FAYETTEVILLE, Ark. — The legal battle over who's involved with the ownership of 7 Brew Coffee Co. of Fayetteville will continue into 2024.
7 Brew and Jimmy John Liautaud, the founder of Jimmy John’s, have been battling in court with back-to-back civil suits against one another since January 2023.
Back in June, 7 Brew announced they'd opened their 100th location. The rapidly expanding drive-thru coffee shop now has 216 locations across the United States listed on its website in December 2023.
The legal battle began on Jan. 13, 2023, after Stillwater Brew LLC, a Delaware company of which Liautaud is a principal owner, filed a lawsuit against Drink House Holdings LLC, the parent company of 7 Brew Coffee, and Bar 7 Bar LLC, the manager of 7 Brew.
The two parties were preparing to reach mediation over the ownership dispute this past May.
However, a recent court filing says the two will continue the legal battle into January 2024, where Drink House is required to respond to Stillwater's motion to dismiss the counter lawsuit by Jan. 8.
Here's a rundown of the litigation process thus far.
Beginning of the legal battle
In the January lawsuit, Stillwater accuses Drink House Holdings of failing to provide access to books and records, breaching an agreement, and violating Wyoming state law where Drink House and Bar 7 Bar are based.
The lawsuit says Stillwater was essentially seeking to "enforce its statutory and contractual rights to review the books and records" of 7 Brew's parent company because Stillwater alleges it is a company member.
A Drink House Holdings LLC operating agreement from Sept. 23, 2020, which is attached to the January lawsuit, names John Davidson with Bar 7 Bar LLC, Jami Coulter with Limestone LLC, and Liautaud as members of the company. On March 1, 2021, documents show 21.3% ownership share was allocated to Stillwater in an amended Profits Interest Grant Agreement.
Stillwater said 7 Brew's managers, John Davidson and Ryan Fowler, failed to respond to "multiple requests" to allow Liautaud to review the books and records. The lawsuit says Stillwater made two formal requests to the defendants on Nov. 4, 2022, and Nov. 18, 2022.
Due to Drink House and Bar 7 Bar being based in Wyoming, the lawsuit says state law requires businesses to respond to a review request within 10 days.
The lawsuit says, "As a member with a 21.3% ownership share in the company, there is no reason for Bar 7 Bar to withhold such basic company materials or completely ignore its obligation to respond to Stillwater's routine request."
According to the lawsuit, the plaintiff seeks "what Stillwater is entitled to under the agreement and Wyoming law."
Response to the January filing
Defendants Drink House Holdings and Bar 7 Bar filed a counter lawsuit and responded to Stillwater's lawsuit in March 2023, where they admitted that Stillwater requested to review the books and records and they did not respond to either of the November requests.
However, they denied Stillwater was a company member and that it had any rights to review the books and records of Drink House.
The defendants allege the agreement Stillwater provided to prove its membership is not valid because "the terms of the agreement are not sufficiently definite enough to allow a court to determine with reasonable certainty the extent of Stillwater's contractual duties."
The counter-lawsuit says if the agreement is determined valid, the defendants claim they were "fraudulently induced into making the contract," so it should be considered void. Additionally, if it is considered valid, the defendants also allege that Stillwater breached the agreement by not carrying out its contractual duties.
Drink House also accuses Stillwater of being liable for failing to contribute to the company.
History between Drink House Holdings and Stillwater
According to court documents, Drink House began conversations with Stillwater on helping with 7 Brew Coffee's business expansion in the summer of 2020, "specifically to gain the assistance of Liautaud."
The defendants allege Stillwater told Drink House that it "had the contacts and capability to solicit franchisees from the base of Jimmy John's franchisees, it was prepared to do so and expected easily to obtain at least 500 franchisees for 7 Brew, and it had the experience and ability to structure and manage supporting infrastructure for a franchise operation for 7 Brew."
However, in its countersuit, Drink House says it still sought confirmation Stillwater could assist and was not under any non-compete restrictions.
The lawsuit says, "During those discussions, the parties agreed that if final terms were ultimately reached and Stillwater undertook the activities the parties discussed, Stillwater would be compensated by receiving a profits interest in Drink House" through the Profits Interest Grant Agreement the Stillwater initially provided in its lawsuit.
The counter lawsuit says all parties signed the agreement on Sept. 23, 2020, but it was then held in escrow until Stillwater could confirm that other companies did not object to Liautaud's involvement with Drink House and 7 Brew Coffee. According to the lawsuit, the agreement was eventually released from escrow after Liautaud said other companies were not an issue in the business deal with 7 Brew.
"Drink House was induced to release the agreement from escrow by those false representations and promises by Stillwater and Liautaud," the lawsuit alleges.
According to the documents, Stillwater did perform some duties expected of it for Drink House until around October 2020, "evidencing that it understood it was responsible under the agreement to develop, implement, and manage a franchise."
However, the lawsuit alleges that "Stillwater ceased its involvement and support for 7 Brew" after canceling a meeting on January 6, 2021, that Liautaud was scheduled to run. Right before the meeting, Drink House was told Liautaud would not be there. According to the documents, Liautaud never explained his absence and never rescheduled the meeting.
In January 2021, Stillwater's President Nic Mueth informed Drink House that Liautaud told Stillwater to stop sending the company's money and resources to 7 Brew, documents allege. Since this communication, the documents said "no member or representative of Stillwater has come to Arkansas to tour, manage, or otherwise interact with the 7 Brew operations."
The defendants claim Liautaud's last visit to 7 Brew's operations in Arkansas was on Dec. 9, 2020. According to the lawsuit, the services Stillwater provided in 2020 were not what was required of it through the agreement and was "not what Drink House bargained for in the making of the agreement and agreeing to give Stillwater a substantial profits interest in Drink House."
Report from April:
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