Eskimo Pie Corporation v. Whitelawn Dairies, Inc.

• Decision Date: 16 April 1968
• Docket Number: 64 Civ. 3718.,No. 64 Civ. 3702,64 Civ. 3702
• Citation: 284 F. Supp. 987
• Parties: ESKIMO PIE CORPORATION, Plaintiff, v. WHITELAWN DAIRIES, INC., Supermarket Advisory Sales, Inc., Allstate Dairies, Inc., Jack Nelson and Henry Landau, Defendants. WHITELAWN DAIRIES, INC. and Supermarket Advisory Sales, Inc., Plaintiffs, v. ESKIMO PIE CORPORATION, Imperial Ice Cream Novelties, Inc., Harry L. Darnstaedt, M. H. Renken Dairy Co., and Food Enterprises, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

284 F. Supp. 987

ESKIMO PIE CORPORATION, Plaintiff, v. WHITELAWN DAIRIES, INC., Supermarket Advisory Sales, Inc., Allstate Dairies, Inc., Jack Nelson and Henry Landau, Defendants.

WHITELAWN DAIRIES, INC. and Supermarket Advisory Sales, Inc., Plaintiffs, v. ESKIMO PIE CORPORATION, Imperial Ice Cream Novelties, Inc., Harry L. Darnstaedt, M. H. Renken Dairy Co., and Food Enterprises, Inc., Defendants.

Nos. 64 Civ. 3702, 64 Civ. 3718.

United States District Court S. D. New York.

April 16, 1968.

Lovejoy, Wasson, Lundgren & Ashton, New York City, for Eskimo Pie Corp., Walter C. Lundgren, New York City, of counsel.

Jaffin, Schneider, Conrad & Rubin, New York City, for Whitelawn Dairies, Inc., Supermarket Advisory Sales, Inc., Allstate Dairies, Inc., Jack Nelson and Henry Landau, Martin L. Conrad, New York City, of counsel.

Gifford, Woody, Carter & Hays, New York City, for Imperial Ice Cream Novelties, Inc. and Harry L. Darnstaedt, Edmund S. Purves, New York City, of counsel.

Schneider & Artz, New York City, for M. H. Renken Dairy Co., Samuel S. Schneider, New York City, of counsel.

MANSFIELD, District Judge.

Pursuant to Rule 2 of the General Rules of this Court, these consolidated actions have been assigned to one judge for all purposes. A series of pretrial conferences have been held for the purpose of simplifying the issues and taking up other matters that may aid in the disposition of the actions, including the possibility of separate jury trials of certain issues pursuant to Rule 42(b), F.R.Civ.P., and the determination of evidentiary questions anticipated at such trials. This decision deals principally with the procedure to be followed by the parties in obtaining rulings with respect to certain evidence to be offered at trial.

The actions arise out of written contracts between Eskimo Pie Corporation ("Eskimo" herein), Whitelawn Dairies, Inc.¹ ("Whitelawn" herein) and Supermarket Advisory Sales, Inc.¹ ("SAS" herein) (Whitelawn and SAS are collectively referred to herein as "Whitelawn-SAS") entered into on or about December 30, 1960, and modified in various respects in 1961 and 1962. These contracts are referred to by the parties as the "Package Deal." All parties agree that the Package Deal is an integrated agreement setting forth in several writings all of the essential terms agreed upon by Eskimo and Whitelawn-SAS. Under the terms of the Package Deal Eskimo granted to Whitelawn, an ice cream manufacturer, the right to manufacture certain ice cream products bearing "Eskimo" wrappers and labels and to SAS the right to purchase such Eskimobranded products from Eskimo or an Eskimo-authorized manufacturer for sale in the New York City Metropolitan Area as follows:

"During the term of this Agreement SAS shall have the non-exclusive right to purchase the Eskimo stock and stickless products listed in Exhibit A hereto, which may be amended from time to time by addition or deletion, from Eskimo or from a manufacturer authorized by Eskimo to manufacture such products within the New York City metropolitan area * * *." (emphasis supplied).

The present lawsuits were instituted after Eskimo, beginning sometime in 1962 and 1963, sold its Eskimo-branded products to others in the New York City Metropolitan Area, and entered into agreements with M. H. Renken Dairy Co. ("Renken" herein) to manufacture, and with Food Enterprises, Inc. ("Food Enterprises" herein) to sell, such products, and assisted Harry L. Darnstaedt and Imperial Ice Cream Novelties, Inc. ("Imperial" herein) in selling such products in the New York City Metropolitan Area. This led to a deterioration in the relationship between the parties to the Package Deal; a purported termination by Whitelawn and SAS of purchases and sales thereunder; and mutual claims of breach of contract, since Whitelawn and SAS appear to have refused to accept and pay for certain products.

The Eskimo action sets forth eight claims, seven of which are for breach of the aforementioned contracts (including two claims for goods sold and delivered thereunder) and an eighth claim for reformation of a written agreement dated April 27, 1962 between Eskimo and SAS, that forms part of the Package Deal. Except for general denials, the Whitelawn-SAS answers admit the sale and delivery of certain goods and assert offsets and counterclaims which also form the basis of the Whitelawn-SAS suit against Eskimo and other defendants.

The Whitelawn-SAS complaint sets forth six claims, the first two against Eskimo for breach of the Package Deal, the next three against other defendants (Renken, Darnstaedt, Imperial and Food Enterprises, no longer a defendant) for inducing such breach, and a sixth charging Eskimo, Darnstaedt and Imperial with missappropriation of trade secrets belonging to Whitelawn. Except for admitting the execution of the instruments constituting the Package Deal, Eskimo and other defendants in the Whitelawn-SAS action deny the material allegations.

All parties have agreed that trial of the issues arising out of the Whitelawn-SAS claim for misappropriation of trade secrets, and trial of all damage issues, may be deferred pending a trial of the liability issues raised by the parties in their respective pleadings.

A threshold question, which appears to be central to the entire dispute between the parties, arises out of the meaning of the word "non-exclusive" as used in the above quotation from the Package Deal, and the proposal of Whitelawn-SAS to offer parol evidence with respect to its meaning. Whitelawn and SAS contend that the word "non-exclusive" as used in the Package Deal meant that Eskimo would have the right to continue existing licenses granted by it to others in the New York City Metropolitan Area and to grant new licenses to national companies (such as the Borden Company, National Dairy Products Corporation), but not to grant licenses to socalled "independent" companies unless required to do so by order of a court or governmental agency, and that Eskimo itself was not to compete with Whitelawn and SAS in the sale of Eskimobranded ice cream products. Eskimo denies such contentions as to the meaning of the word "non-exclusive" and asserts that it plainly meant that Eskimo was granting a bare non-exclusive right to Whitelawn and SAS to manufacture and sell Eskimo products, while retaining the unfettered right to license others as it saw fit to manufacture and sell Eskimobranded ice cream products.

Whitelawn-SAS proposes, upon the jury trial of the issues of liability raised by the two lawsuits, to introduce not only the written agreements constituting the Package Deal, but also parol and extrinsic evidence as to what the parties understood and intended the term "non-exclusive" to mean, including earlier drafts of the Package Deal, correspondence and conversations between the parties leading up to its execution, and subsequent conduct of the parties, including a letter written by Darnstaedt on February 12, 1963 stating that the parties "had a gentlemen's agreement that Eskimo would not solicit any stick franchises in New York City except any of the national companies that Eskimo is serving around the country." More specifically, Whitelawn-SAS would offer testimony of its lawyers and others who negotiated the Package Deal on its behalf to the effect that earlier drafts, including one submitted by an Eskimo official named Gunn (now deceased) contained a clause which would have obligated Eskimo not to license or franchise the Eskimo mark, or sell Eskimo-branded ice cream products, to anyone in the New York City Metropolitan Area other than existing licensees or national dairy organizations, unless Eskimo should be required to do so by court or governmental order; that thereafter Eskimo refused to sign an agreement containing the express clause because of a fear expressed by Eskimo's counsel that the proposed clause might violate the federal antitrust laws; and that accordingly, after a series of conferences, the proposed clause was deleted on the understanding that its meaning would be deemed incorporated into the word "non-exclusive" used in the abovequoted license to Whitelawn-SAS.

Although Eskimo, if such parol evidence were admitted at the trial, would offer testimony of its officials contradicting that of the Whitelawn-SAS negotiators, it argues that such evidence is barred by the parol evidence rule, and seeks preliminary rulings before trial is commenced.

Eskimo's earlier attempts to obtain a determination of this and other issues by way of motions to dismiss and for summary judgment were unsuccessful, two distinguished members of this Court (Judges Levet and Palmieri) properly taking the view that the questions should await further inquiry by the trial judge, since the Court on such motions was required to view the facts most favorably to Whitelawn-SAS, which opposed the motions. In his opinion Judge Levet stated:

"However, this is not a determination in any respect with regard to the admissibility or the non-admissibility of any evidence with respect to the terms of any written contract. These matters are wholly for the disposition of the court at trial."

Judge Palmieri's later decision was grounded in part on a position then taken by Whitelawn-SAS, but since withdrawn by it in a pretrial conference with the trial judge, to the effect that

"a crucial issue is presented as to whether the written agreements of the parties are the full measure of their legal relationships."

All parties now agree that the Package Deal represented an integrated agreement. Judge Palmieri was also under the impression that § 2-202 of New York's Uniform Commercial Code would permit the introduction at trial of evidence as to course of dealing, usage of trade, or course of performance, the issue of retroactivity of that section not having been raised. For reasons set forth below we conclude that the section does not apply to the introduction of parol evidence with respect to the...