Diageo PLC, a major player in the liquor industry, has announced the termination of its partnership with entrepreneur Sean Combs. This decision comes in the wake of a legal dispute initiated by Combs, who alleged that Diageo had failed to support their joint ventures involving Ciroc vodka and DeLeón tequila.
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In late May, Combs filed a lawsuit in the New York Supreme Court in Manhattan, claiming that Diageo, a company that also distributes brands such as Johnnie Walker and Captain Morgan, had neglected their shared responsibility for the Ciroc and DeLeón brands. He further asserted that Diageo had undermined the business by marketing Ciroc and DeLeón as “urban” products rather than appealing to a broader market.
In a recent filing within the same jurisdiction, Diageo responded by seeking the dismissal of the lawsuit and announcing its decision to sever ties with Combs. Over the years, Sean Combs has ventured into various business endeavors, including clothing lines, restaurants, and his involvement with the Revolt TV cable network.
In a statement, Diageo expressed disappointment with Combs’ actions, characterizing them as detrimental to their productive and valued partnership. The company alleged that Combs had acted in bad faith, breaching his contractual obligations and leaving them with no choice but to terminate their business relationship. Diageo stressed its commitment to the success of the CIRÔC and DeLeón brands, citing significant investments, including funding the purchase of DeLeón for their joint venture and over $100 million in brand development. Despite having generated nearly a billion dollars during their 15-year collaboration, Combs’ contributions amounted to only $1,000, and he refused to honor his commitments, according to Diageo.
The company concluded, “We have exhausted every reasonable remedy and see no other path forward.”
In response, John C. Hueston, the attorney representing Sean Combs, likened Diageo’s decision to terminate their agreements to firing a whistleblower who exposes racial discrimination. Hueston asserted that Combs had raised concerns about racially insensitive comments and biased decisions made by senior executives over the years. Diageo had acknowledged the issue by agreeing, in their contract, to treat DeLeon the same way they treated their other tequila brands. Combs initiated the lawsuit to ensure compliance with this contract, and Diageo’s response was an attempt to sever ties with him.
Combs Wines and Spirits entered into a joint venture with Diageo in 2007 to market and promote Ciroc. In 2013, Diageo co-purchased DeLeon with Combs’ company.
Combs’ lawsuit contended that Diageo had not provided the same level of marketing and promotion to Ciroc and DeLeón as it had for other brands in its portfolio.
However, Diageo argued that Combs had failed to fulfill obligations he had previously agreed to. They stated, “From its inception, the Combs Parties failed to fulfill their duty to fund the JV as an equal, fifty-percent owner with Diageo, investing a mere $1,000, while Diageo has invested over $100 million in funds. The Combs Parties’ failure to fund the JV created a contentious relationship, severely damaged the DeLeón brand at a critical juncture, and stalled its promise and potential for growth for several years.”
Diageo also alleged that Combs was attempting to pressure the company for financial gain through legal action, characterizing the lawsuit as a “transparent attempt to pressure Diageo into an early settlement of a planned parallel arbitration proceeding. The complaint reveals a public relations-focused strategy aimed at disparaging Diageo, rather than any claim with legal or factual basis.”