Ben & Jerry's is trying to stop the sale of its Israeli business to a local licensee in order to keep ice cream in Israel.
In a lawsuit filed in federal court in New York Tuesday, Ben & Jerry's claimed that the decision to sell its brand was made without the approval of the independent board.
A judge denied Ben & Jerry's application for a temporary restraining order but ordered them to show cause why a preliminary injunction shouldn't be issued.
Representatives for Ben & Jerry's did not reply to questions.
The controversy began last year when Ben & Jerry's said it would stop selling in the West Bank territory occupied by Israel since 1967.
Israel sees the occupied territories as part of its economy and any attempts to boycott business in the area are seen as applying to the country. The sales of ice cream in Israel would be stopped.
Ben & Jerry's said that its brand is synonymous with social activism and that as part of its deal to be acquired by Unilever in 2000, it had reserved the "primary responsibility for protecting the integrity" of the Ben & Jerry's brand.
The brand has the right to make decisions about its social mission. Ben & Jerry's said that last week.
American Quality Products licenses ice cream products in Israel and sold the Israeli branch of Ben and Jerry's to them. Ben & Jerry's will continue to be sold under Hebrew and Arabic names in Israel.
Despite the right of Ben & Jerry's independent board to make decisions about the brand's social mission, Unilever said in announcing the sale that it had the right to enter into the agreement.
Ben & Jerry's said in its lawsuit that it held a special meeting on Friday and voted to take legal action over the decision to sell.
The Israeli licensor of American Quality Products said in an interview that any potential lawsuit would be between the two companies. I already have an agreement with someone.
The report was contributed to by CNBC.
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