November 6, 2012 in City

Scotts settles grass seed legal battle

Company said dealers misrepresented harvests
By The Spokesman-Review
 

A multimillion-dollar legal fight pitting The Scotts Company LLC, one of the world’s leading lawn companies and the maker of Miracle-Gro fertilizer, against Northwest farmers and two grass seed dealers has been settled.

The case erupted in late 2010 after Scotts refused a contractual obligation to pay millions of dollars for Kentucky bluegrass seed. The company suspected that farmers and two local seed dealers were juicing their harvest numbers to collect more money.

Farmers shot back that Scotts executives had buyer’s remorse. The grass seed contracts were signed at a time when prices were high and Scotts wanted to procure a supply from a region known for growing high-quality grass seed.

Once the recession struck and the real estate market collapsed, customer demand for new turf and grass seed disappeared. The scenario threatened to leave Scotts on the hook with an ever-growing inventory of expensive grass seed with few buyers.

When harvest numbers came in higher than anticipated, Scotts alleged fraud and withheld about $18.5 million from farmers.

The farmers sued.

A judge ordered Scotts to make payments to farmers. Further payouts were held back until fields and invoices could be audited.

Scotts then sued Seeds Inc., Dye Seed Ranch Inc., and others.

Details of each individual settlement were not released, but Seeds Inc. has agreed to make payments back to Scotts.

As the suit dragged on, Scotts hired independent auditors to review the records of the two seed companies that served as middlemen, procuring and processing the seed from farmers and then reselling to Scotts, said Matt Turetsky, an attorney for Ohio-based Scotts.

Records filed in Whitman County Superior Court outline accusations that Seeds Inc. of Tekoa stuffed its Scotts’ grass seed inventory with seed from uncontracted fields to collect the premium price.

Scotts told the judge overseeing the case that the actions amounted to a $5 million fraud. The company asserted it was under contract to buy only a certain kind of bluegrass seed grown under contracts with farmers.

The seed companies and farmers denied Scotts’ allegations, said Pete Erbland, who represented the farmers. He said the settlement terms were acceptable to farmers. He did not speak on behalf of Seeds Inc.

An attorney representing Seeds Inc. was unavailable for comment on Monday.

In a public statement regarding the settlements, Scotts said it hoped to continue working with Northwest farmers.

“First, we know that many growers were caught in the middle of a difficult situation,” Brent Bolton, director of Scotts’ grass seed supply, said in a press release. “This is especially true given the fact that Scotts’ seed contracts were made with the seed processing companies and not with individual growers. Only the seed processors knew which growers to pay and how much.”

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