Pepsi-Cola Co. v. Steak 'n Shake, Inc.

• Decision Date: 03 October 1997
• Docket Number: No. IP 95-580 C B/S.,IP 95-580 C B/S.
• Citation: 981 F.Supp. 1149
• Parties: PEPSI-COLA COMPANY, Plaintiff, v. STEAK `N SHAKE, INC., Defendant.
• Court: U.S. District Court — Southern District of Indiana

981 F.Supp. 1149

PEPSI-COLA COMPANY, Plaintiff, v. STEAK `N SHAKE, INC., Defendant.

No. IP 95-580 C B/S.

United States District Court, S.D. Indiana, Indianapolis Division.

October 3, 1997.

COPYRIGHT MATERIAL OMITTED

Stephen K. Smith, Barnes & Thornburg, Indianapolis, IN, for Plaintiff.

James R. Fisher, Ice, Miller, Donadio & Ryan, Indianapolis, IN, Gregory Garrison, Garrison & Keifer, Indianapolis, IN, for Defendant.

ENTRY DENYING PARTIES' MOTIONS FOR SUMMARY JUDGMENT

BARKER, Chief Judge.

This case comes before the Court on a motion for partial summary judgment by Plaintiff, Pepsi-Cola Company ("Pepsi"), requesting that the Court dismiss Defendant's counterclaim and a motion for summary judgment by Defendant, Steak `n Shake, Inc. ("Steak `n Shake"), requesting that the Court grant its counterclaim and dismiss Pepsi's claim. The parties' respective motions are DENIED.

BACKGROUND

This case involves a contract dispute. During the months of April and May, 1991 Steak `n Shake and Pepsi negotiated a contract whereby Steak `n Shake would replace its then current drink product (King Cola) with Pepsi fountain soft drink products in its restaurants. Based upon the April negotiations, Pepsi prepared and forwarded to Steak `n Shake a preliminary draft of a proposed agreement between the parties. Plaintiff's Exhibit E and Kelley Depo. at 158-60. Along with the proposal, Pepsi's Vice President of On-Premise Sales, Vince Gennaro ("Gennaro"), sent an unsigned letter ("the Letter") that stated:

We are very excited about our new long-term relationship with Steak `n Shake. In support of this partnership, we would like to bring to Steak `n Shake innovative marketing programs to advance both your restaurant business and our soft drink business. We see the opportunity to utilize Steak `n Shake as a "learning laboratory" for new marketing ideas. We will develop programs consistent with your marketing strategies to enhance your image, as well as realize the full potential of soft drinks. We view this marketing partnership to include in-restaurant merchandising, Pepsi-identified cups, cup programs and special events.

We will also use Steak `n Shake as a showcase for Pepsi marketing in the market areas it operates as well as provide Steak `n Shake the strength of our first-class marketing efforts.

I am confident that our collective creativity, commitment and aggressiveness will allow us to set a new standard for soft drink's role in restaurant profitability. Thanks for having the belief in us to chose Pepsi as your partner.

Plaintiff's Exhibit M.

The parties exchanged various drafts of the proposed agreement which were revised by both parties. Kelley Depo. at 174-77; Witherspoon Depo. at 242. On May 24, 1991, the parties executed two written agreements, the Pepsi Promise and the Service & Sales contract (hereafter collectively referred to as "the Contract"). Plaintiff's Exhibits J and K. The Contract expressly states that it supersedes all prior agreements and contains the entire understanding of the parties. In addition, the Contract provides that modifications must be executed in writing, signed by both parties. The Contract also contains a marketing provision which provides:

The Customer [Steak `n Shake] shall participate in at least one Pepsi-Cola approved marketing program per calendar year for each year of this Agreement. The program shall be for the primary benefit of the Customer's system, and the Customer shall use a portion of the Flex Funds payable to the Customer under this Agreement as the Customer decides to help offset the advertising and promotion costs of such programs, limited to the equivalent of $.30 of the $.65 per gallon Flex Fund payments.

Plaintiff's Exhibit J.

Shortly after the parties executed the Contract, Steak `n Shake sent Pepsi a letter stating, in relevant part:

We ask that you give us the original signed letter from Mr. Vince Gennaro, Vice President On-Premise Sales, [the Letter] as we had previously agreed and we also ask that it be made part of this contract as we previously agreed.

Plaintiff's Exhibit L. In response, Pepsi sent Steak `n Shake a signed copy of the Letter. Kelley Depo. at 277-79. Subsequently, on June 19, 199 1, Steak `n Shake sent Pepsi another letter stating, in relevant part:

As discussed today by telephone, we have agreed that the enclosed letter dated June 17, 1991 [the Letter] ... relating to the marketing philosophy of Pepsi-Cola in its new long-term relationship with Steak `n Shake, Inc., is hereby incorporated in the subject Supply Agreement between our companies as a contractual commitment of Pepsi-Cola as is fully set out therein.

If the above correctly sets forth our understanding, please sign at the indicated place below and return for my file.

Plaintiff's Exhibit N. Pepsi did not respond in writing. Thereafter, on June 10, 1991, Steak `n Shake again wrote Pepsi stating:

We have asked you to incorporate [the Letter] into the documents which we signed on May 24th but you have not agreed to do so.

If you do not make [the Letter] a part of our original agreement as requested we still assume that you stand behind it and it will be interpreted as part of our agreement if we are to continue with our installations. If we do not hear from you to the contrary on these understandings we will proceed with the installations.

Plaintiff's Exhibit O. Pepsi again did not respond in writing. The parties continued operating under the Contract for approximately three years until on August 23, 1994 Steak `n Shake notified Pepsi of its intention to terminate the Contract. Complaint ¶ 9; Amended Answer ¶ 5. Pepsi subsequently brought this suit against Steak `n Shake alleging breach of Contract through an improper termination of the Contract. Steak `n Shake responded by alleging that Pepsi breached the Contract first and thereby provided Steak `n Shake "cause" to terminate the Contract and prompted their filing a counterclaim against Pepsi on the grounds that Pepsi wrongfully breached the contract.

SUMMARY JUDGMENT STANDARDS

Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.Pro. 56(c). A genuine issue of material fact exists if there is sufficient evidence for a jury to return a verdict in favor of the non-moving party on the particular issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Methodist Med. Ctr. v. American Med. Sec., Inc., 38 F.3d 316, 319 (7th Cir.1994).

On a motion for summary judgment, the burden rests on the moving party to demonstrate "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). After the moving party demonstrates the absence of a genuine issue for trial, the responsibility shifts to the non-movants to "go beyond the pleadings" and point to evidence of a genuine factual dispute precluding summary judgment. Celotex 477 U.S. at 322-23, 106 S.Ct. at 2552-53. In resolving a motion for summary judgment, a court must draw all reasonable inferences in the light most favorable to the non-movants. Patel v. Allstate Ins. Co., 105 F.3d 365, 366 (7th Cir. 1997); Spraying Sys. Co. v. Delavan. Inc., 975 F.2d 387, 392 (7th Cir.1992). However, we must not "ignore facts in the record merely because they are unfavorable. ... [A non-movant] gets the benefit of the doubt only if the record contains competent evidence on both sides of a factual question." Patel, 105 F.3d at 366. Thus, if genuine doubts remain, and a reasonable fact-finder could find for the party opposing the motion, summary judgment is inappropriate. Shields Enters., Inc. v. First Chicago Corp., 975 F.2d 1290, 1294 (7th Cir.1992); Wolf v. City of Fitchburg, 870 F.2d 1327, 1330 (7th Cir.1989).

Nevertheless, only issues of fact that could affect the outcome of a case are "genuine" such that they may save a case from summary judgment. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Tolle v. Carroll Touch, Inc., 23 F.3d 174, 178 (7th Cir.1994). Thus, if it is clear that a plaintiff will be unable to satisfy the legal obligations required of him to establish his case, summary judgment is not only appropriate, but also required. Celotex, 477 U.S. at 322, 106 S.Ct. at 2552; Herman v. City of Chicago, 870 F.2d 400, 404 (7th Cir.1989). "Summary judgment is appropriate in a matter of contract interpretation where no issues of fact exist because the language of the contract is unambiguous." Grundstad v. Ritt et al., 106 F.3d 201, 205 (7th Cir.1997).

DISCUSSION

Pepsi seeks summary judgment on Steak `n Shake's counterclaim that Pepsi breached the Contract. Steak `n Shake also moves for summary judgment on its counterclaim, and additionally, seeks summary judgment on Pepsi's breach of contract claim, raising three contentions: (1) Steak `n Shake breached for cause, (2) the Contract violated the Statute of Frauds, and (3) Pepsi's requested damages are not legally cognizable.¹

In fact, all the motions distill to these three issues: whether Pepsi breached the Contract, whether the Contract violated the Statute of Frauds, and whether Pepsi's requested damages are legally cognizable. Steak `n Shake alleges that Pepsi violated the Contract's marketing obligations, contending that Pepsi was contractually obligated to conduct marketing programs targeting Steak `n Shake's primary customer base, to wit, babyboomers, and that Pepsi failed to fulfill that obligation. Steak `n Shake invokes the contents of the Letter which it contends obligate Pepsi to conduct marketing programs consistent with Steak `n Shake's marketing strategy to target the baby-boomer population.

Pepsi rejoins that the Letter is not part...