The unusual case of a subsidiary suing its owner – ostensibly to defend its purpose of making less money – is supposed 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, yet Unilever effectively raised that ban by selling the brand to a licensee in Israel.
The socially aware Ben & Jerry's board is pursuing an injunction on Unilever's sale of its Israel brand rights.
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Ben & Jerry's desires to block Israel from its progressive brand over Israel's settlements in the West Bank and parts of East Jerusalem.
The lawsuit argues Unilever tried "to usurp the board's contractual authority and nullify its previous decision prohibiting the sale of Ben & Jerry's products in the West Bank."
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It pits Unilever's authority to make money through Ben & Jerry's sales versus Ben & Jerry's board's social activism pursuing progressive change under its brand.
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"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 explained to the Journal.
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Unilever contends the part of the merger agreement that gives it accountability for financial and operational choices will permit it to sell the rights of Ben & Jerry's in Israel.
A legal expert explained to the Journal that pursuing an injunction against Unilever is invalid because a company is effectively suing itself.
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Furthermore, in the complaint, Ben & Jerry's governance board claims Unilever has frozen the compensation of the ice cream maker's board members.
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"Unprecedented doesn't begin to describe it," Tulane University business law professor Ann Lipton told the Journal.
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Harvard Law professor Jesse Fried explained to 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 said to 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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