Corn bottle pioneer BIOTA locked in legal battle
Sunday, June 19, 2011
DENVER (AP) — The man who started a company that first mass-produced a biodegradable plastic water bottle made from corn remains locked in a legal fight over the company's 2007 demise.
David Zutler, founder of BIOTA Brands of America Inc., is in a legal battle with lender UPS Capital Business Services. A three-day trial over credit claims that remain following the company's alleged default on a loan, bankruptcy and liquidation of its assets, including the sale of the first-of-its-kind plant to make bottles out of corn, begins Monday in district court in Ouray. BIOTA sold spring water in the bottles.
Zutler says a win in court would allow him pursue damages of up to $90 million against the investment arm of shipping giant UPS Inc.
In court documents, UPS says BIOTA defaulted on a government-backed loan and the company failed partly because of contamination at its spring in 2006 that cost the company customers. Zutler says UPS reneged on a forbearance agreement reached while the startup company worked toward profitability and an easily corrected maintenance problem and additional purification equipment at the bottling plant ensured water quality.
After the loan default, Zutler said the company could no longer attract investors, leading to its demise.
"Our reputation has been trashed," Zutler said in a recent interview with The Associated Press. "We want to get paid for what we would have been able to achieve."
UPS spokeswoman Susan Rosenberg said the trial is about a $45,000 claim on the company's outstanding debt following the sale of BIOTA's assets. The estimate comes from a receiver appointed after UPS declared BIOTA in default in May 2006. Rosenberg declined to comment on other issues raised by Zutler.
"The receiver has done a very thorough analysis," Rosenberg said of the credit claim.
Taking plastic branded as Ingeo produced by Cargill Inc.-owned NatureWorks LLC, Zutler worked with a manufacturer of plastic bottle making machines to develop a process to blow it into bottle, making BIOTA the first company to do so, according to NatureWorks spokesman Steve Sterling. The chemical composition of the corn plastic, known as polylactide biopolymer and more brittle than oil based plastic, required a different process.
BIOTA's plastic water bottle, which biodegrades under certain conditions, made a splash when Zutler introduced it at the Telluride Bluegrass Festival in June 2004. The concept of making bottles from corn was so new at the time that a frequently asked question was whether one could eat the bottle. The company answered on its website that eating plastic is not recommended.
Zutler's BIOTA water quickly became the darling of gourmet boutiques and health food stores. In less than two years, Zutler's water was moving into the mainstream and appearing in regional grocery stores in the South, at Walmart stores in Colorado, and Zutler said he was working with major beverage distributors for national distribution, according to court documents and interviews with Zutler. But his plans took a turn when the company had trouble making payments on its loan in the fall of 2005.
The business loan in 2004 happened in June instead of February as originally planned, and the company missed the period when stores order bottled water for that summer, Zutler said, leaving the company struggling for money.
"By July 2005, we were very, very, very low on money," Zutler said, adding that he was busy lining up interested investors.
Whether there was a formal forbearance agreement reached after that summer remains in dispute and part of this weeks' trial.
After UPS placed the company in default in May 2006, Zutler and the brand hung on for about another year. Zutler filed for bankruptcy to try to save his company, but weeks after Zutler's corn bottle and water was featured backstage at the first "green" Academy Awards in February 2007, the company was shut down and Zutler's dream of selling alpine spring water evaporated.
The company's assets were sold, and the matter remains the subject of litigation in both state and federal court.
A twist to Zutler's corn bottle is that it's not recyclable because its chemical composition is different from so-called PET bottles made from oil. NatureWorks' Sterling said that's partly why the company focuses on marketing its resin for use as condiment deli containers, plastic drinking cups, carpet fibers and other products that don't enter the recycling stream.
Since 2004, the technology has advance to where recyclable bottles that used to be made from oil can now be made from plant material. Coca-Cola Co. in April announced that its Dasani water would be sold in bottles made from 30 percent plant materials, while Odwalla fruit juices would be packaged in a bottle that's 100 percent plant material.
Pepsi in March announced it has developed a 100 percent "green" bottle made from switch grass, pine bark and corn husks.
Both beverage giants said they ultimately hope to turn agricultural waste into plastic bottles.