Puerto Rico foodservice distributor José Santiago Inc. on Wednesday filed a complaint in federal court against Virginia-based food-processing company Smithfield Foods Inc. for alleged breach of contract.
José Santiago is seeking more than $30 million in damages for alleged violations of Puerto Rico’s Act 75, which prohibits a principal from impairing or terminating a distribution agreement without just cause. Since 1995, José Santiago has been the exclusive distributor of the Farmland Foods Inc. brand in Puerto Rico, which was acquired by Smithfield in 2003. As part of a brand consolidation process, Smithfield announced in June 2020 that it would rebrand all Farmland Foods products sold in Puerto Rico as Smithfield products, and would allow José Santiago’s competitor Ballester Hermanos Inc. to also distribute Smithfield-branded products. José Santiago claims this violates its exclusive distribution agreement with Smithfield of Farmland Foods products.
In addition, in May 2022, Smithfield Foods informed José Santiago that it would not allow the company to distribute certain Smithfield products unless it signed a written distribution agreement significantly limiting the products it would be allowed to distribute. José Santiago claims this also violates Act 75.
“Smithfield’s decision not to make available Smithfield products to José Santiago for sale to its customers in Puerto Rico will effectively constitute an unjust termination of the distribution agreement between the parties,” the complaint states.
José Santiago is seeking damages and a preliminary injunction preventing Smithfield from terminating their previous distribution agreement. If the court determines that José Santiago is not a distributor protected by Act 75, the company is seeking specific performance and punitive damages under the Puerto Rico Civil Code.
José Santiago is represented by Delgado & Fernández LLC.