ML Macadamia
wins nut ruling

The grower may get at least
$1.15 million after Mauna Loa is
told to pay for 'unusable' products

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By Russ Lynch
Star-Bulletin

A state judge in Hilo yesterday ruled that Mauna Loa Macadamia Nut Corp. must pay for all the nuts it receives from grower ML Macadamia Orchards, regardless of their condition -- a decision that should be worth at least $1.15 million to the grower and could turn around some recent losses and, perhaps, slumping share prices.

Granting a motion for a summary judgment, Circuit Judge Greg K. Nakamura agreed with ML Macadamia that its interpretation of the long-term contracts was correct, said James H. Case, attorney for ML Macadamia. Mauna Loa's attorney, Brian Kang, declined to comment.

Mauna Loa Macadamia Nut Corp., for many years a subsidiary of the old "Big Five" company C. Brewer & Co., refused to pay for some macadamia nuts after it was acquired last fall by a San Francisco-based business financing partnership, the Shansby Group.

By exclusive contract, Mauna Loa is the sole purchaser, packager and marketer of nuts from more than 4,000 acres on the Big Island where production is controlled by ML Macadamia Orchards, a partnership whose shares are traded on the New York Stock Exchange under the symbol NUT.

ML Macadamia grows the nuts for delivery to Mauna Loa and sale under the well-known Mauna Loa brand.

In October 2000, under Shansby control, Mauna Loa refused to pay for receipt of 1.8 million pounds of nuts it said were "unusable."

ML Macadamia took a loss of nearly $1.5 million in the final quarter of last year, blaming it largely on Mauna Loa's refusal to pay while ML Macadamia had to absorb the production costs.

Mauna Loa refused to pay for another 266,000 pounds of raw nuts in the first quarter of this year, according to court documents. ML Macadamia, the grower, again blamed that refusal for a large part of the loss of $416,000 it took in the latest quarter.

ML Macadamia now says Mauna Loa owes it more than $1 million for nuts it delivered according to contract and it went to Circuit Court in Hilo seeking a summary judgment.

Shansby's Mauna Loa, in hundreds of pages of testimony, said it could prove that it was lied to, that the seller misinterpreted the contracts and that the case should go through a full jury trial. At the end of yesterday's hearing, Nakamura disagreed and said an order will be issued demanding that Mauna Loa pay what ML Macadamia says is owed, plus interest.

Meanwhile, ML Macadamia Orchards shares have fallen in the past few months from highs of close to $5 in December to close at $2.99 yesterday. The stock closed up 10 cents today at $3.09.

J.W.A. "Doc" Buyers, chairman of ML Macadamia, said the decision doesn't just support that business but a number of independent growers as well, who have similar contracts with Mauna Loa.