Rebel Creamery, whose ice cream is sold at Walmart, Kroger, Safeway and other grocery stores nationwide, has filed for Chapter 11 bankruptcy protection in Utah as it appeals a $23.785 million judgment awarded to rival Van Leeuwen Ice Cream in a trade-dress dispute.

Rebel Creamery LLC filed its petition on Aug. 14 in the U.S. Bankruptcy Court for the District of Utah, according to court records. The company reported approximately $13.78 million in assets and $23.85 million in liabilities.

Van Leeuwen is listed among Rebel's unsecured creditors with a $23.785 million claim stemming from the federal judgment. Rebel listed the claim as disputed and noted that the judgment is under appeal. The Van Leeuwen judgment accounts for nearly all of the unsecured liabilities that Rebel listed at fixed amounts in its bankruptcy schedules.

Chapter 11 allows a company to keep operating while it restructures its debts under court supervision, and the filing triggers an automatic stay that halts collection efforts and most lawsuits against the debtor, pausing enforcement of the Van Leeuwen judgment while the case proceeds. Disputed claims like Van Leeuwen's are typically resolved or estimated within the bankruptcy case before any distribution is made on them, and the outcome of Rebel's appeal would determine how much of the claim Van Leeuwen can ultimately assert. The stay does not stop Rebel's own appeal, which can continue in the federal courts separately from the bankruptcy.

In its filings, the company also reported approximately $5.22 million in cash and cash equivalents, $2.59 million in accounts receivable and $5.65 million in inventory. Rebel's voluntary petition estimated both its assets and liabilities at between $10 million and $50 million and indicated that funds would be available for distribution to unsecured creditors. The filing lists Austin Archibald as the company's manager and member, and Michael Johnson of the law firm Ray Quinney & Nebeker as bankruptcy counsel.

The bankruptcy filing came less than a month after U.S. District Judge Eric Komitee ruled that Rebel had intentionally infringed and diluted Van Leeuwen's trade dress through 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," Komitee wrote in a July 16 memorandum and order.

Van Leeuwen sued Rebel in 2021, alleging that Rebel's packaging copied the distinctive appearance of its ice cream pints. The court described Van Leeuwen's trade dress as including monochromatic cardboard pints with matching lids, a primarily pastel color palette, black script lettering and an overall minimalist design. Trade dress is a form of trademark protection under the federal Lanham Act that covers a product's overall look and packaging rather than a name or logo, and prevailing plaintiffs can recover the infringer's profits, which is the measure used for the award in this case.

Komitee found that Rebel's packaging was similar and that the evidence supported findings of consumer confusion and bad faith. The judge ordered Rebel to stop selling products bearing trade dress likely to be confused with Van Leeuwen's and required the company to redesign its packaging.

Van Leeuwen had sought $36.4 million of Rebel's profits, but the court reduced the award by 33%, finding that some of Rebel's sales were driven by demand for keto and better-for-you ice cream rather than by the packaging at issue. The reduction left Van Leeuwen entitled to $23.785 million in Rebel's profits from sales of ice cream pints bearing the infringing trade dress.

Court filings do not establish that the Van Leeuwen judgment was the sole cause of Rebel's bankruptcy filing. Rebel's bankruptcy paperwork lists the Van Leeuwen litigation as being on appeal.

Source: Fox Business