Private Label Brokers Group v. Wakefern Food Corp.

A-1972-96T5 (N.J. Super. App. Div. 1998) (Unpublished)
  • Opinion Date: April 29, 1998

CONTRACTS; TORTIOUS INTERFERENCE—A customer can contract with a preferred supplier to the detriment of other suppliers if it is not done in a legally wrongful manner as measured by the prevailing competitive environment.

To enhance its private label program, a retailer-owned supermarket cooperative contracted with a national food broker to be its “preferred broker” and to purchase professional marketing services to promote the cooperative’s private label brands. The buying cooperative feared, and the Court agreed, that if it did not enhance its private label program, it could not respond to, and meet, the competitive marketplace. A successful private label program benefits not only the supplier and the retailer, but the consumer as well. A group of competing local private label food brokers objected to the preferred position of the cooperative’s selected broker and claimed that such a relationship tortiously interfered with their own contracts and their prospective relationships with the food companies that they represented. They feared they would lose the right to represent food producers because they, as brokers, would not be able to successfully market their manufacturers’ products to this particular supermarket cooperative. These fears were realized when, after the preferred brokerage contract was signed, the preferred broker contacted various suppliers in order to induce them to hire the preferred broker to sell their products to the supermarket cooperative. Fanning this fear was a letter sent by the supermarket cooperative to many suppliers which, while advising them that they were not required to deal with its preferred broker, told them that it would be a substantial benefit to the food suppliers to do so. There were also many incidents shown to the Court where the complaining brokers lost certain suppliers as clients.

In analyzing the local broker’s claims, the Court looked at the conduct of the cooperative and the preferred broker in light of the specific facts of the case. It asked the local brokers to demonstrate that the cooperative and/or the preferred broker intentionally and improperly interfered with the performance of the contract between the them and their suppliers. The local brokers could only prevail if they demonstrated that any such interference was done in a manner which was legally wrongful as measured by the competitive environment in which they dealt. The cooperative and preferred broker had every right to further their own competitive interest as well as the interest of their consumers as long as they did not do so with wrongful motive or through wrongful means. Following 23 days of trial, the lower court found, and the Appellate Division agreed, that the relationship between the cooperative and its preferred broker was not an impediment to competition. In fact, it created a greater demand by providing increased information and access to lower cost private label brands that competed with national brand products. No ill-will was found. It was clear to the Court that the cooperative had been losing its competitive edge in the marketplace while the steps that the cooperative took to maintain its place in the food industry may have affected the local broker’s business relationships, it was not illegal nor improper for the cooperative to select a preferred broker in order to maintain its place in the marketplace. Consequently, the local broker’s complaint was rejected by the Court.