Wednesday, September 29, 1999

Kona coffee
farmers win
fake-bean suit

Cheap coffee had been
repackaged as expensive
Kona beans for years

By Debra Barayuga


A $1.25 million settlement was announced today on behalf of Kona farmers, who won a three-year battle to protect the reputation of one of the world's most prized coffee beans.

The class-action lawsuits were filed against California-based Kona Kai Farms Inc., which falsely marketed an inferior grade of Central American coffee as Kona coffee to wholesalers and retailers.

Under the agreement, which requires court approval, Kona Kai Farms and its insurance carrier will pay a total of $1 million to 650 Kona coffee growers.

Also, retail defendants -- Nestles, Costco, First Colony & Tea Co., Gloria Jeans Coffee, Peerless, The Coffee Beanery, Starbucks, Brothers Gourmet and Peets, along with its coffee broker Klein Brothers -- will pay the remaining $255,000.

The financial settlement will be distributed to the farmers in direct relation to the amount of acreage in coffee cultivation each farmer had from 1987 to 1995, the period when the Kona Kai fraud occurred.

Six of the retail defendants also agreed to purchase 161,000 pounds of green Kona coffee from Kona farmers over the next five years.

"The harm that came out of this fraud came directly out of the pockets of the coffee farmer," Gus Brocksen of the Kona Farmers Alliance said.

"We felt obligated to fight for our product, protect the proprietary nature of the Kona coffee name against those who would exploit it and misappropriate it."

In October 1996, federal officials in San Francisco announced that Kona Kai Farms Inc. executive Michael Norton, who had been indicted on wire fraud and money laundering charges, had been rebagging Central American coffee into bags with labels indicating it was Kona coffee.

The federal indictment noted that Norton hired two different work crews -- one to remove the Central American coffee from bags and a second to place the imported coffee into Kona Kai Farms bags labeled as containing Kona coffee.

"For years, the genuine coffee industry has struggled to protect against the abuse and fraudulent use of the Kona coffee name and it was the intent of this lawsuit to provide ongoing protection to the public and to insure the integrity of the excellent coffee that we produce," John Langenstein of Langenstein Farms said.

The lawyers filing the class- action suit were: Mark S. Davis of Davis Levin Livingston Grande; Warren Price of Price, Okamoto, Himeno & Lum; and Leonard B. Simon, Dennis Stewart and Bonny Sweeney of Milberg Weiss Bershad Hynes & Lerach of New York and San Diego.

"After three years of litigation, we are delighted with the outcome of the settlement," Davis said.

"The farmers undertook a difficult battle to fight for the protection of the Kona name and to send a message that coffee farmers would seek to fight the expropriation of the fraudulent use of their product for profit."

Kona coffee is grown on 2,000 acres of land that stretches from Kaloko in North Kona to Honomolina in the south and includes the western slopes of Hualalai and Mauna Loa.

The coffee plants thrive in rich volcanic soil. Most of the farms are family operations.

Kona growers produce less than 2 million pounds of green Kona coffee annually.

After roasting, the average retail price is about $20-$22 per pound. Only Jamaican Blue Mountain coffee is more expensive than Kona coffee.

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