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We Was Robbed!
The Kona Kai Scandal and its Aftermath

BY DONALD N. SCHOENHOLT
SPECIALTIES EDITOR

On June 21, 1932, the judges awarded the decision and the heavyweight boxing title to Jack Sharkey over Max Schmeling. Schmeling’s manager, the legendary promoter Joe Jacobs, shouted into the open radio microphone “WE WAS ROBBED!” His proclamation was heard coast to coast. Last month the slow grinding mill that is the legal system finally caught up to Michael Norton of Kona Kai Farms and meted out a modicum of justice. Each of us in the specialty coffee community was damaged by this man. Each of us was sullied by the dirt he threw upon us. Justice has been served but I for one feel like Joe Jacobs.

Few people in our trade have been able to successfully emulate the maker of Connecticut wooden nutmegs of colonial days. But that has not stopped the ingenious and the avaricious from trying. It was 99 years ago that Dr. Wiley of the United States Department of Agriculture reported that the extent of deception was more than was imagined. Not only were Brazilian origin coffees substituted for Mocha and Java, but cereals and molasses were being substituted for coffee beans “in America’s favorite morning beverage.” One enterprising operator made coffee beans from peas and sawdust. Within a decade, the pure food acts passed into law and much of this foolishness went away, but a century later the potential for the honest person or company to be the victim of fraud remains real. Until discovered in 1996, a goodly amount of Kona coffee was actually from Costa Rica and Panama.

Michael Norton, and his Berkley, California-based Kona Kai Farms, the largest Kona distributor on the mainland, bought millions of pounds of Central American beans and re-sold them as pure Kona coffee during the mid 1990s. In another 20 years Michael Norton’s name will be lost to memory. We should make an effort to remember the damage he inflicted on the specialty coffee community. It is only through remembering the lessons of our history that we will know to take steps to protect our future. In our centuries old trade, where a man’s good name is everything, Norton sold ethics as a commodity of commerce. Unlike coffee beans, once sold, ethics are worthless.

There was an inherent weakness in the Kona coffee market that made it vulnerable to fraud. It was a market built as much on mystique as on cup quality. As Jamaica Blue Mountain, the integrity of the produce bought and sold was essential to the success of the whole Kona community. Unlike the Jamaicans, who have been fighting in defense of their Blue Mountain coffee for more than a generation, Hawaii stood by and let the underfunded coffee farmers fend for themselves. They had the will, but they lacked the resources. They were up against interests with substantial resources and who did not want government regulation to limit their ability to conduct their business.

Governments are created to stand in defense of the people, yet the farmers were frustrated in their efforts to get help from their government. The Food and Drug Administration did not enforce its own labeling regulations. In addition, the Hawaiian Consumer Affairs Department, Hawaii County Mayor Steven Yamashiro and the Department of Agriculture all sadly let the farmers down.

Each time the farmers attempted to legally protect their coffee from dilution or with the registering of a mark to protect the product’s integrity, others would rise to stop them. According to the San Francisco Chronicle, Kona Kai representatives led the opposition. Five filed federal lawsuits in 1994 successfully blocking the issuance of a trademark for Kona Coffee. This trademark, had it been granted, would have aided Kona coffee growers in their effort to stop counterfeiting. The five corporations are: Kona Kai Farms, Berkeley, California; Woolson Tea & Spice d.b.a Lion Coffee Co, Honolulu, Hawaii; Captain Cook Coffee Co., San Francisco, California; Hawaiian Isles Kona Coffee Co., Honolulu, Hawaii; and C. Brewer Co. d.b.a. Royal Kona Coffee Co., Honolulu, Hawaii.

At the time of the Norton affair, in 1996, the state of Hawaii had an inspection program in place for some years. It was voluntary, and invited misrepresentation as the State Department of Agriculture took the word of the Hawaiian seller that the coffee presented for certification was in fact of Kona origin as labeled. Dick Emory, Hawaii State certification facilitator for Hawaiian coffee, reported to the board of directors of the Kona Coffee Council in the midst of the Kona Kai scandal. He said that the (then current) state certification program for coffee was only for grading size and number of defects and did not certify origin. Still, some sellers like the Kona Pacific Farmers co-op made it a rule to have its coffee certified. The state “seal of approval” cost the grower $22.00 an hour for inspection and tagging. This would be a high additional cost for a small farmer. Today a new mandatory certification program that does guarantee origin is in place for all of Hawaii’s coffee.

The federal action against Kona Kai and Norton was the first of its kind according to U.S. Attorney Michael Yamaguchi, who felt he had a compelling case. Still, after the arrest of Kona Kai’s Michael Norton, his council, Christopher Canon, began to mitigate Norton’s activities arguing that “Kona is not a trademark. It’s a term that describes a style of coffee.” He angered many in the specialty coffee business when he asked, “Is all French bread baked in France?” He was additionally quoted as saying that anyone who thinks all Kona beans come from “one beach in Hawaii has to be out of their mind.” In a telephone conversation secretly recorded by a worker, Norton said, “All right, so it’s true we created a nonexistent demand for a nonexistent product.” When the worker complained that he felt guilty about the millions of consumers that were duped,” Norton answered, “Duped for what? They got what they bought…coffee.”

The smarmy lawyer had a point, and the point was sharper than just that on French bread. There is a Cona coffee brewer marketed in the U.K. There is a Kona Coffee Company in Australia that is not in the Hawaiian Kona coffee business. There is precedent for coffee origin names crossing-over and becoming generic names for all coffee such as “java” and “mocha.” As a matter of law, unless the Kona coffee community defended their produce against fraud they might lose legal right to the exclusive use of the Kona name much as Switzerland cheese producers have lost the right to the appellation “Swiss Cheese.”

As a result of the fraud and the State’s ineffective response, coupled with angst, frustration, anger, and a feeling that something at long last must be done, some Kona farmers wanted to file class action lawsuits against Kona Kai.

The Lanham Act (the U.S. Trademark Act of 1946) says that if you profit from the misuse of a mark you are liable to be forced to turn over your ill-gotten gains to the damaged rightful owners of the mark. On advice of council, the farmers in the “class” would include in their suit as defendants those mainland roasters that they could identify as being large Kona Kai customers. According to

Pacific Business News www.amcity.com/pacific/ these included Brothers Gourmet Coffees Inc., First Colony Coffee & Tea Co., Gloria Jeans Gourmet Coffee Corp., Nestle Beverage Co., Peerless Coffee, Price Costco Inc., S&W Fine Foods, and The Coffee Beanery Ltd., Starbucks Corp., Peet’s Coffee & Tea, Regton Co. Inc, Kona Kai Farms Inc., the two legal entities that were “Kona Kai,” and Michael Norton, and Robert Regli (the principals of the Kona Kai entities), were each named in the suits filed in Federal court and the State of California in 1996. Klein Bros. Brokerage and their affiliates, a San Francisco green coffee company, were subsequently added to the defendants list in the California State action.

Whether to participate or even take a position on the suits became an intellectual and emotionally wrenching experience for the Kona farming community. Prominent Kona coffee voices John Langenstein (Langenstein Farms) and Roger Cogburn (Coast 100% Kona Coffee) found themselves on opposing sides of the struggle.

Cogburn appeared to speak for many farmers when he voiced disapproval of the legal language that characterized defendants in the suit as “collaborators.” Langenstein defended the class-action suit, claiming those who backed legal action were motivated not by financial gain but by defense of, “… the families we raise on our farms; the children who will hopefully one day, take over the fields, to maintain the legacy.”


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