A Pennsylvania court has ruled largely against Eat Just and its cultivated meat division GOOD Meat in the early stages of litigation* with bioreactor firm ABEC over unpaid bills. However, ABEC—which claims it is owed $100 million in cash and stock for work done for GOOD Meat—will ultimately have to choose between “two really bad options,” predicts one legal expert.
“One option is to try to litigate and win where the result is a win against a company that is bankrupt and/or has no money,” said Dale Giali, partner at law firm King & Spalding, which is not representing either party. “The alternative is to take a really slimmed down settlement and move on.”
Giali was speaking to AgFunderNews after judge Wendy Beetlestone rejected a bid from GOOD Meat to compel arbitration in the case, and rejected a request from Eat Just to stay the case (put it on ice) pending arbitration.
ABEC: ‘GOOD Meat is an intentionally undercapitalized alter ego of Eat Just’
In a court order dated December 21, 2023, Beetlestone also rejected the argument that Eat Just is not liable for GOOD Meat’s unpaid bills, noting that ABEC had plausibly alleged that “Eat Just and GOOD Meat are a single entity” and that GOOD Meat is “an intentionally undercapitalized alter ego of Eat Just.”
This still has to be proved, but at this stage of the proceedings, said the judge, ABEC had plausibly argued that Eat Just and GOOD Meat were “subject to common control” by CEO Josh Tetrick, that the two companies had “commingled corporate assets,” that stock in the two companies was interchangeable, and that GOOD Meat “did not regularly prepare financial reports in accordance with generally accepted accounting principles” and “failed to properly administer its corporate form as separate from Eat Just.”
However, the judge did not side with ABEC on every count, dismissing one of ABEC’s claims about an invoice connected to its pilot plant agreement with GOOD Meat, and dismissing another relating to alleged commitments from Eat Just to ABEC connected to funding from Nexseer Capital.
In both cases, the dismissals were without prejudice, which means ABEC can file an amended complaint attempting to rectify the issues raised by the judge, noted Giali.
ABEC did not respond to requests for comment, while Eat Just—which told Green Queen in November that it hopes to break even in 2024—told us it doesn’t comment on active litigation.
‘At each step, the expense and disruption to the companies is greater’
At this stage of the litigation, the court is not making any factual determinations, but has concluded that some of the claims can proceed, explained Giali. “There are certainly factual issues to be left to determine, for example, the alter ego theory [that Eat Just is liable for GOOD Meat’s bills] has been sufficiently alleged but has yet to be proven either through summary judgment or a trial.”
As to the unpaid bills themselves, he said, “ABEC will still have to prove that the work contracted for was done, that the invoices were properly set up and weren’t paid.”
So what happens next? If ABEC amends its complaint again, Eat Just/GOOD Meat will have to respond again, but if not, the case will proceed to discovery, “which will ultimately lead probably to summary judgment motions, maybe even crossed summary judgment motions,” said Giali. “And if those are denied, then to a trial date.
“At each step, the expense and disruption to the companies is greater, and so oftentimes in business litigation, that is the catalyst to settlement discussions.”
ABEC had ‘no choice but to terminate the large-scale bioreactor development and manufacturing agreement’
ABEC, which has been working with Eat Just/GOOD Meat on pilot facilities in California and Singapore, announced an exclusive deal with GOOD Meat in early 2022. Under the seven-year deal, ABEC would design, manufacture, install and commission ten 250,000-liter vessels— “the largest known bioreactors for avian and mammalian cell culture”—for a large-scale facility in the US with the capacity to produce up to 30 million pounds of meat.
In an amended complaint filed last year vs Eat Just and GOOD Meat decrying their “repeated failures and broken promises,” ABEC explained that it had “engineered, designed, and established the manufacturing capability” for bioreactors “that would provide the economy of scale to allow for the affordable production of cultivated meat.”
It added: “Although ABEC has delivered on all of its commitments… including the construction of pilot scale bioreactors and support equipment for facilities in the USA and Singapore, defendants have failed to live up to their financial obligations.”
ABEC therefore had “no choice but to terminate the large-scale bioreactor development and manufacturing agreement and associated purchase orders…and to seek to recover its damages,” added the complaint.
‘GOOD Meat was woefully undercapitalized from the beginning’
According to ABEC’s court filing, “GOOD Meat was woefully undercapitalized from the beginning, especially considering that the whole endeavor was likely to cost more than $1 billion, with commitments to ABEC for ABEC’s portion of the project alone likely exceeding $550,000,000.”
Eat Just has raised more than $850 million to date including around $270 million for its wholly owned subsidiary GOOD Meat, which sells small amounts of cell-cultured chicken in Singapore and the US. (Click here to read about its most recent round, reportedly $16 million, announced in September 2023, which is on top of the $850 million.)
In a recent interview with WIRED, Eat Just founder Josh Tetrick said he had abandoned plans for 250,000-L bioreactors (uncharted territory for animal cell culture), adding that, “The reality for us now is we need to figure out a way to build large-scale facilities without spending north of half a billion dollars, because it’s simply not viable long-term. There has to be a better way of doing it.”
*The case is ABEC Inc vs Eat Just Inc, and GOOD Meat, Inc, filed in the Eastern District of Pennsylvania, 5:23-cv-01091.
Further reading:
Crunch time for cultivated meat: ‘Probably 70-90% of players will fail in the next year’
10 years in foodtech with ‘remarkable’ and ‘polarizing’ alt protein pioneer Josh Tetrick
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