Sazerac Co., Inc. v. Falk

• Decision Date: 18 August 1994
• Docket Number: No. 94 Civ. 2330 (RWS).,94 Civ. 2330 (RWS).
• Citation: 861 F. Supp. 253
• Parties: SAZERAC COMPANY, INC., Plaintiff, v. Ferdie A. FALK, and Robert Baranaskas, Defendants.
• Court: U.S. District Court — Southern District of New York

861 F. Supp. 253

SAZERAC COMPANY, INC., Plaintiff, v. Ferdie A. FALK, and Robert Baranaskas, Defendants.

No. 94 Civ. 2330 (RWS).

United States District Court, S.D. New York.

August 18, 1994.

COPYRIGHT MATERIAL OMITTED

Kirkland & Ellis, New York City (Terrence J. Galligan, of counsel), for plaintiff.

Baer Marks & Upham, New York City (Howard Graff, of counsel), for defendants.

OPINION

SWEET, District Judge.

Defendants Robert Baranaskas ("Baranaskas") and Ferdie Falk ("Falk") (collectively the "Defendants") move to dismiss the Complaint, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, in this diversity action brought by Plaintiff Sazerac Company, Inc. ("Sazerac") or, in the alternative, the Defendants seek to join Takara Shuzo Co., Ltd. ("Takara") as a necessary party, pursuant to Rule 19 of the Federal Rules of Civil Procedure.

For the reasons set forth below, the Defendants' motion to dismiss is granted.

The Parties

Sazerac is a corporation organized and existing under the laws of the State of Louisiana, with its primary place of business in New Orleans. Sazerac distributes alcohol beverage products throughout the United States.

Falk is a citizen of the State of Florida and Baranaskas is a citizen of the State of New York. The Defendants were the majority owners of Age International Inc. ("Age"), a Kentucky Corporation with offices in Roslyn, New York, which distributes alcohol beverage products throughout the United States, through AADC Holding Company, Inc. ("AADC"), a New York Corporation. Falk owned 35.1% and Baranaskas owned 33.9% of the stock of AADC.

Takara, a Japanese Corporation, is the exclusive distributor of Age products in Japan and was the minority shareholder in AADC at the time the alleged events occurred giving rise to this action. Takara owned approximately 22.5% of the stock of AADC and had a contractual right of first refusal to purchase the remaining 77.5%.

Prior Proceedings and Facts

On April 30, 1991, Takara purchased approximately 22.5% of the stock in AADC. Under the terms of that sale, Takara had a 30-day right of first refusal to purchase all other shares of AADC stock.

On July 10, 1992, Defendants Baranaskas and Falk entered into an agreement (the "Heublein Agreement") to sell their majority interest in AADC, the parent company of Age, with Heublein Inc. ("Heublein") for approximately $20,000,000. Heublein, a subsidiary of the multinational corporation Grand Metropolitan Incorporated, is in the business of importing and distributing alcoholic beverages such as Bailey's Irish Cream. On August 4, 1992, written notice of Heublein's offer, and AADC's intention to accept, was sent to Takara. On September 3, 1992, Takara gave notice to AADC that it intended to exercise its right of first refusal to purchase the stock. Apparently, Heublein informed Takara that it intended to proceed with the purchase which was due to close on September 4, 1992. In the absence of assurances to the contrary from AADC, Falk or Baranaskas, Takara then sought a temporary restraining order in the United States Court for the Southern District of New York.

On September 4, 1992, Takara, as the minority shareholder in AADC, filed suit in the Southern District seeking to enjoin Baranaskas and Falk from selling their shares of AADC to Heublein on the theory that it was guaranteed a right of first refusal in its shareholder's agreement with Baranaskas and Falk. On September 4, 1992 the Honorable John S. Martin granted a temporary restraining order prohibiting the transfer of any shares of AADC to Heublein and a September 9 hearing date was set for a determination as to whether a preliminary injunction should issue. (Thomas Decl.; Defs.' Mot.Ex. C.)

On September 21, 1992, a stipulation and consent order (the "Consent Order") was "So Ordered" by the Honorable Kevin T. Duffy. The Consent Order stated: (1) that Takara had sent a letter on September 3, 1992 to AADC regarding Takara's right of first refusal of the sale of AADC stock; (2) that Takara tendered to AADC a proposed Share Purchase Agreement ("SPA") which provided a closing date of September 30, 1992; and (3) that the closing date could be extended until October 15, 1992, provided there were reasonable grounds for such notice; (4) that AADC, Baranaskas, Falk and Heublein all agreed to the provisions of the closing date in the SPA; and (5) that if Takara did not purchase the outstanding stock of AADC by September 30 or give notice extending the Closing Date, that Baranaskas and Falk would sell the stock to Heublein in accordance with the terms of the Heublein Agreement. (See Consent Order; Defs.' Mot. to Dismiss, Ex. B.)

On September 30, 1992, Takara exercised its right of first refusal and purchased the outstanding stock in AADC in accordance with the terms of the SPA — allegedly the "mirror image" of the Heublein Agreement. Sazerac contends that at the same time the SPA was executed between the Defendants and Takara, a "concurrent" sale by Takara to the Sazerac of certain "Age Assets" of AADC and its subsidiaries was formalized in an Asset Purchase Agreement (the "APA") on September 3, 1992. The APA has not been attached to the Complaint and its terms and parties are unknown.

Prior to the closing, Age was the primary operating company owned by AADC. Sazerac alleges that the Defendants were aware that Takara intended to sell the Age Assets and certain AADC subsidiaries to Sazerac immediately upon the execution of the SPA by them and Takara. According to Sazerac, the Defendants thus knew of the representations made in connection with the sale of AADC stock were for the benefit of Takara as well as Sazerac.

Takara apparently did transfer the Age Assets to Sazerac, although Takara retained ownership of the corporate entity Age and the trademarks to certain of the Age Assets. In addition, Takara appears to have entered into a long term licensing agreements with Sazerac relating to the use of those trademarks. Sazerac, in turn, agreed to indemnify Age and Takara for certain assumed liabilities.

Sazerac now seeks to file suit against Defendants Falk and Baranaskas for violating warranties allegedly made to Takara under Section 6.8 of the SPA by failing to disclose certain pre-existing obligations concerning: (1) the Sterling Stone and W & W contracts' liquidated damages provisions which required Age to pay an amount equal to the sum of monthly commissions paid to those parties over a year; (2) the Missouri Conrad Liquor Co. distribution contract, an obligation allegedly not disclosed by the Defendants prior to the closing of the SPA; and (3) certain of the Age employee benefit plans later discovered to be out of compliance with the requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., contrary to the Defendants' alleged representations otherwise and Section 6.11(b) of the SPA with Takara.

As a result, Sazerac alleges the following four legal counts in its Complaint: (1) that the Defendants intentionally misrepresented and failed to disclosure the obligations binding the Age Assets; (2) that the Defendants negligently misrepresented certain facts to Sazerac, under a theory that due to the "integrated" nature of the transactions between Sazerac and Takara and between Takara and the Defendants, there was a "functional equivalent of contractual privity" between the Defendants and Sazerac; and (3) that Sazerac is a third party beneficiary to the SPA between the Defendants and Takara and should accordingly be reimbursed for its losses due to the alleged misrepresentations and non-disclosures; and (4) a declaration should be issued by the Court that any liabilities incurred by Sazerac due to the Defendants' failure to disclose certain facts should be honored by the Defendants themselves. Sazerac seeks $200,000 in damages.

The Defendants contend that the action should be dismissed as the Sazerac's claims hinge on the unsupported theory that there is a legal relationship between Sazerac and the Defendants. In the alternative, the Defendants move for joinder of Takara on the theory that it is a necessary party whose party is required for the prosecution of this action.

The motion was filed on May 5, 1994. Oral argument on the motion was heard on June 22, 1994, and it was considered fully submitted at that time.

Discussion

On a Rule 12(b)(6) motion to dismiss, the factual allegations of the complaint are presumed to be true and all factual inferences must be drawn in their favor and against the defendants. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir.1989); Dwyer v. Regan, 777 F.2d 825, 828-29 (2d Cir.1985). Accordingly, the factual allegations considered here are taken from the Plaintiffs' Amended Complaint and do not constitute findings of fact by the Court. They are presumed to be true only for the purpose of deciding the present motions.

Rule 12(b)(6) also imposes a substantial burden of proof upon the moving party. A court may not dismiss a complaint unless the movant demonstrates "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitled him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); accord Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984) (quoted in H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 250, 109 S.Ct. 2893, 2906, 106 L.Ed.2d 195 (1989)).

In the event that a plaintiff alleges a claim based on a written instrument, as is the case here, the court may consider such an instrument in ruling on a Rule 12(b)(6) motion even if it was not attached to the complaint and made a part thereof under Rule 10(c), Fed.R.Civ.P. See Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir.1991) ("Cortec") (considering publicly filed disclosure documents), ...