A. June 1993: Labatt’s purported cooperation with the FDA.

In June 1993, or thereabouts, I received a telephone call from Jay Bratt, the Justice Department lawyer who was the lead prosecutor in the related criminal case.  Bratt asked if I would accept service of a “friendly” subpoena for Mr. Troy; he wanted Troy to testify for the government at a sentencing scheduled for July 9.  See §C, below.

I told Bratt that Troy was not inclined to cooperate with the government; he was dismayed and irritated by the government’s decision to indict the “small fish” (Flavor Fresh and its principals), but to give a pass to the “big fish,” i.e., Labatt and its Everfresh subsidiaries. 

Bratt told me that Labatt and its lawyers had been cooperating with the government and that they had been “extremely helpful.”  He confirmed that the government had no plans to move against Labatt or its subsidiaries.  I reported this information to Troy; he declined to cooperate with the government. 

Four months later, an Everfresh employee (Bruno Moser) gave the government a perjured affidavit that falsely exculpated Labatt for Everfresh’s use of Oleum 320/IDEA.  See §§I, L, below. 

B. June 1993: The New York Times’ investigation.

In early June 1993 I received a telephone call from Diana Henriques, a business reporter for the New York Times.  She told me she was at the Dirksen Center reviewing court files, including the 89c1113 file, for a story unrelated to the Grove Fresh litigation, [1] and had came across a reference in the 89c1113 docket to the 90c5009 case as a “related case.”  She thought the 90c5009 case might be relevant to her story, but she found her access to the file blocked.  She got my name and telephone number from the 89c1113 docket, she told me; she was calling to find out why 90c5009 was under seal.

I told her that both cases had been settled and that the settlement agreement precluded me from discussing the litigation.  I declined to answer her questions about the seal, but I told her about the Coalition’s challenge to the sealing order and gave her the name and telephone number of the Coalition’s attorney. [2] 

C. July 9, 1993: The findings regarding consumer fraud in the related criminal case.

On July 9, 1993, in Kalamazoo, Michigan, Judge Richard Enselen held the first sentencing hearing in the related criminal case.  The hearing concerned Don Wagoner, Peninsular Product’s former president.  Wagoner had negotiated a plea agreement prior to the indictment. 

Under the federal sentencing guidelines the government was required to prove the amount of damages suffered by consumers who had purchased the defendants’ misbranded orange juice products.  At the conclusion of an evidentiary hearing Judge Enselen made the following findings:[3]

  • Between 1984 and 1990 Flavor Fresh and Peninsular Products manufactured 36,616,814 gallons of adulterated, misbranded orange juice products for which consumers paid $151,000,000. 
  • If the products had been truthfully labeled as orange drink rather than falsely labeled as 100% orange juice, the retail value of the products would have been $106,000,000. 
  • The harm to consumers was the difference between what they paid and what the products were truly worth, or $45,000,000. 

Based on these findings and the applicable guidelines, Judge Enselen sentenced Wagoner to five years in prison. 

Four months later, at the sentencing of Wagoner’s co-defendants (Marshall, Benton, and Kohlbach), the government offered a more conservative measure; that measure yielded a finding that the damages to consumers were $10,500,000.  See §XXVI-Q, below.

D. July 14, 1993: The defamatory statements in the defendants’ Seventh Circuit brief. 

On July 14, 1993, the 90c5009 defendants filed a brief in the Seventh Circuit opposing the Coalition’s appeal challenging the seal.  The defendants asked in the alternative that the appeal be dismissed for lack of jurisdiction or that Judge Zagel’s rulings against the Coalition be affirmed. 

The contents of the brief confirmed my suspicion that the defendants would use a Nixon strategy—that is, they would accuse me of  dishonest and unethical conduct—as a means to defeating the appeal.  Their brief contained the following false and defamatory statements concerning me and the 90c5009 complaint that I had filed in August 1990:[4]

Grove Fresh’s attorney responded with a letter threatening to file a completely new lawsuit against Everfresh, among others, which would contain unsubstantiated and scandalous allegations ...  The letter was obviously intended to extract a large settlement  (Br. 7.) (emphasis added)

* * *

[M]any of the allegations in the [new]complaint were false, contained information derived from confidential discovery subject to the protective order, and were designed to embarrass, harass and falsely accuse the defendants.  (Br. 7-8.) (emphasis added) 

* * *

[O]n the eve of the close of discovery in 89 C 1113, plaintiff threatened to file a new action with baseless and scandalous allegations unless Everfresh settled the case for a significant amount of money.  (Br. 26.)  (emphasis added)

* * *

Plaintiff’s subsequently filed new complaint did indeed attach to it many documents subject to the protective order and referenced therein much protected information.  (Br. 27.)

There is little doubt that plaintiff sought to misuse the District Court’s files to harm Everfresh.  (Br. 27.) (emphasis added.)

E. August 5, 1993:  The notice of rescission.

Three weeks after the 90c5009 defendants filed their defamatory brief, I tendered back the $50,000 I had previously received pursuant to the Consulting Agreement, and I gave notice that I was rescinding the Consulting Agreement.  My letter cited four grounds on which the Consulting Agreement was either void or voidable. 

My letter also asserted in the alternative that if the Consulting Agreement were a valid contract, which I did not think it was, the statements in the appellate brief charging me with professional misconduct breached the covenant of good faith and fair dealing implied by Illinois law into every contract.

Finally, my letter put the defendants on notice that if they did not retract their false and defamatory statements I would seek a hearing in the Seventh Circuit to clear my name. 

[1] The story concerned a crop export subsidy program administered by the U.S. Department of Agriculture.  The story was published on the front-page, in three parts, on October 10-12, 1993. 

[2] 2/3/95 Tr. of Proceedings, pp. 112-13.

[3] 7/9/93 Tr. of Proceedings, pp. 204-16, in United States v. Wagoner, 93 CR 19 (W.D. Mich.)

[4] The events surrounding the filing of the 90c5009 complaint are described in Memorandum 3-C, §XVI.