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Finger Lakes Bottling Co., Inc. v. Coors Brewing Co.

October 18, 2010

FINGER LAKES BOTTLING CO., INC., PLAINTIFF,
v.
COORS BREWING COMPANY, DEFENDANT.



The opinion of the court was delivered by: Sidney H. Stein, U.S. District Judge

OPINION & ORDER

Plaintiff Finger Lakes Bottling Co., Inc. brings this action against Coors Brewing Company to enforce an arbitration award pursuant to 9 U.S.C. § 9, and to grant Finger Lakes prejudgment interest pursuant to New York State law. The parties have each moved for summary judgment on the issue of prejudgment interest. For the reasons set forth below, this Court grants Finger Lakes interest on the arbitration award at the Treasury-bill rate from March 21, 2008 until February 25, 2009, and at the statutory rate of nine percent from February 25, 2009 until the entry of judgment in this action.

I. BACKGROUND

Finger Lakes, a beer wholesaler, is a New York corporation with its principal place of business in New York. Coors, a brewer, is a Colorado corporation with its principal place of business in Colorado. Because the parties are citizens of different states, and more than $75,000 is in controversy, this Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a).

Finger Lakes and Coors were parties to an agreement dated January 8, 2003 ("Distribution Agreement") for Finger Lakes to distribute Molson brand beer in upstate New York.*fn1 As part of its plan to consolidate the distribution of its brands, Coors ultimately terminated the Distribution Agreement pursuant to New York State Alcoholic Beverage Control Law section 55-c ("Section 55-c"), N.Y. ALCO. BEV. CONT. LAW § 55-C (McKinney 2000 & Supp. 2010), which governs the termination of distribution "agreements between brewers and beer wholesalers." (Def.'s 56.1 ¶¶ 18, 19; Pl.'s Resp. to Def.'s 56.1 ¶¶ 18, 19.) On March 11, 2005, Molson-Coors' predecessor to the contract-first sent Finger Lakes written notice that Molson planned to consolidate its distributors in New York and that a test arbitration case was underway to determine the fair market value ("FMV") Molson would pay wholesalers to terminate each distribution agreement pursuant to Section 55-c. (Def.'s 56.1 ¶ 19; Pl.'s Resp. to Def.'s 56.1 ¶ 19.) On September 19, 2007, Coors gave Finger Lakes further written notice that Molson would be pursuing its consolidation plan against Finger Lakes. (Def.'s 56.1 ¶ 22; Pl.'s Resp. to Def.'s 56.1 ¶ 22.) Then, on December 7, 2007, Coors notified Finger Lakes that it intended to terminate the Distribution Agreement, effective March 15, 2008. (Def.'s 56.1 ¶¶ 24, 26; Pl.'s Resp. to Def.'s 56.1 ¶¶ 24, 26.) At this time, Coors offered to pay Finger Lakes an estimate of FMV-based on the award in the test arbitration case-plus any other damages that resulted from termination of the Distribution Agreement. (Def.'s 56.1 ¶ 24; Pl.'s Resp. to Def.'s 56.1 ¶ 24.)

In February 2008, Finger Lakes filed a complaint in the Northern District of New York, seeking 1) a declaration that Coors' intended termination of the Distribution Agreement violated Section 55-c and 2) a permanent injunction preventing its termination. The court stayed the litigation pending arbitration and denied Finger Lakes injunctive relief. (Def.'s 56.1 ¶¶ 27-33; Pl.'s Resp. to Def.'s 56.1 ¶¶ 27-33; see also Doldo Bros. and Finger Lakes Bottling Co. v. Coors Brewing Co., No. 7:08CV206, 2008 U.S. Dist. LEXIS 17646, at *29 (N.D.N.Y. Mar. 7, 2008).) In that action, Coors also sought leave to deposit with the court pursuant to Fed. R. Civ. P. 67 its estimate of reasonable compensation, but the court denied Coors' motion. (Id.)

The Distribution Agreement provides for the binding arbitration of disputes. (Distribution Agreement § 11.2.) On March 20, 2008, Coors commenced an arbitration proceeding against Finger Lakes under the auspices of the American Arbitration Association ("AAA"). (Pl.'s 56.1 ¶ 3; Def.'s 56.1 ¶ 3.) Coors sought a declaration of its right to terminate the Distribution Agreement and of the amount of compensation it owed Finger Lakes. (Arbitration Award ¶ 6.) The following day, Coors sent Finger Lakes a notice of actual termination of the Distribution Agreement. (Pl.'s 56.1 ¶ 5; Def.'s 56.1 ¶ 5.) Along with this letter, Coors-through Wright Wisner Distributing Corp. ("Wright Wisner"), a third party acting on its behalf-tendered Finger Lakes a check for $908,893.87, its good faith estimate of FMV pursuant to Section 55-c. (Pl.'s 56.1 ¶ 6; Def.'s 56.1 ¶ 6.) Finger Lakes did not accept this check, and the parties have never agreed on an amount of reasonable compensation. (Pl.'s 56.1 ¶¶ 7, 10; Def.'s 56.1 ¶¶ 7, 10.)

On August 27, 2008, the parties agreed to limit the scope of arbitration to "the damages to which Finger Lakes is entitled by reason of Coors' termination of their distribution rights, and by further agreement that the compensatory damages payable would be measured by the fair market value of those distribution rights." (Pl.'s 56.1 ¶ 11; Def.'s 56.1 ¶ 11.) Additional briefing took place on the issue of exemplary damages, which the arbitrator subsequently denied. (Def.'s 56.1 ¶¶ 36, 37; Pl.'s Resp. to Def.'s 56.1 ¶¶ 36, 37.) Evidentiary hearings were held in December 2008. (Pl.'s 56.1 ¶ 12; Def.'s 56.1 ¶ 12.) In its post-hearing brief, Finger Lakes specifically requested prejudgment interest. (Def.'s 56.1 ¶ 39; Pl.'s Resp. to Def.'s 56.1 ¶ 39.)

On February 25, 2009, the arbitrator granted Finger Lakes $1,060,224. (Award of Arbitrator Joanne Barak dated Feb. 25, 2009 ("Arbitration Award").) The Arbitration Award stated that "[t]he sole issue in this arbitration is a determination of the fair market value ("FMV") on March 21, 2008, of Finger Lakes' distribution rights which were lost on account of the termination." (Arbitration Award ¶ 12.) In a subsequent Disposition of the Application for Clarification of Award, the arbitrator wrote that the subject of prejudgment interest was "beyond the scope of the arbitration and was not considered" and that Finger Lakes' "request to amend the Award to include interest from March 21, 2008, is denied without prejudice to seek interest in any enforcement proceeding." (Disposition of Application for Clarification of Award, Joanne Barak, dated Mar. 31, 2009 ("Clarification"); see also Pl.'s 56.1 ¶ 13; Def.'s 56.1 ¶ 13.)

On April 10, 2009, Wright Wisner tendered Finger Lakes a check for the Arbitration Award amount. (Pl.'s 56.1 ¶ 14; Def.'s 56.1 ¶ 14.) One week later, Finger Lakes wrote Coors that it would not accept the check unless Coors stipulated that Fingers Lakes was fully reserving its right to seek prejudgment interest. Coors did not respond to that letter, and Finger Lakes has never deposited the $1,060,224 check. (Pl.'s 56.1 ¶¶ 15-16; Def.'s 56.1 ¶¶ 15-16.)

Three months later, Finger Lakes commenced this action, asking the Court to confirm the Arbitration Award and grant prejudgment interest at the statutory rate of nine percent. Finger Lakes contends that it is entitled as a matter of right to prejudgment interest pursuant to New York C.P.L.R. section 5001 (MCKINNEY 2000), because Coors breached its contract with plaintiff and deprived Finger Lakes of certain property rights. Finger Lakes argues, in the alternative, that prejudgment interest is appropriate, pursuant to C.P.L.R. section 5002 (MCKINNEY 2000), from August 27, 2008, the date the parties agreed that the only issue for arbitration was the fair market value of plaintiff's distribution rights. Coors contends that no interest is owed, because 1) the arbitrator declined to grant prejudgment interest, 2) Section 55-c does not authorize prejudgment interest, and 3) Finger Lakes has repeatedly refused to accept Coors' offers of payment. Each side, of course, maintains that the equities tip in its favor. As noted, Finger Lakes and Coors have now both moved for summary judgment on the issue of prejudgment interest.

II. DISCUSSION

A. Summary Judgment Standard

Summary judgment is appropriate only if the evidence shows that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In determining whether a genuine issue of material fact exists, the Court "is to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought." Patterson v. Cnty. of Oneida, 375 F.3d 206, 219 (2d Cir. 2004). Nonetheless, the party opposing summary judgment "may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence" in support of its factual assertions. D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998). The same standard applies where the parties file cross-motions for summary judgment, and "each party's ...


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