Last June, after Pennexx defaulted on its credit agreements totaling $11.9 million with Smithfield, Smithfield foreclosed on Pennexx's assets and took over operations, changing the name to Showcase Foods. In a fourth-quarter 2003 earnings report, Smithfield said it would close the money-losing operation. It also reported that it had taken a $2-million pre-tax charge to write down the value of Showcase assets and expects additional related charges of between $6 million and $8 million during the first half of this year.

Meanwhile, shareholders have leveled a class-action securities lawsuit against Pennexx, Smithfield and former Pennexx directors. In response, Pennexx has filed a lawsuit seeking $226 million in damages in a cross claim against Smithfield. The suit alleges, according to a statement from Pennexx, "that Smithfield misdesigned the plant which caused financial losses for Pennexx. As a result, Pennexx defaulted on its credit facility with Smithfield."

The federal court here ordered that the case will enter in the civil trial pool on Nov. 1, and the final pre-trial conference will be held Nov. 4 with all parties to be ready for trial on that date. Smithfield said in a statement, "We believe the Pennexx suit is completely without merit, and we intend to vigorously defend it."