Beyond Meat’s Legal Troubles Are Getting a Lot Bigger

Beyond Meat is tangled in a court case that has gotten bigger than the original Don Lee lawsuit.

A legal tie-up with former supplier Don Lee Farms is casting a dark shadow over Beyond Meat's growth story. | Image: Cindy Ord/Getty Images/AFP

  • Shareholders are starting to question Beyond Meat’s transparency through its legal battle with Don Lee.
  • A new court case alleges BYND insiders sold shares with non-public financial knowledge.
  • The case also suggests that Beyond Meat has been misleading the public on their potential knowledge of the case.

Beyond Meat’s (NASDAQ:BYND) stock has been a hot commodity over the past year as investors look to capitalize on the public’s shift toward plant-based food.

The firm’s products exploded in popularity after fast-food chains around the country added them to their menus. But a legal tie-up with former supplier Don Lee Farms has been casting a shadow over the firm’s growth story, and that cloud just got a whole lot darker.

Beyond Meat’s burgers have gained popularity over the past year. | Source: REUTERS/Moe Doiron

Beyond Meat’s Don Lee Lawsuit

Don Lee Farms claims it is partially responsible for the advent of the Beyond Burger, Beyond Meat’s flagship product.

The manufacturer, and now competitor, alleges that Beyond Meat illegally terminated its contract, stole Don Lee’s proprietary methods for creating the Beyond Burger, and passed them on to new suppliers. 

Beyond Meat’s legal troubles have cast a shadow of doubt over the firm’s success. | Source: Drew Angerer / Getty Images / AFP

Beyond Meat, for its part, claims the contract was terminated after discovering food safety issues at Don Lee.

Don Lee fired back that Beyond Meat was the one with food safety problems. It even alleged that Beyond Meat doctored an inspection document specifically to mislead Don Lee.

I’ve written in detail about the specifics of the case. The long and short of it is that if Don Lee’s case is successful, Beyond Meat could be in for a financial nightmare.

If BYND is found to have stolen and passed on Don Lee’s trade secrets, Don Lee could get a portion of the proceeds of every Beyond Burger sold. That includes back-dated profits from the original terms of the agreement.

Shareholders Join the Case

So far, Beyond Meat has categorically denied Don Lee’s claims. But it seems some shareholders are starting to worry that BYND and its execs are hiding something.

Between January and June, six BYND stock owners filed lawsuits against the firm, claiming breaches of fiduciary duty and questioning the transparency of the firm’s public statements about the Don Lee lawsuit.

Last week, Ian Major joined the chorus of shareholders wishing to know what’s going on at Beyond Meat. Major alleges that Beyond Meat executives were aware of their wrongdoing in the Don Lee case, and haven’t been honest with the public about their expectations for the direction of the case.

Beyond Meat CEO Ethan Brown is included in the list of alleged inside sellers. | Source: Ian Major Vs. Beyond Meat Court Documents

Major alleges that “several company insiders and certain private equity finds tied to Board members” made more than $30 million in profits by selling shares using non-public financial information.

The lawsuit names several former and current board members as well as Beyond Meat’s Senior Vice President of Operations, Chief Growth Officer, and Chief Financial Officer. Ethan Brown, Beyond Meat’s CEO, is also included.

Where BYND Goes From Here

If Don Lee’s claims are proven true, it could cause BYND stock to come crashing down. | Source: Yahoo Finance

Major is requesting Beyond’s books as well as internal communications and meeting notes to determine whether the firm has been intentionally misleading the public on the lawsuit’s severity.

It’s impossible to tell whether Beyond Meat is at fault here. If Don Lee’s accusations are proven false, this entire episode could be wiped from BYND’s history. But notably, if Don Lee’s claims are found to be accurate, it could set off an avalanche of legal problems for Beyond Meat.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned securities.

Last modified: March 5, 2021 1:25 PM

Laura Hoy: Laura has been working as financial journalist covering US markets for more than a decade. Her work can be found in a wide variety of publications including Yahoo Finance, InvestorPlace, Nasdaq and Benzinga. Contact her at lmariehoy@gmail.com, see her LinkedIn profile here.