Don Lee Files New Suit Against Beyond Meat, Claiming “Something is really wrong”

Manufacturing company Don Lee Farms filed a lawsuit against Beyond Meat last week, claiming the California-based food tech giant has a tendency to “overpromise and underdeliver, then scramble for excuses.”

Allegations against Beyond Meat include misleading consumers with “unsupported marketing claims,” touting inaccurate nutrition labels that violate FDA regulation, creating unfair marketplace competition and a range of underlying issues with the company by CEO Ethan Brown, who is described in the complaint as having “an appetite for excuses.”

“Company insiders have described Brown’s constant finger-pointing as having led Beyond to ‘develop an internal culture of blame,’” the complaint said. “Others have noted that while Brown may have had the mettle to run a small startup (where truth can be a malleable concept), he ‘lacks the experience to run the day-to-day operations of a fast-growing public company’ (where truth is mandated by the SEC).”

Don Lee, a multi-generation, family-owned manufacturer and co-packer of both animal and plant-based proteins, is also engaged in a second, ongoing legal dispute with Beyond that began in 2017 when the startup “abruptly” and “wrongfully” ended an exclusive five-year manufacturing agreement, citing “health and safety concerns.” Beyond then allegedly shared proprietary technology, developed by Don Lee, with two other co-packers. The company in turn filed a countersuit against Don Lee, formalizing its alleged health and safety concerns. That case is set to go to trial on September 22 in Los Angeles County Superior Court.

The most recent filing comes only two months after Beyond settled a derivative action of its original dispute with Don Lee, brought by a group of Beyond’s investors. That action claimed the company’s management team “breached their fiduciary duties” by altering and excluding safety information from food reports submitted to Don Lee and did not sufficiently disclose the state of the case prior to taking the company public in 2019. Investors claimed media reports about the ongoing Don Lee controversy in the months following Beyond’s public offering caused share prices to drop.

The new allegations take aim not only at Beyond’s product and business operations, but also its viability as the “the global protein company of the future,” as Brown has claimed.

What’s happening now?

The latest complaint, which was filed in a California federal court last Thursday, begins by stating “something is really wrong at Beyond Meat,” citing sentiments about the internal company culture from unnamed insiders to speculate that Brown is unable to “truthfully” run the publicly traded company.

However, at the core of Don Lee’s argument are two nutrition-based claims, backed by results from an “internationally accredited laboratory that followed rigorous testing methods,” that seek to prove Beyond products do not contain the protein content “equivalent to or greater than animal protein” nor are they made from “all natural ingredients” as the company publicly claims.

The laboratory results, conducted on a range of Beyond products purchased from a variety of different retailers across the country, showed the company’s plant-based products contain anywhere from 12% to 30% less protein than the figure stated on their respective nutrition labels. According to the suit, that overstatement not only has misled consumers, but also violates FDA regulations.

The FDA requires that percent daily value claims be calculated using the Protein Digestibility Corrected Amino Acid Score (PDCAAS), which corrects for the quality of the protein taking efficiency and digestibility into account. While the suit does not clarify whether there is an alternative explanation or whether Beyond has reported what methodology it used, the filing emphasizes the discrepancy between the laboratory results and Beyond’s labeled daily protein values to posit that the company may have violated regulations.

The suit goes on to cite instances in which Beyond has used its protein claim to acquire and retain consumers, secure retail partnerships, including getting placement in the meat aisle next to traditional animal proteins, and garner support for its mission from business partners and investors.

Additionally, Beyond markets its products as made from “simple plant-based ingredients” and that they do not contain “anything synthetic or artificial.” However, Beyond products contain methylcellulose, an ingredient commonly used as a laxative, a cosmetic filler and a binder in hot dogs. According to the complaint, both scientific literature and regulatory bodies recognize methylcellulose as a synthetic chemical as it “does not occur naturally” and is produced by heating cellulose with caustic solution and treating it with methyl chloride.

“While [Beyond Meat’s] privileged market position is undeniable, their success cannot be disentangled from their false claims,” the suit states. “From the very beginning of the company, Beyond Meat has relied on claims of superior protein and non synthetic ingredients to win in the marketplace.”

Don Lee emphasizes that Beyond has not only misled consumers, but also investors, retailers and business partners, stating that the company’s success has been built on “deception and lies” heavily influenced by its nutrition claims.

“From the beginning, as Brown admitted, the company’s polestar was simply ‘grabbing as much land as we can,’ then figuring out the details once they’d beat competitors to store shelves,” the complaint states. “To win the land grab, [Beyond] needed to first differentiate themselves from competitors. They did so by emphasizing the two false claims described above.”

A Beyond Meat spokesperson said ​​“the allegations in the filing lack merit and we are prepared to vigorously fight this in court,” in a statement.