Sidney Frank Importing Co. v. Beam Inc.

• Decision Date: 14 February 2014
• Docket Number: No. 13–cv–1391 (NSR).,13–cv–1391 (NSR).
• Citation: 998 F.Supp.2d 193
• Parties: SIDNEY FRANK IMPORTING CO., INC., Plaintiff, v. BEAM INC. and Cooley Distillery PLC, Defendants.
• Court: U.S. District Court — Southern District of New York

998 F.Supp.2d 193

SIDNEY FRANK IMPORTING CO., INC., Plaintiff,

v.BEAM INC. and Cooley Distillery PLC, Defendants.

No. 13–cv–1391 (NSR).

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

Feb. 14, 2014.

William S. Gyves, Michael Thomas Keilty, Epstein Becker & Green, P.C., New York, NY, for Plaintiff.

Andrew H. Schapiro, Elinor Catherine Sutton, Michael Barry Carlinsky, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, for Defendants.

OPINION AND ORDER

NELSON S. ROMÁN, District Judge.

Plaintiff Sidney Frank Importing Co., Inc. (“SFIC” or “Plaintiff”) commenced the instant action against Beam Inc. (“Beam”) and Cooley Distillery plc (“Cooley”) (collectively “Defendants”) seeking monetary damages for Cooley's alleged breach of a long-term service contract, Beam's alleged violation of common law unfair competition, and Beam's alleged tortious interference with business relations. Defendant now moves pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Plaintiff's First Amended Complaint (“FAC”) for failure to state a claim upon which relief may be granted. Defendant asserts: that under the express terms of the contract, it expired when Plaintiff failed to give written notice to Cooley that it would be extended beyond the initial period; that the unfair competition claim is duplicative of the breach of contract claim; and that Plaintiff fails to sufficiently allege both wrongful conduct and harm for the tortious interference claim. For the following reasons, Defendant's motion to dismiss the complaint is denied.

I. FACTS ALLEGED IN PLAINTIFF'S COMPLAINT

Plaintiff, a New York corporation, owns and imports a broad line of spirits and other alcoholic beverages. Plaintiff has a proven track record of building brands through substantial investment, savvy marketing, and good relationships with wholesale distributors across the United States. Plaintiff's most notable brand is Jägermeister, for which it secured importing rights in 1974. Jägermeister became the top selling imported liqueur in the United States, thanks to Plaintiff's efforts. In 1997, Plaintiff created Grey Goose vodka. Within seven years, Grey Goose became the world's top ultra-premium vodka, before being sold for $2.3 billion. In 2004, Plaintiff sought to recreate similar success with a new Irish whiskey to market in the U.S., Michael Collins, the subject of the service contract with Cooley at issue in the instant action.

Cooley, incorporated under Irish law, is one of only three whiskey distilleries in Ireland. Until January 2012, Cooley was the only remaining independent distillery, producing its own brands—Kilbeggan Irish Whiskey, Tyrconnell Single Malt Irish Whiskey, Connemara Peated Single Malt, and Greenore Single Grain Irish Whiskey—and supplying whiskey to other companies for their private labels. Beam, a Delaware corporation headquartered in Illinois, acquired Cooley and its Kilbeggan brand in 2012. Beam is the largest spirits company based in the U.S. and the fourth largest in the world.

Plaintiff's Michael Collins brand was named for a legendary Irish revolutionary figure who led the struggle for independence from the British in the early 1900s. In 2004, Plaintiff obtained the intellectual property rights to use the Michael Collins name and secured the support of the Collins family. It also began designing and sourcing the bottles and packaging. Plaintiff identified Cooley as the logical choice to produce the brand because of its corporate independence and its utilization of a double distillation process, a point of distinction which Plaintiff desired for its Michael Collins brand. Plaintiff commissioned Cooley to develop both a single malt and a blended Irish whiskey, and the two entered a Product Development Agreement in May 2005. Together the companies worked up detailed specifications for the whiskey, finalized details of bottles, shipping cartons, and other essentials, reviewed the logistics of shipping from Ireland to the U.S., and determined pricing. By November 2005, Plaintiff provided Cooley with a forecast of future demand to ensure that Cooley would have sufficient stock over the years. By December the parties had finalized specifications for the two products.

On January 11, 2006, Plaintiff and Cooley entered into a Services Agreement (“Agreement”).¹ Plaintiff alleges such agreements are commonly used to secure an uninterrupted supply and ensure long-term viability. The Agreement designated Cooley as the exclusive supplier of Michael Collins Blended Irish Whiskey and Michael Collins Single Malt Irish Whiskey. Cooley undertook to manufacture the products in conformity with Plaintiff's specifications regarding color, taste, alcohol content, and consistency; to manufacture enough to meet the quantity specified in Plaintiff's purchase orders; and to bottle and package the products for shipment. Title to the whiskey itself was to belong to Cooley until collection by Plaintiff at Cooley's premises. Title to the Dry Goods, i.e., bottles, labels, corks, capsules, packaging (except shipping cartons) and other necessary dry goods, was to belong to Plaintiff throughout. The Agreement incorporated medium-term forecasts through 2011 for the blended whiskey and through 2015 for the single malt whiskey. It also set prices for the first three years and allowed future increases by Cooley “upon not less than one hundred and twenty (120) days' prior written notice to [Plaintiff] so long as any increase is reasonable and directly related to Cooley's increased costs,” which were to be “promptly documented if requested by [Plaintiff].” (Defs.' Ex. B (Agreement cl. 3.4).) Further, the Agreement set up a schedule of deposits based on future projections payable by Plaintiff to Cooley beginning in the third year, to be credited against the purchase of the whiskey. Portions of the deposits were to be forfeited if Plaintiff failed to meet forecasts.

Regarding the duration of the Agreement, Clause 16.1 provided for an initial period of approximately two years, ending December 31, 2007, ( see Agreement cl. 1.1, definition of “Contract Year”), allegedly so that Plaintiff could assess the viability of the Michael Collins brand before committing to an extended contractual term. The initial period was to be followed by six-year renewal periods. To renew or terminate at the end of the initial period:

Not less than 3 months prior to expiry of the Initial Period, [Plaintiff] may give notice in writing to Cooley either:

(a) that this Agreement will terminate on expiry of the Initial Period; or

(b) that this Agreement will continue for further successive periods of 6 years (each a “Renewal Period”).

(Agreement cl. 16.1.) Termination of the Agreement at the end of a renewal period was allowed either:

(a) by [Plaintiff] on giving written notice to Cooley not less than 2 years prior to expiry of the then current Renewal Period; or

(b) by Cooley on giving written notice to [Plaintiff] not less than 3 years prior to expiry of the then current Renewal Period[.]

(Agreement cl. 16.2.) In the event of a material breach:

This Agreement may be terminated forthwith by either party on written notice if the other party is in material breach of the terms of the Agreement and, in the event of a breach capable of being remedied, fails to remedy the breach within sixty (60) days of receipt of notice in writing of such breach.

(Agreement cl. 16.4.) Recognizing the possibility that Cooley, as the only independent distiller in Ireland, could be the target of acquisition by large conglomerates such as Beam, the parties agreed that:

In circumstances where a third party obtains “control” of Cooley as defined by reference to Section 432 of the Taxes Consolidation Act, 1997, [Plaintiff] shall have the option to either:

(a) terminate this Agreement on giving 2 years' written notice to Cooley; or

(b) require Cooley to continue to perform its obligations under this Agreement for a further minimum period of six (6) years or until the end of the next Renewal period (whichever is later) [;]

(Agreement cl. 16.7), and:

Cooley shall not at any time during the term of this Agreement divest itself of any of its assets which would have the effect of preventing or materially hindering it from fulfilling its obligations under this Agreement unless the person to whom the assets are divested agrees to enter into a novation agreement under which it assumes the rights and obligations of Cooley under this Agreement and is acceptable in all respects to [Plaintiff].

(Agreement cl. 19.8). The parties then chose to address waivers of contractual rights:

No delay, neglect, or forbearance on the part of either party in enforcing against the other party any term or condition of this Agreement shall either be or be deemed to be a waiver or in any way prejudice any right of that party under this Agreement.

(Agreement cl. 19.2.) The Agreement “may not be modified except by an instrument in writing signed by the duly authorised representatives of the parties,” (Agreement cl. 19.6). Finally, the Agreement “shall be governed by and construed in accordance with Irish law,” (Agreement cl. 21.1).

Plaintiff alleges that it invested substantial money, time, and sweat equity during the relationship with Cooley, and spent approximately $14 million from 2006 through 2012 in promotions, marketing, and advertising. The FAC describes numerous purchase orders and periodic projections of demand sent to Cooley during that time. It also alleges that in July 2007 Plaintiff's and Cooley's representatives conferred regarding current inventory and Plaintiff's future production needs, and that the parties agreed to continue the contractual relationship beyond the initial term because the Michael Collins brand was developing nicely. The parties did not memorialize this extension in writing.

In January 2008, Plaintiff paid the deposit to Cooley that was required in the third year by Clause 6.1. This deposit was applied to...