Mars Inc. Sues CR Distributor

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The candy giant Mars. Inc. sued its longtime Costa Rican distributor, Constenla S.A. and Grupo Constenla in U.S. District Court, seeking relief against the Costa Rican firm. An appeal against the court's dismissal of the suit was recently turned down in Mississippi and the most recent suit affirmed the dismissal..

The Mars subsidiary, ITL International, formerly known as Master Food Interamerica, d.b.a. Mars Caribbean and Central America, previously filed a civil suit against Constenla that was dismissed for lack of personal jurisdiction over the defendant.

In May, 1992, Mars entered into an agreement with Ciamesa, which was later acquired by Constenla, to distribute its M&Ms and other candies. The agreement stipulated that Ciamesa would distribute Mars products in Central America and develop the market.

The agreement stipulated that it was non-transferable but strictly applied to Ciamesa. The plaintiffs contend that when Ciamesa was acquired by Grupo Constenla in 1996, it also acquired distribution rights.

The plaintiffs continued to abide by the distribution agreement until it decided recently to begin selling directly to local retailers. When Mars notified Constenla that it wished to terminate or modify the original agreement, the defendants claimed that, under Costa Rican law, they should be paid a termination penalty of $7 million.

The plaintiffs maintained that no penalty applies because the original contract specifies that either party could terminate after a written notice had been received three months in advance. Both the original complaint and the appeal were filed in Mississippi Federal District Court.

The court dismissed the case due to lack of jurisdiction and recommended that a Costa Rican court would be more appropriate. But Mars appealed since the state's port of Gulfport was the exit from the U.S. of 55 shipments of candy obtained by Constenla's firms.

Mars contends the use of this port more than justifies Mississippi jurisdiction since the defendant took delivery of the shipments in Gulfport for transfer to Costa Rica. Constenla has yet to declare whether it will pursue the case in Costa Rican courts.