Monster Involved in Insurer-Funded Settlement in California

May 5, 2014
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Corona, Calif.-based Monster Beverage Corp. has agreed to settle an ongoing securities class action lawsuit against the company and two of its officers in federal district court in Los Angeles.

The settlement, reportedly worth $16.25 million, is pending court approval. The suit was filed by shareholders who claimed the company’s financial reporting was inflated to affect its stock price and it involved the company’s business relations with beverage distributor Anheuser-Busch.

The lawsuit is Cunha v. Hansen Natural Corp. It was originally filed in 2008, and Monster has spent more than five years defending against the allegations in the suit.

The suit was filed as a federal class action on behalf of purchasers of Monster’s common stock between May 23, 2007, and Nov. 8, 2007. The named plaintiff is Marcelo Cuna, who purchased common stock of Hansen Natural. Hansen changed its name to Monster in 2012.

Contrary to the allegations in the lawsuit, Monster’s relationship with Anheuser-Busch was extremely successful during the proposed class period and thereafter.

The suit names as defendants Rodney Sacks, chairman of CEO of Hansen, and Hilton Schlosberg, vice chairman, president, chief operating officer and chief financial of Hansen.

The suit alleges the defendants disseminated materially false and misleading statements and concealed material facts that would adversely affect the company’s stock, and they allowed themselves and other company insiders to sell more than 2.3 million shares of personally held stock for proceeds in excess of $104 million.

The company had been defending itself against the allegations, but evidently called it quits in the face of mounting defense costs.

“However, in light of the potential costs of continued litigation, as well as the potential burden and disruption to the Company and its management, Monster, together with its insurance carriers, believed it was in their best interests to settle the case for the amount set forth in the settlement agreement,” a statement from the company announcing the settlement states.

According to the Monster statement, the full settlement payment is being funded by Monster’s insurance carriers. The carriers are not named in the statement.

The settlement will not have any impact on Monster’s financial position or its income statement, and it contains no admission of liability or wrongdoing on the part of the company or its officers, according to the statement.

Monster said all defendants continue to deny the allegations against them and to maintain that the suit has no merit.

“Contrary to the allegations in the lawsuit, Monster’s relationship with Anheuser-Busch was extremely successful during the proposed class period and thereafter,” reads a statement from Monster. “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 is a marketer and distributor of energy drinks and alternative beverages. The company markets and distributes a host of Monster Energy brand energy drinks.

From This Issue

Insurance Journal West May 5, 2014
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