Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 1 of 12
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF FLORIDA
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`VITAL PHARMACEUTICALS, INC., d/b/a
`VPX SPORTS,
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`
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`v.
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`PEPSICO, Inc.,
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`Plaintiff,
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`Defendant.
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`
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`Case No.
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`
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`COMPLAINT
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`Plaintiff, Vital Pharmaceuticals, Inc., d/b/a VPX Sports (“VPX” or “Plaintiff”), states as
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`follows for its Complaint for Injunctive Relief in Aid of Arbitration against Defendant PepsiCo,
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`Inc. (“PepsiCo”):
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`NATURE OF THIS ACTION
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`1.
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`VPX is one of the leading manufacturers of fitness-focused nutritional supplements
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`and energy drinks in the world. Its BANG® energy drink is among the most popular and rapidly
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`expanding brands in the energy drink segment.
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`2.
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` Following
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`the introduction of the BANG® brand, VPX built a very high
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`functioning distribution network. In late 2019 and early 2020, due to the meteoric rise in sales and
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`popularity of the BANG® brand, and in recognition of the opportunity to further advance and
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`expand the BANG® brand to the top of the highly competitive energy drink marketplace, VPX
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`wanted to ensure that its distribution network was not just good, but best in class. VPX engaged
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`in discussions with PepsiCo, which represented that it had capabilities to advance the BANG®
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`brand beyond VPX’s current high functioning network and encouraged VPX to switch to
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`PepsiCo’s distribution network.
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`-1-
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF FLORIDA
`
`VITAL PHARMACEUTICALS, INC., d/b/a
`VPX SPORTS,
`
`
`
`v.
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`
`PEPSICO, Inc.,
`
`
`Plaintiff,
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`Defendant.
`
`
`
`
`
`
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`
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`Case No.
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`
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`COMPLAINT
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`Plaintiff, Vital Pharmaceuticals, Inc., d/b/a VPX Sports (“VPX” or “Plaintiff”), states as
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`follows for its Complaint for Injunctive Relief in Aid of Arbitration against Defendant PepsiCo,
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`Inc. (“PepsiCo”):
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`NATURE OF THIS ACTION
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`1.
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`VPX is one of the leading manufacturers of fitness-focused nutritional supplements
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`and energy drinks in the world. Its BANG® energy drink is among the most popular and rapidly
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`expanding brands in the energy drink segment.
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`2.
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` Following
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`the introduction of the BANG® brand, VPX built a very high
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`functioning distribution network. In late 2019 and early 2020, due to the meteoric rise in sales and
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`popularity of the BANG® brand, and in recognition of the opportunity to further advance and
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`expand the BANG® brand to the top of the highly competitive energy drink marketplace, VPX
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`wanted to ensure that its distribution network was not just good, but best in class. VPX engaged
`
`in discussions with PepsiCo, which represented that it had capabilities to advance the BANG®
`
`brand beyond VPX’s current high functioning network and encouraged VPX to switch to
`
`PepsiCo’s distribution network.
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`-1-
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`
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 2 of 12
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`3.
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`In March 2020, in reliance on PepsiCo’s assertions of its capabilities and
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`projections for advancement of the BANG® brand, VPX and PepsiCo entered into a distribution
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`agreement whereby, among other things, PepsiCo agreed to distribute certain of VPX’s BANG®
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`products in certain distribution channels throughout
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`the United States (the “Distribution
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`Agreement”).1 That Distribution Agreement included
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`4.
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`In the contracting process, PepsiCo pushed VPX to transition its network at an
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`accelerated pace and even inserted aggressive transition requirements into the Agreement. VPX
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`not only met those aggressive transition
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`requirements, but again relying on PepsiCo’s
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`representations on its capabilities to advance the BANG® brand actually vastly exceeded those
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`requirements, at great expense to VPX.
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`5.
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`Despite VPX’s efforts and good faith approach to the relationship, PepsiCo
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`repeatedly failed to perform, to address VPX management’s performance concerns, or to advance
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`the BANG® brand. Instead, PepsiCo was more concerned with pushing VPX to transition still
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`more of its existing network, beyond what was required of VPX in the Distribution Agreement.
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`6.
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`After months of under-performance and unaddressed or inadequately addressed
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`concerns, it became apparent to VPX that PepsiCo either did not have capabilities that it
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`represented, or that it was less interested in advancing the BANG® brand, and more interested in
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`1 The Distribution Agreement contains a confidentiality provision. Accordingly, VPX is filing this
`redacted version of the Complaint, which cites to certain provisions of the Distribution Agreement,
`and will be seeking leave to file an unredacted version of the Complaint under seal, along with a
`copy of the Distribution Agreement.
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`-2-
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 3 of 12
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`using the popularity of the BANG® brand to tie in and push other failed PepsiCo energy products,
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`such as Rockstar®.
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`7.
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`Accordingly, on October 23, 2020, VPX was forced to protect its BANG® brand by
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`terminating its Distribution Agreement with PepsiCo. In that process, VPX continued its good
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`faith dealings by offering “buyout”. Following that termination, however, PepsiCo has punitive ly
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`scaled back its already inadequate efforts related to the BANG® brand. Still worse, as if the
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`damage that PepsiCo had done to the BANG® brand was not enough, and with no regard for VPX’s
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`benefit of the bargain or need to protect its brand, PepsiCo has taken the position that VPX is
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`somehow trapped into continuing to distribute the BANG® brand only through PepsiCo for not
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`only the short term, but exclusively for the next three years.
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`8.
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`To that end, PepsiCo has gone so far as to threaten VPX’s current and prior
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`distribution partners into not doing business with or even exploring a relationship with VPX.
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`These actions, coupled with PepsiCo’s lack of performance prior to termination, and scaled back
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`efforts following termination, conclusively establish PepsiCo’s reckless disregard for the BANG®
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`brand and its true intentions for entering into the Distribution Agreement with VPX in the first
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`place (e.g. to advance its own failed brands, rather than VPX’s)
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`9.
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`PepsiCo’s actions have caused incalculable and irreparable harm, and will continue
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`to cause such harm, to VPX, the VPX brand, and the VPX distribution network worth billions of
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`dollars, if PepsiCo’s actions are not enjoined.
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`10.
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`Despite PepsiCo’s own failings under the Distribution Agreement, PepsiCo
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`recently filed a Demand for Arbitration with the AAA against VPX.
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`-3-
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 4 of 12
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`THE PARTIES
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`11.
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`VPX is a Florida corporation with its principal office located at 1600 N. Park Drive,
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`Weston, FL 33326, and is therefore a citizen of Florida.
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`12.
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`PepsiCo is a North Carolina corporation with its principal place of business located
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`at 700 Anderson Hill Road, Purchase, New York 10577.
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`JURISDICTION AND VENUE
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`13.
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`This is an action for injunctive
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`relief pursuant to the parties’ Distribution
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`Agreement.
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`14.
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`This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. §
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`1332. The parties to this action are diverse: VPX is a citizen of Florida and PepsiCo is a citizen
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`of New York and North Carolina. The amount in controversy, including the objects of the
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`litigation, exceeds $75,000.00 exclusive of interest and costs. Specifically, VPX has sustained
`
`damage due to PepsiCo’s improper interference with VPX’s business relationships that are
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`immeasurable, but well in excess of $75,000.
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`15.
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`Venue is proper in this Court because, pursuant to 28 U.S.C. § 1391, a substantial
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`part of the events or omissions giving rise to VPX’s claim occurred in this District.
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`-4-
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 5 of 12
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 6 of 12
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`21.
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`The Parties also negotiated
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`22.
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`Still further, the Parties expressly contemplated
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`23.
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`The Distribution Agreement never contemplated
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`-6-
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 7 of 12
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`II.
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`PepsiCo fails to use commercially reasonable efforts to distribute the Licensed
`Products.
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`24.
`
`Almost immediately after the distributor transition process began, VPX started
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`receiving troubling evidence of PepsiCo’s failures to properly service its territories and VPX
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`customers.
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`25.
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`Far from using commercially reasonable efforts, PepsiCo’s distribution strategy has
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`resulted in lost market share for the Licensed Products. In Florida, for example, VPX soon learned
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`that, instead of stocking BANG®-branded coolers with the Licensed Products, PepsiCo had
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`supplanted them with other brands in its portfolio including its core soft drink brands.
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`26.
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`Other Florida retailers reported that, despite 26 core flavors of the Licensed
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`Products, their shelves were frequently barren or otherwise lacking in any meaningful product
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`selection. Prior to PepsiCo’s appointment as distributor, these shelves were fully stocked.
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`27.
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`Further evidence indicates that PepsiCo had reduced shelf space for the Licensed
`
`Products, preferring instead to promote its newly-acquired Rockstar® energy drink portfolio.
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`28.
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`In an ultra-competitive market like the energy drink space, this loss of direct access
`
`to consumers is untenable and cause irreparable harm to VPX.
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`29.
`
`Consistent with the above, PepsiCo failed to adequately supply marquee VPX
`
`accounts. For example, VPX learned from Quick Trip, one of its most significant convenience
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`store customers, that unit sales of the Licensed Products were significantly decreasing since
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`PepsiCo had assumed distribution rights.
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`30.
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`Quick Trip attributed the downward sales trend to frequent out of stock situations
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`at many of its locations throughout the southwestern United States, a result that was squarely due
`
`to PepsiCo’s failure to service the market.
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`-7-
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 8 of 12
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`31.
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`PepsiCo not only failed to distribute Licensed Product within its territories, but has
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`orchestrated a campaign of intimidation to prevent retailers from rectifying their chronic out-of-
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`stock situations directly with VPX.
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`32.
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`In response to Quick Trip’s attempts to secure adequate inventory of the Licensed
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`Product directly from VPX, PepsiCo sought to strong arm Quick Trip by leveraging Quick Trip’s
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`ability to distribute other PepsiCo product, such as Gatorade.
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`III. Termination of the Distribution Agreement and PepsiCo’s subsequent interference.
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`33.
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`In light of PepsiCo’s persistent inability (or unwillingness) to adequately invest
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`resources to distribute Licensed Products, VPX elected to terminate the Distribution Agreement
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`without cause on October 23, 2020.
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`34.
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`Rather than acknowledge the clear effect of termination, PepsiCo escalated its
`
`efforts to obstruct VPX’s ability to transition distribution rights to successor entities.
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`35.
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`PepsiCo has threatened legal action against VPX’s future channel partners despite
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`being terminated. In a letter to VPX’s successor distributor in Texas, dated November 5, 2020,
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`PepsiCo improperly proclaimed that it “retains the exclusive right at this time to distribute Bang.”
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`PepsiCo further demanded that the distributor “immediately cease and desist interfering with
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`PepsiCo’s rights and business relationships.”
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`36.
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`Terminated PepsiCo’s efforts to sabotage VPX’s distribution efforts have also
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`coalesced around a concentrated effort to spread misinformation to retailers. In a press release
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`dated November 17, 2020, PepsiCo represented that it retained “exclusive rights to distribute Bang
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`products in all of the United States…” (Emphasis in original). And further that “PepsiCo’s
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`exclusive rights continue…[n]either VPX nor any other distributor has rights to distribute Bang to
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`your locations.”
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`-8-
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 9 of 12
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`37.
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`These and other threats have caused confusion in the marketplace and have had a
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`chilling effect on VPX’s ability to execute its distribution succession plan. For example, 7-Eleven,
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`one of the nation’s largest convenience store chains, adapted PepsiCo’s November 17, 2020 letter
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`into its own press release and disseminated the very same misrepresentations to its retail network.
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`IV. Arbitration and Interim Injunctive Relief
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`38.
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`The Distribution Agreement contains a provision
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`39. While VPX cannot calculate its harm at this time, as Pepsi continues its tortious
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`actions and until this court enters an order preliminarily enjoining it, VPX continues to and has
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`incurred substantial economic harm that very well could be in the billions of dollars and is
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`otherwise being damaged.
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`40.
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`VPX only seeks to have this Court adjudicate its request for injunctive relief to
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`restore and preserve the status quo pending resolution of the parties’ disputes in the pending
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`arbitration.
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`COUNT I - BREACH OF DISTRIBUTION AGREEMENT
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`41.
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`VPX re-alleges and incorporates herein by reference the allegations contained in
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`the preceding Paragraphs.
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`42.
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`The Distribution Agreement is valid and enforceable contract between VPX and
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`PepsiCo.
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`43.
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`VPX has fully performed all of its obligations under the Distribution Agreement.
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`-9-
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 10 of 12
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`44.
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`45.
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`46.
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`PepsiCo breached the Distribution Agreement by failing to use commercial
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`reasonable efforts to promote, sell and distribute the Licensed Products.
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`47.
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`PepsiCo further breached the Distribution Agreement by issuing false and
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`misleading statements related to the status of PepsiCo’s relationship with VPX and PepsiCo’s
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`entitlement to continue serving as the exclusive distributor of the Licensed Products.
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`48.
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`VPX has and will sustain damages and irreparable harm as a result of PepsiCo’s
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`past and ongoing breaches of the Distributor Agreement.
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`49.
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`VPX has no adequate remedy at law for the foregoing present and threatened future
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`irreparable harm.
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`WHEREFORE, VPX respectfully demands preliminary and permanent injunctive relief,
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`and such other further relief as this Court deems just and proper.
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`COUNT II - TORTIOUS INTERFERENCE WITH BUSINESS RELATIONSHIPS
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`50.
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`VPX re-alleges and incorporates herein by reference the allegations contained in
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`the preceding Paragraphs.
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`51.
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`PepsiCo has knowledge of VPX’s business relationships with its independent
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`wholesale distributors.
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`52.
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`Pepsi has intentionally and without justification, wrongly interfered with VPX’s
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`business relationships with its independent wholesale distributors.
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`-10-
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 11 of 12
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`53.
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`VPX has suffered and will continue to suffer irreparable harm and damages as a
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`consequence of this interference by PepsiCo. Such damages include lost profits and diminished
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`customer goodwill.
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`54.
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`VPX has no adequate remedy at law for the foregoing present and threatened future
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`irreparable harm.
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`WHEREFORE, VPX respectfully demands preliminary and permanent injunctive relief,
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`and such other further relief as this Court deems just and proper.
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`PRAYER FOR RELIEF
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`
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`WHEREFORE, Plaintiff, Vital Pharmaceuticals, Inc. d/b/a VPX Sports prays that the
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`Court grant the following relief:
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`A.
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`a preliminary injunction enjoining PepsiCo from in any way communicating with
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`VPX customers or VPX independent wholesale distributors
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`that PepsiCo is the exclusive
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`distributor of the Licensed Products;
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`B.
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`a preliminary injunction enjoining PepsiCo from engaging in any communications
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`with VPX customers or VPX independent wholesale distributors which prohibit, discourage or
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`deter VPX customers or VPX independent wholesale distributors from purchasing the Licensed
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`Products from VPX or its independent distributors;
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`B.
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`an Order awarding VPX its attorneys’ fees and costs associated with prosecuting
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`this action; and
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`C.
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`such other and further relief as the Court deems just and proper, including general
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`damages and/or punitive damages.
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`Dated: November 25, 2020
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`-11-
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`Case 0:20-cv-62415-RAR Document 1 Entered on FLSD Docket 11/25/2020 Page 12 of 12
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`
`
`/s/Zachary S. Foster
`Zachary S. Foster
`Florida Bar No. 111980
`QUARLES & BRADY LLP
`101 E. Kennedy Blvd.,
`Suite 3400
`Tampa, Florida 33602
`Telephone: (813) 387-0300
`Fax: (813) 387-1800
`Zachary.Foster@quarles.com
`
`and
`
`Francis Massabki
`Florida Bar No. 687901
`Vital Pharmaceuticals, Inc.
`1600 North Park Drive
`Weston, FL 33326
`Telephone: (954) 641-0570
`Fax: (954) 389-6254
`frank.massabki@vpxsports.com
`
`Attorneys for Plaintiff
`Vital Pharmaceuticals, Inc.
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`-12-
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