Food Dive: Megan Poinski - Senior Reporter

Dive Brief:

Beyond Meat agreed to pay $515,000 in attorneys' fees and make changes to its corporate governance to settle consolidated lawsuits filed by shareholders about an ongoing court battle the company is fighting with former co-manufacturer Don Lee Farms. The underlying dispute between Beyond Meat and Don Lee Farms is still pending in California Superior Court.

As part of the settlement, Beyond Meat will add a Risk Committee to its board that will examine all legal, ethical, operational and strategic risks before the company. Two-thirds of Beyond Meat's board will now be made up of people who are independent of the company. Information on the company's corporate whistleblower program and corporate governance will be posted on its website as well.

This sprawling legal battle kicked off in 2017, when Don Lee Farms accused Beyond Meat of stealing its trade secrets, providing unusable and unsafe raw materials for manufacturing, failing to compensate Don Lee for products it had made, and not ensuring it had operational equipment and personnel to make its products. Beyond Meat filed a counter suit against Don Lee in 2020. A trial is set for next month.

Dive Insight:

A side chapter of Beyond Meat's battle with Don Lee Farms appears like it is about to end with a relatively small financial impact on the company. In documents posted to its investor relations website after business hours on Friday, Beyond Meat stressed this is not a class-action style settlement, so individual shareholders will not be able to get money from it. (Named plaintiffs, however, may apply for $2,000 awards.) Paying for plaintiffs' attorneys' fees and making some board changes is a relatively easy way to end this litigation. All parties agreed to the settlement — which ends the litigation and is not an admission of wrongdoing — in January. The court gave it preliminary approval last month, and a hearing for final approval is scheduled for July.

Adding risk management committees to corporate boards has become a popular strategy to help companies realize and mitigate the challenges before them. In light of the tumultuous business climate of the past two years, punctuated by the COVID-19 pandemic, the need for specialized risk committees has become apparent, business strategy consultants have said.

Although a Beyond Meat risk committee likely would not have prevented this lawsuit from taking place — it was filed two years before the company went public in 2019 and involved a contract dispute from its early years as a business — having it in place could prove invaluable. Plant-based food is an inherently risky space. While it's getting to be more accepted in the mainstream with wide availability and a variety of brands at grocery stores and foodservice, its former meteoric growth is slowing. Companies, including Beyond Meat, are facing the new challenge of expanding market share and converting new consumers. For Beyond Meat's part, Founder and CEO Ethan Brown has said that slowing sales are the result of several supply chain and pandemic consumer behavior factors, but it could be comforting to investors to have a more independent panel of board members also weigh in on the company's strategy.

It's unclear if the requirement of independent board members would make much of a change in the current operating structure of Beyond Meat. Currently, Brown — who is also the board chairman — is the only member who has a direct role in the company's operations. However, the requirement can ensure investors that the company will be governed more independently in the future.

But this settlement is just a small step. There still may be a lot of bitter — and potentially expensive — fighting to come between Beyond Meat and Don Lee Farms. A hearing is scheduled this week on a motion dealing with the claim that Beyond Meat stole Don Lee's trade secrets, and the trial is set to begin next month. In its annual report filed in March, Beyond Meat said it would "vigorously defend" the company and its current and former employees implicated in the dispute. However, in the case that Beyond Meat is not victorious, the company could be required to pay steep damages. Beyond Meat couldn't estimate how much that might be in its annual report, but it could be significant — making right now a very good time to settle the investor litigation.