Business

Dram Ownership Dispute with Rocky Mountain Soda Settled in Court, Getting Messy Online

The court battle over Dram dragged on for seven days.
The court battle over Dram dragged on for seven days. Dram/Instagram
In December, two local companies that once had a business relationship met in court for a jury trial that dragged on for seven days. At issue was the ownership of Dram, a company known for its herbal and CBD-infused sparkling waters, CBD drops, bitters, switchels and body products. The verdict? The two parties exchanged a dollar.

But now they're exchanging plenty of charges and countercharges online.

Shae Whitney and her husband, Brady Becker, started Dram in 2011 in their home kitchen, then moved into what is now the Bread Bar space in Silver Plume before purchasing a farm in Salida in 2017 and transplanting their operations there.

By then, they'd already begun working with Andrew "Drew" Fulton and Christopher Moose Koons, the owners of Rocky Mountain Soda and Sparkling CBD (aka Colorado's Best Drinks). In the consumer package goods (CPG) space, it's common for a company like Dram to work with a co-packer, a manufacturing company that produces an existing company's line, which is how Dram defines its relationship with Rocky Mountain Soda.

But in 2019, things between the two companies got messy. Very messy.
click to enlarge The "CBD" on these cans stands for "Colorado's Best Drinks." - LUCY BEAUGARD
The "CBD" on these cans stands for "Colorado's Best Drinks."
Lucy Beaugard

The dispute surrounds the creation of Dram Drinks LLC, which Fulton and Koons say was formed in partnership with Whitney and Becker, as outlined in an operating agreement from 2016 that purports to give Fulton and Koons 49 percent of the Dram business. Whitney and Becker say that the agreement was altered and then executed without their knowledge after Dram decided to end its co-packing relationship with Rocky Mountain Soda following a 2019 9 News story that exposed shortages in a Sparkling CBD product.

On March 29, Dram posted a series on Instagram outlining its side of the story. Fulton "secretly" filed the Dram Drinks LLC agreement with the Colorado Secretary of State's Office, it said, an action that was revealed only when Whitney was mistakenly copied on an email from Fulton one month after Dram stopped working with Rocky Mountain Soda.

"It said, 'I trademarked Dram, is that going to get me 50 percent of their company?'" Whitney recalls. The filing included photos of Dram's can art and logos, too. "We never shared any recipes with them because we'd heard horror stories about co-packers, but there was just a deeper level of deception," she says.

After the unsettling discovery, Whitney called Koons. "I thought we were friends," she notes. "I asked him what he'd done." She also called Secretary of State Jenna Griswold's office to find out if the filing could be removed. "I was told, understandably, that the Secretary of State's Office doesn't have a punitive arm. They said, 'You need to get a lawyer, then you'll need a judgment showing this was filed without consent.' ... This exposed an incredibly massive loophole."

Determined to maintain ownership of Dram, Whitney and Becker did get a lawyer and filed suit against Fulton, Koons, Rocky Mountain Soda and Sparkling CBD for declaratory judgement, breach of contract, negligence and deceptive trade practices. Rocky Mountain Soda's owners filed a series of counterclaims in response.
click to enlarge Rocky Mountain Soda was founded in 2009. - ROCKY MOUNTAIN SODA/INSTAGRAM
Rocky Mountain Soda was founded in 2009.
Rocky Mountain Soda/Instagram

"We had become friends during that time," Koons says of the first few years working with Whitney and Becker. "I think the thing that hurts the most in this whole thing is bringing Rocky Mountain Soda and Colorado's Best Drinks into the fold. We've been portrayed as this huge corporation. We're a company of twelve, thirteen people, including Drew and myself, that started here. Started ourselves. We have no outside investment. We started all bootstrap. We started in a factory in Commerce City over twelve years ago.... The way we were portrayed really hurt, because we have employees that have their livelihoods here that I don't want it to affect."

On April 2, Rocky Mountain Soda published a webpage with its own account of the dispute, with a Q&A and a timeline that included links to corresponding documents.

Dram posted a Q&A in response.

Wading through all those posts, you get a feel for what the jurors went through in Denver District Court. After they'd heard all the testimony, Judge Andrew P. McCallin explained, the jury had determined "that no partnership or LLC was formed" regarding Dram Drinks LLC, although the "parties had a contractual relationship." But "no party breached any contractual obligations owed to the other parties," and that's why the jury "found that nominal damages of $1 should be awarded to each party."

Last month, the judge filed a second order denying that either side cover the other's legal expenses. "Defendants [Rocky Mountain Soda] don't seriously content that they prevailed in this matter. They didn't," he said. "But neither did Plaintiffs [Dram] when you consider all of the claims, counterclaims, defenses, discovery, motions, trial testimony, exhibits, jury instructions and verdict presented in this matter. No one won."

His order concludes: "The effort, time and resources that went into this case on both sides is staggering. Yet the jury returned a verdict that essentially represents a walk-away for the parties. No party can reasonably be said to have prevailed under these circumstances."

"The emotional toll has been horrendous," Whitney admits. "This is what Brady and I do every day. We don't have investors. We don't have consultants. We literally built this from the ground up. We don't have kids, so this is our baby, and to have someone lay claim to it was devastating and totally unbelievable."

"It's been really, really hard," Koons says. "The fact that this all went on through COVID, and something that all of us worked really, really hard on bringing to fruition. It's been really, really difficult."
click to enlarge Dram also makes other products including herbal bitters. - DRAM/INSTAGRAM
Dram also makes other products including herbal bitters.
Dram/Instagram

And while the Secretary of State's Office will not comment on this specific case, Griswold is working on possible legislation to address the issue of company theft. "Currently, the Secretary of State’s Office does not have the authority to alter any business filings even when information is fraudulently filed," says Annie Orloff, communications director for the office. "Further, there is no clear statutory authority to create the systems needed to field, refer, and investigate complaints of suspected fraud. That is why this bipartisan bill is so important. Under the new bill, when the Department of State receives a complaint of suspected fraudulent filings, meaning a filing that includes the unauthorized and fraudulent use of someone’s address, and/or someone’s name as registered agent, filer, etc., that complaint will be referred to the Attorney General’s Office for investigation. If the investigation determines the business filing to be fraudulent, the Department will then redact victim information and flag the record as suspected fraudulent activity."

Whitney says she's heard from many other business owners who have had issues with co-packers. "It just leaves such a level of exposure and opportunity for people to steal — money, ideas, short ingredients, mess things up," she explains. "So many business owners, especially female business owners, are scared into not telling their story."

But after she did via Instagram, Koons says the fallout was immediate, and painful. "I've lived here pretty much all my life, for at least 45 years, and I'm part of this community, and I'm proud to be part of this community," he notes. "Unfortunately, some of the community is automatically assuming that everything that was said was correct and I really think there's another side to the story."

He and Fulton are "talking to counsel about the appeal process and what that looks like," Koons says. "We have not formed any conclusions yet."

Meanwhile, Whitney and Becker are focusing on growing Dram. "We're just happy to be able to keep our business," Whitney concludes. 
KEEP WESTWORD FREE... Since we started Westword, it has been defined as the free, independent voice of Denver, and we'd like to keep it that way. With local media under siege, it's more important than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" program, allowing us to keep offering readers access to our incisive coverage of local news, food and culture with no paywalls.
Molly Martin is the Westword Food & Drink editor. She’s been writing about the dining scene in Denver since 2013, and was eating her way around the city long before that. She enjoys long walks to the nearest burrito joint and nights spent sipping cocktails on Colfax.
Contact: Molly Martin