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Ben & Jerry’s, Unilever and the State of Israel

The saga regarding Ben & Jerry’s and its attempt to boycott Israel’s disputed territories continues. Last summer, Ben & Jerry’s, which was sold to Unilever in 2000, notified its Israeli licensee, American Quality Products (AQP) that it would not renew the Israeli license when it expires in December 2022 because Ben & Jerry’s board, which was retained after its sale and allowed to advocate its unique set of “social values,” objected to the sale of its ice cream in the disputed territories. Avi Zinger, the owner of AQP, insisted that it maintained the right to sell the ice cream in the disputed area and was required to do so under Israeli law.

After a year of wrangling, political pressure, with some U.S. states (including New Jersey) divesting from Unilever stocks and a lawsuit filed by Zinger, Unilever figured out that it had a serious problem under Israeli law. Unilever had actually bound itself to the Zinger relationship in 2000 pursuant to an arrangement made at the time with the Israeli government and the company now realized it needed a way out.

 

Recent Developments in the Case

As a result, a few weeks ago in an apparent “end-run” around Ben & Jerry’s board’s determination to sever its relationship with Zinger and AQP, Unilever sold its Israeli business to AQP behind Ben & Jerry’s back. (It gave it a few days’ notice.). Ben & Jerry’s then sued its sister company Conopco, Unilever’s operating division, to try and block the seemingly done deal.

Now, in the latest saga, just two weeks after it filed suit, Ben & Jerry’s and Conopco have agreed to attempt two weeks of mediation to resolve the lawsuit. So what exactly is going on, what can the parties reasonably accomplish in mediation, and what will happen next?

Who really made the decision to block the sales in Israel? Was it Unilever or Ben & Jerry’s? Is Ben & Jerry’s really a separate company that had—and has—the power to block the sale to Zinger? Is it really too late for those at Ben & Jerry’s who object to the deal with AQP to block it? If so, why are they bothering with this suit? What do the documents actually say and is there something else going on here? What power, if any, does the Israeli government have?

Having spent hours reading the documents, the court filings and many newspaper articles on the subject, I have become aware of certain facts that, though public, have not been discussed much in the media and which I believe are both interesting and relevant. I present the facts and some arguments that I believe are most relevant and what I believe could be at least one possible outcome.

 

The ‘Historical Social Values’ Issue

When Ben & Jerry’s sold its ice cream business to Unilever in 2000, for tax reasons, it did so via a merger agreement. Though prepared to sell its company—it would be making a lot of money on a sale—Ben & Jerry’s insisted that it would do so only if it could maintain a “board” that would be allowed to guide the company with respect to its social values.

Clearly, though, Unilever, like any company paying a huge amount of money for assets, had no interest in the seller telling the buyer what to do with the asset once sold. That’s the point of a sale! But Ben & Jerry’s wouldn’t budge and Unilever really wanted the product, so the parties worked out a highly unusual compromise.

On the one hand, the agreement speaks to the right of this social board to preserve only the “historical” social priorities of the company and the integrity of the brand; this way Unilever knew what it was getting into. On the other hand, in a nod to Ben & Jerry’s past and the recognition that things can change, the Ben & Jerry’s board maintained these social priority rights under the agreement “as they evolve.” [emphasis added].

What does this mean? That’s now before the court. Obviously, in the wording “as they evolve” Ben & Jerry’s board will argue that there was room for these social values to change going forward with the company continuing to have the right to preserve those values. At the same time, I submit that the historical “social priorities” of Ben & Jerry’s at the time of the agreement did not contemplate aggressive, BDS-like behavior and certainly not based upon political or international agendas.

In this regard, the “historical social values,” as documented in the agreements at the time, included such things as being sensitive to women’s wages and social changes regarding capitalism. The social mission of the company focused on creating economic opportunities for the poor, practicing “caring capitalism” by integrating concern for the disadvantaged in the company’s day-to-day business activities, striving to minimize negative impact on the environment, and supporting socially and environmentally sustainable methods of food production and family farming. It’s quite a leap from there to claim that the social justice board can force boycotts of entire markets based on its political views.

To read the merger agreement as permitting “boycotts” of the type Ben & Jerry’s has claimed in the Middle East would essentially mean that the company could block any major market for any reason—as long as it aligns with its newly developed social values. That’s a big leap.

Taken to its logical conclusion, such authority could also mean that Ben & Jerry’s could stop the sale of ice cream altogether based upon such “social values.” It could in theory blocks sales of its ice cream in Texas due to the state’s abortion laws, or in Florida or Indiana because it permits vouchers for students to attend private and parochial schools. Ben & Jerry’s presumably gave up this right when it engaged in the capitalist decision to sell. And the agreement does specifically make reference to the fact that it is only the social priorities “contemplated” in the agreement, i.e., at the time.

Ben & Jerry’s historical priorities were exclusively domestic and exclusively social. Does it have the right to go international and political? Is the boycott of Europe next? The social priorities also consistently involved positive actions, as opposed to prohibitions. The priorities didn’t restrict Unilever at all, and had the document been written in the form of restrictions, Unilever would have presumably had a problem with the agreement since it wasn’t likely that it would allow a company to tell it what it couldn’t do post-sale.

Ben & Jerry’s claim that the boycott of the disputed territories governed by Israel is consistent with its historical social values is also difficult to make given that Ben & Jerry’s sold ice cream to Israel’s producers, including in the disputed territories, for years, even before it sold the company to Unilever.

Only 21 years after it sold its rights did Ben & Jerry’s attempt to interfere with that market. Imagine, it sold its rights to an area, got paid for it and then said, “Sorry, you can’t sell there anymore.” Sure, they can claim that Israel’s conduct has changed, but has it?

 

The Israeli Market Factor—Strauss, Etc.

Following the brouhaha associated with Ben & Jerry’s announcement of the non-renewal, Avi Zinger initiated a lawsuit against Unilever to force Unilever to renew the license. Unilever came on strong in response repeatedly emphasizing that it never promised Zinger and AQP a license beyond the term of the agreement between the parties. In their search for a hook to compel Unilever to renew with Zinger, somebody discovered an important fact that had previously been overlooked—that Unilever had actually bound itself to an agreement with the Israeli government at the time of its merger with Ben & Jerry’s in 2000.

Specifically, when the Unilever-Ben & Jerry’s merger took place in 2000, the transaction required Israel’s approval because Unilever is very heavily invested in Israel and would have a monopoly on ice cream via the Strauss company—wholly owned by Unilever by virtue of the merger. This would violate Israeli law. And so just like Sprint and T-Mobile can’t merge and continue to do business in the U.S. without a government signoff, Strauss wouldn’t be able to continue to sell many of its dairy products in Israel after it acquired Ben & Jerry’s, a primary competitor, without Israeli approval. To avoid problems with the Israeli government, Unilever sought the Israeli government’s consent to the merger.

Pursuant to a consent decree—essentially an agreement between Israel, Unilever and Ben & Jerry’s in 2000, the parties agreed that Zinger’s licensing agreement with Ben & Jerry’s would continue and not change—and would be renewed, with no changes to the agreement except with permission of the applicable Israeli authority. This was a condition of Unilever’s ability to continue to operate in Israel pursuant to Israeli anti-monopoly laws. By refusing to renew the license to AQP, Ben & Jerry’s and Unilever essentially violated its agreement with the Israeli authority from 2000.

Once Unilever realized this and was now facing the wrath of the Israeli government—and due to U.S. states’ pension funds coming down hard on it—Unilever did an “end run” around its Ben & Jerry’s board and sold the Israeli business to AQP, presumably with the Israelis agreeing that they would accept that as satisfactory to their 2000 concerns, as documented in the consent decree.

 

Can the Sale be Undone?

Game over now that the sale has been completed, right? Can the sale be undone?

Conopco, Inc. is the principal operating subsidiary of Unilever. Conopco is responsible for day-to-day operations, marketing and sales. Unilever/Conopco claims in its lawsuit that the sale is complete so it can’t be undone. Under U.S. law, once a transaction to a third party is completed, all an aggrieved party can get is damages. It can’t undo the transaction. Certainly to undo the transaction, one has to have jurisdiction over the purchaser and the Court has no jurisdiction over AQP.

Presumably, too, undoing the transaction would require the cooperation of the Israeli authorities. And it is highly unlikely that the Israelis would cooperate because, among other things, it would trigger a violation of the consent decree previously issued by the Israeli authorities, to which Unilever agreed. In any event, if there is antisemitism underlying Ben & Jerry’s conduct, this is not exactly something that Israel would be able or even inclined to enforce.

So Unilever figures it solved its problem although it angered its Ben & Jerry’s board. But is the transaction really “done,” as Conopco claims, and are there ongoing obligations here that can be stopped?

Interestingly, Ben & Jerry’s sued Conopco here, not Unilever.

Suppose in addition to the sale, effectuated and completed by Unilever the holding company, the agreement provides that Conopco has to give AQP recipes for its new flavors. And suppose certain parts of the transaction have not really been completed. Is Ben & Jerry’s trying to stop these? Can they? Would the Israeli anti-merger regulators really care that much if the new recipes were not provided going forward? What exactly are Conopco’s ongoing obligations and how important are they to AQP?

On the one hand, it is likely a violation of the consent decree that Israel, Unilever and Ben & Jerry’s agreed to if these recipes were denied, since nothing can change in the licensing agreement with AQP without Israel’s consent. But as a practical matter that won’t necessarily stop the Ben & Jerry’s board from pursuing its claim or for a court in the U.S. to order Conopco not to take further action in support of the Unilever/AQP agreement. Also, in the end, how much would Israel care if the issue were limited to AQP not getting new recipes?

 

Broader Implications

I suspect that the parties—Conopco/Unilever and Ben & Jerry’s—already see possible resolutions that the two would agree to even reluctantly and would therefore try to avoid costly litigation. The ramifications of
the litigation for each side could also have much broader implications that could be unsettling. If, for example, Unilever prevails and the Court finds, among other things, that Ben & Jerry’s rights regarding its social priorities are limited to what they were in 2000, Ben & Jerry’s board would lose its ability to pursue many of its evolving social values going forward. The Court may also find that the social priorities never allowed for any kind of negative conduct, e.g., boycotts or the blocking of sales.

A Unilever loss, on the other hand could appear in a few ways:

1. The Court could force Conopco/Unilever to try to undo the transaction. It would be a nightmare in terms of Israel markets and the empowerment of a board at Ben & Jerry’s, along with problems for Unilever in Israeli markets for their other products.

2. It could block Conopco/Unilever from moving forward with parts of the transaction or with respect to ongoing obligations that are only to be performed in the future, e.g., the sharing of recipes.

3. The Court could simply rule that Unilever has to pay damages. But to whom? And for what damages? And what about the fact that Ben & Jerry’s has been selling to Israel for years?

Technically speaking, I’m not actually convinced that Ben & Jerry’s has the authority to sue in the name of Ben & Jerry’s. Unilever owns Ben & Jerry’s and there is no real separate board here. This board was created for a very limited purpose, with limited powers, and it is far from clear that it has the authority to launch a lawsuit in the name of Ben & Jerry’s. At the same time, this board presumably has the right to protect the interests/rights for which it negotiated, so even if this particular lawsuit were dismissed, Ben & Jerry’s presumably could bring it back, titled differently.

 

Unilever—Missteps or a Partner in Crime?

One arguably small but troubling concern is how Unilever conducted itself in the past regarding Ben & Jerry’s attempts to boycott the disputed territories. Did Unilever realize that it was an action based in antisemitism? Did it care? Did it in fact condone Ben & Jerry’s actions? And by doing so, did it admit that Ben & Jerry’s board had rights that it now seeks to deny?

Specifically, when Ben & Jerry’s first announced its boycott and Zinger sued Unilever, Unilever aggressively defended its right to not renew its license with AQP. Through the prestigious law firm of Sullivan Cromwell, it argued over and over that Unilever never agreed to renew Zinger’s license and that Zinger has no rights. It also came out that Unilever’s designee on Ben & Jerry’s social board actually initially voted in favor of the boycott.

Unilever got flat-footed when it suddenly came out that there was a consent decree with the Israeli authorities in which Unilever specifically agreed to renew Zinger’s license. Unilever realized that its failure to do so could create real problems for it in the Israeli markets.

Whoops. Talk about an “Oh no!” moment. Unilever looks really bad, having jumped up and down confidently telling AQP that it had the absolute right to not renew the agreement or now be forced to make the exact opposite argument—that it had to continue—by the same lawyers.

But worse, Unilever’s conduct here make it pretty clear that so long as there was no problem in the Israeli market with regard to its separately owned Strauss company, they were quite ready to throw Zinger and Israel under the bus, and perhaps were even supportive of antisemitic conduct … until two things happened: (i) they realized that they faced real issues in the Israeli markets with the Israeli government where they are hugely invested, and (ii) many states divested their pension funds from Unilever stock, citing anti-BDS laws.

(That Jews aren’t buying Ben & Jerry’s ice cream at Cedar Market or Glatt Express in Teaneck or in other similar stores isn’t mentioned in the papers and is likely completely irrelevant—even if it does make us feel that we are doing something. The boycott of Ben & Jerry’s by a bunch of Modern Orthodox Jews and other American Zionists has zero impact here financially, and is no more relevant to Unilever than the boycott of Hellman’s mayonnaise or Dove soap—same company, same bottom line. And frankly, the universe of Zionists is infinitesimal on the world economic level, and the boycott of ice cream by some of those Zionists is completely irrelevant.)

 

The Outcome

The outcome of this case in terms of whether Unilever had the right to disregard Ben & Jerry’s social board is unclear, as well as what the parameters of that board’s rights are and were. Unilever agreeing to it was, in hindsight, wrought with issues. The world has changed and now is much angrier. “Social priorities” now include highly aggressive activities that include boycotts and sometimes even violence. In fact, as we learned through the Black Lives Matter protests of summer 2020, violence is now tolerated or at least understood on the extremes and encouraged as part of “free speech.”

It is unclear how the court will rule here, but I do suspect that there are actions that the judge can block going forward if he or she were inclined to honor that Ben & Jerry’s board’s conduct was within its rights. This matters greatly to both Unilever and Ben & Jerry’s. The question is do they want to have this fight now, over Israel’s disputed territories?

Since the sale is done already, Ben & Jerry’s doesn’t stand much to gain from the fight right now except maybe stopping future recipes and an “emotional” win on its antisemitic campaign against Israel. Unilever has already messed things up by previously supporting the boycott and litigating against Ben & Jerry’s and not realizing the ramifications in the Israeli market.

So Unilever and Ben & Jerry’s both have an incentive to kick the can down the road. If they do, will Ben & Jerry’s ever try a boycott again of any market? Other than Israel, do they really care?

 

Interesting Facts About Some of the Players

In May, Unilever named Nelson Peltz as a board member. Peltz is an American activist investor who holds a roughly 1.5% stake in Unilever. His hedge fund Trian Fund Management manages funds with interests in about 37.4 million Unilever shares, or 1.5% of the British Unilever company, the parent of Unilever USA.

It hardly seems a coincidence that Pelz was appointed to the board. He is a major donor and honorary co-chairman of the board at the Simon Wiesenthal Center, an institution that has heavily criticized Unilever and Ben & Jerry’s in the past. SWC has also pushed for state investment funds to divest from Unilever and placed the company on its 2021 Global Anti-Semitism Top Ten list, which includes Iran and its terrorist proxy, Hamas. At a minimum, all of us should be supporting the SWC, which does a tremendous amount and is focused on antisemitism without political distractions from a right-wing or left-wing agenda that seem to affect other Jewish organizations. One wonders what brought Mr. Pelz into the company.

It would seem that the SWC and Peltz have properly decided that voices other than those of Anuradha Mittal, the board executive at Ben & Jerry’s who is rumored to have been behind the BDS campaign, need to be heard at Unilever. SWC has apparently spent a fair amount of time educating Unilever. Based upon statements coming from Unilever CEO Alan Jope about antisemitism and the manner in which Unilever has conducted itself since its initial missteps, perhaps Unilever has learned some lessons here. We’d like to think so.

At the same time, everything about the Ben & Jerry’s lawsuit against Conopco after Unilever sold its property suggests that Mittel and her ethics board may indeed have a visceral hatred toward Israel and likely toward Jews in general, which is not going away. If she were motivated by pressure from the “woke,” as some would like to believe, she and the board could have left well enough alone and proudly proclaimed that with the sale of Unilever/Ben & Jerry’s Israeli business to Zinger, the company is no longer involved with the sale in Israel. They did that. But it wasn’t enough for them.

A nuanced reading of the documents and some statements in the litigation suggest that Mittel couldn’t handle the Jewish community’s celebration that she and the board lost and they won.

I think of the word of Haman in the story of Purim who, in speaking to his wife Zeresh, opines how nothing is acceptable to him so long as Mordechai the Jew sits peacefully at the gates of the palace. Mittel seemed unwilling to accept the Jews’ peaceful state, even if she and her board would have reluctantly accepted a deal with someone other than Zinger, who dared to gloat and earlier disregard her directive that he not sell in the Territories. Indeed, the Ben & Jerry’s papers explicitly refer to Zinger bragging after Unilever’s sale—a fact not really relevant unless, of course, a law firm is simply trying to satisfy a highly charged emotional client whose real issue is the antisemitic trope of the “gloating, scheming Jew.” I also sense that Mittel believes that there is still room for her to obtain a “win” or at least to mitigate our celebration of her loss. She may be correct.

 

The Mediation

The move by Ben & Jerry’s to mediation suggests the following:

The stakes are extremely high for both Ben & Jerry’s and Unilever. Unilever has some weaknesses in its argument here. The sale was clearly an “end-run.” So even if there is nothing the board can do, that’s only true with respect to past actions, not future transactions. My guess: There are definitively ongoing commitments like the transfer of new recipes that can be legally and effectively blocked should the judge go along with it. And with that, the social board will be empowered.

On the other hand, the social board needs to be very careful here because not only does it risk coming up empty handed if it proceeds with the litigation, but it also risks hurting its ability in general to enforce its social priorities going forward should the court address the meaning of that term and its limitations.

 

The Bottom Line

I believe that the parties will now engage in talks to withhold things from AQP going forward, like new recipes. Even though Unilever has agreed to provide this, they could in theory just breach their commitment to Zinger to honor this provision. It is unclear what would happen in such a case since we don’t have access to the agreement between Zinger and Unilever. It is also unclear how the Israeli authorities will react since it would arguably be a technical violation of the consent decree, which specified the arrangement with Zinger had to stay in effect. It is highly likely that the Israelis signed off on the Unilever-AQP agreement and that Unilever would again seek Israel’s approval to any modification in their conduct.

It is also possible that Unilever and AQP could have private talks to change the terms of their agreement, i.e., a partial refund of part of the sales price or some other incentive to get AQP to go along with the deal, and that the Israeli government too would go along. This would give the board the ability to say, “We won; no more Ben & Jerry’s.”

Unilever may also be compelled to announce its “understanding” of the Ben & Jerry’s position while speaking out against antisemitism. Apart from the limitations on the recipes, the whole thing could basically evolve into politics. Then again, the parties could use the opportunity to renegotiate/modify the merger agreement regarding the social priorities to avoid problems going forward.

As the world becomes increasingly radicalized and the woke become angrier and more aggressive, Unilever would be wise to insist on such as part of any settlement here. Given Ben & Jerry’s unique move against the State of Israel, it is possible that Ben & Jerry’s would agree to such changes in any event, since, let’s be honest—Ben & Jerry’s never intended to—and likely never will—try to block any markets other than the Jewish one.


Meyer Muschel, an unapologetic advocate for the Jewish people, is an attorney at law licensed in New York. He lives with his wife and two daughters in Teaneck. He can be reached at [email protected].

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