Minneapolis-based brand management firm Castello is taking The Alkaline Water Company to court, alleging the publicly traded beverage maker failed to make payments and fraudulently misrepresented its ability to “produce products of sufficient quality to meet retailer standards.”
According to the lawsuit, filed last month in the United States District Court for the District of Minnesota, the two companies signed an agreement on January 15, 2020 for Castello to help grow Alkaline Water’s CBD-infused water line through marketing and retail expansion. Among the services provided by Castello were co-branded marketing campaigns between Alkaline Water and Southwest-based specialty retailer CBD Emporium and another retailer, CBD Plus.
However, Castello alleges in the suit that Alkaline Water failed to deliver on the co-branded campaigns and was unable to produce the required inventory for the agreement, stating that “Alkaline’s representations as to the quality of its goods and the quantity it could deliver were knowingly false.” As well, the suit alleges Alkaline Water repeatedly failed to pay Castello and that the company circumvented the agreement to directly work with Castello’s contractors.
“I wish we hadn’t been forced to take this step,” Castello president David White said in a press release. “Castello delivered several remarkable co-branded campaigns in key markets in 2020 for The Alkaline Water Co. and we have not been paid. Unfortunately, we have learned of other agencies that experienced similar treatment.”
White claimed that Castello produced over 115 billboards promoting Alkaline Water and placed their CBD products in “numerous retail stores” as per the agreement. According to the complaint, Alkaline Water was required to give 90 days notice to end the partnership and moved to terminate its contract with Castello on August 31, 2020. However, the company allegedly failed to pay Castello a $560,000 set price for the CBD Plus campaign, in addition to other monthly fees.
“Despite numerous reassurances that payment would occur, it never happened,” White said in the release.
The lawsuit seeks financial damages in excess of $1 million and attorney’s fees.
The Alkaline Water Company, however, has called the lawsuit itself fraudulent and filed a countersuit alleging that Castello misrepresented their company and abilities.
According to the countersuit, filed last month, Alkaline Water said it hired Castello in January 2020 after being impressed by former president Troy Devens who they believed had the experience and industry connections to grow the brand. However, the suit claims Devens left Castello the same month that Alkaline Water signed the agreement, but Alkaline Water wasn’t informed he was gone until some time later. Devens’ LinkedIn account shows he was employed at Castello until February 2020 but now works for CVS.
In a statement to BevNET, the company claims that “Castello had no other employees to service our account and their responsibilities under the agreement” and were in repeated talks with White about a lack of performance.
An internal email from July, entered as evidence by Alkaline Water in its countersuit, shows the company’s frustrations and accuses Castello of overstepping the agreement to focus on marketing efforts that Alkaline Water never requested, as well as attempting to sell the brand’s core water products in addition to CBD, despite only being asked to handle the CBD products.
The company confirmed it filed its 90-day termination notice on August 31.
Alkaline Water alleged that Castello sued the company for nonpayment of work constructing billboards, which it says were actually purchased by a third party that Castello was not involved with; “they did not make the order, interface with the vendor, or pay the vendor,” the company said. Alkaline Water added that Castello “also sued us for additional services that were never performed and this has been validated by a third party.”
“Castello appears to be a fraudulent enterprise of Dave White – who uses bogus and slick sales tactics to hook companies like us trying to grow their retail channels, all the while Castello has no employees or expertise to perform their services it sells you on,” The Alkaline Water Co. stated. “It appears their plan is to use job boards to find freelancers to do their work – never knowing if they can find qualified individuals who will do an acceptable job.”
In an email to BevNET, Castello denied Alkaline Water’s allegations and noted that “numerous people” worked for Castello on the deal and asserted that the billboards were a part of the two parties’ contract.
“Alkaline’s characterization of Castello is inaccurate, ignores the numerous people that worked on their matters over most of a year, and completely misses the point that Castello performed its obligations under the agreement delivering multiple new retailers to Alkaline,” the company stated. “In spite of this, Alkaline chose not to honor the agreement they made.”