Mrs. Fields Wins Fight With Interbake Over Cookie Agreement

  • Delaware judge orders company to honor distribution deal
  • Mrs. Fields sought $28 million in damages over nixed contract

Mrs. Fields Brands Inc. can force Interbake Foods LLC to honor an agreement to market the chain’s chocolate-chip cookies at grocery and convenience stores, a judge ruled.

Interbake, which makes Girl Scout cookies and store-brand treats for retailers such as Wal-Mart Stores Inc., wrongfully attempted to pull out of the Mrs. Fields pact early and must continue to sell the company’s sweet treats until the end of the year, Delaware Chancery Court Judge Andre Bouchard concluded Monday.

Tim Ragones, a Mrs. Fields spokesman with Joele Frank, said in a statement that Famous Brands, the parent company for Mrs. Fields, was “pleased that the court found Interbake’s attempt to terminate the license agreement was improper.”

“We look forward to pursuing a renewed claim for damages arising from Interbake’s improper termination attempt once the agreement has expired,” he said.

Mrs. Fields said Interbake sabotaged the distribution deal in revenge for its failed 2015 bid to buy the cookie maker’s retail unit for $50 million. Richmond, Virginia-based Interbake said it walked away after finding Mrs. Fields’s executives lied about the strength of the company’s retail market.

Bouchard rejected Mrs. Fields’ bid to force Interbake, a unit of Canadian conglomerate George Weston Ltd., to pay as much as $28 million in damages.

“We’re pleased with the decision,” Geoff Wilson, a Weston spokesman, said Monday.

Deep Roots

Both sides in the bakery battle have deep roots. Mrs. Fields, based in Broomfield, Colorado, traces its start to founder Debbie Fields’s original store, opened in 1977 in Palo Alto, California. Interbake was born as Southern Biscuit Works in 1899 and began selling its famous Sailor Boy Pilot Bread 20 years later, according to its website. In 1937, the company became an official baker of Girl Scout cookies.

Mrs. Fields has struggled amid flattening consumer demand for sweet treats. While the company has name recognition, the brand wasn’t among the top 20 U.S. cookies during the past 12 months ending in September, according to data from consumer research firm IRI. Global-snack giant Mondelez International Inc.’s Oreos and Chips Ahoy are the largest cookie brands in the $8 billion market.

Mrs. Fields argued that it could exit the retail deal if Interbake didn’t sell at least $20 million worth of cookies and brownies annually. Interbake erroneously believed that the provisions also allowed the Canadian company to walk away from the five-year licensing pact if it couldn’t meet those sales targets, Mrs. Fields said. The deal is scheduled to run until December.

‘Commercial Sense’

“It makes little commercial sense to think the parties would have intended that Interbake could terminate the License Agreement early due to its own failure” to hit sales targets, Bouchard said in his ruling.

Mrs. Fields filed for bankruptcy in 2008 in hopes of wiping out $145 million in debt and revitalizing the brand, according to court filings. Z Capital Group, a private-equity fund and one of Mrs. Fields’s creditors, acquired the chain in 2013.

Having an end date to the contract with Interbake could make Mrs. Fields’s brand more attractive for a potential acquirer, who might want to explore other manufacturing options, according Darren Tristano, president of Chicago-based Technomic, an industry research and consulting firm.

“I think if they’re in limbo, it creates an opportunity,” he said.

The case is The Mrs. Fields Brand Inc. v. Interbake Foods LLC, CA12201, Delaware Chancery Court (Wilmington).

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