Norpac claims assignee files suit alleging $7.12 million shortfall

By Caroline Salls

Pittsburgh, March 9 – Norpac Foods, Inc. payment claims assignee National Frozen Foods Corp. filed a lawsuit Friday in the U.S. Bankruptcy Court for the District of Oregon, alleging that Norpac was overpaid by at least $7.12 million for inventory sold.

National Frozen Foods said the company that purchased Norpac’s assets, Oregon Potato Co., assigned its rights under the asset purchase agreement to PNW Veg Co., LLC, and VegCo assigned its right to some payment claims to sister-affiliate National.

Under the purchase agreement, National said VegCo was to purchase all of Norpac’s bulk product inventory, with the price paid at closing based in part on an estimated inventory value, subject to adjustment up or down through a post-closing true-up process.

The purchase agreement provided that, if the parties cannot reach agreement on the “final purchase price” after the post-closing true-up, their differences are to be submitted to the bankruptcy court for final resolution.

According to the lawsuit, National contends that the final purchase price should have been adjusted downward in the amount of at least $7.12 million. The plaintiff if asking the court to order Norpac to repay the purchase price shortfall.

In addition, National said a $10.26 million invoice related to its agreement to purchase all of Norpac’s finished goods inventory should be offset by the purchase price shortfall amount.

As an alternative claim, National is seeking damages for Norpac’s alleged breach of the purchase agreement. Specifically, National said Norpac breached its representations and warranties that all inventory would be merchantable and fit for its intended purpose, that it would be of marketable grade and that it would conform to applicable customer agreements.

“National has been damaged in the amount of at least $7,121,707 by paying for at least 19.7 million pounds of product that did not meet those standards,” the complaint said.

National also alleged that Norpac breached its duty of good faith and fair dealing by agreeing to National’s positions in negotiations regarding adjustments, but at the same time refusing to refund the purchase price shortfall.

Salem, Ore.-based Norpac Foods is a grower-owned cooperative focused on processing frozen vegetables and fruit. The company filed bankruptcy on Aug. 22, 2019 under Chapter 11 case number 19-62584.

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