Earlier this month a jury in Colorado handed CBD and adaptogenic beverage maker DRAM Apothecary a partial victory in a lawsuit it had brought against its former manufacturing partner, Rocky Mountain Soda.
After a seven day trial in December 2021, a jury in the District Court of Denver County found on March 10 that no partnership or LLC existed between or among Heyseed LLC, DRAM’s parent company, and Rocky Mountain Soda, a Denver-based beverage maker and distributor that also manufactures its own branded products, such as hemp extract-infused sparkling water line Colorado’s Best Drinks and RTD cocktails from Lifted Libations. No damages were awarded.
The dispute is centered around the events following DRAM’s decision to move to a new co-packer in October 2019. According to DRAM’s co-founders Shae Whitney and Brady Becker, who launched the company from their kitchen in 2011, the brand had been co-packing with Rocky Mountain Soda since 2016, but decided to switch to a new manufacturer due to a variety of production issues and a desire to scale.
After informing Rocky Mountain Soda of its decision, Whitney and Becker claim that the co-packer’s co-owner, Andrew Fulton, without their knowledge, filed an application with the Colorado Secretary of State’s office to create a new co-owned LLC called “Dram Drinks,” intended to hold exclusive bottling rights to DRAM’s family of functional beverages in 12 oz. cans, as well as artwork and logos.
In response to DRAM’s lawsuit, Fulton and Koons countersued for $25 million in damages and future lost profits, claiming that the brand would be unjustly enriched if they were not required to compensate Rocky Mountain Soda’s two owners for the work they had done for the brand. The co-packer argued that a valid co-ownership agreement did exist and that it had incurred costs related to product DRAM’s development and production. Additionally, Fulton and Koons said they had passed up an opportunity to work with another brand, Koios, in order to dedicate more line time to DRAM.
The jury affirmed that no co-ownership agreement or LLC existed between DRAM and Rocky Mountain Soda, only a contractual relationship for manufacturing the product.
In his conclusions, District Court Judge Andrew P. McCallin wrote: “The full scope of the parties’ relationship was a choice between a co-owned business or a contractual relationship. The jury found that the parties had a contractual relationship. The jury also found that no party breached any contractual obligations owed to the other parties,” and that neither was entitled to recover costs.
The jury also determined that DRAM does possess trade secrets, but that they were not used or misappropriated by Rocky Mountain Soda.
In his order denying recovery of costs to either party, Judge McCallin noted that the plaintiffs “came up far short when the entire constellation of claims, counterclaims and defenses are considered in this action.”
“The effort, time and resources that went into this case on both sides is staggering,” he wrote. “Yet the jury returned a verdict that essentially represents a walk-away for the parties. No party can reasonably be said to have prevailed under these circumstances.
Speaking with BevNET on Wednesday, Becker said he and Whitney were “pleased” with the jury’s decision. Since leaving Rocky Mountain Soda, the company has been co-packing in Salida, Colorado at its own 3,000 square foot facility. Earlier this month, it announced a new distribution deal with Breakthru Beverage Group that will take its drinks into Colorado and Illinois, with plans to expand into a further four states in the future.
“We have a lot of people on our social media saying that they can’t believe we didn’t get damages, but that’s not what it was about for us,” he said. “We get to retain complete ownership of our business, which we’ve always had, so we consider it a big win for ourselves.”
Koons said he and Fulton are in discussion with legal counsel on how to proceed from the case, including a potential appeal.