Tyson Seeks to Protect Trade Secrets With Suit

Tyson Foods Inc.’s lawsuit against ConAgra Inc., filed Aug. 5, is not the first time the food industry giants have butted heads.

ConAgra drove up the bidding for Holly Farms Inc. of Wilkesboro, N.C., in 1989 when Springdale-based Tyson tried to buy the company. Tyson’s cash cost to acquire Holly Farms wound up being around $1.5 billion.

Leonard Teitelbaum, an analyst with Merrill Lynch Global Securities in New York, says that was more than industry analysts expected Holly Farms to go for at the time. But in the long run, the acquisition was a strategic one for Tyson.

“During that time, there was extreme consolidation going on in the industry,” Teitelbaum says. “Holly Farms was one major product line out there that would have fit either buyer like a glove. You have to look at an acquisition like that as a strategic move versus a financial one.

“Tyson was able to go get a major player in the industry, and Holly Farms has ended up being a true jewel.”

The cost of Tyson’s “trade secrets” lawsuit, filed this month in Washington County Chancery Court, is apt to be a lot cheaper, although ConAgra will assuredly put up a fight. The Omaha, Neb., food conglomerate recently hired Springdale lawyer Jim Crouch to be its local counsel.

Crouch says ConAgra’s written response is not due until Aug. 29. In the meantime, ConAgra’s director of corporate relations, Scott Dietz, says it is the company’s policy not to comment on pending legal or personnel matters.

Tyson, represented by Fayetteville attorney Ken Shemin, asks for protection under the Arkansas Trade Secrets Act against the disclosure of proprietary information by former employees who recently joined ConAgra. Four of the former Tyson employees – David A. Purtle, Jerry Dowd, John Curran and Mike Hamblin – are named in the suit along with ConAgra.

The defendants all recently left senior positions with Tyson to go directly to ConAgra, where they assumed similar responsibilities. The suit alleges they have “direct knowledge” of specific proprietary information that could be detrimental to their former employer.

Teitelbaum says he believes ConAgra was simply trying to steal good people, not trade secrets.

“I don’t think there was any intent by ConAgra to run afoul, no pun intended,” Teitelbaum says. “Tyson trains people exceedingly well, and if they leave Tyson they would be a valued addition to any company. I think ConAgra was probably just acting that way.”

And although a meat glut and the sagging price of poultry will have more to do with Tyson’s performance than the lawsuit, Teitelbaum says the company is trying to send a message. Tyson, which had poultry sales of $7.4 billion in 1998, wants to protect its position as the poultry industry leader.

“Tyson is saying that it has a lot of technology and it thinks it does its business better than anyone,” Teitelbaum says. “They’re saying, ‘You’re not going to find out how we do things by hiring our people.’ Tyson wants to protect its stock in trade, which is its production methods and turning out excellent products.”

Purtle was formerly a senior vice president at Tyson and general manager of fresh consumer products. Dowd was a senior vice president and general manager of food service distribution, Curran was formerly senior vice president and general manager of fresh consumer products, and Hamblin was division manager of food service national accounts.