The American firm that owns the majority of Egg City may lose its stake in the world's largest egg farm to its Japanese partner as the result of a federal court's ruling in Los Angeles on Friday.
U.S. District Judge Stephen V. Wilson ordered the Careau Group, the U.S. firm that owns 60% of the Moorpark egg farm, to pay more than $36 million in loans and interest to Okura & Co. (America), the U.S. subsidiary of a large Japanese trading company that owns the remainder of the farm. Okura was also allowed to go ahead with its foreclosure proceedings against Egg City.
"It's certainly safe to say we are disappointed in the outcome," said Michael McCann, an attorney with a Santa Barbara law firm that represents Careau Group. "We are exploring possible responses, one of which may be an appeal."
The order by Wilson stems from a long, simmering battle between Careau and Okura over the operation and ownership of Egg City and its 3.5 million chickens.
Okura & Co. received a 40% stake in the farm in 1987 after loaning Careau $13 million to pay off creditors and emerge from Chapter 11 bankruptcy court proceedings. Okura said it invested another $17 million in the ranch.
But early last year, Okura filed suit to foreclose on the ranch, claiming that Careau Group was nearly $20 million behind in interest and principal payments and was expected to default on the entire loan.
In a countersuit, Richard Carrott, who owns most of Careau Group, claimed that Okura had conspired to make it impossible to pay back the loan as part of a "secret takeover" of the farm. Careau Group sought $72.5 million in damages.
Wilson, however, threw out most of the significant claims in the Careau suit and sided with Okura.
Officials of Okura could not be reached for comment.