The suit, which was filed in Wisconsin federal court on Monday, says that from 2006 through 2012, Land O'Lakes paid over $15 million for the whey protein concentrate without knowing that it was non-conforming.
"Because the product was adulterated with urea, it was not merchantable or fit for use by Land O'Lakes and had no value," said the complaint.
The US agribusiness giant is seeking at least $10m in damages from the supplier.
Gerald Poppy, president of Packerland, told us the company was present at the filing and is “currently reviewing” the suit but would not be in a position to comment on its merit until it had completed its evaluation.
Urea is an animal urine derivative commonly used in fertilizer. It is also used as a cost effective replacement for a part of the protein in a cattle feed ration when soybean prices are high.
A non-protein nitrogen (NPN) compound, it is converted into proteins by the bacteria in the rumen of cows.
However Land O’Lakes said adding NPN compounds like urea as ingredients to commercial feed for animals with non-functioning rumen systems like calves, as a source of equivalent crude protein, is completely illegal.
It added that failure to disclose the addition of an NPN on the label of commercial feed also “constitutes a violation of law”.
Land O'Lakes' complaint alleges Packerland executives directed its blend master and laboratory manager to add urea to its whey product after business hours to artificially inflate its protein levels so it would pass as a higher quality product.
And the Minnesota based group claims it experienced a number of challenges with the whey protein concentrate from reduced production to increasing tailings to ammonia-like odor and high pH levels, but Packerland, it alleged, blamed the quality issue on a raft of production and processing equipment failings.
The practice of adding urea was discovered within Packerland after the company was purchased by Packerland Holding in May 2012, prompting the new management to fire three of the former company's executives and the laboratory manager, according to the suit.
Packerland Holding allegedly did not inform its customers of the issue when it was identified. The supplier and the former employees agreed to a $9.8m settlement in December 2012, said the complaint.
Land O'Lakes claims it learned of the adulteration issue around two months ago when those employees sought reimbursement from an insurance company for the settlement payment made to Packerland Holding.
“In or around September 2014, Land O’Lakes learned from recently unsealed documents filed in the insurance-coverage case that Packerland and Packerland Holding had been adding urea to the product,” said the suit.