Nov 4, 2011

Litigants settle SweeTango dispute

The parties in the SweeTango dispute have agreed to settle their legal differences.

On Sept. 20, Dennis Courtier, owner of Pepin Heights Orchards, Lake City, Minn., said the remaining legal claims against his orchard and the University of Minnesota would be dismissed with prejudice, meaning the case would never again see a courtroom.

The settlement was the result of a Feb. 4 ruling by Judge Lloyd Zimmerman of Minnesota’s Fourth Judicial District. In that ruling, Zimmerman dismissed most of the claims that were filed against Pepin Heights and the University of Minnesota in June 2010, when the orchard and land-grant institution were sued by more than a dozen Minnesota apple growers.

The plaintiffs sued over access to the SweeTango apple – a much-hyped variety released a few years ago by the University of Minnesota’s breeding program. According to the lawsuit, the university granted Pepin Heights an “exclusive license to grow, have others grow on its behalf, and sell SweeTango.”

In turn, Pepin Heights formed a cooperative called Next Big Thing, allowing growers in several other states and Canadian provinces to join. Membership was limited, however, as the cooperative sought to regulate the ways SweeTango could be grown and marketed.

The exclusivity of Next Big Thing limited access to what could be an extremely lucrative apple – even for growers in its home state. In their lawsuit, the plaintiffs sought equal access to SweeTango and wanted to void the exclusive agreement between the university and Pepin Heights.
One of the main goals of the lawsuit was to challenge the idea of a publicly funded university developing a product and granting an exclusive license to one business to sell that product. The plaintiffs don’t consider that legal, said Frank Femling, owner of Afton Apple Orchard in Hastings, Minn., and one of the plaintiffs.

“Even if it is legal, is it ethical?” Femling asked.

Judge Zimmerman, however, ruled that the agreement between the university and Pepin Heights is legal. Minnesota’s antitrust and monopoly laws do not apply to its land-grant university, he said.

The plaintiffs think the judge erred in his decision, but don’t have the funds to pursue the lawsuit any further, Femling said.

Courtier considered the lawsuit “groundless.”

“Pepin Heights won the license to bring this new and exciting variety to the market in a fair head-to-head competition with one of the plaintiffs,” he said. “After the license was granted to Pepin Heights, the plaintiffs behind this case tried to use the courts to accomplish what they couldn’t in the open marketplace.”

The point of the agreement between Pepin Heights and the University of Minnesota was to carefully manage where and how SweeTango is grown, harvested and shipped, to make sure the apple maintains its quality reputation in the eyes of consumers, Courtier said.

As part of the settlement, the plaintiffs agreed to pay Pepin Heights $25,000 in legal fees, said Lisa Lamm Bachman, the attorney who represented the plaintiffs.

The settlement gave the plaintiffs at least one concession, however. Under the original licensing agreement with the university, Minnesota growers who weren’t members of Next Big Thing could grow up to 1,000 Minneiska trees (the trees that yield SweeTango apples) on their property, provided they only sold the apples through direct-market channels and didn’t pool them for the wholesale market. Thanks to the settlement, state orchards can now grow up to 2,000 Minneiska trees, as long as the total amount of trees in the state doesn’t surpass 100,000. By 2017, those numbers will go up to 3,000 trees per grower and 150,000 per state, Bachman said.

Femling had no immediate plans to plant Minneiska trees at Afton Apple Orchard, but if SweeTango becomes as popular as Honeycrisp, he might change his mind. If he does, 3,000 trees would be plenty, since he sells all his apples direct from the farm.

To plant Minneiska trees, however, Femling would need to get permission from Dennis Courtier. He wouldn’t expect Courtier to refuse, but that conversation could get a little awkward, Femling said.

By Matt Milkovich, Managing Editor