5-Hour Energy maker loses legal battle with former manufacturer
April 2, 2013
Opportunist Magazine Cover Story
March 15, 2016
Out of steam: 5-Hour Energy maker cannot renew lawsuit against bottler, court rules
October 30, 2014
Farmington Hills-based Innovation Ventures LLC, makers of the popular 5-Hour Energy drink, cannot revive a dismissed 2012 lawsuit against a company that used to bottle its energy shot in Livingston County, the Michigan Court of Appeals has ruled.
But the new ruling in a once-contentious noncompetition and trade secrets case may be partly moot, because Liquid Manufacturing LLCno longer bottles the Eternal Energy shot drink or anything else, nor owns the equipment that once manufactured 5-Hour Energy.
A three-judge panel last week unanimously upheld Oakland County Circuit Judge Phyllis McMillen’s March 2013 dismissal of Innovation Ventures’ lawsuit against Liquid and LXR Biotech LLC, then based in Green Oak Township.
LXR is now in Auburn Hills and continues to sell its Eternal Energy shot drink online and through retailer agreements with Wal-Mart Stores Inc. andFamily Dollar, according to its website. The company also markets Perfectly Petite, a weight loss energy drink marketed to women, at Ulta Salon, Cosmetics & Fragrance stores, and recently launched a “10-hour” timed release energy shot that includes dissolving beadlets for a delayed release of some caffeine, said the company’s attorney, John VanOphem.
Its president and co-owner, Andrew Krause, said the company is “gaining traction and customers at an exponential rate” and is “succeeding in spite of the trials the 800 pound gorilla has thrown at LXR,” in an email to Crain’s.
But Liquid Manufacturing, which previously housed production for LXR near Brighton, closed in February when the property was purchased from foreclosure by Illinois-based Packaging & Distribution Finance Group LLC.
Peter Paisley, owner of Liquid Manufacturing and a former co-owner of LXR, said the beverage packaging company “could not sustain operational status” between the costs of the 5-Hour lawsuit and separate litigation with Green Oak over its wastewater output.
He also said the manufacturing equipment that Liquid Manufacturing used to house for 5-Hour Energy and later bought from Innovation Ventures has since been sold.
Liquid Manufacturing manufactured 5-Hour Energy from 2007 until Innovation Ventures decided in May 2009 to move production work in-house to a Wabash, Ind. plant. Afterward, Liquid manufactured some LXR products at the same location.
Innovation Ventures sued in 2012, alleging breach of contract, violation of noncompete and confidentiality agreements, violation of trade secret laws, unjust enrichment and conspiracy. The company initially obtained a temporary restraining order against the LXR owners, but McMillen lifted it less than two weeks later.
Krause, a former principal at the now-defunct K&L Development of Michigan LLC, which had designed and installed the production and packaging equipment at Liquid Manufacturing, had relocated LXR to Auburn Hills well before the foreclosure and now co-owns it with another investor, VanOphem said. The company has new manufacturing equipment at its new offices that had no connection to 5-Hour.
McMillen later found that Innovation Ventures only asked Krause to sign a noncompete in late April 2009, days before it terminated its relationship with K&L and after Krause's company had already completed all of its work for the company. Innovation raised a slew of challenges to that ruling, but the Court of Appeals last week rejected all of them.
Chad Halcom: (313) 446-6796, email@example.com. Twitter: @chadhalcom
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