BOON RAWD TRADING INTERN. v. Paleewong Trading Co.

• Decision Date: 19 February 2010
• Docket Number: No. C 09-05617 WHA.,C 09-05617 WHA.
• Parties: BOON RAWD TRADING INTERNATIONAL CO., LTD., Plaintiff, v. PALEEWONG TRADING CO., INC., Defendant. and Related Counterclaims.
• Court: U.S. District Court — Northern District of California

688 F.Supp.2d 940

BOON RAWD TRADING INTERNATIONAL CO., LTD., Plaintiff, v. PALEEWONG TRADING CO., INC., Defendant and Related Counterclaims.

No. C 09-05617 WHA.

United States District Court, N.D. California.

February 19, 2010.

Gilda R. Turitz, Ryan Judson Meckfessel, Sideman & Bancroft LLP, San Francisco, CA, for Plaintiff.

Donald R. Wild, Enoch Wang, Wild, Carey & Fife, San Francisco, CA, Gary Ettelman, Ettelman & Hochheiser, PC, Garden City, NY, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART COUNTERDEFENDANT'S MOTION TO DISMISS AND VACATING HEARING

WILLIAM ALSUP, District Judge.

INTRODUCTION

In this contractual beer brawl involving the exclusive importation rights for Singha Beer, the crisp and refreshing "original premium Thai beer," plaintiff and counterdefendant Boon Rawd Trading International Co., Ltd. ("BRTI") moves to dismiss seven counterclaims asserted by defendant and counterclaimant Paleewong Trading Co., Inc. ("PTC"). For the reasons set forth below, the motion must be GRANTED IN PART and DENIED IN PART.

STATEMENT

Boon Rawd Sreshthaputra was born in Thailand in 1872. Schooled by his father until he was eleven years old, he was then sent away to be educated by Buddhist monks, as was custom at the time for young Thai men. His working career began humbly, first as a teacher in his teenaged years, and then as a clerk at the British-owned logging company, A.J. Dickson. After a lengthy career in the logging industry, Sreshthaputra bet his dreams on entrepreneurship, starting a small ferry company to transport Bangkokians across the Chao Praya river between the cities of Bangkok and Thonburi. He faced stifling competition, first from rival ferrymen, and then from industrious bridge builders. In 1929, his ferry business underwater, Sreshthaputra abandoned his ships and turned to alcohol. Brewing, that is. After honing his skills in the tradition-soaked beer halls of Germany and Denmark, the first bottle of Singha Beer rolled off the assembly line at Boon Rawd Brewery in 1933. Thailand's oldest and most popular beer was launched.¹

Plaintiff and counterdefendant BRTI is a Thai corporation and wholly owned subsidiary of Singha Corporation Co., Ltd., which is owned in its entirety by Boon Rawd Brewery Co., Ltd., the original family brewery founded by Boonrawd Sreshthaputra over 75 years ago (Compl. ¶ 7). Today, BRTI exports Singha Beer to over 37 countries around the world, including the United States (ibid.). Defendant and counterclaimant PTC, a New York corporation, began serving as a U.S. importer and distributor of Singha Beer in the 1970s, eventually becoming the only importer and distributor of Singha Beer in the United States (id. ¶¶ 9, 10, 11). The crux of this dispute is whether "only" in this context meant "exclusive."

This motion to dismiss targets seven counterclaims raised by PTC in its answer (Dkt. No. 6). To be clear, plaintiff BRTI's complaint asserted only a single claim for declaratory relief, claiming that it had the right to freely terminate its relationship with PTC as an importer of Singha Beer (Compl. ¶¶ 20-23). An important fact underlying both BRTI's claim and PTC's counterclaims in this dispute is that there was never any written contract evidencing the alleged "exclusive" agreement between the parties. Rather, PTC alleged in its answer that a "course of conduct" formed the basis of such an agreement. With this procedural posture set forth, the facts below are as alleged in PTC's answer and counterclaims.

According to PTC, it has been for the past 32 years the exclusive importer and distributor of products manufactured by Boon Rawd Brewery within a defined territory of 32 states (Ans. ¶ 27). Singha Beer is the most significant of these products, all of which are encompassed by this dispute.² For the past 26 years, this exclusivity agreement also extended to portions of California and New York (ibid.). In 2002, PTC alleged that BRTI began engaging in a "tactical scheme" to strip PTC of its exclusive importation rights by unilaterally encroaching into PTC's defined territory, appointing a subsidiary as a "dual importer" to compete with PTC, practicing price discrimination against PTC, misappropriating PTC's confidential proprietary information, unilaterally setting artificial sales goals, and accusing PTC of various improprieties expounded on later in this order (id. ¶ 28).

While PTC's answer alleged that it had exclusive importation rights to Boon Rawd products dating back to 1976, it bears noting that BRTI was not Boon Rawd Brewery's exporter of its products until 2000. Prior to that date, a different entity, Rajvitee Co., Ltd., served as the exporter of Boon Rawd's products (id. ¶¶ 9-10, 39). Nevertheless, PTC's answer alleged that in 1976, Boon Rawd Brewery—the parent company who is not a party to this action—appointed PTC as its exclusive U.S. importer and distributor for states straddling the east coast, including New York (id. ¶ 36). This agreement purportedly included distribution rights within New York, as well as the right to appoint wholesalers and distributors in other states (ibid.). PTC further alleged that in 1993, Boom Rawd Brewery appointed it as the exclusive importer and distributor in exclusive territories within California (id. ¶ 38).

When BRTI took over as the exporter of Boon Rawd products in 2000, PTC claimed that there was a "mutual understanding" between the parties that PTC would continue to serve as the exclusive importer and distributor of Boon Rawd products for the territories outlined above. This mutual understanding was allegedly pursuant to an agreement created by the "course of conduct" between PTC and BRTI's predecessors-in-interest over the prior 25 years (id. ¶ 39). Moreover, it supposedly was always "understood and agreed" between BRTI (and its predecessors) and PTC that PTC's importation rights could not be terminated without good cause (id. ¶ 40). In the event that a termination of the agreement occurred, however, the agreement purportedly entitled PTC to "compensation for the value of their importation rights" (ibid.).

Despite this alleged exclusivity agreement, BRTI supposedly began a "tactical campaign" in 2002 to diminish the value of PTC's importation rights, diminish PTC's profits, and create a pretextual basis to terminate PTC's importation agreement for cause (id. ¶ 41). As an example, in 2003, PTC claimed that BRTI formed Singha North America ("SNA") to (1) compete with PTC as an importer and distributor of Boon Rawd products and (2) eventually replace PTC in the exclusive territories it served (id. ¶ 42). PTC made this claim despite BRTI's alleged representation that the new entity would only import products into those territories that were not serviced by PTC, and would not encroach into PTC's alleged exclusive territories (id. ¶ 43).³ In sum, PTC alleged that SNA was formed by BRTI to eventually become the exclusive importer for the entire United States (id. ¶ 44).

The answer further alleged that in 2003, PTC learned of BRTI's first attempt to terminate its exclusive importation rights in California without good cause (id. ¶ 45). Upon information and belief, PTC alleged it was BRTI's intent to transfer these importation rights to SNA once they were stripped from PTC (ibid.). After discussions between the parties, however, BRTI purportedly withdrew its termination notice because it had "no good cause" and the compensation offered to PTC was neither "appropriate" nor "acceptable" (id. ¶ 46). Over the next few years, plaintiff allegedly re-attempted on numerous occasions to obtain PTC's exclusive importation rights for a nominal sum. These proposals, however, went unrequited (id. ¶¶ 47, 48).

BRTI then pursued a different approach. In or around 2006, BRTI proposed that SNA and PTC form a joint venture that would share importation rights to Boon Rawd products, while leaving PTC with its exclusive distribution rights in their alleged exclusive territories (id. ¶ 49). During the negotiation process, however, BRTI nevertheless began exporting its products to SNA for distribution within defendant's exclusive territories (id. ¶ 51). This produced considerable ferment between the parties. To assuage these concerns while negotiations continued, BRTI represented to PTC that "the dual importing would not cause any problems. . . in light of the fact that the joint venture would soon be completed" and that PTC "would benefit from these sales" being consummated by SNA (id. ¶ 51). Additionally, BRTI allegedly promised PTC that SNA would only sell Boon Rawd products to one distributor in California—Young's Market—who in turn would only be permitted to sell the products to limited number of accounts, none of which belonged to PTC (id. ¶ 52). PTC claimed that it relied upon these representations by BRTI and, in the interests of finalizing the joint venture agreement, did not protest these sales (id. ¶ 53). Despite these representations, SNA supposedly began competing directly with PTC in California, selling to two of PTC's sub-distributors. Additionally, Young's Market began distributing Boon Rawd products to accounts being served by PTC (id. ¶ 54). Finally, the answer alleged that SNA—who is not a party to this action—hired a key PTC employee in 2006 to enable itself to compete in California, and that BRTI misappropriated PTC's confidential proprietary information and provided it to SNA (id. ¶¶ 55, 56). These acts supposedly were performed by BRTI and SNA in furtherance of aforementioned "tactical campaign" to strip PTC of its importation rights by "making the brand less valuable to PTC" (id. ¶ 57).

After good faith negotiations ended in 2006, BRTI refused to go forward with the joint venture it had originally proposed (id. ¶ 50). According to defendant, BRTI—recognizing that it could not simply terminate defendant's exclusive agreement to import Boon Rawd products in California and New York—then offered to purchase...