Unilever has creatively sold its brand rights in Israel to effectively block Ben & Jerry’s boycott of Israel, but the ice cream company is suing its parent corporation to keep its ban on selling its ice cream in Israel.
The unusual case of a subsidiary suing its owner – ostensibly to protect its goal of making less money – is set to be heard by a New York court Monday, The Wall Street Journal reported.
Ben & Jerry’s argues Unilever is circumventing its governance board when it sold the brand rights in Israel. The ice cream maker had boycotted sales of its brand in Israel, but Unilever effectively lifted that ban by selling the brand to a licensee in Israel.
The socially aware Ben & Jerry’s board is seeking an injunction on Unilever’s sale of its Israel brand rights.
Ben & Jerry’s wants to block Israel from its progressive brand over Israel’s settlements in the West Bank and parts of East Jerusalem.
The lawsuit claims Unilever attempted “to usurp the board’s contractual authority and nullify its previous decision prohibiting the sale of Ben & Jerry’s products in the West Bank.”
It pits Unilever’s authority to make money through Ben & Jerry’s sales versus Ben & Jerry’s board’s social activism seeking progressive change under its brand.
“This is the most unique merger agreement I’ve ever seen, the byproduct of a year and a half of negotiation which culminated in a corporate governance structure which provides the board with clearly delineated rights and the power to enforce those rights,” Ben & Jerry’s attorney Shahmeer Halepota told the Journal.
Unilever contends the part of the merger agreement that gives it responsibility for financial and operational decisions will permit it to sell the rights of Ben & Jerry’s in Israel.
A legal expert told the Journal that seeking an injunction against Unilever is invalid because a company is effectively suing itself.
Also in the complaint, Ben & Jerry’s governance board claims Unilever has frozen the compensation of the ice cream maker’s board members.
“Unprecedented doesn’t begin to describe it,” Tulane University business law professor Ann Lipton told the Journal.
Harvard Law professor Jesse Fried told the Journal the unique Unilever agreement with Ben Jerry’s has proven to fail, because of this breakdown on differing opinions on social activism.
“This is a very weird arrangement,” Fried told the Journal. “It’s not just that I haven’t seen it, it’s that I don’t think it exists anywhere in the world except for at Ben & Jerry’s.”
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