FREEPORT — A dispute between two well-known, longtime Maine companies ended last week when L.L. Bean was ordered to pay more than $960,000 to the owners of Worcester Wreath Co. of Harrington.
Maine Superior Court Justice Andrew M. Horton heard the case in the state Consumer and Business Court in Portland. He decided Bean owed Worcester more than $1.7 million for wreaths and other balsam products the company agreed to buy in 2008 before an economic collapse reduced Bean’s catalog sales of the products.
Bean, which is celebrating its centennial this year, was liable for more than $7.2 million worth of balsam products bought from Worcester in 2008 and had already paid $5.5 million, Horton found.
The judgment was reduced by more than $774,000 to account for savings in materials, labor, and payroll taxes created when Bean asked Worcester to stop making wreaths because of a slump in holiday sales in 2008.
Carolyn Beem, the public affairs manager for L.L. Bean, said she could not discuss whether the company will appeal the decision.
“The relationship with Worcester Wreath Co. was terminated in 2009 as a result of complex business concerns. This had become a troubled business relationship that L.L. Bean is pleased to put behind us,” Beem said in an email.
The claims and counterclaims filed by each company required Horton to rule on eight counts including multiple breach of contract claims. While determining Bean is financially liable for balsam products it agreed to buy, Horton also found for the Freeport company in four claims, including a charge the company acted fraudulently.
The 79-page summary and ruling describes the deterioration and eventual dissolution of a 27-year relationship between the two family-owned businesses.
Before the companies parted ways, court records indicate Bean bought 90 percent of the balsam products made in Washington County by Worcester, the 40-year-old company known nationally for originating the Wreaths Across America program that places wreaths on graves at Arlington National Cemetery in Virginia.
Court records show 478,000 balsam items made by Worcester Wreaths were sold by L.L. Bean in 2007 during the holiday season. Sales plummeted by more than 200,000 units in 2008, even as Bean’s officials agreed to buy 389,000 units.
Before 2008, the companies had a less formal arrangement on items sold to L.L. Bean, with inventory levels determined by Bean forecasts made in the first quarter of each year.
The arrangement became more formalized in 2008 when Worcester’s bank wanted to see a more formal commitment from Bean.
Bean’s 2008 sales forecasts anticipated more than 405,000 units would be sold, and the company agreed to buy 344,000 units that spring. In late September, Bean issued a second purchase order for 45,000 more units, according to court records.
About two months after the second purchase order was issued, court records show Bean employees warned Worcester that inventory was exceeding demand, and Worcester agreed to slow or stop production if needed, with cost savings to be deducted from future invoices.
Not all officials at both companies were aware of the November discussion about slowing or halting production, and the officials who did speak did not detail what kind of savings could be deducted from future invoices – two factors Horton noted precipitated the court fight.
In early spring 2009, Bean informed Worcester it was shifting to Whitney Wreath for some products, and the business relationship was severed entirely on May 1, 2009.
Appeals by either side in the case would be heard by the Maine Supreme Judicial Court.