Rebel Creamery, a popular keto-friendly ice cream brand, has sought bankruptcy protection while fighting a $23.8 million judgment. The move raised questions about the future of a product sold in grocery stores across New Mexico.
New Mexico shoppers reaching into the freezer aisle for a pint of Rebel Ice Cream may soon find themselves asking whether the popular keto-friendly brand will still be there.
Rebel Creamery LLC has filed for Chapter 11 bankruptcy protection in Utah while appealing a staggering $23.785 million judgment awarded to its rival, Van Leeuwen Ice Cream, in a legal battle over packaging.
It filed the bankruptcy protection on August 14 in the U.S. Bankruptcy Court for the District of Utah, listing about $13.78 million in assets against $23.85 million in liabilities. The company claims it has approximately $5.22 million in cash and cash equivalents, $2.59 million in accounts receivable, and $5.65 million in inventory.
However, the biggest question for New Mexico consumers is simple: Will Rebel Ice Cream continue to appear on supermarket shelves?
The company’s products are sold nationwide through major retailers including Walmart, Kroger and Safeway. That means the bankruptcy may affect availability of the brand in stores throughout the state.
There is no sign in the bankruptcy filing that Rebel is immediately shutting down or abandoning its retail operations. Chapter 11 generally will give companies protection while they attempt to reorganize their finances and continue the operations.
But the financial numbers show how big the legal fight has become.
Rebel listed Van Leeuwen as its largest unsecured creditor, with a staggering $23.785 million claim arising from the federal judgment. The company has disputed the claim, noting that the judgment is currently under appeal.
The judgment represents almost all of the unsecured liabilities Rebel listed at fixed amounts in its bankruptcy schedules.
The packaging battle exploded into a multimillion-dollar judgment
Rebel filed the bankruptcy after less than a month U.S. District Judge Eric Komitee issued the ruling. In a July 16 memorandum and order, Komitee concluded that Rebel had intentionally infringed and diluted Van Leeuwen’s trade dress through the appearance of its ice cream packaging.“The evidence at that trial left no doubt that Rebel infringed and diluted Van Leeuwen’s trade dress and did so intentionally,” the judge wrote.
Van Leeuwen sued Rebel in 2021. The former argued that the latter copied the distinctive visual identity of its own packaging for its ice cream pints.
The court noted Van Leeuwen’s trade dress as featuring monochromatic cardboard pints and matching lids, pastel colors, black script lettering and a minimalist overall appearance.
Komitee found sufficient similarities between the competing packages to support findings of consumer confusion and bad faith. He ordered Rebel to stop selling products using packaging likely to be confused with Van Leeuwen’s and required the company to redesign its packaging.
Van Leeuwen had sought an eye-watering $36.4 million in Rebel’s profits. But the judge reduced that amount by 33 percent, saying that some sales by respondent company were driven by consumer demand for keto and so-called better-for-you ice cream, not the disputed packaging itself. That resulted to a judgment of $23.785 million.
What it could mean for consumers in New Mexico
New Mexico consumers should not assume that Rebel Ice Cream will disappear from stores.
The bankruptcy filing does not establish that the Van Leeuwen ruling alone caused the company’s financial problems. Rebel will appeal the judgment. But Chapter 11 will place Rebel’s finances under court supervision at a critical moment.
Rebel appointed Austin Archibald as its manager and member, and Michael Johnson of Ray Quinney & Nebeker as the company’s bankruptcy attorney.
Both of the company’s assets and liabilities are between $10 million and $50 million. It stated that funds would be available for distribution to unsecured creditors. That simply means the fight over the $23.785 million court ruling is now playing out on the appeal and the bankruptcy courts.
The legal battle could determine whether one of the country’s recognizable better-for-you ice cream brands remains a fixture in America’s freezer aisles, including those in New Mexico.
