‘Deceptive, Fraudulent and Destructive’: Accused of Failing to Pay Sazerac $38.6 Million, RNDC Denies All Wrongdoing in Scathing Response
After being accused in a January lawsuit of failing to pay liquor giant Sazerac $38.6 million in invoices, Republic National Distributing Company has penned a withering response.
“Setting aside the inaccuracies littered throughout Sazerac’s Complaint, the Complaint is made all the more meritless in that it is Sazerac which has entirely stopped paying amounts owed to RNDC, not the other way around,” RNDC wrote in an answer filed Friday with the Western District of Kentucky Court.
“This lawsuit represents the culmination of a scheme that Sazerac put into motion long before it suddenly terminated RNDC’s long-standing distributor rights in 30+ markets — a termination notice that was sent without any prior warning late on the Friday afternoon before the New Year’s holiday weekend,” RNDC wrote in the response.
RNDC says it is submitting its counterclaims to “seek redress for every dollar owed by Sazerac, and the mounting damages resulting from Sazerac’s deceptive, fraudulent and destructive campaign.”
When reached for comment by Whiskey Raiders, Sazerac said it does not comment on litigation matters.
In June, RNDC gave Sazerac a notice terminating its contract, a move that RNDC came after “repeatedly trying to encourage Sazerac to negotiate a new rate.” RNDC maintains that it made it clear that it had “every desire” to continue serving as Sazerac’s distributor but needed to negotiate a “new, fair agreement.” In December, Sazerac terminated all partnerships with RNDC effective Feb. 1.
Sazerac owns notable brands including Buffalo Trace, Sazerac, Colonel E.H. Taylor, Blanton’s, 1792, Southern Comfort and Fireball Cinnamon Whisky.
Republic National Distributing Company’s Side of the Story
RNDC alleged that Sazerac owes it millions of dollars — not the other way around.
“Simply put, it is Sazerac, not RNDC, which owes the other millions of dollars. … This suit was allegedly initiated to recover proceeds of sales for inventory that, in actuality, Sazerac obtained through fraud and other wrongful conduct; this conduct should not be rewarded through payment of these ill-gotten gains.”
RNDC detailed its account of Sazerac’s “scheme,” claiming the company hatched an “ill-advised plan to cut costs and regulatory corners.”
According to RNDC, Sazerac moved “traditional and licensed distributor-only functions” in-house, which RNDC seemed to consider a betrayal, as it noted RNDC had worked with Sazerac for decades and wrote that “Sazerac made clear how little it values the supplier-distributor relationship at the heart of the beer, wine, and spirits industry.”
RNDC claimed this decision by Sazerac decreased the profit margins of its distributors — like RNDC.
The distributor continued by claiming that Sazerac’s new strategy failed to consider “market and regulatory realities” and thus was doomed to fail. RNDC said it tried to work with Sazerac through the implementation of this new strategy, but “Sazerac’s plan compensated RNDC so little for its comprehensive distribution services that the relationship finally became untenable.”
RNDC said once the relationship had reached that breaking point, the company attempted “good faith negotiations,” but Sazerac “wanted to dictate its own terms, regardless of the consequences or RNDC’s concerns.”
From there, RNDC says, Sazerac built a network of distributors to replace RNDC before parting ways with it on New Year’s Eve.
According to RNDC, Sazerac then publicly announced the termination of RNDC in more than 30 jurisdictions, which led to “widespread confusion.”
“Knowing that it had literally forced RNDC to purchase tens of millions of dollars in Sazerac product before the large-scale New Year’s Eve termination, Sazerac doubled its own revenues and profits by selling new Sazerac product to its dozens of newly appointed distributors across 30+ markets, leaving RNDC with little to no opportunity to sell its remaining inventory to successor distributors (as is standard industry practice),” RNDC wrote in its response.
Additionally, RNDC claims Sazerac pushed a “false narrative” as to why it had ditched RNDC in favor of its “new, impractical” distribution model.
RNDC claims that Sazerac then launched the lawsuit against it “to deflect attention from its own bad faith.”
Sazerac’s Side of the Story
After the parties announced plans to go their separate ways, Sazerac alleges that RNDC “raised prices, canceled promotional pushes, and otherwise created a difficult transition for the company,” according to VinePair.
In the lawsuit, Sazerac alleged that it shipped $40.7 million worth of products to RNDC, which likely then sold them to retail stores — the usual process. However, RNDC didn’t pay Sazerac for the products, which were shipped in December. The invoices — totalling $38.6 million (due to a $2.1 million depletion credit) were due in January.
Sazerac further claimed that RNDC used illegal “tie-in” sales (sales in which consumers are allowed to purchase a good they want only if they agree to also purchase a different good) of Sazerac’s rare and coveted products, such as its Van Winkle whiskeys.
Sazerac also alleged that RNDC failed to properly promote sazerac products and “bad-mouthed Sazerac and otherwise attempted to harm Sazerac by unfairly distributing future sales and the transition to new distributors.”
What Republic National Distributing Company Seeks
RNDC concluded its response to Sazerac with a list of its “prayers for relief.” In the list, RNDC said it prays that the court:
- rule in favor of RNDC on all counts;
- award RNDC monetary and punitive damages for all damage sustained “in an amount to be proven at trial”;
- award RNDC all of its attorneys’ fees and costs connected with prosecuting and defending the claims related to the lawsuit;
- order Sazerac to cease all “tortious interference with RNDC’s retailer relationships”;
- award RNDC all interest allowed by law; and
- grant RNDC “all other and further relief” that the court finds to be “just and proper.”
This isn’t Sazerac’s only ongoing legal issue, as the company is dealing with class-action lawsuits regarding the allegedly deceptive miniature bottles of Fireball Cinnamon Whisky and Southern Comfort often sold in gas stations.
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