Despite claims by Vital Pharmaceuticals/VPX Sports boss Jack Owoc that “terminated means terminated,” PepsiCo can continue to distribute Bang energy drinks until the completion of ongoing dispute between the two parties, according to an emergency arbitration ruling issued on Monday.
The ruling confirmed that Pepsi “remains the exclusive distributor” of Bang in the U.S. until October 24, 2023. The arbitrator also ordered Owoc and his company to cease making “false and misleading public statements” that the deal had been terminated and that customers must order products directly through Vital/VPX.
Documents filed with the United States District Court Southern District of Florida, though heavily redacted, shed further light on the fault lines that developed between Bang and Pepsi since entering the distribution agreement in March. According to the text, within six months of signing the contract, VPX “began making unreasonable demands” from Pepsi for “enhanced monetary payments” and to order more product.
“While PepsiCo had no obligation to do so under the agreement’s terms, PepsiCo worked in good faith to discuss and attempt to address those extra-contractual demands in a commercially reasonable way,” the document states, but Bang remained unsatisfied.
After Owoc announced he was terminating the deal without cause, VPX allegedly breached the contract by attempting to “take back” markets in Texas and Florida by actively soliciting customers and alternative distributors to purchase its products. While doing so, Owoc and the company continued to make public comments disparaging Pepsi as “feckless” and “pathetic” and asserting Bang has released itself from the deal. Much of Owoc’s ire has been focused specifically on rival energy drink Rockstar: The CEO contends that Pepsi’s grand design in purchasing exclusive distribution of Bang was to “block and control” the company and therefore revive Rockstar, which it had acquired for $4.5 billion prior to VPX distribution deal.
“Pepsi thinks that just because we signed a contract with them that they have the right to destroy Bang — one of the greatest brands and American success stories of all time,” Owoc told Beverage Digest earlier this week.
Pepsi responded to the notice of termination by filing an application with the American Arbitration Association (AAA) for an emergency Demand for Arbitration in November, which was opposed by VPX. After considering the contract, the appointed arbitrator, attorney David C. Singer, concluded that the agreement was “clear on its face” in stating “unambiguously” that the deal does not terminate “until three years after a written notice of termination is received by the other Party.”
Singer ruled that VPX was causing confusion and “damage to PepsiCo’s good will, reputation and relationships … that cannot be adequately addressed with a monetary payment in the future.” He noted that Bang’s actions showed the company was both replacing distributors immediately (as if the agreement was terminated with cause) while also retaining the option to do so gradually over a three-year period (as if it was terminated without cause).
Singer wrote: “Based upon Respondent’s decision to terminate the Agreement (VPX) without cause, Respondent cannot replace Claimant (PepsiCo) as its exclusive distributor until the three-year Notice Period expires on October 24, 2023.”
On Tuesday, Pepsi filed an expedited motion asking the judge to confirm the arbitration ruling.