant-based foods.
The shareholders filed suit as Beyond Meat will reportedly “have to expend millions of dollars” as a result of litigation, internal investigation, and overcompensation. They also argue that Beyond Meat’s board of directors engaged in breach of contract, misappropriation of trade secrets, unfair competition, and fraud through their actions. Further, they assert that the individual defendants (Ethan Brown, Mark J. Nelson, Seth Goldman, Gregory Bohlen, Diane Carhart, Raymond J. Lane, Bernhard van Lengerich, Ned Segal, Christopher Isaac “Biz” Stone, Donald Thompson, Kathy N. Waller, Jessica Quetsch, and Anthony Miller) contributed to this by engaging, permitting, and allowing the company to engage in these acts.
The shareholder plaintiffs argued that the Beyond Meat board of directors “cannot consider a demand to commence litigation against themselves on behalf of Beyond Meat with the requisite level of disinterestedness and independence.” The shareholders are seeking a declaration that they are entitled to this action as they are adequate representatives of the company, that the individual defendants have breached their fiduciary duties, that Proportion and CLW have aided and abetted the breach of fiduciary duties, and lastly, they are seeking a direction for Beyond Meat to “take all necessary actions to reform and improve its corporate governance and internal procedures.”
Weiner, Brink, and Klein demand a trial by jury for the board of director’s “fraudulent misconduct, wrongful termination of the Company’s co-manufacturing agreement, misappropriation of trade secrets, and other misconduct.”
The plaintiffs are represented by Tostrud Law Group and The Brown Law Firm. The defendants are represented by Spertus Landes & Umhofer LLP and Stoel Rives LLP.
