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Doldo Brothers, Inc. v. Coors Brewing Co.

March 7, 2008

DOLDO BROTHERS, INC. A NEW YORK CORPORATION; AND FINGER LAKES BOTTLING CO., INC. A NEW YORK CORPORATION, PLAINTIFFS,
v.
COORS BREWING COMPANY A COLORADO COMPANY, DEFENDANT.



The opinion of the court was delivered by: Thomas J. McAVOY, Senior United States District Judge

DECISION & ORDER

I. INTRODUCTION

Plaintiffs commenced this action on February 22, 2008 pursuant to the Court's diversity jurisdiction seeking (a) a declaration that Defendant's stated intention to terminate Plaintiffs' distributor agreements for the exclusive territorial distribution of Molson beer violates New York Alcohol Beverage Control Law § 55-c ("ABC Law § 55-c "), and (b) a permanent injunction preventing termination of those agreements. See Compl., dkt. # 1. On February 25, 2008, Plaintiffs moved by way of application for an order to show cause for a preliminary injunction preventing termination of the agreements until further proceedings could be conducted under the provisions of ABC Law § 55-c. See Motion, dkt,. # 6. The Court granted the application for an order to show cause, ordered Defendant to respond by February 28, 2008, and set the matter down for a hearing on March 5, 2008. See 2/25/08 Order to Show Cause, dkt. # 7. Defendant responded by opposing the motion for a preliminary injunction and by making a cross-motion to: (a) deposit $1,291,000 into the Court pursuant to Fed. R. Civ. P. 67(a) as "reasonable compensation" for the Molson distribution rights of the 2 plaintiffs; and (b) stay litigation pending arbitration. See Def. Opp. and Cross-Motion, dkts. # 10 - # 11. Plaintiffs filed papers in opposition to the cross-motion on February 4, 2008, and the Court conducted a hearing on the motions on February 5, 2008.

II. BACKGROUND*fn1

a. Parties

Doldo Brothers, Inc. ("Doldo Brothers") is a licensed, multi-brand distributor of alcoholic and non-alcoholic beverages with its principal place of business in Watertown, New York. It has been the exclusive distributor of Molson in Jefferson and Lewis counties for 17 years. Finger Lakes Bottling Co., Inc. ("Finger Lakes") is a licensed, multi-brand distributor of alcoholic and non-alcoholic beverages with its principal place of business in Auburn, New York. It has been the exclusive distributor of Molson in Cayuga, Seneca, Ontario, Wayne, and Yeats counties for 16 years, and in Oswego County for 11 years. Coors Brewing Company ("Coors") is a Delaware corporation with its principal place of business in Colorado.

b. Agreements/Relationship of the Parties

In the mid-1990s, both Plaintiffs signed written distribution agreements with Martlet Importing Co, Inc. ("Martlet"), a former imported of Molson beer into the United States. In the late 1990s, Martlet's importing rights of Molson beer were assigned to a joint venture between Miller Brewing Company ("Miller") and Molson Canada. Plaintiffs both contend that their primary domestic beer is, and was at the time of the joint venture, Miller brand beer. Miller did not require Plaintiffs to sign written distribution agreements.

Molson Canada's relationship with Miller ended in 2000 and a joint venture between Molson Inc. and Coors was formed - Molson 2000 LLC - for the sole purpose of distributing Molson beer in the United States. In January 2001, Coors assumed sales and distribution responsibilities of this new joint venture. At that time, Molson 2000 LLC, which later changed its name to Molson USA LLC ("Molson USA"), requested Plaintiffs and the other New York Molson beer distributors to execute a document entitled the "Molson Amendment." In January 2001, both Plaintiffs executed the Molson Amendment. See Vasile Aff. ¶ 10 & Ex. B; Doldo Aff. ¶ 10 & Ex. B.

The Molson Amendment provides in pertinent part:

Any and all disputes between Distributor and the Company or its agent, Coors, except nonpayment of Distributor's account, including without limitation a dispute as to whether the Company has grounds to terminate this Agreement, which disputes are not resolved by Mediation, shall be submitted to binding arbitration in the city nearest to Distributor in which there is a regional office of the American Arbitration Association, before a single arbitrator, in accordance with the Commercial Arbitration Rules and procedures of the American Arbitration Association.

Molson Amendment ¶ 6.2.

In early 2001, Molson USA formulated and began to implement what it termed a policy of consolidation. Plaintiffs contend that the plan was "simply a marketing plan to align the Molson distributor network with the Coors distributor network." Plf. Mem L. p. 6. In late 2002, Molson USA contacted both Plaintiffs and purportedly told them that the plan was to align distribution channels with Coors distributors. Id. Molson USA proffered new distributor agreements, entitled "Molson Distributorship Agreement" (the "Molson Agreement"), to both Plaintiffs. Doldo Brothers signed the Molson Agreement, see Doldo Aff. ¶ 11 & Ex. C, Finger Lakes did not. The Molson Agreement has a binding arbitration provision with language identical to that found at paragraph 6.2 of the Molson Amendment. See Molson Agreement, ¶ 11.2.

Plaintiffs contend that, throughout 2003, their attorney disputed Molson USA's right to consolidate Molson beer distribution in New York. On Feb. 9, 2005, the parent companies of Coors and Molson merged, resulting the formation of the Molson Coors Brewing Company ("Molson Coors"). Plaintiffs contend that Molson USA "continued its operation as a wholly owned subsidiary of Molson Coors, and continued its efforts to align its distribution network." Plf. Mem. L. p. 6.

On March 11, 2005, Molson USA contacted both plaintiffs and reiterated that it adopted a nationwide "policy of consolidation" in 2002. Thereafter, on August 4, 2005, Molson USA advised Plaintiffs that Molson USA commenced an arbitration against another New York State wholesaler, John G. Ryan, Inc. (the "Ryan Arbitration"), to obtain a declaration that it was entitled pursuant to [ABCL] §55-c to terminated the Ryan distributorship pursuant to its consolidation policy. By this letter, Molson USA advised Plaintiffs that if successful, "Molson USA will seek declarations permitting the termination of its agreement with Plaintiffs." On September 19, 2007, as a result of the decision in the Ryan Arbitration, Molson USA advised Plaintiffs it was going to be "commencing an action against [Plaintiffs] in order to accomplish the consolidation of the Molson brands with the Coors network consistent with New York Consolidation Statutes Section 55-c."

Plf. Mem. L. p. 7.

By letter dated December 7, 2007, Coors announced to Plaintiffs that, as of December 2, 2007, Coors became, by assignment, the successor to Molson USA as the supplier of Molson brands. Id. By this letter, Coors further announced that "[p]ursuant to Section 55-c of the New York Alcoholic Beverage Control Law . . . Coors has elected to terminate the distribution agreement for the Molson Brands with your company as part of its nationwide policy of consolidation for the Molson Brands . . . effective March 15, 2008." Id. Coors offered to pay Plaintiffs 2.9 times their gross profit on the sale of the Molson brands as compensation for the loss of the right to distribute Molson brands in their respective territories. The "2.9 times gross profit on ...


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