Sonoma’s Smashmallow wins $21 million jury judgment in breach of contract suit

Following a six-week trial, a Sonoma Brands company that specializes in gourmet marshmallows was awarded almost $21 million by a Sonoma County Superior Court jury in a two-year breach of contract lawsuit against a Dutch food processing company.

Executives at Smashmallow, which is co-owned by Jon Sebastiani, announced Oct. 23 the civil judgment in Santa Rosa was based on a claim that Tanis Foods Tec, founded by Peter Tanis, failed to deliver on an over $2 million contract.

The agreement involved the “designing, developing and installing” of a machine that would help the Sonoma company ramp up production of its flavored marshmallows found anywhere people gather to make S’mores, BraunHagey & Borden Attorney David Kwasniewski said Tuesday. Its flavors include the most popular, cinnamon churro, along with chocolate chip, root beer and strawberries and cream. This is a far cry from the first confection mashed up from mallow plants in ancient Egypt in 2000 B.C.

“It was malevolent,” the plaintiff attorney said in response to whether he believed equipment maker was operating in an incompetent or clandestine way.

As evidence, the attorney explained engineers for the Lelystad, Netherlands, firm said they lied to Smashmallow, claiming samples were produced by the machine once supposed to produce 2,200 pounds per hour. Rather, they were manufactured by hand — a process Smashmallow was already doing before it decided to seek methods to increase production in 2019. Its crew of at least 50 workers averaged 844 pounds per hour.

“On its best days, that was what the machine was doing. And on most days, it would blow a gasket,” Kwasniewski said.

Further, the complaint filed in May 2021 alleged the machine created an “unsafe” working environment by spewing dust and particulates from the starch and sugar emitted during operation at Smashmallow’s contracted production plant in York, Pennsylvania.

“And the machine created a hippopotamus of waste — 4,000 pounds,” the Smashmallow attorney added.

To top it off, “Tanis now demands the remaining payment, approximately $300,000 for a system that does not function as agreed upon by the parties,” the legal complaint reads.

Phone calls made to the defendant’s attorney at Arent Fox Schiff, Lynn Fiorentino, were unanswered.

In addition, the complaint added that “to correct the system’s flawed filtration system,” Smashmallow paid approximately $37,982, $42,967 and $8,681 for consulting services, a replacement filtration system and dust collector, respectively.

Kwasniewski indicated the production fiasco added insult to injury because Smashmallow was on a fast-track to growth. Two years after launching the business in 2016, Smashmallow doubled its revenue in one year to $10 million. It received $43 million in venture capital as part of that growth plan, Kwasniewski pointed out.

Within Sonoma Brands wholesale family of snack foods that manages Krave jerky, Smashmallow debuted on the Inc. 5000 national list of fast-growing companies listed as No. 3,954 with 79% revenue growth between 2017 and 2020, the Business Journal reported Aug. 24, 2021. In March, it moved up to No. 193 of 250 firms in the magazine’s regional rankings.

Part of the production’s misfortune, Smashmallow had no real competition, the attorney claimed. Now, there are others, and the company missed out capitalizing on the time it put into its innovation, he added.

Currently, the company is down but not out.

“It’s wound down but not closed,” Kwasniewski said.

Susan Wood covers law, cannabis, production, tech, energy, transportation, agriculture as well as banking and finance. She can be reached at 530-545-8662 or susan.wood@busjrnl.com

Correction, Oct. 31, 2023: The complaint is against Tanis Food Tec, founded by Peter Tanis. An earlier version of this story referenced Leo Tanis, who runs Tanis Confectionery.