AriZona Iced Tea founders battle in court

Co-founders of the Woodbury-based maker of AriZona Iced

Co-founders of the Woodbury-based maker of AriZona Iced Tea products, Beverage Marketing USA, are fighting in court over hundreds of millions of dollars. (March 21, 2012) (Credit: Newsday / Alejandra Villa)

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Breaking up can be hard to do, especially when hundreds of millions of dollars are involved.

The high-stakes business divorce involving co-founders of Beverage Marketing USA Inc., the Woodbury-based, privately held maker of AriZona Iced Tea products, was on display Tuesday in state Supreme Court in Mineola. Attorneys for both sides made their final arguments in one of the many contentious lawsuits and counterclaims these former partners have hurled at one another over the past several years.

Tuesday's closing arguments centered on claims made by Domenick Vultaggio, one of AriZona's founders, that John Ferolito, the other founder, had allegedly broken his contractual and fiduciary obligations to provide equal financing to Beverage Marketing USA during a cash crunch. Vultaggio is asking for about $287 million in damages.

Justice Timothy S. Driscoll instructed the attorneys to submit written summations by July 3.

Ferolito's attorney, Nicholas Gravante, a partner at Boies, Schiller & Flexner Llp in Manhattan, denied those allegations, arguing that his client made no such agreement.

When it comes to disputes between founders, "the more money involved, the messier it gets," said Anthony Sabino, a Mineola attorney and professor of law and business at St. John's University. Sabino has no knowledge of the specifics of the AriZona litigation, but has dealt with similarly complex corporate lawsuits.

Beverage Marketing has a 39.9 percent share of the ready-to-drink tea market, said John Sicher, editor and publisher of Beverage Digest, which covers the nonalcoholic beverage industry. That share beats out PepsiCo's Lipton, which holds 34.5 of that market. Court documents filed in 2009 said sales for Beverage Marketing were approaching $1 billion.

At the core of the litigation is a struggle for control of the company's future. Ferolito, who no longer is involved in the company's day-to-day business, has attempted to sell part of his stake in the business -- a move that was blocked in the courts by Beverage Marketing USA and Vultaggio, court papers said.

Still outstanding are Ferolito's claims in State Supreme Court in Manhattan alleging that Vultaggio breached his fiduciary duty. That suit is seeking in excess of $600 million in damages. A separate claim in New York County will determine how much it will cost Vultaggio to buy out Ferolito's stake in the company.

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