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Major Brands, Inc. v. Mast-Jagermeister US, Inc.

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

November 15, 2019

MAJOR BRANDS, INC., Plaintiff,
v.
MAST-JÄGERMEISTER US, INC., MAST-JÄGERMEISTER U.S. HOLDING, INC., SOUTHERN GLAZER'S WINE AND SPIRITS OF MISSOURI, LLC, SUPERIOR WINES AND LIQUORS, INC., and SOUTHERN GLAZER'S WINE AND SPIRITS, LLC Defendants.

          OPINION, MEMORANDUM AND ORDER

          HENRY EDWARD AUTREY, UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Defendant Mast-Jägermeister US, Inc.'s Motion to Dismiss Second Amended Complaint, [Doc. No. 138] and Defendants Southern Glazer's Wine and Spirits of Missouri, LLC, Southern Glazer's Wine and Spirits, LLC and Superior Wine and Liquors, Inc.'s Motion to Dismiss, [Doc. No. 141]. Plaintiff opposes the Motions. For the reasons set forth below, the Motion with respect to Superior will be granted. Defendant Mast-Jägermeister US, Inc.'s Motion to Dismiss Second Amended Complaint will be denied. Defendants Southern Glazer's Wine and Spirits of Missouri, LLC, Southern Glazer's Wine and Spirits, LLC's Motion will be granted in part and denied in part.

         Facts and Background

         Plaintiff alleges the following facts.[1]

         Major Brands is a wholesaler licensed in the State of Missouri, under the provisions of Chapter 311 Mo.Rev.Stat, to sell intoxicating liquor to retailers licensed in the State of Missouri.

         Southern Missouri and Superior[2] are wholesalers ostensibly licensed in the State of Missouri under the provisions of Chapter 311 Mo.Rev.Stat., to sell intoxicating liquor to retailers licensed in the State of Missouri, and compete with Major Brands, but now "Southern Missouri" represents to the Court that it is a Florida and Texas company.

         Jagermeister is a manufacturer whose brands of intoxicating liquor are distributed through duly-licensed wholesalers in the State of Missouri.

         Major Brands had a longstanding oral agreement of continuing indefinite duration with Jagermeister for decades, whereby Jagermeister granted Major Brand the exclusive rights to offer, sell, and distribute within the State of Missouri certain brands of spirits (the “Brands”) and Major Brands has for decades offered, sold and distributed those Brands of spirits within the State of Missouri (the “Distribution Agreement”) creating demand and value for those Brands in this State. As part of that longstanding oral agreement Jägermeister also granted Major Brands the right to use its trademarks in the State of Missouri, which Major Brands did so use in compliance with Jägermeister's instructions.

         Under the understood terms of the oral Distribution Agreement, which was based on the ongoing pattern and practice of the dealings between the parties and which guided the parties' relationship for decades, Jägermeister could not terminate the parties' relationship without first establishing good cause.

         Separate and apart from the understood terms of the oral Distribution Agreement under Missouri's Franchise law [Mo.Rev.Stat. § 407.400, et seq.], Jägermeister could only terminate the Distribution Agreement and Major Brands' rights to distribute the Brands after first establishing “good cause” for the termination, as that term is defined in Mo.Rev.Stat. § 407.413.5.

         Pursuant to the Distribution Agreement with Jägermeister, and with Jägermeister's full knowledge and encouragement, Major Brands has made substantial investments in the marketing and distribution of the Brands, and has built up and developed goodwill over the decades for those products throughout the State of Missouri. Major Brands' investments include, without limitation, significant expenditures of time, money, and human resources.

         Plaintiff further alleges that under Missouri's Franchise law [Mo. Rev. Stat. § 407.400, et. seq.] and as part of the Distribution Agreement, Jägermeister may only terminate the Distribution Agreement and Major Brands' rights to distribute the Brands after first establishing “good cause” for the termination, as that term is defined in Section 407.413.5 of the Revised Statutes of Missouri.

         For example, Major Brands hired and trained a Jägermeister Brand Specialist whose exclusive focus was the marketing and distribution of Jägermeister's Brands within Major Brands' top accounts in the Columbia, Missouri market. Major Brands' Jägermeister Brand Specialist, who was chosen for the job, in part, due to his established relationships with on-premise accounts (bars and restaurants) in Columbia, provided accounts in Missouri with brand education, on-premise and off-premise (grocery stores, liquor stores, etc.) activations, and consumer samplings. Additionally, the Jägermeister Brand Specialist increased brand awareness within Major Brands' larger sales force to drive sales of the Jägermeister Brands in Missouri. Major Brands' Jägermeister Brand Specialist served approximately 40 accounts in the Columbia market, and would perform samplings with new Jägermeister cocktails and facilitate special holiday and game-day promotions in on-premise accounts. Major Brands' Jägermeister Brand Specialist extolled Jägermeister's products to bartenders and retailers in Missouri and instructed them about Jägermeister's products and the use of those products in unique drink recipes. He also set up displays and posters in on-premise locations, educated bartenders on the use of Jägermeister's shot machines and shot glass freezers, supported key activations, promoted Jägermeister's products on social media, and worked closely with Major Brands' on-premise sales representatives to facilitate and fill orders. The Major Brands Missouri Jägermeister Brand Specialist also coordinated directly with, and provided weekly reports to, Jägermeister's State Manager.

         Major Brands both trained the Jägermeister Brand Specialist directly and worked with Jägermeister to ensure he was provided with extensive education and training on Jägermeister's products, enabling him to promote those products to retailers throughout Missouri. Among other things, the Missouri Jägermeister Brand Specialist was trained on the history of Jägermeister, and its products; Jägermeister's future plans for its Brands; different cocktails that could be made using the Brands; the sale and use of Jägermeister shot machines, speed-pour machines, and shot glass freezers; and Jägermeister's expectations moving forward. This education and training was unique to the Jägermeister Brands. The Jägermeister Brand Specialist position had to be eliminated upon Jägermeister's termination of Major Brands, and the individual that had filled that position had to be completely retrained, as his product knowledge was limited to the Jägermeister Brands.

         In addition to the Jägermeister Brands Specialist, Major Brands' sales representatives made countless sales calls on their numerous retail accounts several times a week, helping Missouri retailers with Jägermeister trademark branding, point-of-sale material, promotional events, and building displays, specific to the Jägermeister Brands.

         Major Brands made substantial marketing investments year after year in the Brands, and provided marketing support for those products in the retail trade - including displays, drink promotions, and special events. In one year alone, Major Brands invested hundreds of thousands of dollars in marketing and promoting Jägermeister's products. These investments included incentives for sales representatives, local marketing activities, point-of-sale and print promotions, and contributions to Jägermeister's marketing fund. For example, Major Brands reinvested six dollars and fifty cents per every case of Jägermeister sold-with a smaller portion per case going to Jägermeister's national marketing fund and the majority portion per case allocated to Major Brands' local Jägermeister marketing fund in Missouri. Jägermeister would often work with and direct Major Brands as to how it wanted the local marketing fund to be utilized in Missouri (e.g., shot machines, promotions, etc.).

         Major Brands also made innumerable incremental investments in Jägermeister through price reductions in the retail market. For example, at Jägermeister's urging, Major Brands “posted” prices for different sizes of Jägermeister's products, cutting its margins to drive key prices in the market and improve sales in Missouri.

         In furtherance of the parties' common interest in marketing the Jägermeister Brands, Major Brands purchased Jägermeister shot glass freezers, Jägermeister speed-pour machines, and Jägermeister tap machines, and in turn sold these items to retailers in the Missouri market to assist Jägermeister in meeting its Machine Key Performance Indicator goals. Major Brands was asked by Jägermeister to make these franchise-specific investments, and was indeed required to make these franchise-specific investments in order to promote Jägermeister's Brands under the Distribution Agreement. Major Brands sold the Jägermeister equipment at cost, without making any profit.

         Major Brands promoted the Jägermeister Brands at numerous Missouri special events, including the Soulard Oktoberfest, July 4 celebrations, St. Louis Mardi Gras, several Halloween events, and numerous other holiday events. Major Brands also performed local Missouri market blitzes.

         Additionally, Major Brands made many franchise-specific investments in its relationship with Jägermeister, including by destroying approximately 1, 000 cases of Spiced Jägermeister at Jägermeister's request, and at a cost of $81, 000.00.

         At Jägermeister's request, Major Brands took on excess inventory of Jägermeister products (covering 100 days of demand) in an effort to help its partner boost its sales figures.

         Major Brands also facilitated Jägermeister's hiring of one of Major Brands' best sales managers to become its State manager.

         Major Brands' relationship with Jägermeister was viewed as a partnership, and Major Brands' sales team was active in looking for opportunities to sell Jägermeister's Brands and add value to and promote the Brands. Indeed, the parties were truly interdependent, as Jägermeister could not sell the Brands in Missouri without a licensed wholesaler, and Major Brands depended on Jägermeister to supply trademarks, the Brands, and provide market insights and direction, among other things.

         Major Brands was in weekly, and sometimes daily, contact with Jägermeister to discuss sales, strategies, promotions, and to obtain and provide feedback.

         Major Brands instituted unique and interactive programming for Jägermeister in Missouri. For example, at Jägermeister's insistence, Major Brands purchased a “Cash Grab Machine” for use in incentivizing its sales representatives to sell more Jägermeister products. The “Cash Grab Machine” was emblazoned with Jägermeister's trademark logos, and filled with “Jägermeister dollars” created by Major Brands' graphics department. Sales representatives who sold the most Jägermeister products in any given quarter were awarded with time in the “Cash Grab Machine” to collect as many “Jägermeister dollars” as they could, which would in turn be redeemed for cash or gifts.

         Additionally, Major Brands conducted the National Wolfenbuttel bus training program in its parking lot to provide its Missouri sales force and all office personnel with training on the Jägermeister Brands. Major Brands also transported buyers from across Missouri to St. Louis to participate in the bus training program and learn more about Jägermeister's products.

         Major Brands expended extensive amounts of time and effort in recruiting, training, and educating employees on Jägermeister's products. For example, Major Brands would use sales meetings to educate its sales force on Jägermeister's products, new Missouri marketing campaigns, and Jägermeister cocktail recipes. This training was specific to Jägermeister and became useless to Major Brands and its employees upon Jägermeister's termination of the Distribution Agreement.

         Both Major Brands and Jägermeister worked as partners to achieve the common goal of growing the goodwill and sales of Jägermeister's products in Missouri, and the parties ...


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