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7 Brew Legal Battle Grows Scorching Hot

3 min read

Remember in June when we told you that the court battle over ownership of 7 Brew Coffee Co. of Fayetteville, the rapidly growing coffee shop chain, was headed to mediation?

Yeah, well, that didn’t happen.

In fact, the legal pleadings have been piling up, and as of late November, briefs were scheduled into January. 

If you’ll recall, 7 Brew has been fighting with Jimmy John Liautaud, the billionaire founder of the Jimmy John’s sandwich operation. The legal battle began with a lawsuit filed Jan. 13 in Benton County Circuit Court by Stillwater Brew LLC, a Delaware company of which Liautaud is a principal. Stillwater sued Drink House Holdings LLC, the parent company of 7 Brew Coffee, and Bar 7 Bar LLC, the manager of 7 Brew. Both Drink House and Bar 7 Bar are based in Wyoming.

Stillwater’s original complaint said that it’s a member of Drink House Holdings and that Bar 7 Bar had failed to respond to multiple requests by Stillwater to review the company’s books. 

But Drink House and Bar 7 Bar claimed that not only had Stillwater been given the opportunity to review the company’s books, but that Stillwater has no ownership interest in the company. Drink House and B7B said that the ownership agreement cited by Stillwater isn’t a valid contract and even if a court determines that it was a valid contract, “Defendants were fraudulently induced into making the contract.”

Drink House and B7B filed a counterclaim against Stillwater in which they allege that Liautaud failed to live up to promises that he would help the company develop its franchise program.

In May, the parties filed a joint motion saying they were trying to resolve the dispute through mediation. 

In July, things grew ugly again. Stillwater named 7 Brew CEO John Davidson and Chairman Ryan Fowler, described as “management defendants,” individually and said they had tried “to strip Stillwater’s equity in Drink House for their own gain.” It also alleged “self-dealing, misappropriation of funds, and utter disregard of corporate formalities and contractual obligations in their management of Drink House.”

Stillwater’s complaint said that it was supposed to have received a 22.5% stake in Drink House and that its “expertise and know how provided immense value to 7 Brew.” It claimed that the defendants were trying to “cut Stillwater out of the rewards to be reaped from Stillwater’s hard work.”

In September, Davidson and Fowler responded by saying Stillwater’s claims were legally insufficient and that they were named individually only “for purposes of intimidation.” Drink House and B7B went on to deny Stillwater’s allegations and accused Liautaud and Stillwater of fraud.

Drink House said that Liautaud said that he could “bring 500 franchisees to 7 Brew, no problem — the Jimmy John’s franchisees love me and anything I do they’ll want to do.”

However, Drink House said, it later learned that Stillwater and Liautaud “were in fact contractually prohibited from performing the services they had agreed to perform.” That was because, Drink House said, of previous agreements with Inspire Brands/Roark Capital, which bought Jimmy John’s Sandwiches in 2019.

The court docket shows that Liautaud was scheduled for a deposition on Nov. 20 in Fayetteville and that deadlines for further pleadings in the case had been extended into the new year.

The lawyers for Stillwater and Liautaud are Sean M. Berkowitz and Garrett S. Long of Latham & Watkins of Chicago. Those for Drink House are Marshall S. Ney and Alexa Mizer of Friday Eldredge & Clark in Rogers and Todd P. Lewis of Conner & Winters of Fayetteville. 

When we reported on the 7 Brew legal battle in June, the number of 7 Brew locations listed on its website stood at 90. It now lists 173 locations, primarily in the South and Midwest.

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