Bowmont Corp. v. Krombacher Brauerei Bernhard Gmbh & Co., Civil Action No. 3:02 CV 1969 (CFD) (D. Conn. 9/8/2003)
| Decision Date | 08 September 2003 |
| Docket Number | Civil Action No. 3:02 CV 1969 (CFD). |
| Court | U.S. District Court — District of Connecticut |
| Parties | BOWMONT CORPORATION, Plaintiff, v. KROMBACHER BRAUEREI BERNHARD GMBH & CO. Defendant. |
Pending is the plaintiffs Motion for Preliminary Injunction [Doc. # 7]. This is an action in which the plaintiff, Bowmont Corporation ("Bowmont") alleges that the defendant, Krombacher Brauerei Bernhard Gmbh & Company ("Krombacher"), breached a contract under which Bowmont was to be the exclusive distributor of Krombacher Beer in the eastern United States. Bowmont seeks a preliminary injunction to compel Krombacher to continue performing pursuant to the agreement. For the reasons that follow, the motion is DENIED.
Following the hearing on the plaintiffs motion, the Court makes the following findings of fact and conclusions of law.
Bowmont is a licensed beer importer and distributor with its headquarters in Westport, Connecticut. Krombacher is a German company with its principal place of business in Krombach, Germany.1 Krombacher is the brewer of Krombacher Pils Beer ("Krombacher Beer"), currently the most popular beer in Germany.
On September 1, 2000, Bowmont and Krombacher executed a written agreement under which Bowmont was to have exclusive importation and distribution rights for Krombacher beer in 36 states (the "2000 Agreement"). As contemplated by the 2000 Agreement, the parties also executed a retainer agreement (the "Retainer Agreement") under which Krombacher agreed to pay Bowmont specified amounts for marketing and promotions; the amounts paid by Krombacher pursuant to the Retainer Agreement were to be based on the volume of Krombacher Beer purchased by Bowmont. The 2000 Agreement also set volume goals for Bowmont's distribution of Krombacher beer. The 2000 Agreement set an initial three-year term, which would automatically renew for a second three-year term, unless Bowmont decided to terminate the agreement after the first term. Krombacher also had the right to terminate the 2000 Agreement following the initial three-year term, but only if Bowmont failed to meet the stated distribution goals. The 2000 Agreement also included a forum selection clause designating Frankfurt, Germany as "the jurisdiction for all disputes arising from this agreement . . ."
The relationship between the parties went smoothly for the first few months after the 2000 Agreement was executed. For example, in February 2001, Krombacher agreed to expand the exclusive distribution territory from 36 states to include the entire United States. However, by late 2001, the parties' relationship began to deteriorate. Bowmont claimed that Krombacher had failed to provide the proper packaging for U.S. distribution as contemplated by the 2000 Agreement. The parties also had disputes regarding billing; both parties claimed that the other owed it money, and Krombacher denied Bowmont's request to convert some of its billing statements from German Marks to Euros.
On April 9, 2002, Bowmont and Krombacher representatives met at Bowmont's offices in Westport, Connecticut. At the meeting the parties agreed they should terminate the 2000 Agreement and the Retainer Agreement. They negotiated terms for a new agreement. Having agreed in principle on a number of terms of a new agreement, the parties agreed that Krombacher would later provide a written draft of the new agreement for Bowmont's consideration. There was no agreement as to all the material or essential terms of a new agreement on April 9, 2002 and both parties then understood that a new agreement would not be in place until executed in writing. Krombacher provided a signed draft to Bowmont on June 28, 2003. However, Bowmont objected to several of the provisions included in that draft and the parties continued their negotiations as to those provisions. Krombacher continued to ship Krombacher Beer to Bowmont after the April 9, 2002 meeting, and after sending the draft of the new agreement on June 28, 2003.
Further disputes regarding outstanding invoices resulted in Krombacher's refusal to continue shipments of Krombacher Beer to Bowmont. In October, 2002, Krombacher sent a letter to Bowmont indicating that it was terminating the 2000 Agreement and making a demand for monies owed by Bowmont under that agreement. Bowmont then filed this action, alleging that Krombacher's refusal to make further shipments constituted a breach of the new agreement negotiated on April 9, 2002, and filed the pending motion for preliminary injunction.
The Second Circuit has cautioned that preliminary injunctive relief "is an extraordinary and drastic remedy which should not be routinely granted." Buffalo Forge Co. v. Ampco-Pittsburgh Corp., 638 F.2d 568, 569 (2d Cir. 1981) (internal quotation marks omitted). Entry of a preliminary injunction is appropriate where the party seeking the injunction establishes: (a) the injunction is necessary to prevent irreparable harm, and (b) either (i) likelihood of success on the merits, or (ii) sufficiently serious questions going to the merits of the claim as to make it fair ground for litigation, and a balance of the hardships tips decidedly in favor of the movant. See, e.g., Able v. United States, 44 F.3d 128, 130 (2d Cir. 1995). Thus, the first part of the standard — irreparable harm — must always be met, but the party seeking an injunction may satisfy the second prong by establishing either a likelihood of success or sufficiently serious questions going to the merits and a balance of hardships in its favor. Thus, here, the Court must consider whether Bowmont would suffer irreparable harm in the absence of a preliminary injunction. If so, the Court must then consider whether Bowmont is likely to succeed on the merits or whether Bowmont has raised sufficiently serious questions as to the merits, and the balance of hardships tips in favor of Bowmont.
In Tom Doherty Assoc., Inc. v. Saban Entertainment. Inc., 60 F.3d 27 (2d. Cir. 1995), the Second Circuit considered the circumstances under which the loss of a single product line could constitute irreparable harm for purposes of a preliminary injunction. The Court reasoned that, in the typical situation where money damages can be readily calculated, there is usually no irreparable harm. However, the Court noted that if the calculation of damages would be speculative, or if the discontinuance of the product would result in the discontinuance of the business, preliminary injunctive relief may be appropriate:
We believe that the governing principle is as follows. Where the availability of a product is essential to the life of the business or increases business of the plaintiff beyond sales of that product — for example, by attracting customers who make purchases of other goods while buying the product in question — the damages caused by loss of the product will be far more difficult to quantify than where sales of one of many products is the sole loss. In such cases, injunctive relief is appropriate. This rule is necessary to avoid the unfairness of denying an injunction to a plaintiff on the ground that money damages are available, only to confront the plaintiff at a trial on the merits with the rule that damages must be based on more than speculation. Where the loss of a product with a sales record will not affect other aspects of a business, a plaintiff can generally prove damages on a basis other than speculation. Where the loss of a product will cause the destruction of a business itself or indeterminate losses in other business, the availability of money damages may be a hollow promise and a preliminary injunction appropriate.
Id. at 38. Here, there was no evidence that it would be difficult or impossible to calculate the damages caused by Krombacher's refusal to continue shipment of Krombacher Beer to Bowmont (although Bowmont has argued that it will also suffer a loss of business goodwill). For example, there has been no showing that the loss of Krombacher Beer will impede Bowmont's sale of other products. However, the Court finds that, if preliminary relief is not granted, it is likely that "the loss of [Krombacher Beer] will cause the destruction of [Bowmont]," id. at 38. In 2002, sales of Krombacher Beer constituted nearly 100% of Bowmont's sales. As a result, the loss of the Krombacher account could well result in the destruction of Bowmont's business. Therefore, the Court finds that Bowmont has satisfied the "irreparable harm" standard for obtaining a preliminary injunction.
II. Likelihood of Success/Serious Questions Going to the Merits
As stated above, in order for a preliminary injunction to issue, Bowmont must demonstrate, in addition to its showing of irreparable harm, that it is likely to succeed on the merits or that there are sufficiently serious questions going to the merits and the balance of hardships tips in its favor. See Able, 44 F.3d at 130.
Bowmont has not demonstrated that it is likely it will succeed on the merits of its claim. With regard to Bowmont's claim that Krombacher's conduct has violated the agreement reached at the April 9, 2002 meeting, Bowmont has not shown that it is likely it will be able to overcome Krombacher's statute of frauds defense. The Court finds, based on the evidence presented at the preliminary injunction hearing, that the parties contemplated memorializing the agreement in writing before it became binding, and the parties were unable to agree on a final version of the written agreement. The alleged contract — an agreement regarding the distribution of Krombacher Beer in the United States — is within the statute of frauds, because it is a contract for the sale of goods that exceeded $500. See Conn. Gen. Stat. § 42-2-201.2
Moreover, any alleged...
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