Pacer awarded $14.5 million in dispute with Del Monte Foods

Pacer awarded $14.5 million in dispute with Del Monte Foods An arbitrator has awarded Pacer Global Logistics nearly $14.5 million in a dispute with Del Monte Foods Co. over a logistics agreement.
   While the arbitration opinion was not made public, both companies are public, and they have been documenting their dispute and its eventual resolution in filings with the U.S. Securities and Exchange Commission and press releases over the past year.
   Del Monte said the arbitrator with the American Arbitration Association said March 27 that Pacer had a right to terminate an agreement with Del Monte and that the food company must reimburse Pacer $14.5 million for line haul and fuel charge costs incurred in 2005-2006 on Del Monte’s behalf, that were above benchmarked rates established in a contract between the two companies, plus interest.
   It appeared to be an unhappy conclusion to what seemed to start out as a promising deal between the two companies. In March 2005, Del Monte, a U.S. producer of branded and private label food such as StarKist tuna and Contadina tomatoes and pet products such as Milk-Bone biscuits, said it had signed a deal under which Pacer would manage delivery of both imported and domestically produced Del Monte products from more than 30 plants and distribution facilities to 2,800 customer distribution centers and retail outlets.
   That year, Richard Wolford, Del Monte’s chief executive officer, had referenced the deal in a statement that the agreement was part of “structural changes to deal with the inflationary cost environment, including outsourcing transportation to a large logistics company to take advantage of their expertise and scale.”
   But a dispute between the two firms broke out in early 2006 and Del Monte said it switched to a different transportation provider in May of that year, though Pacer continues to provide some rail brokerage and highway brokerage service to Del Monte under separate services.
   Del Monte said it filed a notice of arbitration with the American Arbitration Association on Feb. 15, 2006, which initiated arbitration proceedings against Pacer. It alleged Pacer breached the logistics agreement and sought damages of $40 million.
   Pacer filed its own demand for arbitration with AAA, asserting claims against Del Monte for breaching the agreement, seeking a declaration of its ability to terminate the agreement, and asked for damages of $22.5 million.
   After discovery, Pacer said Del Monte pared back its claim to $11.4 million, then after a full hearing before an arbitrator in December, dropped its breach of contract claims against Pacer, so that the only remaining issue was Pacer’s claim for Del Monte’s breach of contract and related money damages, and for up to $15.7 million “due and owning” from Del Monte for services provided under the agreement.