`Judge Denies Bid to Hold Kangadis Owners Responsible in Fraud Case - Olive Oil Times
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Judge Denies Bid to Hold Kangadis Owners Responsible in Fraud Case

By Virginia Brown Keyder
Dec. 5, 2014 10:19 UTC
Robin Amato, Paule Pachter and Themis Kangadis, own­ers of the bank­rupt Gourmet Factory, pro­ducer of Capatriti brand olive oils.

One can never be too sure of any­thing in this old world, but an end may well be in sight to the legal trou­bles aris­ing out of mar­ket­ing pomace oil as pure olive oil by Kangadis Food, Inc. under their Capatriti brand, as well as those of the company’s prin­ci­pals, Aristides, Themes and Andromahi Kangadis and Kangadis Family Management LLC.

In its first-ever legal action against an olive oil com­pany, the North American Olive Oil Association (NAOOA) sued the mak­ers of the Capatriti brand of oil last year, claim­ing that The Gourmet Factory falsely sold olive pomace oil as ​“100% Pure Olive Oil.” The Capatriti brand used to account for more than 15 per­cent of the olive oil mar­ket in New York, New Jersey, Connecticut and other states, accord­ing to the NAOOA.

Olive pomace oil is a refined prod­uct extracted from the byprod­ucts of the first press­ing, the left­over olive pits and pulp, using high heat and chem­i­cal sol­vents. ​“Olive pomace oil is not allowed in any grade of olive oil under any stan­dard in the world,” said Eryn Balch, exec­u­tive vice pres­i­dent of the NAOOA.

On December 10, U.S. Bankruptcy Court in Central Islip, New York is expected to approve a $2 mil­lion set­tle­ment of last year’s $261.6 mil­lion con­sumer class action suit. And ear­lier this week, Judge Rakoff of the United States District Court of the Southern District of New York set out his rea­sons for his October 23, 2014 order grant­ing Kangadis Family Management LLC sum­mary judg­ment on their motion to dis­miss an action by lead plain­tiffs Ebin and Jenkins to pierce its cor­po­rate veil.

Had the plain­tiffs’ action been suc­cess­ful, it could have led the way to find­ing the three fam­ily mem­bers per­son­ally liable for the $261.6 mil­lion. It was this claim that ini­tially drove Kangadis Food, Inc. into bank­ruptcy ear­lier this year.

Judge Rakoff found that the plain­tiffs in the class action had pro­duced ​“no com­pe­tent evi­dence from which any rea­son­able juror could con­clude that defen­dants used their alleged dom­i­na­tion of Kangadis Food Inc. as a means to accom­plish the fraud.” Such dom­i­na­tion is required under New York law in order to pierce a cor­po­rate veil, and find the prin­ci­pals of a cor­po­rate entity per­son­ally liable for the actions of the cor­po­ra­tion.

New York law has a two-pronged test for veil-pierc­ing: First, it must be shown that ​“the own­ers exer­cised com­plete dom­i­na­tion of the cor­po­ra­tion in respect to the trans­ac­tion attacked,” and, sec­ondly, ​“that such dom­i­na­tion was used to com­mit a fraud or wrong against the plain­tiff which resulted in plain­tiff’s injury.”

With regard to the sec­ond prong, it must be estab­lished that ​“the own­ers, through their dom­i­na­tion, abused the priv­i­lege of doing busi­ness in the cor­po­rate form to per­pe­trate a wrong or injus­tice.” No such abuse could be found on the part of the Kangadis fam­ily mem­bers and no evi­dence was found that Kangadis Family Management LLC ​“exer­cised any con­trol or dis­cre­tion over KFI regard­ing the trans­ac­tion at issue.” The cor­po­rate struc­tures of Kangadis Food, Inc. and Kangadis Family Management, LLC. there­fore remained intact.

The attor­neys for the cus­tomers are ask­ing the Court for $1.9 mil­lion in legal fees and expenses: $10,000 each to the two named plain­tiffs, Eben and Jenkins, and up to $50 each for the remain­ing mem­bers of the class. Such class actions are becom­ing increas­ingly fre­quent in the area of food label­ing.

Kangadis, oper­at­ing under Chapter 11 pro­tec­tion, recently announced it added the Shaw’s super­mar­ket chain as a cus­tomer. Shaw’s is one of the old­est con­tin­u­ously oper­ated super­mar­kets in the United States with roots dat­ing to 1860, and 155 store loca­tions through­out five New England states, the state­ment said.

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