D & G STOUT, INC. v. Bacardi Imports, Inc., S87-605(RLM).

• Decision Date: 21 October 1992
• Docket Number: No. S87-605(RLM).,S87-605(RLM).
• Citation: 805 F. Supp. 1434
• Parties: D & G STOUT, INC., f/k/a General Liquors, Inc., David R. Stout, and Georgia R. Stout, Plaintiffs, v. BACARDI IMPORTS, INC., Defendant.
• Court: U.S. District Court — Northern District of Indiana

805 F. Supp. 1434

D & G STOUT, INC., f/k/a General Liquors, Inc., David R. Stout, and Georgia R. Stout, Plaintiffs, v. BACARDI IMPORTS, INC., Defendant.

No. S87-605(RLM).

United States District Court, N.D. of Indiana, South Bend Division.

October 21, 1992.

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Franklin A. Morse II, South Bend, Ind., for plaintiffs.

Timothy W. Woods, South Bend, Ind., for defendant.

MEMORANDUM AND ORDER

MILLER, District Judge.

This cause, which requires the court to consider the reach of promissory estoppel under Indiana law, came before the court for trial without intervention of a jury on remand following the Seventh Circuit's reversal of this court's earlier grant of summary judgment to the defendant. D & G Stout, Inc. v. Bacardi Imports, Inc., 923 F.2d 566 (7th Cir.1991).

For the reasons that follow, the court concludes that although the defendant's promise was conditioned on future events and limited in duration by its context, and although the defendant was unaware of the nature of the plaintiffs' reliance on the promise, the plaintiffs have shown that the promise was made with the expectation that the plaintiffs would rely on it, that the promise induced reasonable reliance of a definite and substantial nature, and that injustice can be avoided only by the promise's enforcement through an award of damages, although in a lesser sum than sought by the plaintiffs.

This memorandum and order is intended to comply with the court's obligations under Fed.R.Civ.P. 52(a).

I.

As 1987 began, Indiana was caught up in the series of acquisitions and mergers that had swept the nation's liquor distillers and wholesale distributors in the mid-1980's. In 1979, there had been more than a score of major wholesale distributors in Indiana; that number had dwindled to eight by 1985. General Liquors, Inc. (now known as D & G Stout, Inc., one of the plaintiffs in this action), was among the surviving distributors at the beginning of 1987. The South Bend-based distributor had controlled about forty-three percent of liquor distribution in northern Indiana in 1985, and had obtained Fort Wayne Liquors, Inc. in 1986, but the consolidation trend affected General Liquors, Inc. less favorably in the first half of 1987.

A.

When 1987 began, General Liquors, Inc. ("General") was the northern Indiana distributor for four major supplier distilleries: James H. Beam Company, Brown-Foreman, Hiram Walker, and the defendant in this action, Bacardi Imports, Inc. In the spring of 1987, General learned that it no longer would be representing the Brown-Foreman line, which had been responsible for about eleven percent of General's liquor business. In June, the Jim Beam lines were withdrawn. Both withdrawals were done on thirty days' notice to General, the notice period customary in the industry; General had represented both suppliers on an at-will basis. Neither termination was due to General's performance.

General had entered the spring of 1987 with an eye toward expansion. In June, General's president, David Stout, had begun negotiations concerning a merger with the Fred A. Beck Company ("Beck") of Indianapolis. When Mr. Stout examined the Beck's books, he concluded that company was saddled with too much debt to justify a merger. Mr. Stout also learned that Bacardi, which also supplied Beck, was not entirely pleased with its relationship with Beck's chief financial officer, who would have remained in place in the contemplated merger. Accordingly, Mr. Stout terminated the negotiations with Beck in June.

Mr. Stout also engaged in discussions with other distributors in or shortly before June. Olinger, a major distributor based in Indianapolis, discussed the purchase of General; General discussed the purchase of Monarch, another distributor in the southern part of the state. Neither discussion progressed very far; Olinger purchased another South Bend-based distributor.

B.

June brought two other significant developments. First, as noted above, the Beam Company terminated General as a distributor; the Beam lines had accounted for thirteen percent of General's liquor business. Combined, the Brown-Foreman and Beam decisions reduced General from a $32.5 million business to a $19 million business. These line losses engendered grave concern both within and without General concerning General's future. Mr. Stout met frequently with other General officers and its accountant to discuss that future. Several possible courses of action were discussed, including seeking additional product lines, expanding territories, "downsizing", and closing altogether.

Mr. Stout did not want to close the business. His family had been in the wholesale liquor distribution business since Prohibition; he had been involved with General all his working life. General still had two major suppliers (Hiram Walker and Bacardi) and a third of some significance (Canandaguia). After reviewing several possible scenarios with General's accountant, Mr. Stout concluded that if General could keep those three product lines and downsize by closing the Fort Wayne facility, General could continue as a profitable business. General listed the Fort Wayne building for sale, with an asking price of $960,000.00.

1.

Uncertainties still remained; General's at-will distributorship agreements with Hiram Walker, Bacardi, and Canandaguia were terminable at any time. General's relationships with those suppliers had been good, but so, too, had been its relationship with the Beam Company. Although General had been a Bacardi distributor for as long as Mr. Stout could remember, market forces, including reduced consumer demand, were forcing unpleasant business decisions notwithstanding good relationships of long standing. Mr. Stout decided to seek verbal commitments from his three major suppliers. He obtained such commitments from Hiram Walker and Canandaguia.

2.

Also in June, Beck, unsuccessful in its pursuit of a merger with General, announced that it was closing its doors. Beck's closure would leave Bacardi with no distributor in southern Indiana. Accordingly, upon learning of Beck's decision, Bacardi arranged to send four people — vice president of marketing William Tovell, division manager Ron Tebbe, Atlantic regional manager Ned Russo, and Indiana sales manager Scott Narup — to Indianapolis to interview prospective replacements for Beck in southern Indiana. Those interviews were conducted on July 9.

Bacardi also invited General to the July 9 meeting. Although Mr. Stout had spoken of expansion to develop a state-wide distributorship, it does not appear that Bacardi gave even slight consideration to offering the southern distributorship to General, its northern distributor. To the contrary, Bacardi had serious concerns about General's viability as the northern distributor in light of the product line losses General had suffered. Bacardi's invitation to General to attend the July 9 session had two purposes: Bacardi wanted to get General's views on who should replace Beck in southern Indiana; more importantly, Bacardi wanted to acquire more information concerning General's viability as a Bacardi distributor.

General, too, had a secondary motive in attending the July 9 interviews: Mr. Stout wanted to obtain Bacardi's assurance that the supplier-distributor relationship would continue with General. As noted before, Mr. Stout did not believe General could survive if it lost any of its three remaining principal lines. At this point, following the losses of the Brown-Foreman and Beam lines, Bacardi accounted for thirty percent of General's sales and twenty-three percent of General's profit.

3.

General's eggs were not wholly within a single basket when Mr. Stout and other General officers entered the hotel suite in Indianapolis to meet with Bacardi on the afternoon of July 9, however. Earlier that morning, Mr. Stout had a private meeting with James LaCrosse, who headed the Indianapolis-based National Wine & Spirits Corporation.

Mr. LaCrosse had come to the hotel for National's interview with Bacardi. The interview did not go well: National reported that it already distributed the product of Bacardi's principal competitor (Seagram), and that it would be interested in distributing Bacardi products only if granted a state-wide distributorship; the Bacardi representatives perceived the presentation as arrogant. Mr. LaCrosse also had a second motive in coming to the hotel, however. Like Bacardi, he questioned General's future in light of the loss of the Brown-Foreman and Beam lines. He wanted to buy General and thought Mr. Stout might be interested in selling.

Accordingly, pursuant to arrangements made a day or two earlier, Mr. LaCrosse met alone with Mr. Stout at the hotel for about an hour and discussed his desire to purchase General. Mr. LaCrosse made no concrete proposals, but was not misunderstood; Mr. Stout understood that Mr. LaCrosse very much wanted to acquire General. Mr. Stout did not disclose the topic of the LaCrosse discussion to either of the other two General officers who accompanied him to the interview.

4.

The varied motives of the Bacardi representatives and Mr. Stout led to three serious topics of discussion. First, the General officials were allowed to review the other interviewees' brochures and were asked their opinion as to what Bacardi should do about the southern Indiana distributorship. The Olinger presentation impressed the General officials, who recommended that Bacardi assign the southern Indiana distributorship to Olinger.

Discussion next turned to General's condition and future. Most of the discussion occurred between Bacardi's Mr. Tovell and General's Mr. Stout. They reviewed, in somewhat summary fashion, the remaining product lines General was distributing. Mr. Stout assured Bacardi that General would stay in business if it kept the Bacardi, Hiram Walker, and Canandaguia lines, and told Mr. Tovell he had commitments from Hiram...