Miller Brewing Co. v. Best Beers of Bloomington, Inc.

• Decision Date: 11 February 1993
• Docket Number: No. 53S01-9302-CV-222,53S01-9302-CV-222
• Citation: 608 N.E.2d 975
• Parties: MILLER BREWING COMPANY, Appellant (Defendant Below), v. BEST BEERS OF BLOOMINGTON, INC., Appellee (Plaintiff Below).
• Court: Indiana Supreme Court

Page 975

608 N.E.2d 975

MILLER BREWING COMPANY, Appellant (Defendant Below), v. BEST BEERS OF BLOOMINGTON, INC., Appellee (Plaintiff Below).

No. 53S01-9302-CV-222.

Supreme Court of Indiana.

Feb. 11, 1993.

Stephen W. Terry, Ronald D. Gifford, Baker & Daniels, Indianapolis, Gary Clendening, Harrell, Clendening & Coyne, Bloomington, for appellant.

James R. Cotner, Ronald L. Chapman, Karen A. Wyle, Cotner Andrews Mann & Chapman, Bloomington, for appellee.

ON PETITIONS TO TRANSFER

KRAHULIK, Justice.

This case involves the interpretation of Ind.Code Ann. Sec. 7.1-5-5-9 (West 1982) ("Termination Statute") pertaining to the termination of an agreement between a brewer and a wholesaler. Miller Brewing Company ("Miller") (Appellant-Defendant below) seeks transfer after the Court of Appeals affirmed the award of compensatory damages in favor of Best Beers of Bloomington, Inc. ("Best Beers") (Appellee-Plaintiff below). Miller Brewing Co. v. Best Beers of Bloomington, Inc. (1991), Ind.App., 579 N.E.2d 626. In addition, Best Beers seeks transfer from that portion of the opinion vacating an award of punitive damages entered in its favor. Several issues are raised in the petitions, which we restate as follows:

(1) Whether the trial court erred in refusing Miller's tendered instruction on the Termination Statute;

(2) Whether the Court of Appeals erroneously interpreted the Termination Statute;

(3) Whether punitive damages are appropriate in this breach of contract action; and

(4) Whether the admission of an irrelevant document constituted reversible error.

The facts most favorable to the verdict were set out in the opinion of the Court of Appeals, including that court's footnotes 1, 2 and 3, as follows:

Miller Brewing Co. is a Wisconsin corporation which brews a variety of beers. It distributes its products in Indiana through independent distributors who sell the products to various retail outlets. Best Beers had been a Miller distributor since it first entered into a distributorship agreement with Miller in 1950. Under the 1950 agreement, and all the subsequent distributorship agreements between the parties, Best Beers was given the nonexclusive right to sell Miller products in certain designated counties.

Under the 1983 distributorship agreement, Miller gave Best Beers the primary responsibility for distributing various Miller products in Monroe, Brown, and Owen counties. Miller could neither give Best Beers the exclusive right to sell its products in these counties nor demand that Best Beers distribute only Miller products ¹, however, because Indiana law prohibits exclusive distributorships. Because of Miller's inability to grant exclusive distributorships, other Miller distributors could, and did, distribute Miller products in the counties assigned to Best Beers. ²

Best Beers proved to be a satisfactory distributor of Miller products for over thirty years. From the inception of the distributorship until 1984, Best Beers never received less than a satisfactory rating from Miller. In 1984, however, the previously good relationship between Miller and Best Beers began to sour.

In January of 1984, Miller made Nancy Catalane its local area manager. At first Catalane rated Best Beers' performance as adequate, but within a few months she began to issue a series of highly unfavorable distributorship evaluations and memoranda. These unfavorable evaluations and memoranda charged Best Beers with a variety of ills including alleged mismanagement and an inability to keep overage beer out of the market, alleged acts of personal misconduct committed by one of Best Beers' senior employees, alleged attempts by Best Beers' employees to convince retailers not to stock Miller High Life, and alleged failures of Best Beers' sales personnel to adequately market Miller product lines.

In late 1984, one of Best Beers' prime competitors, Monroe Beverage Co., sent a letter to Miller in which Monroe Beverage intimated that Miller High Life should be added as a companion brand to Miller Lite in an "all MILLER distributorship." (Record, p. 6293). At the time, Monroe Beverage was the Miller Lite distributor in the area.

Between 1984 and 1986, Best Beers' sales of Miller High Life continually declined. In 1986, Best Beers' sales of High Life increased modestly. Best Beers' decrease in sales paralleled a nationwide decrease in the popularity of Miller High Life.

Between 1980 and 1987 sales of High Life in cans and bottles decreased by almost two thirds, from 21,557,569 barrels in 1980 to 7,829,760 barrels in 1987. At the same time, marketing of draught High Life rose and then declined slightly, from 1,810,912 barrels in 1980 to 1,271,859 barrels in 1987. During this time, Best Beers' Miller High Life sales were equivalent to or better than the national average.

Best Beers had to contend with some difficulties in sales that were caused by Miller. In the eighties, Miller chose to emphasize Lite in its advertising while de-emphasizing High Life. In addition, Miller refused to supply Best Beers with adequate point-of-sale (p.o.s.) advertising materials while complaining that Best Beers did not maintain adequate p.o.s. materials in its retail markets. Miller also refused to fill orders from Best Beers in the manner requested by Best Beers. In many instances, Miller would not send the products Best Beers requested in the quantities requested. This caused Best Beers to be overstocked on some product lines and understocked on others.

In general, the retailers with whom Best Beers dealt were pleased with its performance. Some retailers, including one which had at one time attempted to pay Best Beers with twenty to thirty thousand dollars worth of bad checks, did, at Miller's request, lodge complaints with Miller concerning Best Beers. The three written complaints in Miller's file concerning Best Beers were all drafted in July of 1985, apparently in response to a request from a high level Miller employee.

In October of 1986, Miller sent Best Beers a preliminary notice of termination. This notice informed Best Beers that Miller intended to terminate the distributorship agreement because of a host of alleged deficiencies in Best Beers' performance:

1) failure to aggressively market the allotted Miller product lines by failing to rotate stock in retail accounts, failing to provide merchandising services and product delivery to retail accounts, and failing to comply with marketing plans and commitments made to Miller;

2) failure to maintain a balanced inventory by being periodically out of stock on some product lines and not stocking others;

3) failure to maintain quality control by failing to observe code-date requirements, failing to properly rotate stock in the warehouse, vehicles, and retail locations, failing to prevent overage beer from reaching customers, failing to retrieve overage beer from retailers, failing to replace overage beer in the retail outlets, and failing to destroy overage beer when found;

4) failure to attend Miller training programs or to offer on site training programs 5) failure to preserve Miller's good will by failing to participate in community activities, failing to convey a positive image of Miller products to retailers, and failing to "maintain a cooperative, positive attitude" toward Miller and its employees;

6) failure to provide regular deliveries to retailers;

7) failure to ensure proper placement, installation, and display of Miller p.o.s. materials in retail locations; and, finally,

8) failure to cooperate with and be friendly to Miller employees, failure to provide Miller with information upon Miller's request, and failure to implement an alcohol awareness program in Best Beers' primary territory.

Best Beers attempted to keep overage beer off of its retailers' shelves and attempted to remove beer which passed the date restriction while on the retailers' shelves. Despite its efforts, Miller representatives found overage beer in some retail accounts which were normally serviced by Best Beers. At the time the overage beer was found in the market, transshippers were also actively selling in the area. ³ Although Best Beers was not obligated to dispose of overage beer sold by transshippers under the distributorship agreement, Catalane attempted to force Best Beers to remove and destroy beer sold by transshippers. Miller did not make any attempt on its own to remove overage beer sold by transshippers.

Best Beers took several steps to remedy the defects alleged by Miller in the termination letter. The distributor formulated a cure plan. It hired new sales personnel to concentrate on Miller products. It drafted new forms for tracking overage beer and sought the cooperation of retailers in combatting the overage beer problem. It sought to provide Miller with whatever additional information Miller requested. None of these efforts placated Miller.

Following an extended period during which Best Beers attempted to cure its alleged deficiencies, Miller terminated the distributorship agreement. shortly thereafter, Miller awarded the distributorship to Monroe Beverage, a distributor whose performance was equivalent to, and in some ways inferior to, that of Best Beers. In awarding the distributorship to Monroe Beverage, Miller succeeded in consolidating all of its product lines in a single local distributor.

579 N.E.2d at 630-32. Best Beers filed an action seeking compensatory and punitive damages for wrongful termination of the Distributor Agreement. Miller asserted a counterclaim against Best Beers seeking compensatory damages for Best Beers' failure to comply with all of the requirements of the contract. The trial court entered judgment on the jury's verdict awarding compensatory damages of $397,852 and punitive damages of $1,989,260 to Best Beers and nothing to Miller on its counterclaim. Miller appealed. The Court of Appeals affirmed the award of compensatory damages. It also affirmed Best Beers' entitlement to...