CHICAGO — Playboy Enterprises has been hit with a lawsuit after trying to sever its deal with the company that makes and distributes its energy drink.
The suit filed in Cook County Court claims that Playboy wrongfully cut its licensing agreement and sought new distribution.
The plaintiffs, Play Beverages (PlayBev) and CirTran Beverage Corp. are also suing brokers United Licensing Group and RLC Partners, and distributor Redi FZE.
Also named in the suit is broker Jimmy Esebag, RLC principal Ron Coopersmith and Redi FZE principal Paul Levin.
According to Courthouse News, Playboy allegedly granted PlayBev the right to manufacture and sell the Playboy Energy Drink in 2006, and a year later made a distribution deal with CirTran.
"During the last four years, PlayBev and CirTran have successfully grown the network to a point where they have launched the product into more than 30 countries and have obtained distributors for more than 80 countries," the lawsuit states. "Last year, PlayBev and CirTran sold more than a half million cases of the Playboy Energy Drink worldwide."
Although the deal was for five years, the companies claim Playboy knew that some of the distribution agreements extended beyond the initial term and that Playboy "represented to prospective distributors that PlayBev's license was in good standing."
Admitting it failed to meet minimum sales per the agreement, PlayBev however maintains that Playboy " appreciated that PlayBev had made significant progress in developing the market for the Playboy Energy Drink."
The company also claims that Playboy's vice president of global licensing represented that minimum net sales "would never be an issue from Playboy's perspective as long as PlayBev continued to develop its territory and expand its distribution network."
But when new management took over last spring, the plaintiffs claim Playboy started to seek a a replacement licensee. "Playboy began working with Mr. Jimmy Esebag and Mr. Ron Coopersmith during the spring of 2011 in order to cut PlayBev out of the energy drink distribution network," the lawsuit states.
The complaint continues, "Playboy did not disclose to PlayBev that it had entered into negotiations with alternative licensees, and did not disclose to PlayBev that its brokers were attempting to secure an alternative licensee. To the contrary, Playboy actually encouraged PlayBev to invest additional funds and resources into its distribution network in order to better position itself for the next license renewal period.
"Playboy was simultaneously asking PlayBev to make an additional royalty payment of approximately $1.8 million, even though Playboy planned to declare PlayBev in default once one of Mr. Esebag's alternative licensee placed its sufficient funds into escrow to demonstrate its commitment to the proposed deal."
PlayBev is claiming that Playboy started negotiating with Redi FZE while it was still under contract and began working closely with Redi FZE, in order to assist that distributor in breaching its distribution contract.
On July 14, Playboy allegedly notified distributors that PlayBev had defaulted on its licensing agreement, and was in the process of terminating the deal.
PlayBev said in the complaint, "Playboy's communication was unsolicited and intended to disrupt the distributor network by creating unnecessary concern and uncertainty among the distributors.”
The plaintiffs are seeking an injunction barring Playboy from terminating the license agreement, and unspecified damages for breach of contract, breach of good faith, tortious interference and promissory estoppel.