On Black Rifle Coffee Company
Founded by former servicemen, Black Rifle Coffee Company is a veteran-owned coffee business that strives to provide premium coffee while supporting those who serve the nation. Black Rifle Coffee Company’s founders Evan Hafer, Matt Best and Jarred "J.J." Taylor have all served in the U.S. military.
The company was founded in 2014 (and incorporated in Utah) with the mission of selling high quality, small-batch, coffee while supporting veterans, law enforcement and all other American citizens through the best cup of coffee available. The officers, directors, and employees of Black Coffee Company continue to be committed to both the veterans they employ and the customers they serve, recognizing the sacrifices of the men and women who have served and continue to serve our country.
The Company’s espresso blends in particular have become well known in the veteran community as coffee blends for tactical application. In fact, Black Rifle Coffee Company is a certified Small Business under the SBA’s mentor-protégé program through the U.S. Small Business Administration, which permits larger businesses to mentor smaller businesses to promote growth and development. The Company’s tactical connections have led to significant sales through membership in the Ten Percent for the Brave program. This program provides first responders//police/EMS/FireA locally run coffee subscription service which donates 10% of sales to customer selected charities.
Black Rifle Coffee Company has continued to grow and diversify in recent years. The Company has a growing national and international user base , thanks to wide availability through the Company’s website, and local distributions in Nepal, Sweden and Europe. It is now included in the Brownells’ Ex-Sclusive Espresso Series and sells merchandise, including T-shirts, hoodies, popsockets, decals and mugs among others. Beyond its online or via Black Rifle Coffee branded companies, Black Rifle Coffee Company featured on cable television shows on the History Channel and Discovery Channel. Its mission and message are further disseminated by the company’s social media presence, whether it is Robert Patrick’s Orange Vox Holster™ or Black Rifle Company Coffee or any number of its Directors, Employees and Friends, including retired Marine Corps Major Rob O’Neill. Its online presence and book, "#1 New York Times Bestseller: #1 TIME Best Seller" is Matthew Best’s memoir, "Thank You for Your Service."
Today, Black Rifle Coffee Company is a fierce competitor in the industry with 54 different roasts, supporting a brand of tactical rapid response teams, who purchase coffee at a discount, and provides either a 10% discount for first responders or 30% discount for active duty military. The ability to donate money to various charitable causes, including its Coffee or Die magazine and fundraisers for other associations, also helps its continuing growth.
The Lawsuit
The Black Rifle Coffee Company lawsuit involves Utah-based Black Rifle Coffee Company and its majority-owner and CEO, Evan Hafer; Idaho resident and former Coffee or Die Magazine editor in chief Matt Taormina; Idaho resident Sean Parnell, who both currently works for and is an equity holder in Black Rifle; and Texas resident David Riedel, who is part owner of a limited liability company that owns several North Carolina Bob’s Discount Furniture franchised retail stores. The original complaint was filed against only Black Rifle, but it was amended in July to include Hafer, Taormina, Parnell, and Riedel as defendants. The amended complaint asserts that those four defendants are, either directly or indirectly, the "Black Rifle Owners and Managers (BROM) Parties."
Black Rifle Coffee is a specialty coffee company known for its advocacy and support of conservative values, veterans, and first responders. In recent years, the company has gained notoriety for its viral marketing campaigns, social media presence, and their very successful Black Rifle Coffee podcast. In 2016, its founders formed the nonprofit organization Troops First Foundation, which sponsors specific veteran-focused causes, such as a campaign to help service members save their legs after suffering traumatic injuries and another campaign that arranged for injured service members to enjoy 2015 NFL playoff games in true luxury by sitting in officers’ boxes.
Defendants have vigorously denied the allegations in the lawsuit, including any involvement in holding or participating in any conspiracy. They have also vigorously contested the valuation process used by Plaintiff Avow Media, Inc., as biased, flawed, and fatally flawed. The valuation process that Avow Media, Inc. used is heavily criticized in the initial complaint, filed May 17, 2019, and the amended complaint that was filed on July 11, 2019. Under the employment agreement signed by the founders, the dispute over valuation should have been decided by an independent, third-party valuation expert who would have determined the fair value of the stock to be sold to Avow Media, Inc. at liquidation. The Black Rifle Owners and Managers (BROM) Parties assert that Avow Media, Inc. falsely claims that its valuation decision was based on an assessment of Black Rifle Coffee’s options and the fairness of the "Stockholder Rights Plan" plan. They allege that Avow Media, Inc. did not consider the "Stockholder Rights Plan", closely-held corporation law, or "fundamentally comparable companies" in its December 2018 analysis. The Avow Media, Inc.-prepared valuation, they contend, wrongfully undervalued Black Rifle Coffee by calculating the company’s low fair value as a percentage of revenue when market valuations of comparable companies were on average 7.8 times higher. They also assert that Avow Media, Inc.’s reliance on internal financial projections—provided only on a limited basis to a select subset of Black Rifle Coffee stockholders—was improper and unorthodox. The BROM Parties claim that because they had not been provided with such financial projections, the valuation was improperly skewed in favor of Avow Media, Inc.
In addition to breach of contract and declaratory judgment claims, the Black Rifle Coffee lawsuit also allege multiple tort and tort-like claims, including fraud and violation of the Idaho Uniform Securities Act. In discovery, Defendants have indicated that they intend to seek to disclose highly-sensitive, confidential personal information regarding the finances, accounting, and tax returns of Defendants targeted by Plaintiff’s allegations. On July 10, 2020, Black Rifle Coffee Defendants also filed a counterclaim, pressing multiple claims against Plaintiff, Avow Media, Inc., including breach of good faith and fair dealing.
Legal Context
There are a multitude of legal issues at play in the Black Rifle Coffee Company lawsuit. This case is an action for breach of contract and specifically for breach of the terms of the non-disclosure agreement (NDA) between the founder of Black Rifle Coffee Company and Roh in connection with the sale of the company by the founder to Roh. While non-disclosure agreements in this context are fairly common, the manner and parameters of their enforcement can become troublesome if the terms are not clearly defined and sufficiently circumscribed. A non-disclosure agreement provides protections to a company concerning the sharing of sensitive information with employees, vendors and other third parties. But if one of the parties to an NDA then decides that it rightly or wrongly has been wronged or believes that it has been taken advantage of somehow, the likelihood of a counterclaim for wrongful prevention of the disclosure of the information may be costly to litigate and to try. The NDA should allow for exceptions to enforcement if the information sought to be withheld from third parties is necessary to the sale of the business or some arbitrarily narrowed circle thereof. The NDA in Black Rifle Coffee Company did not appear to carve out exceptions for the disclosure of financial information, such as the Borrowing Base, which required the disclosure of a much wider circle of people than the artificially defined scope of people whose names were listed on an NDA. Equally troublesome, the NDA does not suggest any kind of redress mechanism or alternate enforcement vehicle under its terms. The lender controlled the disclosure of the Borrowing Base, and the borrower’s lender was in turn controlled by its chosen bank lending team, so under the terms of the NDA, this favorable pricing and lucrative borrowing base for Black Rifle Coffee Company was precluded by the NDA. Against all reason, the NDA entered into between Black Rifle Coffee Company’s founder, Evan Hafer, and David Roh was upheld.
Possible Outcomes of the Lawsuit
Possible Outcomes of the Case
As of now, it is difficult to predict the outcome of this case. However, based on the allegations made against Black Rifle Coffee Company, and the findings in analogous cases, an unfavorable outcome for Black Rifle Coffee Company could have serious implications for the company, its brand reputation, and the company’s culture.
If the conservative values embraced by Black Rifle Coffee Company are found to be a protected category under state or federal employment discrimination law , this could open the doors to lawsuits filed by employees or former employees who have been dismissed or subjected to adverse employment actions on the basis of their liberal political views.
Even if the accusations are resolved without a formal finding of discrimination—such as through a settlement—Black Rifle Coffee Company will be forced to expend significant time and money defending itself against the lawsuit and will experience a negative reputation as a result.
Reactions from Consumers & the Public
Despite criticisms, Black Rifle Coffee Company appears to have stood by their brand values and maintained support from a substantial portion of their customer base. Through conflict, the company has established a brand dedicated to their fierce commitment to American ideals. "Gun owners are a very dedicated, passionate community," said Lexi Lash, a black belt in Brazilian Jiu-Jitsu and police officer. "If you can show that you care about gun rights, gun owners will help you."
In the wake of the lawsuit, one local community member even started a petition to bring back the grandfathered property tax exemption to keep tax rates lower for residents in Texas where the company is based. "I and my friends think of Black Rifle Coffee Company as small business that employs other local small business people, pays taxes, gives to veterans’ charities, and gives military and law enforcement discounts," said Granis Leciak of Texas.
Black Rifle Company has been proactive in addressing the reaction to their lawsuit. They posted on their Instagram that they ‘keep getting emails asking them to not bow to activist [demanding] that we pull our support of the NRA.’ On Twitter, the company stated, "We will never back down. Never. We’re fighting for our right to opinions and to support the Second Amendment."
Though they seem undeterred by the reaction, overall reception of the company seems more sympathetic. According to a poll created by I Side With, which matches survey takers with ideology-based candidates, 84% of voters of both party sides agreed the suit should be dropped. Since filing the suit, Black Rifle Coffee jerseys and accessories have become a hot commodity on the resale market, such as eBay.
Future for Black Rifle Coffee
Many people are speculating on the next moves Black Rifle Coffee Company may make post-lawsuit. While the defense of Black Rifle Coffee Company may be their first and foremost concern, as a business, Black Rifle should also have a plan for how to recover and grow from what they have been through, even if it means taking a step or two back for the time being. Throughout the course of this lawsuit, the coffee company’s social media universe has remained active, and all indications show that this move was intentional. The company hasn’t shrunk back from CEO Evan Hafer’s original posting a video on social media to announce the lawsuit; they forged on with their marketing, making sure they remained relevant. They even continued to release new limited editions, garnering even more attention. They continue to sell mugs and other merchandise, maintaining their fan base with these new items. Social media interactions with their followers have stayed consistent, even turning some people who don’t necessarily know or like the company into fans. Even if the mainstream media has turned its attention to this lawsuit, the company’s supporters have not, and many people seem to be coming out in defense of Black Rifle Coffee Company. Through social media, the people that are loyal to the coffee company have shown their support and helped get the word out about this lawsuit. Black Rifle Coffee has even seen crowds of supporters lining up to buy their coffee and show their support. A town hall scheduled for August 31, 2018, in Lacey, Washington to discuss the ongoing incident was widely publicized on social media (including by the Battle Born Company itself), and the people who attended were even larger than expected, and several additional events sprung from the town hall, including an anti-boycott against those who are boycotting the coffee company, and a concert at the town hall following the discussion. In fact, there was so much interest in the town hall, that an update from July 30 states that the auditorium was so full that people who came later will be in an overflow room. Further updates were added and erased after the update guide explains they were added and deleted by members of the media because "you understand what we are doing." The legal dispute is covered in detail in several articles (such as this one) , and appears in a detailed timeline on their website. And while Black Rifle Coffee did take a hit with their boycott, it appears that their sales did not dip nearly as much as they would have with a successful boycott, and some retailers even saw an increase in sales of Black Rifle Coffee products (here’s a great article in the Denver Westword covering the boycott and its fallout). While some may have forgotten them, many have not, and they have continued to maintain their core supporters who have publicly shown their loyalty to Black Rifle Coffee Company in many ways. As we mentioned before in Part 2 of this blog series, the ongoing battle becomes one of time, money, and will. They appear to have the resources to make it through this lawsuit (even if they may need to take a bit of a break while the lawsuit continues). They will not back down, that has been made abundantly clear, and they will take things one day at a time until the lawsuit is over. But considering their perseverance thus far, it seems likely that they will come out at the end of all of this, and continue to grow in the future. The coffee industry in general has seen a huge increase in social media influence by its consumers. People frequently buy from brands they feel are more personalized and relatable, more similar to their own view of the people behind the brand. This is precisely what Black Rifle Coffee Company capitalizes on in its social media interactions. Coffee companies like Black Rifle are entering a time where expanding their social media influence is a critical part of their marketing strategy, and with young adult and Millennial coffee drinkers starting to enter the workforce and become some of the largest consumers of coffee and coffee products, maintaining a voice among their consumers is more important than ever. As is further proven by Black Rifle Coffee Company and other coffee companies relying on social media to get the word out, this is still a critical time for the coffee company and coffee companies in general; they will need to continue to walk a fine line by avoiding crossing the line and flaming the fire even more, while still remaining unflinching in the face of adversity.