Vitarroz Corp. v. G. Willi Food International Ltd.

Vitarroz Corp. (plaintiff) was a distributor of ethnic food products. Vitarroz sought to merge with Willi USA Holdings (Willi) (defendant). Vitarroz and Willi signed an agreement regarding the proposed merger, which required the parties to maintain as confidential the existence of the agreement and any information exchanged during due diligence. The confidentiality provision survived even if an acquisition was not completed. The acquisition did not happen. Subsequently, Willi sought to issue a joint press release stating that Willi had conducted a “detailed review of the financial condition of Vitarroz” and the acquisition did not go forward due to “issues that arose during the due diligence process.” Vitarroz immediately rejected the proposed language. Willi nevertheless issued the press release on its own. Vitarroz sued Willi and related parties (defendants), asserting various claims based on a breach of the confidentiality provision. The parties agreed to move the dispute to arbitration, and the principals of Vitarroz, Steve and Artie Weinreb, joined as parties. Before the three-arbitrator panel, extensive discovery occurred, followed by a five-day evidentiary hearing. Vitarroz and Willi called nine and six witnesses, respectively. One day, an arbitrator had an unexpected personal matter, and the panel ordered each party to limit their direct and cross-examination of Steve to about 30 minutes each. Steve and other witnesses described the harm to Vitarroz after Willi issued its press release. Importantly, several of Vitarroz’s suppliers testified that they understood the press release to mean that there was something financially amiss at Vitarroz, and further, the suppliers observed how Vitarroz was adversely impacted by the press release. The panel ruled in favor of Vitarroz, discussing how the press release disclosed that there was something objectionable about Vitarroz’s financial condition in breach of the confidentiality agreement. The panel’s decision relied in large part on the testimony of the third-party suppliers. In court, Willi moved to vacate the award, while Vitarroz moved to confirm. Willi argued that it was improperly limited in its cross-examination of Steve.