Lawsuit Could Weaken Sunkist : Citrus: A claim by one of its directors supports U. S. government’s suits against the cooperative. Result could be lower prices for consumers.
Sunkist Growers Inc., struggling to defend itself against federal lawsuits for allegedly violating sales quotas, is now trying to fend off accusations from within that, if true, could severely weaken the 100-year-old citrus cartel.
For the first time, a Sunkist director has accused management at the Sherman Oaks-based cooperative of condoning abuse of sales quotas. The director’s claims support the U.S. government’s suits and increase the likelihood that federal sales quotas will be permanently abolished--which would drastically erode Sunkist’s control over citrus prices and could lead to lower citrus prices for consumers.
Sunkist, the nation’s largest citrus cooperative, was accused last August by the Justice Department of overshipping lemons in violation of sales quotas set by the federal government. Sunkist and its members have also been accused of overshipping millions of dollars of navel oranges in numerous other suits by the federal government and private growers.
The suits have hurt Sunkist’s image in its centennial year and created disarray in its boardroom and dissent among its ranks. Sunkist, which has 6,500 member growers and packers and represents 65% of the citrus production in California and Arizona, has repeatedly denied any wrongdoing.
But last month, Berne Evans, a Sunkist director and one of the state’s biggest growers, alleged in a suit in Los Angeles Superior Court that Sunkist management knew about and condoned quota abuses by its member packinghouses. Evans is trying to block an attempt by Sunkist management to settle the federal suits, saying it would unfairly cost Sunkist members who did not reap windfall profits by violating federal quotas.
Volume quotas for oranges and lemons are among 42 so-called federal “marketing orders” intended to prevent food gluts that could lead to price wars and hurt farmers. But the quotas date back to the Depression, and have long been criticized as outdated. Partly because of the alleged Sunkist violations, the U.S. Department of Agriculture temporarily lifted federal quotas for lemons and navel oranges in January.
Analysts say that if Sunkist is found guilty of cheating, it could lead to the permanent termination of citrus quotas. Sunkist has long been a leading advocate for the quotas, but independent growers argue that quotas enable Sunkist to control prices and maintain its dominance in Arizona and California, which produce the bulk of fresh oranges and lemons sold in supermarkets.
“This is just another swipe at Sunkist, and this time it’s coming from within,” said Dennis Johnston, an independent orange grower in Kern County.
Because the marketing order was lifted this year, Johnston said his 900-acre farm has harvested a record crop so far and that wholesale prices of oranges are down substantially this year. In past years, Johnston and other growers have been forced to pick fewer oranges because of limits set under the quotas.
The cancellation of quotas and bumper crops in California and Florida have driven down citrus prices, some to the lowest levels in three years. Shoppers last month paid nearly 51 cents a pound for oranges and grapefruit, 87 cents a pound for lemons, according to the Bureau of Labor Statistics. Analysts say prices could drop further if volume quotas are abolished.
Sunkist’s boardroom fight and the problems with the volume quotas have reportedly caused some Sunkist members to withdraw from the cooperative, whose revenue reaches about $1 billion a year.
Russell Hanlin, Sunkist’s president, and several other board members did not return telephone calls Monday. But Curt Anderson, Sunkist’s spokesman, said in a release, ‘Allegations that Sunkist condones misconduct by any of its members are simply untrue.” Anderson accused Evans of causing controversy by trying to institute policies of his own at the board.
Evans, a Sunkist board member since 1989, referred questions to his attorney at Alschuler, Grossman & Pines in Los Angeles. In court papers, Evans claimed that Hanlin admitted to him that Hanlin knew that certain Sunkist members violated volume quotas. Sunkist’s attorneys at Tuttle & Taylor in Los Angeles have not yet filed a formal response to Evans’ complaint, but in other court papers Hanlin denied having made such admissions.
Evans filed suit because he wanted to block Hanlin and other Sunkist directors from removing Evans from the cooperative and the board, apparently because of his outspoken complaints. Earlier this month, Evans won a preliminary injunction preventing Sunkist from ousting him.
Bob Rieners, a citrus farmer in Exeter, Calif., and a Sunkist member, said the temporary removal of orange volume quotas has hurt his business. Rieners refused to comment on Sunkist’s problems, but he said Sunkist could lose more members if the volume quotas are permanently removed.
Because of the controversy, Rieners declined to say whether he would remain a Sunkist member.
