Allegedly ‘rancid’ coconut milk leads to nearly $1M legal dispute in Boulder County

BOULDER — A Boulder-based producer of coffee and creamer products made with functional ingredients such as mushrooms alleges in a lawsuit filed this week that a supplier owes it nearly $1 million as a result of “rancid” coconut milk shipments. 

Laird Superfood Inc., in a lawsuit filed in Boulder County District Court, claims that Fort Morgan-based Smirk’s Ltd. caused “harm to its reputation with its own customers, extensive expenses, and business distraction” by “failing to deliver acceptable CMP for Laird’s use” between 2018 and 2023. “CMP” is an acronym for coconut milk product.

“Rather than litigate Smirk’s’ breaches, on Sept. 15, 2023, Smirk’s and Laird entered into a settlement agreement. The settlement agreement obligates Smirk’s to immediately pay Laird $50,000. Smirk’s timely made this $50,000 payment to Laird,” according to the lawsuit.

“As additional consideration to compensate Laird for the rancid and nonconforming CMP delivered by Smirk’s, the settlement agreement requires Smirk’s to grant Laird a 15% discount on future sales of all products and raw materials to Laird, up to an aggregate discount of $950,000,” the complaint said. “The settlement agreement further states that Smirk’s would compensate Laird for future blends of CMP sold to Laird that are rancid and do not conform to the specifications.”

After the settlement was reached, Laird claims that “Smirk’s was unwilling and unable to adequately test for rancidity prior to delivering CMP to Laird. Smirk’s’ insistence on using its inadequate process for identifying and mitigating rancid and non-conforming CMP caused Smirk’s to continue to sell rancid and non-conforming CMP to Laird.”

Laird, “relying on Smirk’s’ warranties over the CMP,” sold Smirk’s-sourced coconut product to its customers, the lawsuit alleges. “… Laird’s customers have complained about, and have been forced to return, the rancid and non-conforming CMP to Laird. … Smirk’s’ sale of rancid and non-conforming CMP to Laird has harmed Laird’s business relationships with its customers.”

Laird, which claims it is no longer sourcing coconut milk from the Fort Morgan supplier, said it has received only $169,000 of the $950,000 aggregate discount promised as part of the settlement agreement. 

The lawsuit claims that Smirk’s last month made “a sly attempt” to prompt Laird into releasing Smirk’s from its discount obligations under the settlement agreement. “Laird is entitled to seek recovery for the rancid and nonconforming CMP that was delivered before the settlement agreement, in addition to rancid and non-conforming CMP that was delivered after the settlement agreement.”

Representatives of the lawsuit’s parties did not respond to requests for comment Thursday morning.

The lawsuit is Laird Superfoods Inc. v. Smirk’s Ltd., case 2024CV30178, filed Feb. 27 in Boulder County District Court.

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