Red Lobster’s failed Ultimate Endless Shrimp promotion in 2023 is back in the spotlight in a new lawsuit launched against Thai Union by some of Red Lobster’s creditors.
Red Lobster made all-you-can-eat shrimp a permanent fixture on its menu in June 2023 and, by the end of that year, was reporting a significant financial hit as a result. The promotional event, which sold unlimited shrimp for USD 20 (EUR 17.49), was later cited in Red Lobster’s bankruptcy filing in early 2024 and resulted in a dispute between the company and Thai Union, which was a minority owner of the restaurant chain, that featured accusations of mismanagement.
In a new lawsuit, creditors of Red Lobster are again accusing Thai Union of mismanaging the company. Red Lobster GUC Trust, formed in September 2024, is bringing the lawsuit against Thai Union in a Florida court.
“Thai Union treated the Company as little more than a distribution arm for its own products, milking whatever value it could from Red Lobster, especially as the company became insolvent,” the lawsuit states.
Thai Union first bought a large stake in Red Lobster in 2016, shelling out USD 575 million (EUR 503 million) to get a 25 percent stake and preferred shares that could be converted into common shares within 10 years, giving it a further 24 percent. In 2020, Thai Union Group bet even bigger on Red Lobster and scooped up a controlling 49 percent share as the chain was reported as struggling.
The lawsuit claims that following the acquisition, Thai Union deployed its own employees into Red Lobster’s offices to lobby for its own interests – including in the selecting of seafood suppliers.
“Thai Union dispatched Paul Kenny, a Thai Union employee and Red Lobster Master Holdings GP Board member, to serve as an ‘advisor’ to the Company and, in short order, as interim CEO after driving the Company's then CEO to resign and gutting Red Lobster of many of its other senior leaders,” the lawsuit claims. “At every turn, Thai Union pressed Red Lobster to purchase ever-increasing amounts of overpriced Thai Union shrimp with no consideration for – or active disregard of – Red Lobster's operations and bottom line.”
The lawsuit claims the USD 20 endless shrimp promotion was one way Thai Union exploited Red Lobster to “squeeze out every drop of value” via lopsided contracts that only benefited the supplier and hurt the restaurant chain.
“The Everyday [USD] 20 Ultimate Endless Shrimp deal represented not a single irresponsible decision by Thai Union-led management (although it was that) but, rather, the culmination of Thai Union's efforts to steer Red Lobster to prioritize its shrimp offerings – and push Red Lobster to buy as much Thai Union product at inflated prices as possible, including by underpricing the promotion to keep consumer demand high, no matter the economic consequences for Red Lobster,” the lawsuit states.
It further claims Thai Union knew by the spring of 2023 that Red Lobster was facing financial headwinds and, instead of making efforts to help make it financially viable, used it as a means of extracting value for the company. It also alleges that Thai Union “stood on both sides” of the transaction, leading it to make business decisions that were against Red Lobster’s fiduciary interests.
The lawsuit also details that Thai Union imposed a pretextual “ban” on pre-breaded shrimp suppliers that competed with Thai Union under the premise of a “quality review.” It claims that all three vendors it was using at the time – Thai Union, Red Chamber, and Sunnyvale – failed those reviews over minor infractions. Following that, Sunnyvale priced itself out of an RFP process, and then Kenny in his role as CEO allegedly banned Red Chamber as a supplier to the objections of employees.
“The decision to ban Red Chamber was unprecedented,” the lawsuit states.
Following that decision, Thai Union served as the sole supplier of pre-breaded shrimp and used that position to its advantage, the lawsuit alleges. It claims the company charged Red Lobster more for shrimp than the going market rate, even as the company knew the restaurant chain was facing financial issues.
It further claims Kenny set the price of the unending shrimp promotion to USD 20.
“Numerous Red Lobster employees objected to Kenny's idea and told him it was unworkable,” the lawsuit states.
Following the initial suit, the plaintiffs in the case – Red Lobster GUC Trust – has moved for a clerk’s default following Thai Union failing to respond to the lawsuit in a sufficient amount of time. While that default was granted, Thai Union still has some time to respond.
The lawsuit adds to the ongoing suit against Thai Union, launched by Fortress Credit. Thai Union originally signaled it may be open to settling the case, but recent court filings on 26 June indicate that the lawsuit is ongoing.
