Former Heidi’s Suitor Files $5.6-Million Suit : Johnston Foods Accuses Yogurt Chain of Committing Fraud to Obtain a Loan

A former suitor of Heidi’s Frogen Yozurt Shoppes has filed a lawsuit accusing the Laguna Hills chain of fraud and deceit and seeking damages of $5.6 million.

The lawsuit by Johnston Foods, filed Tuesday in Orange County Superior Court, follows the announcement last month that a planned merger of Heidi’s and Johnston Foods had fallen apart.

Since then, Heidi’s has signed an agreement to be acquired by New York-based Steve’s Homemade Ice Cream.

That deal is still pending.

Heidi’s had agreed in early September to be acquired by Johnston Foods, a yogurt manufacturer owned by Button Industries of Los Alamitos.

Johnston sells premium-quality yogurt and other dairy products in 11 Western states. Its operations include a Sacramento manufacturing plant, which was supposed to make soft yogurt for Heidi’s 89 stores once the deal was completed.

According to the lawsuit, Heidi’s and its founder, Heidi Miller, signed an agreement Sept. 9 promising to buy all of the yogurt needed by the chain from Johnston Foods for at least 3 years.

Because Heidi’s agreed to buy yogurt from the firm, Johnston Foods loaned $150,000 to the chain, Miller, and Miller’s associate, Brian Pallas, according to the lawsuit.

The lawsuit contends that Heidi’s promise to buy yogurt was a deliberate “scam and fraud” designed to extract the $150,000 loan and that no yogurt orders were ever received.

Miller and Pallas could not be reached for comment. Robert F. Scoular, a lawyer for Heidi’s, said he believes that “the lawsuit is without merit” but declined further comment.

In an interview, Johnston Foods owner C. E. Prichard of Pasadena said the proposed merger of Johnston Foods and Heidi’s fell apart because of Heidi’s “significant laundry list of problems.”

Legal claims and lawsuits have been filed against Heidi’s by many of its franchisees, who contend that the company deliberately misled them. Heidi’s, in turn, has filed two lawsuits accusing three of its franchisees of jeopardizing the proposed sale to Steve’s by terminating their franchise agreements and trying to induce others to do the same. Both lawsuits are pending.

Prichard said in an interview that he believes that “the venom with the franchisees is insurmountable” and made a merger unattractive. “We’ve concluded the franchisees are more right than she is,” he said.