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Paul Beverage Co., Inc. v. The American Bottling Co.

United States District Court, E.D. Missouri, Eastern Division

March 5, 2019

PAUL BEVERAGE CO., INC., Plaintiff,
v.
THE AMERICAN BOTTLING CO., Defendant.

          MEMORANDUM AND ORDER

          JEAN C. HAMILTON UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Defendant The American Bottling Company's Motion for Summary Judgment, filed December 6, 2018. (ECF No. 40). The motion is fully briefed and ready for disposition.

         BACKGROUND

         Plaintiff Paul Beverage Co., Inc. (“Paul Beverage” or “Plaintiff”), is a Missouri corporation with its principal place of business located in Jefferson County, Missouri. (Defendant The American Bottling Co.'s (“ABC” or “Defendant”) Statement of Uncontroverted Material Facts in Support of its Motion for Summary Judgment (“ABC's Facts”), ¶ 1). ABC was a successor-in-interest to Seven Up Bottling Company of St. Louis, Inc., and is a Delaware corporation with its principal place of business located in Plano, Texas. (Id., ¶ 2).

         On or about November 26, 1990, Paul Beverage and ABC entered into a “Distributor and Consignment Agreement” (“Agreement”), whereby the parties agreed that Paul Beverage, as an independent business enterprise, would distribute ABC's products pursuant to the terms of the Agreement. (ABC's Facts, ¶ 4). The Agreement contained the following relevant provisions:

Distributor's Opportunity…..The Company (ABC) will enter into such an Agreement with only one (1) Distributor (i.e., Paul Beverage) for responsibility to distribute the Company's Scheduled Products in any given market area which shall be a part of the geographic areas served by the Company and which shall be referred to as the “Distributor's market area of responsibility”. In each such case, the Company thus depends upon that Distributor to provide, and Distributor is personally obligated to Company to provide, the effective, consistent and regular distribution, timely deliveries and adequate market representation (as further set out herein) of the Company's Scheduled Products in the Distributor's market area of responsibility to enable Company to satisfy its own obligations to its franchisors and trademark licensors of market penetration and service and supply of products to retail outlets on a consistent and regular basis, by means of store door delivery and shelf stocking, and that Distributor shall remain ultimately responsible to Company for the performance of Distributor's obligations hereunder….

         I. Services to be performed by Distributor:

         For the period of this Agreement and in accordance with its terms and conditions, Distributor shall:

         A. Capability.

         Provide such working capital, personnel, equipment, warehouse space and other areas as may be necessary to operate properly as a Distributor and to satisfactorily perform the obligations of this Agreement….

         C. Obligation to Distribute:

         Distribute on behalf of the Company such Scheduled Products as may be offered for sale by the Company and which may be from time to time itemized on the Distributor's Allowance List and List of Scheduled Products, as it may be amended, as may be necessary to provide effective, consistent and regular distribution, timely deliveries and adequate market representation by the service and supply of such Scheduled Products to retail outlets, by means of store door delivery and shelf stocking, in the Distributor's market area of responsibility and to enable Company to meet[] its obligations to its franchisors under Company's various franchise agreements.

         D. Market Development.

         Aggressively promote the distribution of the Company's Scheduled Products throughout the Distributor's market area of responsibility and energetically develop new outlet distribution in its market area of responsibility….

         II. Obligations on the part of the Company:

         On its part, the Company hereby agrees for the term of this Agreement as follows:

         A. Fill Orders.

         It shall make reasonable efforts to fill each order received from Distributor for delivery to Distributor of such Scheduled Products from time to time offered for sale by the Company through Distributor….

         D. Advertising and Promotion.

         The Company shall provide to Distributor such advertising and sales promotional material as the Company may from time to time have available, it being understood that Distributor shall have no obligation hereunder to purchase any such material. The Company shall provide public relations, marketing and merchandising services to publicize and promote the Scheduled Products consigned to Distributor by the Company….

         IV. Miscellaneous Provisions:…

         B. Term and Termination.

         The term of this Agreement shall be for an indefinite period….

In any event, such Agreement will terminate automatically upon the death of the Distributor, if an individual, or a material change in the ownership or operating form of the Distributor, whether voluntarily or by operation of law or, in either case, on Distributor's bankruptcy or open and notorious insolvency. A “material change of ownership” as used above shall mean a change of partners, or addition of a partner, if Distributor is a partnership or a change in corporate control, if Distributor is a corporation….
Anything to the contrary hereinabove further notwithstanding, Company may terminate this Agreement upon thirty (30) days' written notice to the Distributor given at any time in the manner described above, but only on the following grounds: for failure of Distributor to aggressively promote the sale of Company's Scheduled Products within Distributor's market area of responsibility; or for any dishonest act to a Distributor's customer or to the Company; or for conduct of Distributor detrimental or not appropriate to the business of distribution of Company's beverages and products; or for material failure to comply with the terms of this Agreement; or upon Distributor's failure to pay over to or remit to Company any funds or money properly due and owing by Distributor to Company or which is the property over which there is not a bona fide dispute between Distributor and Company with regard to the amount due to Company; or upon a substantial change of the form or method of doing business by Company, whether or not such change shall be unilaterally determined by Company, which change of form or method of doing business shall materially affect the form or method of distribution of Company's beverages and products.
In the event of any termination by the Company, or of automatic termination, or of termination by bankruptcy or insolvency or by death, or by material change in ownership or operating form of Distributor, the Company shall purchase any beverage truck(s) and other equipment owned and used by Distributor in performing Distributor's obligations under this Agreement at their “fair market value” and Distributor shall sell the same to Company at their “fair market value”;…

(Agreement, attached to ABC's Facts as Exh. A, PP. 1-3, 5, 6, 9, 10-11).

         Prior to 2016, Paul Beverage operated as a warehouse distributor, meaning it serviced customers using inventory maintained in its own warehouses. (Plaintiff's Statement of Additional Material Facts (“Plaintiff's Facts”), ¶¶ 7, 8). In early 2016, Paul Beverage maintains ABC approached it, and asked if Plaintiff would take additional territory and customers in South St. Louis County and South St. Louis City. (Id., ¶ 17). Paul Beverage began servicing the new territory in approximately March, 2016. (Id., ¶ 18).

         Also in early 2016, ABC asked Paul Beverage to move to a cross-docking operation. (Plaintiff's Facts, ¶ 25). Under cross-docking, rather than maintain inventory in the distributor's warehouse, product is received by the distributor from ABC's Hazelwood facility daily. (Id., ¶ 26). Those products are then reloaded onto the distributor's trucks for delivery to customers. (Id.). Paul Beverage began cross-docking in July, 2016. (Id., ¶ 28). According to Mark W. Paul (“Mark Paul”), the President of Paul Beverage from April, 1983 to July 28, 2017, Plaintiff experienced issues after the move to cross-docking including, but not limited to, late deliveries, deliveries of fallen and damaged product, deliveries of incorrect trailers and product, and incomplete deliveries due to out-of-stock product in ABC's Hazelwood facility. (Id., ¶ 30, citing Mark Paul Declaration, attached to Plaintiff's Facts as Exh. 3, ¶ 15).[1] Charles Parish, Plaintiff's district manager[2], confirmed that if there were delays with product coming in, that would cause a “domino effect”, including problems with merchandising. (See Plaintiff's Facts, ¶ 31, citing Parish Dep., PP. 205-06).

         With respect to promoting Defendant's product, ABC asserts it had an incentives program designed to increase both the distributor's earnings and ABC's sales, but that from 2015 to 2017, Paul Beverage failed to meet incentives goals on many more occasions than other similar distributors. (ABC's Facts, ¶¶ 10-11, citing Dan Schmidt Decl., ¶¶ 9, 10 and attached Exh. B). Plaintiff disputes ABC's claim on several fronts. First, Plaintiff maintains the document cited by ABC, Exhibit B, actually reflects that Paul Beverage met as many or more incentive levels in numerous months than one or more of the comparison distributors. (See Plaintiff's Response to ABC's Facts, ¶ 10, citing ECF No. 43-2, PP. 4-15, 17-19, 21-23). Plaintiff further maintains that ABC failed to provide materials to Paul Beverage necessary to meet goals within the incentives program on at least ten occasions; that ABC did not always credit Paul Beverage for achieving goals in the incentives program; and that Paul Beverage engaged in its own promotion of ABC's products, by sponsoring or donating product at its own expense to fundraising events held by churches, police organizations, the Rotary Club and the local Chamber of Commerce. (Plaintiff's Facts, ¶¶ 55, 56, 58, citing Parish Dep., PP. 61-63, 83; Mark Paul Dep., attached to Plaintiff's Facts as Exh. 10, PP. 68-69, 70; Mark R. Paul Dep., attached to Plaintiff's Facts as Exh. 11, PP. 223-224; Mark Paul Decl., ¶ 31).

         With respect to performance, it is undisputed that Paul Beverage's drivers were instructed to deliver all product in their trucks. (ABC's Facts, ¶ 18). Despite this instructive, Mark Paul testified there were occasions where drivers would fail to complete their routes during the day. (See Excerpts of Mark Paul Deposition, attached to ABC's Facts as Exh. B, PP. 145-150). Mark Paul further testified, however, that all three of the men exhibiting such problems were fired, and by in or around March, ...


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