JC Millett Co. v. Park & Tilford Distillers Corp.

• Decision Date: 02 July 1954
• Docket Number: No. 31815.,31815.
• Citation: 123 F. Supp. 484
• Court: U.S. District Court — Northern District of California
• Parties: J. C. MILLETT CO. v. PARK & TILFORD DISTILLERS CORP.

123 F. Supp. 484

J. C. MILLETT CO. v. PARK & TILFORD DISTILLERS CORP.

No. 31815.

United States District Court, N. D. California, S. D.

July 2, 1954.

COPYRIGHT MATERIAL OMITTED

J. Albert Hutchinson, San Francisco, Cal., for plaintiff.

McCutchen, Thomas, Matthew, Griffiths & Greene, San Francisco, Cal., for defendant.

MURPHY, District Judge.

This is an action originally brought by plaintiff, a California Corporation, in the State Court on four separate causes of action. Generally stated, the first and second causes of action allege breach by defendant of respectively, an implied and express contract for the distribution of defendant's products. The third alleges fraud in the procurement of the contract. The fourth asks for an injunction, an accounting and other relief based on alleged unfair competition of the defendant. The case was removed to this Court on the ground of diversity jurisdiction. Plaintiff's motion for a preliminary injunction based on the fourth cause of action was denied by Judge Roche.

The parties became enmeshed in interrogatories and procedural motions to the extent that the discovery proceedings were terminated by order of this Court and the case set for pretrial conference. Defendant's motion for summary judgment came on for hearing at that same time. Judge Goodman ordered that only the issues relating to the liability of Park & Tilford would be determined at a preliminary trial. The ruling on defendant's motion for a summary judgment was reserved to the preliminary trial.

Pursuant to this order, the issue of defendant's liability was tried before me without a jury.

The major issues in this suit hinge upon the character of the relationship of the parties under which it is conceded plaintiff bought defendant's products as a wholesaler and resold them to retail outlets. It is likewise agreed by both parties that this relationship existed for only about seven months and was terminated by the defendant.

The arrangement under which plaintiff sold defendant's products arose wholly out of oral conversations extending from September, 1951 through January, 1952. Both parties were represented by men of long experience in the liquor business. Very few details were discussed but plaintiff expressly agreed to take on the "distributorship" of defendant's products.

The factual setting of the parties and the condition of the industry at that time must necessarily be set out if the discussions are to be understood.

Plaintiff, J. C. Millett Company, (hereinafter referred to as Millett) is a California Corporation licensed as a wholesale distributor and importer of alcoholic beverages which has been actively engaged in the business since the repeal of prohibition. It engages in this business in eleven northern counties in California through three divisional offices, one in San Francisco, one in Oakland and a third in Salinas.

Defendant, Park and Tilford Distillers Corporation, (hereinafter referred to as Park & Tilford) is a Delaware Corporation which manufactures and imports from abroad, alcoholic beverages. Its products are trade marked and such products are unavailable under such trade names from any other source. It engages in business in California and in this District.

Millett, in common with other liquor distributors in Northern California distributed various "lines" of alcoholic beverages. Within the trade a "line" is the aggregate of various types of distilled spirits bottled in different sizes, which are sold in a group to a wholesaler by a particular distiller.

Park & Tilford have a wholesaler's license in California and they do much of their own wholesaling in the Los Angeles area. But in Northern California for a substantial period of time prior to the negotiations they had dealt solely through two distributors and did not then and do not now sell to any one else.

In late 1950 and in 1951 the liquor distributing business was in a critical and transitional period. Competition was keen. It was a buyer's market. Prior to this time most distributors in this area had done business without any written contracts regarding duration or termination of their distributorships. The distillers would give no such contracts. The Wines and Spirits Wholesalers of America, an association of liquor wholesalers had been trying to get termination contracts from the distillers for about four years. By October 1951, many distillers did business without written contracts but some had obtained written contracts of varying provisions. Some contained exclusive "dual" or "three way" distributorships. There were written contracts containing only a provision for termination by either party on notice or at a stated time after. But such contracts were hard to get. On most of the business handled by Millett there were no such contract provisions.

During this period distillers were changing their distributors. National Distillers, for whom Millett had distributed for many years, in early 1951 had "cut off" its distributors "to go exclusive" with Max Sobel. One of Park & Tilford's two distributors, Tonklin & Modlin, was also affected by this change. In fact, they were going out of business and had published this fact to the trade. There were rumors that Kinsey, which after the loss of the National Distillery, was Millett's largest "line", was going to drop Millett. Park & Tilford wanted another distributor to take Tonklin & Modlin's place. They were looking over the distributors in this territory.

It was in this posture that discussions between Mr. J. C. Millett, president and principal stockholder of Millett and Mr. Harry Herting, District Manager, Northern California for Park & Tilford, began. In September an informal and wholly inconclusive discussion took place. With the arrival in San Francisco in early October 1951 of Mr. Benjamin Cooperman, Park & Tilford's newly appointed Western Division Manager, the negotiations began in earnest.

Mr. Millett began the discussions for plaintiff but became ill in the middle of October and the talks were continued by Mr. William Loviner, the manager of Millett's San Francisco Branch. Cooperman and Herting represented Park & Tilford. From October to January they met about four times. The primary topic which filled the discussions was the problem of duration and termination. This problem was discussed at all their meetings. Millett and later Loviner communicated to Cooperman that Millett had been hurt in the past by distillers terminating their distributorship and would not consider taking on the Park & Tilford distributorship unless they had protection against termination. They requested a one year termination agreement and at another time a five year termination agreement. Cooperman told the Millett people that to his knowledge Park & Tilford had no such contracts. Cooperman told them repeatedly that Millett needed no such contract; that Park & Tilford was a fine company; that never in the history of the company had Park & Tilford "cut off" a distributor. He cited examples in the San Francisco area, one of them Tonklin & Modlin, where Park & Tilford had continued to sell to distributors who were not performing well. Initially, Millett did not desire to take on the Park & Tilford line. He had other commitments. Loviner so informed Cooperman. But Cooperman replied that he had looked over the other distributors in the area and Park & Tilford wanted Millett. The discussions continued. Loviner continued to ask for a contract regarding termination. Cooperman told him that he would try to get such a contract; that he did not know what he could do and that he would have to take it up with the New York office. He reasserted that Millett needed no such contract for Park & Tilford never "cut off" a distributor. Millett agreed to become the distributor. This was based in large part on Cooperman's representation regarding continuity — but also on the fact that Millett was losing the Kinsey line. Cooperman went to New York to discuss the contract provision regarding termination and Millett's credit. While there Mr. Harry Herrfeldt, Park & Tilford's Vice President and Sales Manager, told him that Park & Tilford had no such contract and would not enter into one. But upon having Millett's credit checked he told Cooperman to go back and sell Millett merchandise.

Upon his return to San Francisco Cooperman told Loviner that he could not get the desired termination contract but the program was "all set to go". He told Loviner that he need not worry; that Park & Tilford would continue to sell their merchandise to Millett so long as they did a satisfactory job.

On January 8, 1952, an initial order for $143,532.02 worth of merchandise was written up. Since boat shipments of merchandise from the East took 21 days and overland shipments 7 to 14 days, Cooperman and Herting arranged with Loviner for Millett to buy $52,512.80 worth of this merchandise from Park & Tilford's two local distributors.

Millett began to sell Park & Tilford products at each of their branches. Monthly depletion reports showing the amounts of each particular item sold were sent to Herting. This is a normal procedure in the trade. Loviner and Herting discussed ways of making the depletion greater. Millett ordered merchandise from Park & Tilford to fill up its supply of depleted items. Park & Tilford sent out information to Millett and its other distributors as to what particular items were to be pushed during a given period and allocated quantities of certain relatively scarce items among them. Herting discussed with the Millett people Park & Tilford's current marketing plans.

A sales representative of Park & Tilford attended Millett's sales meetings and gave its salesmen information and material to help them sell Park & Tilford merchandise. As is normal in the industry, this sales representative called upon retailers to solicit orders for Park & Tilford distributors. He did not take signed orders.

Herting worked...