537 F.3d 1165 (10th Cir. 2008), 06-6243, Specialty Beverages, L.L.C. v. Pabst Brewing Co.

Docket Nº:06-6243, 06-6250.
Citation:537 F.3d 1165
Opinion Judge:EBEL, Circuit Judge.
Party Name:SPECIALTY BEVERAGES, L.L.C., Plaintiff-Appellant-Cross-Appellee, v. PABST BREWING COMPANY, Defendant-Appellee-Cross-Appellant.
Attorney:Robert E. Norman (Jack S. Dawson with him on the briefs), Miller Dollarhide, Oklahoma City, OK, for Plaintiff-Appellant-Cross-Appellee. Craig W. Hoster (Michael R. Pacewicz with him on the briefs), Crowe & Dunlevy, P.C., Tulsa, OK, for Defendant-Appellee-Cross-Appellant.
Judge Panel:Before KELLY, EBEL, and McCONNELL, Circuit Judges.
Case Date:August 19, 2008
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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537 F.3d 1165 (10th Cir. 2008)

71 Fed.R.Serv.3d 490

SPECIALTY BEVERAGES, L.L.C., Plaintiff-Appellant-Cross-Appellee,

v.

PABST BREWING COMPANY, Defendant-Appellee-Cross-Appellant.

Nos. 06-6243, 06-6250.

United States Court of Appeals, Tenth Circuit.

August 19, 2008

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Robert E. Norman (Jack S. Dawson with him on the briefs), Miller Dollarhide, Oklahoma City, OK, for Plaintiff-Appellant-Cross-Appellee.

Craig W. Hoster (Michael R. Pacewicz with him on the briefs), Crowe & Dunlevy, P.C., Tulsa, OK, for Defendant-Appellee-Cross-Appellant.

Before KELLY, EBEL, and McCONNELL, Circuit Judges.

EBEL, Circuit Judge.

Plaintiff Specialty Beverages, L.L.C. sued Defendant Pabst Brewing Company for breach of contract and fraud. Specialty Beverages and Pabst both filed motions for judgment as a matter of law pursuant to Rule 50(a) of the Federal Rules of Civil Procedure. The district court granted Pabst's motion regarding Specialty's fraud claim and granted Specialty's motion regarding Pabst's impossibility and impracticability defenses. The court denied Pabst's motion regarding Specialty's lost profits damages for its breach-of-contract claim. After the jury returned a verdict for Specialty on its breach-of-contract claim, the district court also denied Specialty's motion for attorneys fees pursuant to Oklahoma statute.

We hold that the district court correctly granted Specialty's motion regarding Pabst's impossibility and impracticability defenses, correctly denied Pabst's motion regarding lost profit damages, and correctly denied Specialty's motion for attorneys fees. The district court erred, however, when it granted Pabst's motion regarding Specialty's fraud claim. We exercise our jurisdiction pursuant to 28 U.S.C. § 1291, and REVERSE and REMAND for a trial on Specialty's fraud claim. We AFFIRM the district court's decision regarding all other issues raised in these appeals.

I. Facts

The contract dispute underlying these appeals arose out of the intricacies of Oklahoma law regulating the sale of beer. Oklahoma law permits the sale of both "low point" and "strong" beer. "[L]ow-point beer" includes "[a]ll beverages containing more than one-half of one percent ( 1/2 of 1%) alcohol by volume and not more than three and two-tenths percent (3.2%) alcohol by weight." Okla. Stat. tit. 37, §§ 163.1, 163.2(1). "Strong" beer contains "more than three and two-tenths percent (3.2%) alcohol by weight." See id. § 163.1. This case involves a contract for the distribution of "strong" beer.1

Oklahoma significantly regulates the distribution of beer (as well as wines and other intoxicating beverages). See id. §§ 501-99 (Alcoholic Beverage Control Act). That Act provides, among other things, that a brewer cannot sell beer directly to a wholesaler or retailer. Instead, Oklahoma has created a four-tiered system for selling beer: First, the brewer must sell its beer to a "non-resident seller." A "non-resident seller" must be licensed by the State of Oklahoma and is authorized "to solicit and take orders for alcoholic beverages from the holders of licenses authorized to import the same into [Oklahoma],

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and to ship or deliver, or cause to be shipped or delivered, alcoholic beverages into Oklahoma pursuant to such sales." Okla. Stat. tit. 37, § 524(A). In more concrete terms, the "non-resident seller" sells the beer to a licensed "wholesaler," who in turn sells the beer to a licensed retail establishment. See Okla. Stat. tit. 37, § § 518.1, 521(E), (F), 524. A brewer may have more than one non-resident seller distributing beer to Oklahoma wholesalers.

Even though they are not permitted to deliver beer to retail establishments, licensed non-resident sellers are permitted to go into licensed retail establishments to market and obtain space for their products from the retailer. A non-resident seller can also help the retail establishment order beer from that non-resident seller. The sale and delivery just has to be made through a licensed wholesaler. Thus, non-resident sellers can, in effect, work as the sales force for both the brewer and wholesaler. A non-resident seller can sell beer through, and a retail establishment can take delivery from, any number of licensed wholesalers.

This case involves a contract between Specialty Beverages, a non-resident seller licensed in Oklahoma, and Pabst, the largest brewer of strong beer doing business in Oklahoma.2 Dennis James and Toby Tindell, along with two other "silent partners," formed Specialty Beverages in the fall of 2002, and obtained the required licensing by February 2003. Specialty Beverages was a limited liability company formed under Delaware law and, as such, was qualified to be a non-resident seller in Oklahoma. Specialty Beverages began distributing lesser known brands of beer, wine, and soda.

Pabst, meanwhile, had a longstanding relationship with Marrs Distributing Company, which acted as the non-resident seller of certain Pabst brands in Oklahoma.3 Over the course of their relationship, Pabst had become increasingly dissatisfied with Marrs. One of Pabst's concerns about Marrs's performance was that Marrs did not maintain any inventory of Pabst products from which licensed wholesalers and retailers could order. Thus, wholesalers and retailers had to place orders for Pabst products several months in advance. Marrs also did not make any effort to market Pabst's brands to retail establishments, and instead relied solely on orders from wholesalers. In addition, although Pabst had authorized Marrs to distribute twenty-five Pabst brands, Marrs serviced only eight of them.

In light of Pabst's growing dissatisfaction with Marrs, Pabst's Oklahoma marketing manager, Chuck Lefholz, approached Specialty Beverages in the spring of 2003. Originally, Lefholz wanted Specialty Beverages to distribute Pabst's low point beer, but Specialty Beverages was not interested. Later that same year, Lefholz again approached Specialty Beverages, but this time, he inquired whether Specialty would distribute Pabst's strong beer.

During negotiations, Specialty Beverages and Pabst discussed Pabst's business relationship with Marrs and the concerns Pabst had about Marrs's performance. Regarding Pabst's contractual relationship with Marrs, Lefholz explained to Specialty

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Beverages that Pabst had a one-year, terminable-at-will "appointment letter" with Marrs. Although that "appointment letter" was renewable each year, it had already expired for that year and Pabst did not intend to renew it.

Despite Lefholz's belief that Pabst could terminate its relationship with Marrs, others at Pabst, specifically Rosemary Sarabia-Mata, a "distributor contract coordinator," and Yeoryios Appallas, Pabst's vice president and general counsel, warned Lefholz that, in addition to the one-page annual appointment letter it had with Marrs, Pabst also had an eighteen-page "exclusive" distributorship agreement 4 with Marrs that did not include any termination date. General Counsel Appallas opined that Pabst could terminate its written distributorship agreement with Marrs only after giving Marrs sixty days' notice and then only if Pabst could "prove that Marrs did not service and cannot service the territory assigned." Lefholz, however, rejected that interpretation of Pabst's relationship with Marrs, asserting that Oklahoma law would not recognize an exclusive distributorship agreement. Although there were a number of internal communications among Pabst officials concerning its contractual relationship with Marrs, no one from Pabst told Specialty Beverages about Pabst's exclusive distributorship agreement with Marrs. Toby Tindell, one of Specialty Beverages' owners, specifically testified that Specialty Beverages would never have entered into any agreement to be Pabst's non-resident seller if Specialty had known about the exclusive arrangement between Pabst and Marrs.

Lefholz eventually obtained permission from Pabst's management to notify Marrs that Pabst was not going to renew Marrs's appointment letter. Pabst sent Marrs this termination notice on April 8, 2004.

A week later, on April 15, Pabst issued Specialty Beverages an "appointment letter," "appointing" Special Beverages to be "our Nonresident Seller License for the State of Oklahoma for one year effective April 14, 2004 thru April 14, 2005 subject to Renewal at the sole discretion of Pabst Brewing Company." The appointment letter then specifically listed a number of brands of Pabst beers. Although the letter does not specifically state this, Specialty Beverages understood that "those sorts of appointment letters could be terminated on 30-days notice with or without cause."

Pabst's general counsel, Appallas, testified that, in addition to the appointment letter, he also prepared a much lengthier distributor agreement for Specialty Beverages. That agreement was similar, although not identical, to the agreement Pabst also had with Marrs. In drafting the distributor agreement for Specialty Beverages, Appallas started with Pabst's standard distributor agreement and then modified it to make a one-year, non-exclusive agreement. According to Appallas, he made these modifications because Specialty Beverages was a new company without a track record. Appallas further testified that he told Lefholz to send this agreement to Specialty Beverages, along with the one-page appointment letter. Lefholz responded he would not send that distributor agreement to Specialty Beverages because all that was needed was the appointment letter. The record indicates that

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Pabst never sent the distribution agreement to Specialty. On...

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