- Unilever said last week the sale of the Ben & Jerry's business would keep the ice cream products available in Israel and its occupied territories.
- Ben & Jerry's said in a lawsuit that Unilever's decision was made without the approval of its independent board.
- Ben & Jerry's had said last year it would stop sales in the West Bank territory occupied by Israel.
Ben & Jerry's is suing parent company Unilever to stop the sale of its Israeli business to a local licensee, a move the consumer products giant said would keep the ice cream products available in Israel and its occupied territories.
Ben & Jerry's said in a lawsuit filed in federal court in New York Tuesday that Unilever's decision was made without the approval of its independent board, which has the primary responsibility for safeguarding the integrity of its brand's name.
A judge on Tuesday denied Ben & Jerry's application for a temporary restraining order but ordered Unilever to show cause by July 14 for why a preliminary injunction should not be issued.
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In a statement, Unilever said that "the deal has already closed" and that it does not comment on pending litigation. A Ben & Jerry's representative did not respond to a request for comment.
The suit marks the latest development in a controversy that was set off last year when Ben & Jerry's said it would stop sales in the West Bank territory occupied by Israel since the Six Day war in 1967.
Israel's government sees the occupied territories as part of its economy and any efforts to boycott business in the areas are seen as applying to the country. Stopping sales of the ice cream in the occupied territories would have ended sales throughout Israel.
In its suit, Ben & Jerry's said that its brand is "synonymous with social activism" and that as part of its deal to be acquired by Unilever in 2000, it had reserved the "primary responsibility for safeguarding the integrity" of the Ben & Jerry's brand through its independent board.
It said that Unilever had publicly recognized the brand's right to make decisions about its social mission. But then last week, Ben & Jerry's said Unilever "abruptly reversed course."
Unilever announced last week that it sold the Israeli branch of its Ben & Jerry's business to American Quality Products, which licenses the ice cream products in Israel. American Quality said it would continue selling Ben & Jerry's under Hebrew and Arabic names throughout Israel and its occupied territories.
Despite the right of Ben & Jerry's independent board to make decisions about the brand's social mission, Unilever said in announcing the sale that it had the right to enter into the agreement because it had reserved primary responsibility for financial and operational decisions.
After Unilever announced the sale, Ben & Jerry's said in its lawsuit that its board held a special meeting on Friday and voted to sue over the decision.
In an interview with CNBC after last week's move by Unilever the Israeli licensor, Avi Zinger of American Quality Products, said any potential lawsuit would be "between Unilever and Ben & Jerry's. I already have a deal."
-- CNBC's Candice Choi contributed to this report.