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Commitments and Contingencies
9 Months Ended
Sep. 26, 2015
Commitments and Contingencies:  
Commitments and Contingencies

 

8.Commitments and Contingencies

 

Contractual

 

Our future contractual obligations consist principally of long-term debt, operating leases, minimum commitments regarding third-party warehouse operations services, forward purchase agreements and remaining minimum royalty payments due licensors pursuant to brand licensing agreements.

 

In order to mitigate the risks of volatility in commodity markets to which we are exposed, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections and expected usage levels.  Our purchase commitments for certain ingredients, packaging materials and energy are generally less than 12 months.

 

Legal Proceedings

 

We are periodically a party to various lawsuits arising in the ordinary course of business.  Management believes, based on discussions with legal counsel, that the resolution of any such lawsuits, individually and in the aggregate, will not have a material adverse effect on our financial position or results of operations.

 

Under our license agreement with the Jamba Juice Company (“Jamba Juice”), we are obligated and have agreed to indemnify and defend Jamba Juice in the two matters identified below, and Jamba Juice has tendered defense of these matters to us.

 

On June 28, 2013, a class action complaint against Jamba Juice and the Company, captioned Lilly v. Jamba Juice Company et al (the “Lilly Matter”), was filed in the Federal Court for the Northern District of California.  The plaintiff purports to represent a class of individuals who purchased make-at-home smoothie kits from Jamba Juice, and alleges that such smoothie kits contain unnaturally processed, synthetic and/or non-natural ingredients and that use of the words “all natural” on the labels of these smoothie kits is unfair and fraudulent and violates various false advertising and unfair competition laws.  The plaintiff also alleges that the smoothie kits contain two additional allegedly non-natural ingredients.  The Company asserted its belief that the “all natural” statement on the smoothie kits was not misleading and was in full compliance with U.S. Food and Drug Administration guidelines.  On September 17, 2013, we filed a motion to dismiss, seeking to dismiss plaintiffs’ claims as to gelatin and the Orange Dream Machine smoothie kit.  Our motion was denied in November 2013.  On February 3, 2014, the plaintiffs filed a motion to certify a class of all persons in California who bought certain Jamba Juice smoothie kits.  On September 18, 2014, the court issued an order granting class certification solely for purposes of determining liability and denying certification for purposes of damages.  The court requested further briefing on the question of whether it has jurisdiction to certify a class for purposes of granting injunctive relief.  Following mediation, the basic terms of a proposed class settlement were reached.  The parties signed a definitive agreement that was filed with the court for approval on December 1, 2014.  Subsequently, the court approved the settlement, the terms of which required the Company to (i) remove the “all natural” designation on the labels of the challenged products and (ii) pay $5,000 to each of the two individual plaintiffs and $425,000 to plaintiffs’ counsel for fees and costs.  The Company would pay no damages to class members, although there is no release by class members of any individual damage claims they might have related to the Lilly Matter.  The Company has complied with the requirements of the settlement and the case has been dismissed.

 

On February 26, 2015, the Company received a demand letter from counsel in California purporting to represent plaintiff, Maria Ghermezian and other California consumers.  The letter alleges that the Company’s use of the words “all natural” to describe certain kettle cooked potato chips is misleading and deceptive to consumers and violates the California Consumer Legal Remedies Act.  The demand letter seeks changes to the Company’s advertising of the products, a recall of the products, and restitution.  Numerous “all natural” lawsuits have been brought against various food manufacturers and distributors in California over the past several years, including the Company.  In July 2015, the matter was resolved to the satisfaction of the parties.