Maykuth v. Adolph Coors Co.
| Decision Date | 19 October 1982 |
| Docket Number | No. 81-3152,81-3152 |
| Citation | 690 F.2d 689 |
| Parties | 1982-83 Trade Cases 64,996 Gerald S. MAYKUTH, d/b/a Bighorn Beverage, Plaintiff-Appellant, v. ADOLPH COORS COMPANY, a Colorado Corporation, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
C. W. Leaphart, Jr., Helena, Mont., argued, for plaintiff-appellant; W. William Leaphart, Helena, Mont., on brief.
Leo Bradley, Golden, Colo., argued, for defendant-appellee; Richard F. Cebull, Anderson, Brown, Gerbase, Cebull & Jones, P. C., Billings, Mont., on brief.
Appeal from the United States District Court for the District of Montana.
Before HUG, SKOPIL and FLETCHER, Circuit Judges.
Gerald Maykuth operated Bighorn Beverage, a wholesale beer distributorship, pursuant to a contract with Adolph Coors Company ("Coors"). When Coors terminated Maykuth as a distributor, he brought this action, claiming the termination breached their contract and violated Montana statutes regulating the distribution of beer. Maykuth also alleged violations of the Sherman Act, 15 U.S.C. § 1.
We affirm the district court's determination that Maykuth failed to establish Coors's liability under the antitrust laws. However, we hold that Coors did breach Maykuth's contractual and statutory rights and is liable for damages on those claims. We also reverse the district court's conclusion that Maykuth is liable to Coors for breach of contract.
In 1976, Coors began marketing its products in Montana. Maykuth applied for a distributorship in the Helena area. The company required dealers to maintain a refrigerated warehouse with a recycling facility, and to acquire refrigerated trucks and other specialized delivery equipment. Maykuth's application included his plans for developing and financing the required facility and equipment. On the basis of that application, Coors awarded Maykuth a distributorship by a contract executed in January, 1977. Maykuth developed a "model facility" The contract terms were consistent with Coors's policy of closely regulating the distribution and marketing of its products. The company maintained that the beer's unique qualities required Coors to restrict areas in which it was distributed and to impose strict quality controls. It vigorously opposed any distribution of its products outside of designated distribution territories. Each distributor was therefore limited to a specific marketing territory and was required by the contract to assume responsibility for quality control of all the beer it sold.
and purchased the necessary equipment, incurring expenses of approximately $600,000.
The new business did not prosper. Maykuth attributed its financial problems to Coors's failure to resolve union disputes, Coors's test-marketing in Montana of the "ecology press-tab can," and Coors's more favorable treatment of other dealers, including provision of advertising and credit services. Coors denied these claims, contending that Maykuth's unrealistic market projections, his improvident financing arrangements, and his failure to promote sales aggressively had caused the failure of the business. Maykuth attempted to improve sales through a series of price promotions. His pricing policies resulted in increased sales, but the business continued to operate at a loss.
In June, 1978, Maykuth was contacted by John Bennett, a "beer broker," who wanted to purchase Coors beer for sale outside Montana. Maykuth originally refused to sell to Bennett, fearing such a sale would violate state licensing requirements. He advised Coors that Bennett had contacted him. He also discussed the proposed sale with state officials, who advised him that state liquor regulations did not prohibit retailers from selling beer to purchasers who planned to distribute it out of state. Maykuth specifically outlined to the state liquor control administration a plan whereby he would sell beer by the truckload to one of his licensed retail customers, Super Save, which in turn would sell the beer to Bennett. Assured by the liquor control administration that this plan did not violate state law, Maykuth agreed to sell large shipments of beer to Super Save for resale to Bennett.
Maykuth sold eight semi-trailer loads under this agreement, loading Bennett's trucks at Maykuth's dock and riding in the truck to Super Save, where he signed over the bill of lading. The first six sales to Bennett went as planned. Drivers of the last two shipments, destined for Alabama, decided to stop at the Coors brewery in Colorado to exchange Coors's unique plastic pallets for regular wooden ones. Coors intercepted 4,080 cases of the beer, which were being transported without refrigeration, and took possession of them. The beer was traced to Maykuth. Coors's counsel contacted him, demanding that he reclaim the beer and return it to Helena for distribution. Maykuth refused; he took the position that the sale of the beer to Super Save had terminated his responsibility for it.
Immediately after this incident, Coors decided to terminate Maykuth's distributorship. He was advised by letter on August 28, 1978 that he was terminated as of August 31 for "lack of veracity." Maykuth then filed this action.
Count one of Maykuth's complaint, which invoked the district court's diversity jurisdiction, claimed breach of contract. Count two, also alleging diversity, charged violations of dealer-protective provisions of the Montana statutes regulating the distribution of beer. Counts three and four alleged violations of the Sherman Act, 15 U.S.C. § 1. Maykuth claimed the termination resulted from his refusal to comply with Coors's price fixing policy and its unlawful territorial restraints. Coors denied each of these claims and asserted a counterclaim demanding damages for Maykuth's breach of the agreement.
After a bench trial, Coors was awarded judgment on each of these claims. Maykuth appeals.
Maykuth's breach of contract and state statutory claims challenge the manner in The distributorship contract permitted termination on three different bases. Under P II(1), a distributor could be terminated immediately for specified highly egregious conduct, including commission of a felony, conduct constituting moral turpitude, and revocation of a state liquor license. 1
which Coors cancelled his distributorship. He claims that because the termination was without good cause and without sufficient notice, it violated contractual and statutory provisions intended to protect the distributor.
The second termination provision, which appeared in P IX(1), allowed for termination by either party on thirty days' notice. The terminating party was not required to specify a cause for the cancellation. A distributor terminated under this clause could invoke a separate provision, P VIII(2), that required Coors to purchase the business's assets (the "buy out" provision). 2
The third basis for termination, P IX(2), involved breach of the contract. If Coors determined a breach had occurred, it was required to serve notice on the distributor and allow him ninety days to cure the breach. As an additional protection, a distributor who received notice of breach under this clause could demand arbitration under P XV. The purpose of the arbitration was to determine if "proper cause" existed for termination. 3
These contract provisions must be read in conjunction with the statutory scheme that regulates the distribution of beer in Montana. A notice requirement for distributor terminations is set out in Mont.Rev. Codes Ann. § 16-3-222, which provides in part:
All contracts, agreements, or franchises between a brewer and a wholesaler shall specifically set forth or contain the following:
... (5) a termination clause providing that the brewer shall deliver, in writing The statutes also require the brewer to state the cause for the termination and to allow the distributor to attempt to cure the default. Mont.Rev. Code Ann. § 16-3-221 states that: "It is unlawful for any brewer (to) ... (4) cancel or terminate, except for just cause ... any agreement or contract, written or oral, or the franchise of any wholesaler ...." (Emphasis added.) Section 16-3-222(4) requires that the contract include a procedure for review and specification of wholesaler deficiencies and "that a reasonable period of time shall be given the wholesaler for rectification of said deficiencies prior to any notice of intent to terminate." Finally, the statutes provide that all these statutory protections shall be incorporated into the contract, whether or not the writing expressly includes them.
to the wholesaler a 60-day notice of intent to terminate the agreement, contract, or franchise.
The district court concluded that incorporation of the statutory provisions into the contract was necessary. However, it failed to determine the application of the statutes to each of the contract's termination provisions. We now consider that application.
The provision in P IX(1) for termination on thirty days' notice without cause cannot be reconciled with the statutes' cause and notice requirements. We therefore conclude that it is invalid, and could not have been the basis for a lawful termination of the contract.
The P IX(2) provision, which allows for termination in the event of a contract breach, satisfies the statutory requirements. It allows termination only for cause and includes the procedure for notification of default and opportunity to cure required by section 16-3-222(4). In addition, it gives the distributor the contractual protections of a ninety-day period to cure the default and the option to demand arbitration. P IX(2) is thus an enforceable termination provision.
The P II(1) provision allows immediate termination for certain conduct. The "just cause" requirement of section 16-3-221(4) must be applied to this provision also. Therefore, reliance upon one of the acts specified in this...
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