Riseandshine Corporation v. Pepsico, Inc.

Background

Riseandshine Corporation, doing business as Rise Brewing, sought a preliminary injunction barring PepsiCo, Inc. from using the MTN DEW RISE ENERGY mark in connection with canned energy beverages. On November 4, 2021, the court granted the injunction and required Riseandshine to post a $250,000 bond under Federal Rule of Civil Procedure 65(c). Riseandshine posted the bond the next day.

The Second Circuit vacated the preliminary injunction on July 22, 2022, because Riseandshine had not shown a likelihood of success on the merits. On August 2, 2023, the district court granted PepsiCo summary judgment on all claims and closed the case. Riseandshine filed a notice of appeal on August 16, 2023, and that appeal was pending when this order was issued.

PepsiCo’s Bond-Recovery Motion

PepsiCo moved to recover the entire $250,000 bond. Rule 65(c) permits recovery against a bond for costs and damages caused by an injunction when the enjoined party was wrongfully restrained. The court explained that a party is wrongfully restrained when, in light of the final decision on the merits, it had the right to perform the conduct the injunction prohibited.

The court found that PepsiCo met that standard. The preliminary injunction had been vacated because Riseandshine failed to show a likelihood of success, and PepsiCo later won summary judgment on all claims. The court therefore concluded that PepsiCo had the right to engage in the conduct that the injunction had barred.

Damages

The court explained that a party wrongfully restrained is presumed entitled to recover against the bond, but only for damages that are proven and were proximately caused by the injunction. PepsiCo submitted documents and deposition testimony concerning two categories of costs:

- Rebranding Costs: More than $250,000 to develop a new brand name and update design work, artwork, digital assets, and other materials. - Destruction Costs: More than $250,000 in lost value involving goods, services, and marketing materials connected to the enjoined mark, including a canceled Super Bowl advertisement and discarded materials.

The court found both categories were proximately caused by the injunction, which prohibited PepsiCo from using or displaying the mark in promoting, selling, distributing, or advertising its product. The court also found that the remaining rebranding costs, even excluding disputed costs paid to PepsiCo’s bottlers, independently exceeded the full bond amount.

Riseandshine’s Arguments

Riseandshine argued that PepsiCo’s rebranding costs were not recoverable because the bond order did not expressly list them, the costs lacked sufficient factual support, and PepsiCo had failed to reduce its losses. The court rejected those arguments, finding no requirement that recoverable damages be specifically identified in the bond order and finding PepsiCo’s supporting declaration and documents sufficient.

Riseandshine also challenged some destruction costs, including costs related to the Super Bowl advertisement and materials that might have been usable after the injunction was reversed. The court concluded that those challenges did not affect PepsiCo’s recovery because the undisputed rebranding costs alone exceeded $250,000, and further costs likely would have been required to undo the rebranding effort.

Finally, Riseandshine argued that fairness and justice justified denying recovery. The court rejected that argument, stating that good-faith pursuit of a preliminary injunction was not unusual and that allegations that PepsiCo intentionally copied the mark did not justify withholding the bond because PepsiCo’s right to engage in the enjoined conduct had been established.

Disposition

The court granted PepsiCo’s motion to recover the bond. It ordered Riseandshine to turn over the entire $250,000 bond to PepsiCo and directed the Clerk of Court to close the motion at Docket No. 498. The order did not resolve Riseandshine’s pending appeal.