FILED: NEW YORK COUNTY CLERK 09/08/ :43 AM INDEX NO /2014 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 09/08/2014
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1 FILED NEW YORK COUNTY CLERK 09/08/ AM INDEX NO /2014 NYSCEF DOC. NO. 1 RECEIVED NYSCEF 09/08/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x In the Matter of the Application of MONSTER BEVERAGE CORPORATION, Petitioner, for an order pursuant to Section 2304 of the CPLR quashing a subpoena issued by ERIC T. SCHNEIDERMAN, Attorney General of the State of New York, Respondent x Index No. VERIFIED PETITION Petitioner Monster Beverage Corporation ( MBC ), as and for its Verified Petition, respectfully alleges as follows NATURE OF THE ACTION 1. This is an action to quash, pursuant to Section 2304 of the Civil Practice Law and Rules, an in-office investigative subpoena ad testificandum and duces tecum dated August 6, 2014 (the Subpoena ) issued by the Office of the Attorney General of the State of New York (the Attorney General ), and to suspend MBC s obligation to respond to the Subpoena. PARTIES 2. Eric T. Schneiderman is the Attorney General of the State of New York. 3. MBC is a Delaware corporation and has its principal place of business in Corona, California. MBC s common shares are publicly listed on the NASDAQ stock exchange. Through its separately incorporated operating subsidiaries, including Monster Energy Company ( MEC ), MBC is a leading marketer and distributor of alternative beverages and energy drinks, including Monster Energy brand energy drinks ( Monster ). Monster accounts for more than 90% of MBC s revenues.
2 JURISDICTION AND VENUE 4. This action is properly being brought in New York County pursuant to CPLR 506 because the Attorney General s office, located at 120 Broadway, New York, New York, has been handling the instant investigation and issued the Subpoena; all communications and actions related to the prior subpoena and current Subpoena took place in New York County; and the Subpoena is returnable in New York County. FACTS 5. Monster was introduced to the market in Monster competes with other well-known energy drinks such as Red Bull, Rockstar and brands sold by Pepsi and Coca- Cola. Like other energy drinks, Monster is designed to increase the consumer s energy and alertness through an energy blend consisting of, among other things, B-vitamins, glucose, caffeine, guarana, L-Carnitine and taurine, and at the same time be refreshing and enjoyable. 6. Over the past 12 years, more than 10 billion cans of Monster have been sold and safely consumed in the United States and throughout the world. MBC estimates that when all energy drinks containing similar ingredients to Monster are taken into account, well over 50 billion cans have been sold and safely consumed worldwide since Every Monster can label contains a complete list of ingredients and, beginning in 2013, the total amount of caffeine contained in the product. Since Monster was first introduced in 2002, every can label has contained the explicit statements to Consume Responsibly, and that Monster is [n]ot recommended for children, people sensitive to caffeine, pregnant women or, since 2012, women who are nursing. MEC was the first energy drink company to include such advisory statements on its product labels. 8. MEC also has endorsed the American Beverage Association guidelines which, among other things, state that energy drink manufacturers will not (a) market their products to children under 12; (b) market their products in K-12 schools; (c) provide energy 2
3 drink samples to children; and (d) highlight images of children on their company-managed websites. 9. At approximately 10 milligrams ( mg ) of caffeine per ounce, a 16-ounce can of Monster contains approximately 160 mg of caffeine. Published reports show that the caffeine level in Monster is identical or in some cases less on a per ounce basis than Red Bull, Rockstar and other leading energy drinks, and is also significantly less on a per ounce basis than most popular coffeehouse brewed coffee drinks and some iced coffee specialty drinks. For instance, these reports show that a 16-ounce Grande Starbucks brewed coffee contains 330 mg of caffeine, more than double the 160 mg in a 16-ounce can of Monster, and a 16-ounce medium cup of Dunkin Donuts Coffee contains 206 mg of caffeine. Based on reported caffeine levels, some soda products also contain caffeine amounts comparable to those found in Monster; the extra-large single-serving fountain drink of Mountain Dew, for example, has about 234 mg of caffeine. 10. As permitted under the Federal Food Drug and Cosmetic Act ( FDCA ) and regulations administered by the federal Food and Drug Administration ( FDA ), MEC has determined that caffeine and each of the other Monster energy-blend ingredients are generally recognized as safe ( GRAS ) for use in Monster. This determination was based upon a comprehensive evaluation of the body of relevant scientific literature in the public domain, including the overwhelming body of scientific research dating back decades and substantiating the safety of caffeine for consumers of all ages. The FDA, the federal regulatory agency with the exclusive authority to make GRAS determinations, has never determined or issued any ruling that the ingredients as found in Monster were not GRAS. 11. As also permitted by the FDCA and FDA regulations, from the time Monster was first introduced until 2013, MEC lawfully elected to label Monster as a dietary supplement, like virtually every other energy drink manufacturer. The FDA has never 3
4 determined that Monster could not be labeled as a dietary supplement. In 2012, MEC voluntarily decided that, beginning in 2013, it would begin labeling Monster as a conventional food. 12. On or about June 26, 2012, the Attorney General issued a subpoena duces tecum to MBC, purportedly pursuant to his authority under Executive Law 63(12) and GBL 349 and 350 (the 2012 Subpoena ), seeking the production of a multitude of documents relating to the advertising, marketing, promotion, usage, ingredients and sale of Monster. 13. The 2012 Subpoena was patently overbroad and burdensome. Ultimately, MBC produced responsive materials subject to a Limited Search and Production agreement, dated March 22, 2013 (the Modified Agreement ), while reserving its general objection to the scope and basis for the 2012 Subpoena. 14. The Modified Agreement remained extremely overbroad and compliance with the Modified Agreement was extremely burdensome to MBC. MBC produced hundreds of thousands of pages of documents in response to the 2012 Subpoena and incurred millions of dollars of costs and expenses. 15. Nevertheless, the Attorney General has now issued a new Subpoena, dated August 6, 2014, seeking yet more documents and the testimony of Harmony Booker, an MEC employee located in Florida who oversees the activities of the Monster Energy Collegiate Ambassador Team members ( CATs ) college students who promote and market Monster primarily on their campuses in the southern United States. According to the Subpoena, it is returnable September 8, 2014 with respect to the requested documents, and September 12, 2014, with regard to Ms. Booker s deposition. 16. On August 11, 2014, in response to a request from counsel for MBC as to the factual basis for the Subpoena and the underlying investigation, the Attorney General responded that he has reason to believe that [MBC] is engaged in deceptive and illegal marketing of Monster, including, but not limited to 4
5 1. marketing Monster as safe when the product is associated with serious health risks particularly to children and young adults; 2. aggressively marketing Monster to children and young adults[;] 3. promoting the consumption of Monster with alcohol[;] 4. misbranding Monster as a dietary supplement in violation of FDCA 21 USC 321(ff)(2)(B)[;] and selling an adulterated food not generally recognized as safe [ GRAS ] in violation of FDCA 21 USC 342(a)(2)(c) and 348 and NY Ag & Mkts Law 199-a and On September 2, 2014, counsel to MBC requested by letter that the Attorney General withdraw the Subpoena, but the Subpoena has not been withdrawn. THE SUBPOENA EXCEEDS THE ATTORNEY GENERAL S AUTHORITY 18. There is no valid factual or legal basis for issuance of the Subpoena. None of the items specified by the Attorney General in his August 11, provide a basis for issuing the Subpoena, or conducting the investigation, because none of the items specified set forth any illegal conduct, and in particular any conduct that, even if illegal, the Attorney General is authorized to investigate. 19. No Federal or New York State law or regulation makes it illegal to sell Monster, or market it to any age group. Nor is there anything illegal about promoting the sale of Monster as a mixer with alcohol. (Indeed, to MBC s knowledge, the Attorney General is not even investigating Red Bull, which MBC estimates leads all energy drink manufacturers in sales in New York in all channels, and nationally dominates the market in on-premise (i.e., bars and restaurants) sales, generating approximately 15-20% of its revenue from on-premise sales, in comparison to the less than 2% of revenues earned by MEC from such sales.) 20. Neither the FDA nor the New York Department of Agriculture and Markets the federal and state agencies entrusted with regulating food safety has made any determination that Monster is adulterated or misbranded or is not GRAS. In issuing the 5
6 Subpoena, the Attorney General seeks impermissibly to invade the province of the FDA, which has jurisdiction to make such determinations under federal law (and which is currently conducting a review of energy drinks), and of the New York Department of Agriculture and Markets, which has been entrusted, in the Agriculture and Markets Law, with sole authority to investigate and issue subpoenas concerning these matters under New York law. 21. Even if the Attorney General had a legitimate basis for the Subpoena, the testimony and documents it seeks are irrelevant to the Attorney General s investigation. 22. With respect to the present case, no lawsuit has been commenced by the Attorney General. 23. No prior application for the relief requested herein has been made to this or to any other Court. WHEREFORE, Petitioner MBC respectfully prays for an order (1) pursuant to CPLR 2304 quashing the non-judicial subpoena ad testificandum and duces tecum, dated August 6, 2014, issued by Respondent Eric T. Schneiderman, the Attorney General of the State of New York; (2) suspending Petitioner MBC s obligation to respond to the Subpoena; and/or (3) granting such other and further relief this Court may deem just and proper. Dated New York, New York September 8, 2014 SCHULTE ROTH & ZABEL LLP By/s/ Martin L. PerschetzXXXXXX Martin L. Perschetz Gary Stein Frank J. LaSalle Jared Wong Amy Lawrence 919 Third Avenue New York, New York (212) Attorneys for Petitioner 6
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