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BEST BRANDS BEVERAGE, INC. v. FALSTAFF BREWING COR

October 3, 1985

BEST BRANDS BEVERAGE, INC., Plaintiff,
v.
FALSTAFF BREWING CORP., PEARL BREWING CO., Defendants


Owen, District Judge.


The opinion of the court was delivered by: OWEN

OPINION AND ORDER

OWEN, District Judge

 For several years, Best Brands has been the exclusive distributor of Falstaff beer products in a number of eastern states including New York. Believing itself threatened by what it views as astonishing and discriminatory price hikes by the brewer and by a secret and sudden loss of territorial exclusivity, Best Brands moves for a preliminary injunction in two main areas. First, it seeks to roll back prices charged it by Falstaff to those existing prior to November of 1984, noting that the questioned subsequent increases were not imposed on any other distributor nationwide. Second, it seeks to enjoin shipments to the new "dual master distributor", Consolidated Beverage Corporation, a company with a history of prior business failures *fn1" clandestinely appointed to distribute Falstaff products in areas heretofore served exclusively by Best Brands, noting that no other such dual master distributorship has ever existed heretofore.

 For reasons that follow, based on a showing of violations of contract and antitrust law, I grant Best Brands' motion for a preliminary injunction and deny Falstaff's application for a rehearing on a prior finding of contempt for violation of this court's temporary restraining order. *fn2"

 Since 1982, the parties have been dealing under the explicit and implicit terms of a master distributorship arrangement. Best Brands has been the exclusive distributor of Falstaff's Ballantine Ale and Haffenreffer Private Stock in a territory which, though initially limited to New York, now extends to Virginia. The course of dealing has reflected the exclusivity of territory and preferential pricing in return for Best Brands' investment of money and effort to build a market for a hitherto moribund product (Ballantine Ale) and an unknown one (Haffenreffer Private Stock). David Tye, President of Best Brands, testified that he made his exclusivity deal with one Jack Miller, now deceased, but formerly Vice Chairman of Falstaff; that it was a permanent arrangement, only cancellable "if I didn't do a good job." Lutz Issleib, a current Falstaff Vice President, acknowledged at his deposition that such deals are frequently made on the basis of a handshake, and subsequent documentation supports Best Brands' contention that it operated as exclusive master distributor with preferential pricing:

 1) A Falstaff document entitled "Exclusive Master Distributor Report" dated June 1, 1982, sets out the New York territory in which Best Brands was to begin operation as "exclusive master distributor" on behalf of Falstaff. Falstaff has not denied that it titled and signed that document.

 2) A letter dated March 31, 1983 from Clifford Lincoln (Falstaff's national sales manager) discussing a previous price increase and its effect on Best Brands' preferential pricing guarantee reads:

 
. . . Keep in mind when you discuss your F.O.B's with anyone, yours are the lowest in the East and have been with the concept of the mastering.

 Indeed, several Falstaff executives stated at depositions that mastering is always exclusive. None had ever heard of the concept of "dual mastering" before the present dispute. Earl Thompson, until recently plant manager of Falstaff's brewery at Fort Wayne, Indiana, stated:

 
Q. In your 33 years at Falstaff, have you ever before heard of two master wholesalers for one state?
 
A. Two master wholesalers - -
 
* * *
 
Q. Have you ever had dual master's [sic] before?
 
A. I said I did not recall such.

 Best Brands' business relationship with Falstaff has been quite successful, Its territory has been repeatedly enlarged (the last time, as recently as January 1984), the record contains a number of congratulatory letters expressing Falstaff's satisfaction and Falstaff executives' confirm that Best Brands is a major source of Falstaff's income. Issleib stated:

 
Q. Have you been satisfied with Best Brands' sales results over the course of the last year?
 
* * *
 
A. Are you talking about volume?
 
Q. Yes.
 
A. Case volume, certainly.
 
Q. Have you discussed Best Brands' sales volume with other people in Falstaff management over the last year?
 
A. Yes, Carl Mullen.
 
Q. Has Carl Mullen expressed satisfaction to you with Best Brands' sales volume during the last year?
 
A. Definitely.
 
Q. Have you ever heard anyone at Falstaff complain about Best Brands' sales volume, during the last year?
 
* * * *
 
A. Not to my recollection, no.
 
Q. Have you discussed Best Brands' sales volume over the last year with anyone else at Falstaff?
 
* * * *
 
A. Dave Kaiser, Earl Thompson, Val Picket.
 
* * * *
 
Q. What was the substance of your discussions concerning Best Brands' sales volume with Dave Kaiser?
 
A. Well, with all three of them it is just one general discussion, how happy I was with the sales that were being shipped to Best Brands, the volume.
 
Q. Why were you happy?
 
A. Well, if you ship a volume, the brewery makes money, obviously.
 
Q. So, the brewery has been making money as a result of [shipments to Best Brands].
 
A. That's public information.
 
Thompson stated:
 
Q. Could you identify the largest customer of the Fort Wayne, Indiana brewery?
 
A. Today?
 
Q. Yes.
 
A. Recently, I would say Best Brands, New York.
 
* * * *
 
Q. Which of Falstaff's customers purchased the largest volume of Falstaff products?
 
A. That would be Best Brands.
 
Q. Has that been the case for the last -- since the beginning of 1984?
 
A. I can't speak for '85, but I can speak for '84. That's a true fact . . .
 
* * * *
 
Q. Can you describe what you know of Best Brands' effort to promote sales of Falstaff products?
 
* * *
 
A. I just know the cases he sold in 1984, he sold most cases as far as a single distributor, for Falstaff.
 
* * * *
 
Q. Have sales of Falstaff products grown as a consequence of Best Brands' ...

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