US meat processor Smithfield Foods has announced that a court has dismissed a $226m cross-claim of Pennexx Foods against Smithfield and two of its officers. 

Pennexx filed the cross-claim on 3 December 2003, alleging thirteen causes of action including fraud, breach of fiduciary duty and tortious interference with contractual
Relations, Smithfield said. 

Pennexx sought damages in excess of $226m.  Smithfield maintained from the outset that the cross-claim was completely without merit.

Pennexx ceased operations in June 2003 after Smithfield foreclosed on its assets and took over its operations. Before the takeover by Smithfield, Pennexx was a provider of case-ready meat to retail supermarkets in the northeast.

The cross-claim alleged that in early 2001, Pennexx rejected an inquiry to purchase the company by Smithfield. In June 2001, Smithfield acquired 50% of the common stock of Pennexx and provided the company a credit facility to fund the expansion of its operations. According to the claim, Pennexx and Smithfield were to work together through a joint venture and Pennexx also agreed to assist Smithfield by supplying Smithfield's branded pork to the New York market. 

Pennexx said that to meet increased demand and accommodate future growth under its joint venture with Smithfield, it purchased a 145,000 square foot building in Philadelphia in April 2002. As part of the joint venture, Smithfield agreed to renovate the building into a state-of-the-art, automated plant for producing case-ready meats.

The cross-claim alleged that Smithfield was responsible for design problems with the new plant, which then allegedly caused Pennexx to suffer financial losses that triggered a default under the company's credit facility with Smithfield. Smithfield then foreclosed upon Pennexx, seized its assets and took over its operations, Pennexx said.