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Monster Energy settles lawsuit over financial benefits

Agreed to settle a six-year-old class-action suits relating to claims it overstated the financial benefits of its distribution arrangement with Anheuser-Busch

Monster Energy has taken a hard swallow, and last week, agreed to settle a six-year-old class-action suits brought against the beverage company relating to claims it overstated the financial benefits of its distribution arrangement with Anheuser-Busch. Reuters reports that shareholders led by the Structural Ironworkers Local Union #1 Pension Fund in Forest Park, Illinois, claimed that the record results posted in 2007 by the maker of Monster Energy and Allied drinks, then- known as Hansen Natural Corp, were inflated.

The lawsuit, Cunha v. Hansen Natural Corp., was originally filed in 2008, and Monster said it had spent more than five years aggressively defending against the allegations. According to the complaint, the results reflected "channel stuffing," in which Monster would provide Anheuser distributors with too many drinks to sell, at times up to a year's worth of inventory, even though Anheuser had "practically abandoned" distribution of the Allied product line. According to media reports, the settlement is approximately over $16 million.

According to Monster, contrary to the allegations in the lawsuit, Monster's relationship with Anheuser-Busch was extremely successful during the proposed class period and thereafter. After that relationship began in 2006, Monster achieved record sales in each quarter during the proposed class period, and significantly improved its Monster Energy product line's market share. Further, despite the lawsuit's allegations of harm to investors, Monster's stock price rose by 75 percent during the proposed class period, generating nearly $1.7 billion in shareholder value during that time.

Monster Beverage says that the full payment would be funded by its insurance carriers, nor will the large monetary settlement have any impact on the company’s financial position. The settlement agreement, which has to be approved by the court, does not contain any admission of wrong-doing

Rodney Sacks, CEO of Monster Beverage said he believed the company would have prevailed if the litigation had continued. “Nevertheless, given the terms of the settlement, the payment of which is being funded by insurance carriers entirely, we believe it is in the Company's interests to put this matter behind us."


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Alexis Harrison

Alexis Harrison is a Connecticut-based writer and public relations professional whose career spans both print journalism and broadcast news. Alexis started her professional life as...

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