Family-owned beverage maker Orange Bang and Monster Energy Company have asked an U.S. District Court in California to confirm an interim award of $175 million in damages and a 5% royalty on all future net sales of Bang-branded products — plus nearly $10 million in attorney’s fees and costs — after an arbitrator found that VPX was liable for breach of contract and trademark infringement by falsely claiming its products contain creatine.
What’s the background?
The origins of the case go back over a decade and stem from a 2009 trademark infringement filed by Orange Bang against VPX; according to court documents, pursuant to the settlement agreement in that case, VPX was granted permission to use the Bang trademark on creatine-based products or other beverages that are marketed exclusively in vitamin and supplement channels.
A decade later in 2019, Orange Bang claims to have discovered that Bang had been violating the settlement agreement by marketing beverages that did not contain creatine. That September, after filing a motion to compel arbitration based on a provision in the agreement, Bang agreed to enter binding arbitration proceedings with VPX.
Over the two weeks of hearings, the arbitrator determined that creatyl-l-leucine (CLL), which is advertised by VPX as “Super Creatine” in its products, is not actually creatine and does not provide the benefits of creatine. In its request for confirmation of the interim award, attorneys for the plaintiffs noted that the arbitrator “emphasized that VPX’s own creatine expert made ‘some significant admissions, some of which can only be characterized as stunning and not helpful in advancing VPX’s position in this case,’” including by conceding that “there is no evidence to support the efficacy of CLL.”
Meanwhile, the arbitrator found that VPX “did essentially nothing in order to ensure compliance with the VPX Marketing and Sales Restrictions” requiring its non-creatine-based products to be marketed exclusively in nutrition and supplement channels.
“It is simply not possible for VPX to comply with the VPX Marketing and Sales Restrictions when it never bothered to communicate the existence of the VPX Marketing and Sales Restrictions to its own employees, to its own customers, to its own distributors (such as Pepsi) or to the all-important retailers,” the arbitrator wrote.
How is Monster involved?
According to Hueston Hennigan, which represented the plaintiffs in the suit, Monster agreed to assist Orange Bang in its lawsuit against VPX and was granted partial assignment of Orange Bang’s rights under its agreement with VPX.
In June 2020, both companies initiated arbitration against VPX with the American Arbitration Association.
What is included in the interim award?
The arbitrator found that VPX had violated the two basic tenants of the settlement agreement: that Bang’s products contain creatine and that they are sold exclusively in the nutrition and supplement channel. In issuing the award, Orange Bang and Monster chose to recover $175 million in lost profits. In lieu of a permanent injunction from using Orange Bang’s trademarks, VPX selected the option of paying a 5% royalty fee from net sales for as long as the mark is used.
After subsequent hearings and briefings from both sides, the arbitrator included over $9.2 million in attorney’s fees and costs in the Final Award.
What happens next?
The interim award must be confirmed by a court within one year of the award. Orange Bang and Monster are also asking for prejudgment and postjudgement interest on the Final Award.