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Canada Dry Delaware Valley Bottling Co. v. Hornell Brewing Co.

March 31, 2009

CANADA DRY DELAWARE VALLEY BOTTLING COMPANY, ET AL., PETITIONERS,
v.
HORNELL BREWING CO., INC., D/B/A FEROLITO, VULTAGGIO & SONS, RESPONDENT.



The opinion of the court was delivered by: Ronald L. Ellis, United States Magistrate Judge

OPINION AND ORDER

I. INTRODUCTION

On June 24, 2008, Canada Dry Delaware Valley Bottling ("CDDV") and Canada Dry Potomac Corporation ("CDP") (collectively, "Canada Dry") filed a Motion to Compel Compliance and for Contempt against Hornell Brewing Company, Inc. ("Hornell"). Canada Dry alleges that Hornell has violated the terms of a settlement agreement that the Parties stipulated to during arbitration. The agreement was entered as a Consent Award by an arbitration panel, confirmed by a Court Order, and entered as a Judgment. Canada Dry seeks an order (1) compelling Hornell to comply with the Consent Award and (2) finding Hornell in civil contempt. The Honorable Sidney H. Stein referred this motion to the undersigned on October 2, 2008. For the reasons set forth below, Canada Dry's Motion to Compel Compliance and for Contempt is DENIED.

II. BACKGROUND

A. The Parties

Hornell is a New York Corporation that produces, markets, and sells beverages and other products. (June 24, 2008 Decl. of John Tanglienti ("Tanglienti Decl.") ¶¶ 3-4.) Hornell's core product line is AriZona Iced Tea in a variety of flavors and package sizes. (Id. ¶ 5.) Hornell began marketing and manufacturing AriZona Iced Tea in 1992, and it was the top-selling iced tea brand in the United States in 2007. (July 23, 2008 Decl. of Don Vultaggio ("Vultaggio Decl.") ¶ 3; Tanglienti Decl. ¶ 8.)

CDDV and CDP are bottlers and distributors of soft drinks and other beverage products in New Jersey, Maryland, Ohio, Delaware, Virginia, and the District of Columbia. (Vultaggio Decl. ¶ 4.) They are part of the so-called "Honickman Group," which includes other bottling and distribution companies. (Id.) The Honickman Group is the sixth largest bottler in the United States, with net sales of over one billion dollars. (Id.)In addition to AriZona Iced Tea products, CDDV and CDP also distribute a variety of other beverage products. These include Snapple Iced Teas, Mistic Iced Teas, and Nantucket Nectars, which directly compete with Hornell's AriZona Iced Teas. (Id. ¶ 5.)

B. The Distributor Agreements

In 1997, Hornell entered into two Distributor Agreements with CDDV (the "CDDV Agreements"). Under these agreements, Hornell appointed CDDV its exclusive distributor with respect to certain Hornell products in five counties in Pennsylvania, seven counties in New Jersey, and all of Delaware.(Id. ¶7.) The A-1 Schedules of the CDDV Agreements authorize CDDV to distribute, on an exclusive basis, "[a]ll non-alcoholic beverage products in all product sizes, except those set forth on Schedule A-2." (Id., Ex. B at 37.) The A-2 Schedules authorize CDDV to distribute, on a non-exclusive basis,

All products in 7.7 ounce cans, tetra packs, 64 ounce bottles, 128 ounce bottles and 16 ounce glass bottles; provided that the products in 16 ounce glass bottles are non-exclusive only as to sales to . . . non-traditional beverage outlets . . . [and] that such non-exclusivity shall not apply as to any such stores located only in the Philadelphia and New York Metropolitan areas. (Id., Ex. B at 38.) In addition to the exceptions to exclusivity in the A-2 Schedules, CDDV's appointment as distributor is not exclusive with respect to new products that Hornell might develop in the future. (Id., Ex. B at ¶ 8.) Paragraph 8 of the CDDV Agreements, entitled "Marketing of Other Products," contemplates that Hornell might, at some time in the future, decide to sell other products in the CDDV Territory, and requires Hornell to offer certain of these to CDDV for exclusive distribution:

This Agreement shall extend only to those Products specifically set forth in Schedules A-1 and A-2. Manufacturer shall offer to Distributor the right to distribute on an exclusive basis other non-alcoholic beverage products sold in single serve (32 ounces or less) packages that do not require refrigeration which Manufacturer may, at any time in the future during the term hereof, decide to sell in the Territory. . . . (Id.) The CDDV Agreements further provide that, should Canada Dry decide to buy any other products that Hornell decides to sell in the future, "such other products shall be entered on Schedules A-1 and A-2 as either Exclusive or Non-Exclusive Products as applicable." (Id.)

In 1998, Hornell entered into a similar Distributor Agreement with CDP (the "CDP Agreement"). (Vultaggio Decl. ¶ 9.) The CDP Agreement grants CDP exclusive distribution rights to certain Hornell products in the District of Columbia and in seven counties in Maryland. (Id.) In relevant part, Schedule A-1 of the CDP Agreement authorizes CDP to distribute, on an exclusive basis in a defined territory, all non-alcoholic, non-carbonated beverage products in all product sizes, except for those set forth in Schedule A-2. (Id., Ex. C at 22.) Schedule A-2 authorizes CDP to distribute, on a non-exclusive basis, all 7.7 ounce cans, tetra packs, and all products larger than one liter. (Id., Ex. C at 23.) As with the CDDV Agreements, the CDP Agreement contemplates that Hornell might, at some time in the future, decide to sell other products in the CDP Territory, and requires Hornell to offer certain of these to CDP for exclusive distribution. (Id., Ex. C at 10.) Any future products Hornell decides to sell, and which CDP accepts, must be entered on Schedule A-1 or A-2 as applicable. (Id.)

The appointment of CDDV and CDP as distributors of Hornell products under the CDP Agreement and the CDDV Agreements (collectively, the "Distributor Agreements"), is perpetual, subject to the termination clauses within the Agreements. (Id., Ex. B ¶ 1, Ex. C ¶ 1.) The Distributor Agreements also contain identical arbitration clauses. (Id. ¶ 11.) The arbitration clauses provide that "[a]ny and all disputes hereunder other than a failure by the Distributor to satisfy its payment obligations to the Manufacturer . . ...


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