But the purveyor of fruit spreads and other foods plans to continue expanding, despite the setback, a spokesman said Thursday.
Lancaster Fine Foods filed for Chapter 11 bankruptcy May 31, according to court documents. The company, a subsidiary of Earth Pride Organics, operates out of a facility in East Hempfield Township, where it produces everything from chutney to cheese spreads.
It was a brand of fig jam at the heart of the lawsuit that preceded Lancaster Fine Foods’ fall into bankruptcy – specifically, its Divina fig and orange fig spreads.
The case alleges that Lancaster Fine Foods and a New York-based food distributor called FoodMatch illegally used trade secrets they gained during a relationship with a third company, Dalmatia Import Group Inc., to create the Divina brand.
Dalmatia sued FoodMatch and Lancaster Fine Foods over the “impersonator jams,” saying they had violated a number of non-compete and trade secret laws. The suit also accused the companies of illegally selling fig spreads under the Dalmatia name, despite Dalmatia rejecting the batches for sale.
A jury ultimately awarded Dalmatia $5.2 million in damages. The law firm representing the company claims the verdict was the first in the United States to make use of the Defend Trade Secrets Act, a 2016 law that lets companies sue for trade secret violations in federal court instead of relying on inconsistent state laws.
Lancaster Fine Foods filed for bankruptcy less than a month after the judgment. A spokesman for the midstate company said Thursday, however, that the bankruptcy was simply a legal maneuver to avoid drawing out the lawsuit any longer than needed.
“While we respect the court’s ruling, it is being appealed by FoodMatch and could continue for years,” Lancaster Fine Foods said in a statement. “Rather than investing resources in a legal dispute, we have decided to focus on our people, our company and our community.”
Chapter 11 bankruptcy lets businesses continue operating while they put together a plan to pay their debts. It also places any lawsuits against the business on hold.
Lancaster Fine Foods makes up the bulk of Earth Pride Organic’s operations, said Alex Thompson, a part owner of the company. Earth Pride also has three other subsidiaries, none of which were a party in the lawsuit or subsequent bankruptcy.
Five years after its founding, Lancaster Fine Foods has grown to 75 employees and moved earlier this year to a larger building to accommodate its growth. Thompson expects sales to continue growing and noted the company just recently hired 12 more employees.
“This move will streamline and strengthen our business both operationally and financially,” Lancaster Fine Foods said of the bankruptcy in its written statement. “While it was hard, we believe it will make us a better company that can continue to provide for our 75 employees and their families for decades to come.”