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Foster Farms Wins $10 Million Case Against SunTrust

by 5m Editor
23 July 2010, at 11:08a.m.

US - After six years of litigation, including an appeal, Foster Farms has secured a $10 million final judgment against SunTrust Bank from the US District Court in Fresno, California.

In the initial judgment, entered by the Court against SunTrust in 2008, Senior District Court Judge Oliver O. Wanger ruled that SunTrust violated credit and confidentiality agreements. The court ordered an initial award of $4 million in favour of teh US poultry products company Foster Farms, after it rejected a last-minute plea from SunTrust to reduce the damages to $750,000.

Unsatisfied with Judge Wanger's ruling, SunTrust appealed to the US Court of Appeals for the Ninth Circuit in San Francisco.

However, the appeal proceedings went awry for SunTrust when the Court determined that even more money should have been awarded to Foster Farms, including attorneys’ fees that Foster Farms incurred to prove certain facts that SunTrust refused to admit.

The final judgment against SunTrust now comes to $10 million.

SunTrust had provided financing to Foster Farms, when the company acquired selected assets from competitor Zacky Farms in 2001. The case arose after Foster Farms discovered that SunTrust had secretly begun a lending relationship with Zacky a few months later, and while the credit agreement was still in effect. During the course of the litigation over the credit agreement, attorneys for Foster Farms unearthed evidence indicating that SunTrust had used Foster's confidential information in the process.

The attorney for Foster Farms, Carmine Zarlenga of Howrey LLP, said the case presented a special challenge.

"Once we figured out that SunTrust had violated the confidentiality agreement, a real issue arose as to how to best compile the damages for that behavior. My litigation team and I decided to demand that SunTrust disgorge all the profits they made as a result of the misuse. The disgorgement approach is recognized under California law, but it had not been applied in a bank confidentiality setting. We feel that we have set a precedent for expanding the disgorgement approach in bank deals as well.”

Zarlenga was especially pleased with the fee award. "SunTrust certainly put us through the paces, but ultimately suffered the consequences at the tail end of the case when they had to pay part of our fees. That's a happy ending in my book."