Business Ownership Dispute Analysis: Jay-Z Against Bacardi

Rap icon and entrepreneur Jay-Z finally settled a dispute between his company, SCLiquor, LLC, and Empire Investments, Inc. (a subsidiary of Bacardi, Inc). The business ownership dispute began when Jay-Z proposed an agreement for Bacardi to buy out his interest. The controversy centered around Jay-Z’s valuation of the company and Empire’s refusal to turn over vital financial records. Jay-Z became suspicious that Empire was intentionally inhibiting D’Usse, LLC’s (a joint venture between SCLiquor and Empire) performance to artificially lower the price to buy out a portion of Jay-Z’s interest in the venture. After months of legal battles and arbitration, the parties finally reached an agreement (the terms of which are undisclosed) in February 2023.  

BrewerLong provides practical solutions to help individuals, families, and business owners resolve disputes. Our primary focus is providing top-tier but personable legal counsel to business owners throughout Florida. If you’re dealing with a business ownership dispute, reach out today to speak with a lawyer!

Who Is Involved in the Business Dispute Between Jay-Z and Bacardi?

D’Usse is a premium cognac company, a joint venture between SCLiquor and Empire. SCLiquor and Empire formed D’Usse in 2012, and it has grown exponentially since then, outpacing many of the key players in the cognac space. 

On the plaintiff’s side of the lawsuit are Shawn Carter (better known as Jay-Z) and his company, SCLiquor. Jay-Z owns the majority of SCLiquor and uses it to engage in investment opportunities. When SCLiquor filed the lawsuit, it was a 50% owner of D’Usse. 

On the defense’s side is Bacardi, a well-known spirits company that sells famous products such as Bacardi Rum. Empire Investments is a subsidiary of Bacardi and is also on the defense side. According to the complaint filed in October 2022, Empire took over much of the responsibility for the day-to-day operations and management of D’Usse. Because SCLiquor sued to request records from Empire regarding D’Usse, D’Usse is the defendant in the lawsuit. 

What Caused the Ownership Dispute?

Jay-Z sought to negotiate with Bacardi to buy some of his ownership interest under an existing buy-out agreement between them. The parties disagreed on the proper valuation of D’Usse, and because of that, they could not agree on a fair price for the deal. 

SCLiquor filed the lawsuit in October 2022 to obtain an accounting of D’Usse’s records. SCLiquor alleged that Empire was intentionally mismanaging D’Usse to decrease its value and thus buy out SCLiquor’s portion at a lower value. Empire disagreed and refused SCLiquor’s requests to view certain financial records. When the parties could not reach an agreement, SCLiqour filed suit. 

What Was the Legal Basis for the Business Ownership Dispute?

SCLiquor filed the lawsuit under a Delaware law that gives members of a limited liability company the right to request the following information:

  • The status and financial information of the LLC;
  • A copy of the LLC’s income tax returns;
  • Contact information for every member and manager of the LLC; 
  • A copy of governing and legal documents, such as the operating agreement, powers of attorney forms, and other similar materials; 
  • The date on which every member or manager became a member or manager; 
  • The current and future anticipated capital contribution of each member; and
  • Any other information regarding the LLC that fairly relates to the requestor’s position as a member. 

In the case at hand, Jay-Z (through SCLiquor) was requesting certain financial information in part to determine the company’s proper valuation. This request related to his position as a member of the company because he was going to use this information to determine the appropriate valuation. Moreover, he began to suspect Empire was purposefully holding D’Usse back from its true potential so that Empire could purchase SCLiquor’s interest at a lower price. His request for records served as a way to either confirm or deny this to be the case. When Empire refused to comply with the records request, SCLiquor felt it had no choice but to file a lawsuit. 

What Was the Result of the Lawsuit?

After the parties engaged in several rounds of arbitration and legal battles, they came to an agreement for Bacardi to buy an undisclosed portion of SCLiquor’s share. Previously, SCLiquor and Empire each owned a 50% share in the company. After the deal, SCLiquor and Empire both own interest in D’Usse; however, SCLiquor’s exact share is unknown. The final valuation of D’Usse is likewise confidential, but many estimate it to be somewhere in the $3 billion range, which is the valuation initially proposed by Jay-Z. With the private ownership dispute now resolved, the parties will continue to work together and grow the business under the new ownership interest structure

Contact the Business Law Team at BrewerLong for Help

At BrewerLong, we understand the challenges faced by business owners, whether they run a small company with a close friend or an international venture with a hundred others. Our team successfully helps entrepreneurs at all stages to help create a solid foundation to limit the potential for business disputes. When conflicts arise, we help business owners efficiently and effectively reach a solution with minimal impact on their operations. Trevor Brewer has been practicing business law for decades and has participated in many speaking engagements on corporate topics, such as “3 Common Mistakes in Buy-Sell Agreements.” If you are involved in a business ownership dispute, contact our team today for legal help.

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