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SACHS v. BROWN-FORMAN DISTILLERS CORP.

September 12, 1955

Joseph SACHS, doing business as Atlantic Liquor Wholesalers, Plaintiff,
v.
BROWN-FORMAN DISTILLERS CORPORATION, Defendant



The opinion of the court was delivered by: WEINFELD

Plaintiff, Joseph Sachs, a licensed liquor wholesaler, sold to the defendant, Brown-Forman Distillers Corporation, a distiller, 1,200 barrels of aged bulk whiskey for $ 100,259.49. He now seeks to recover three times the sum of $ 481,642.51 representing the difference between the sales price and $ 582,000, the claimed market value of the barrels of whiskey. The action is grounded upon an alleged violation by the defendant of the price discrimination provisions of the Robinson-Patman Act. *fn1" The same transaction is also the subject of a separate cause of action for single damages based upon an alleged violation of the Alcoholic Beverage Control Law of the State of New York which, in substance, makes it unlawful to discriminate directly or indirectly in price between one of the Robinson-Patman Act. *fn1" The same New York. *fn2"

At the threshold it is noted that at the time these parties entered into the transactions which give rise to the present suit, the plaintiff had scarce bulk whiskey and the defendant had scarce nationally advertised case goods. Each sold the desired commodity to the other. There is no claim that the price charged to the plaintiff for the case goods was different from that charged by the defendant for the same goods to any of its other wholesale distributors in the State of New York, who were the plaintiff's competitors. What plaintiff does charge, in substance, is that the defendant as a condition of the sale of the case goods to him required that he sell his scarce bulk whiskey below its fair market value and that the difference between the latter figure and the sales price allocated to the number of cases purchased by him represents an increased price per case over that charged to other of defendant's New York distributors and as such is a prohibited price discrimination.

The defendant contends that its purchase of the bulk whiskey was made at the then applicable maximum OPA prices, -- the maximum price that plaintiff legally could charge. Other defenses are also advanced.

 As against plaintiff's essential claim we consider the facts.

 For a number of years prior to April, 1946, the plaintiff was engaged on a modest scale in the wholesale liquor business under the name of Atlantic Liquor Wholesalers. On April 3, 1946 he entered into a formal agreement for the purchase of the entire outstanding capital stock of Capitol Wine & Spirit Corp. (hereinafter called 'Capitol'), a large and theretofore successful liquor wholesaler whose federal license had been annulled but which was then operating under successive extensions to permit an orderly liquidation of its inventory. The sale of 'Capitol's' stock to plaintiff was made subject to the approval of both the New York State Liquor Authority and the Office of Price Administration. Among Capitol's assets were 4,150 barrels of aged bulk whiskey. Plaintiff in the negotiations leading to the consummation of the contract was represented by his brother who at one time practiced law and was then the head of two finance companies and generally experienced in legal, business and financial matters.

 Plaintiff and his brother, convinced that a combined venture of Atlantic and Capitol required for its successful operation the distribution of nationally advertised brands of whiskey, undertook negotiations to secure such products. The defendant is a distiller of well-known and nationally advertised brands of whiskey, among them 'Old Forester' bourbon and 'King' blended whiskey. Accordingly plaintiff, even before the requisite approvals had been issued -- and indeed even before the formal agreement for the purchase by him of Capitol's stock had been signed -- initiated and thereafter conducted negotiations with the defendant to obtain defendant's aforementioned products. These negotiations had progressed so far that on June 20, 1946 a conference was held at the defendant's offices in Louisville, Kentucky between the plaintiff's representatives and the defendant's representatives. Again acting principally for the plaintiff at this session was his brother.

 At the June 20th conference an agreement was reached and embodied in a letter from the defendant addressed to Capitol. This agreement provided for the sale by Capitol to the defendant of 1,200 barrels of bulk whiskey at the applicable OPA maximum ceiling prices. Payment for this merchandise was to be made by the defendant against sight draft drawn on it with warehouse receipts attached.

 The June 20, 1946 letter further committed the defendant to the delivery to Capitol over a period of two years and six months, beginning July, 1946 and ending December, 1948, of 120,006 cases of defendant's Old Forester and King at the applicable maximum OPA ceiling price to wholesalers during price control, and when no longer subject to government price regulation, at the defendant's lowest f.o.b. price to similar wholesalers in effect from time to time. Capitol was to have the right to distribute these case goods in the Metropolitan area of New York City and Newburgh, New York. The agreement was stated to enure to the benefit of, and be binding upon, the successors and assigns of the respective parties, provided however that any assignee of Capitol be a duly licensed liquor wholesaler and satisfactory to the defendant.

 While formal approvals to the sale of the stock had not been issued at the time of the conference, plaintiff's representatives and Capitol's officers were aware that the respective governmental agencies had indicated consent to the sale and that the certificates of approval would be issued in due course.

 On June 27th, just one week after the letter agreement of June 20th was delivered to plaintiff's brother, the plaintiff, following the issuance of the requisite consents, became the sole stockholder of Capitol pursuant to the agreement of April 3, 1946. As of 12:01 a.m. July 1, 1946, pursuant to a plan of voluntary liquidation, all of Capitol's assets were distributed to the plaintiff as its sole stockholder, who thereby became the owner of the 4,150 barrels of bulk whiskey, which included the 1,200 to be sold to the defendant and referred to in the letter of June 20, 1946.

 OPA controls expired at midnight on June 30, 1946 *fn3" and no price control was in effect until July 25, 1946, when the Price Control Extension Act of 1946 became effective. *fn4" The twenty-five day period between is referred to as the hiatus period. On July 12, 1946 the plaintiff forwarded to the defendant warehouse receipts covering the entire 1,200 barrels of whiskey together with a sight draft at the June 20, 1946 OPA price totalling $ 100,257.49 which was accepted and paid by the defendant on July 15th -- all in accordance with the terms of the June 20th letter.

 As already noted, the June 20, 1946 letter was signed by the defendant but not by Capitol. However, on July 12, 1946 when plaintiff forwarded the warehouse receipts for the 1,200 barrels of whiskey together with the sight draft he advised the defendant it was 'in accordance with the terms of your letter of agreement * * *' and further, that among Capitol's assets taken over by him was the 'contract with your company, which I was very pleased to adopt' and requested the defendant pursuant to its letter of June 20, 1946 'to indicate * * * in writing that you are satisfied with the assignment of the said contract to me * * *'. On July 17th the defendant formally consented to the transfer 'of our contract with Capitol' to the plaintiff.

 The plaintiff's claim in this suit stems from the June 20, 1946 agreement, although he contends that as to him there was no agreement until July 17, 1946 when a novation occurred. The basic claim, already noted, is that the bulk whiskey which was sold for $ 100,257.49 had a fair market or 'true economic' value of $ 582,000 and that the difference was an overcharge or price discrimination practiced by the defendant in its sale to him of the case goods and a violation of the Robinson-Patman Act, entitling him to recover treble the amount which he claims to be the resultant damage.

 In my view of the case, it is unimportant to the decision of the basic question presented whether the contract be deemed to have been made on June 20, 1946 when price controls were in effect or in July, 1946 during the hiatus period. I say this although I am of the view, and so find, that the letter agreement of June 20, 1946, although subject to the defense of the Statute of Frauds, and possibly other defenses, by Capitol, was fully ratified, affirmed and adopted by the plaintiff, as evidenced by various writings and memoranda signed by or on behalf of the plaintiff. This makes it ...


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