Data

Date:: 01-06-2006
Country:: USA
Number:: 02 Civ. 4635 (RPP)
Court:: U.S. District Court, Southern District of New York
Parties:: Multi-Juice,S.A. v. Snapple Beverage Corp.

Keywords

SCOPE OF CISG - DISTRIBUTORSHIP AGREEMENTS NOT COVERED BY CISG

Abstract

A US manufacturer and a Greek distributor entered into negotiations for a contract to distribute Snapple beverages in Greece. The exclusive distributorship negotiation was the result of a settlement agreement between the Greek distributor and the US manufacturer’s former parent company. As a result of the negotiations the parties reached an agreement on all issues, including the choice of New York law as the law governing the contract, but failed to agree on termination provision. Although a written contract was never executed between the parties, they acted as if it was. One year later, the distributor failed to pay the manufacturer for products received and terminated its business without notifying the manufacturer. Then the manufacturer filed suit for breach of contract under the CISG, claiming that CISG provides for the enforcement of oral agreements such as the exclusive distributorship agreement concluded with the distributor (CISG Art. 11).

The Court found that the CISG was not applicable in the case at hand. After citing several cases which stated the CISG does not apply to distributorship contracts that do not cover the sale of specific goods and do not contain definite terms regarding quantity and price, the Court ultimately held that New York law governed the contract since all the draft distribution agreements exchanged between the parties contained a choice of law provision for that law.

Fulltext

OPINION AND ORDER

ROBERT P. PATTERSON, JR., U.S.D.J.

By motion dated September 30, 2005, Defendants/Counterclaim Plaintiffs Snapple Beverage Corp. ("Snapple") and Mistic Brands, Inc. ("Mistic") ("Defendants") moved for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure ("Fed. R. Civ.P.") to dismiss the First Cause of Action of Plaintiff Multi-Juice, S.A. ("Multi-Juice") for breach of a distribution agreement between Snapple and Multi-Juice; dismiss the Fourth Cause of Action for breach by Snapple of the Settlement Agreement with Snapple Hellas S.A. ("Hellas"); grant Snapple summary judgment on its First Counterclaim for breach of contract against Multi-Juice and Counterclaim Defendants Arthur Tavantzis and Naoum Tavantzis ("the Tavantzises"); and grant Snapple summary judgment on its Second Counterclaim for attorneys' fees against Multi-Juice and the Tavantzises. By motion dated October 3, 2005, Plaintiff New Age Beverage Hellas ("New Age") moved pursuant to Fed.R.Civ.P. 56 for summary judgment against Mistic for breach of an exclusive distribution agreement entered into on October 13, 1995.

For the reasons that follow, Plaintiffs' First Cause of Action for breach of the distribution agreement between Snapple and Multi-Juice is dismissed; Plaintiffs' Fourth Cause of Action for breach of the Snapple Hellas Settlement Agreement is dismissed; and summary judgment is granted as to Defendant Snapple's counterclaim against Multi-Juice for goods sold and delivered but denied as to Defendants' motion for summary judgment for breach of contract and attorneys' fees. In addition, Plaintiff New Age's motion for summary judgment against Mistic is denied.

BACKGROUND

Plaintiffs commenced this action on June 14, 2002. In the First Cause of Action, Multi-Juice seeks damages for breach of a three- to five-year exclusive beverage distributorship agreement entered into between Snapple and Multi-Juice, a Greek corporation. The alleged exclusive distributorship agreement was entered into subsequent to a settlement in August 1997 of a lawsuit commenced by Snapple Hellas, S.A., a Greek distribution company owned by the Tavantzises, against Snapple and its prior parent corporation, the Quaker Oats Company ("Quaker"). In the Fourth Cause of Action, Plaintiffs seek damages from Snapple for breach of the Hellas Settlement Agreement. By motion dated September 30, 2005, Defendants moved for partial summary judgment pursuant to Fed.R.Civ.P. Rule 56. The background to this controversy is set forth in a prior opinion of this Court, Multi-Juice, S.A. v. Snapple Bev. Corp., No. 02 Civ. 4635(RPP), 2003 U.S. Dist. LEXIS 7040 (S.D.N.Y. Apr. 24, 2003), familiarity with which is assumed.FN1By motion dated September 30, 2005, Plaintiff New Age moved for summary judgment pursuant to Fed.R.Civ.P. Rule 56 against Defendant Mistic.

FN1. On April 24, 2003, this Court granted Defendants' motion to dismiss six of the ten causes of action listed in the Complaint. See Multi-Juice, S.A., 2003 U.S. Dist. LEXIS 7040.

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Claims of Plaintiffs Multi-Juice and Hellas Against Snapple and Counterclaim of Snapple

Statement of Facts

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From approximately 1995 to August 1997, Hellas was engaged in the business of importing and distributing Snapple Brand beverages in Greece. Id. P 5.FN2 On or about February 23, 1996, Hellas brought suit against Snapple and its then-owner, the Quaker Oats Company, in the United States District Court for the Southern District of New York (Case No. 96 CV 1371) (the "Hellas Action"), claiming wrongful termination and breach of contract. Id. P 6; Orr. Ex. 1 PP 8, 18.FN3In or about mid-1997, Triarc Companies, Inc. ("Triarc") acquired Snapple from Quaker. Def.'s 56.1 P 7. The Hellas Action was settled on or about August 11, 1997, pursuant to a settlement agreement between Snapple (under Triarc ownership), Quaker, the Tavantzises individually, and Hellas (the "Hellas Settlement Agreement"). Id. P 8; Orr. Ex. 7.

FN2. Although the Plaintiffs admit this statement, the testimony submitted by the parties indicates that the Tavantzises were in the business of importing and distributing Snapple Brand beverages in Greece from approximately 1992 until prior to February 1996, when Snapple Hellas brought suit against the Quaker Oats Company. Gray Ex. 6 at 125.

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The Hellas Settlement Agreement provides, inter alia, that "Hellas and Snapple shall negotiate in good faith towards entering into a 3-5 year written agreement under which Snapple would convey to Hellas the exclusive right during the term of that agreement to distribute Snapple beverages in Greece." Def.'s 56.1 P 9. The Hellas Settlement Agreement contains an integration clause, providing that "[t]his Agreement constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter contained herein." Id. P 10. The Hellas Settlement Agreement also contains a choice of law clause, providing that it "shall be governed by the substantive law ... of the State of New York."Id. P 11.The Tavantzises subsequently formed Multi-Juice, S.A. (together with the Tavantzises, "Multi-Juice"). Id. P 12.

After the Hellas Settlement Agreement, Snapple and Multi-Juice negotiated and exchanged seven drafts of a written distribution agreement.Id. P 13; Orr Exs. 8-15. The negotiations on behalf of Multi-Juice were conducted by Louis F. Burke ("Burke"). Def.'s 56.1 P 14. Burke was authorized at all times to negotiate with Snapple on Multi-Juice's behalf. Id. P 15.

On or about October 17, 1997, Burke sent a letter to Snapple's counsel, Gary Lyons ("Lyons"), stating, "I just wanted to follow-up with a letter regarding the status of the contract which is being negotiated between Arthur Travis [sic Tavantzis] and Snapple Beverage Corporation ... a contract must be entered into by the end of October in order to set the stage for labels and production as well as pre-selling ... we were hopeful that in view of settling this case back in late August/early September, a contract could have been finalized by this time."Id. P 16; Orr Ex. 16. On or about November 12, 1997, Burke sent a letter to Lyons, stating "Arthur and Naoum are very anxious to finalize this agreement...." Id. P 16; Orr Ex. 17.FN4

FN4. This letter enclosed a marked-up draft agreement dated November 5, 1997.

As a result of the negotiations between the parties, by December of 1997, Snapple and Multi-Juice reached agreement on all issues, with the exception of the provisions regarding termination. Orr Ex. 12. In a letter to Snapple, dated December 6, 1997, after addressing the termination provision, Burke stated, "We have agreed on all other issues." Id. Attached to Burke's letter is a draft of the distribution agreement, dated December 4, 1997 ("December Draft Distribution Agreement"). Id. P 18.FN5

FN5. Plaintiffs admit that the cited materials are authentic and accurately quoted but deny Snapple's claim that Snapple and Multi-Juice reached agreement on all issues. Plaintiffs, however, cite to no evidence contradicting the allegations. In fact, the pages Plaintiffs cite from the deposition of Naoum Tavantzis acknowledge that it was the termination clause that was in dispute. Def.'s 56.1 P 18; Chebli Ex. 3 at 169-72. The remainder of Plaintiffs' citation states that Naoum Tavantzis wanted a contract like a prior contract he once had with Snapple Valley Stream in the early 1990s. Naoum Tavantzis admits that he authorized Mr. Burke to negotiate the distribution agreement on his behalf, Orr Ex. 3 at 139-40, and he does not deny that there was no dispute about the other provisions of the contract being negotiated by Mr. Burke. In fact, Naoum Tavantzis testified that he did not review or provide comments on any of the draft agreements exchanged by the parties but left that to the lawyers. Orr Ex. 3 at 138; Gray Ex. 6 at 194 ("Like I said, with the contracts, I was waiting for a finished one to come at me and be told to sign it. Did I sit there and read them every time? No I didn't"). The only specific provisions mentioned by Naoum Tavantzis in any way refer to the distribution agreement being negotiated by Mr. Burke. Accordingly, this paragraph of Defendant's Rule 56.1 statement is deemed admitted.

The parties agreed, inter alia, on the following provisions contained in the December Draft Distribution Agreement:

a. Section 6.1: "Products may be ordered by DISTRIBUTOR only pursuant to written purchase orders on the form provided by SNAPPLE. Each such purchase order shall be subject to written acceptance by SNAPPLE at its sole discretion."

b. Section 7.1: "Unless SNAPPLE should otherwise agree in writing in each instance, payment for Products purchased by Distributor hereunder shall be in sterling pounds and payable to Snapple via certified check or electronic funds transfer [or] bank check...."

c. Section 7.2: "The invoice price of each shipment of products shall become payable by DISTRIBUTOR in full in accordance with SNAPPLE's invoice terms."

d. Section 7.3: "[I]f DISTRIBUTOR is delinquent in payment, upon SNAPPLE's written notice to that effect, DISTRIBUTOR shall reimburse or pay SNAPPLE for all costs and expenses incurred by SNAPPLE in collecting the delinquent amounts, including, but not limited to, reasonable legal fees."

e. Section 12.7: "THIS AGREEMENT AND THE PERFORMANCE OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA."

f. Section 12.12: "This Agreement and the Exhibits hereto supersede all prior oral and written communications between the parties concerning, and constitute their sole and exclusive understanding with respect to, the subject matter hereof."

g. Exhibit 3: "TARGETED ANNUAL MINIMUM PURCHASES" provides that "Notwithstanding DISTRIBUTOR's obligation to maximize the distribution of each type and line of Products in the Territory, during the Term of the Agreement the targeted annual minimum volume of purchases by DISTRIBUTOR shall be: Year 1-50,000 cases; Year 2-100,000 cases; Year 3-200,000 cases; Year 4-00,000 cases; and Year 5-400,000 cases."

Def.'s 56.1 P 19. The Defendant's cited materials are admittedly authentic and accurately quoted. Except for the termination clause, Plaintiffs offer no evidence of disagreement on the above terms, which appear in all later draft agreements. Accordingly, paragraph 19 of Defendant's 56.1 statement is deemed admitted under Local Rule 56.1.

While the parties exchanged additional drafts of the distribution agreement after December of 1997, none of the material provisions changed. Def.'s 56.1 P 20; Orr Exs. 13-15. Plaintiffs claim only that on January 9, 1998, Defendants changed the multiple of annual volume of sales upon an unjustified termination by Snapple in P 11 .4 of the termination provision from $3.00 to $2.00.FN6 Plaintiffs' Response to Defendants' Statement Pursuant to Local Rule 56. 1 ("Plaintiffs' Response to Def.'s 56.1") P 20. Plaintiffs cite no other support for their denial. Accordingly, since Defendants have admitted that the termination provisions remained in dispute, paragraph 20 of Defendant's 56.1 Statement is deemed admitted.

FN6. The $3.00 figure appears for the first time in the draft agreement accompanying Mr. Burke's letter of December 1997. Orr Ex. 12. The termination provision and the $2.00 figure remained unchanged in all future drafts.

Although none of the drafts of the distribution agreement were ever fully executed by the parties, Snapple and Multi-Juice "operated as if a written exclusive agreement for the distribution of Snapple products in Greece had been executed among them."Def.'s 56.1 P 21. Orr Ex. 1 (Complaint) P 28.

For each shipment of Snapple products from Snapple to Multi-Juice in 1998 and 1999, Multi-Juice received a detailed invoice of the products in the shipment. See, e.g., Orr Ex. 20. Both the prices of the shipment (in pounds sterling) and the terms of the invoice were printed clearly and plainly on each of the invoices that was sent to Multi-Juice in 1998 and 1999. Def.'s 56.1 P 22; Orr Ex. 6.

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FN7. Plaintiffs deny that all the products conformed to the orders or that they were accepted but cite to no evidence to support the denial. Accordingly, P 24 of Defendant's 56.1 Statement is deemed admitted. Local Rule 56.1.

(...)

Multi-Juice failed to pay the amounts due and owing under the 1999 Invoices. Def.'s 56.1 P 32; Orr Exs. 6, 28-33. Representatives of Snapple contacted Multi-Juice on numerous occasions regarding the amounts past due and owing.

(...)

In late 1999, Multi-Juice ceased operations without providing notice to Snapple. Def.'s 56.1 P 35; Orr Exs. 31-34. Plaintiffs deny this allegation, citing the deposition of Naoum Tavantzis, Grey Ex. 6 at 342-46, and assert without citing to evidence that they believe Defendants were aware that Multi-Juice had ceased operations by at [the] latest December 1999 and that several of the subsequent purported attempts to communicate with Multi-Juice by Snapple were made by Snapple after it knew that Multi-Juice's office was closed "to set up Snapple's position for anticipated litigation.

(...)

On or about June 23, 2000, Snapple sent a letter to Multi-Juice stating, inter alia,"As you are aware, you have been delinquent for a long time in paying our invoices in spite of the various grace periods that we have extended to you. As of today your account has an outstanding balance totaling more than L54,000 GBP (sterling). We have been trying to contact you since October 28, 1999 ... Unfortunately, we have received no response from you."Def.'s 56.1 P 37; Orr Ex. 33.

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DISCUSSION

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Choice of Law

Multi-Juice asserts that its breach of contract claim is governed by the U.N. Convention on Contracts for the International Sale of Goods, codified at 15 U.S.C. Appendix (1985) (hereinafter "CISG"). Complaint ("Compl.") P 1. Plaintiffs claim that the CISG provides for the enforcement of oral agreements such as the exclusive distributorship agreement here. Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion for Partial Summary Judgment ("Plaintiffs' Mem. in Opp.") at 10. Article 11 of the CISG states that "[a] contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses."However, Article 1 of the CISG states that the "Convention applies to contracts of sale of goods between parties whose places of business are in different States: (a) when the States are Contracting States ..." (emphasis added) and does not indicate that it applies to distribution agreements. See Helen Kaminski v. Marketing Australian Products, 1997 U.S. Dist. LEXIS 10630 (S.D.N.Y.) (determining that the CISG does not apply to distributorship contracts that do not cover the sale of specific goods and contain definite terms regarding quantity and price); Viva Vino Import Corporation v. Farnese Vini, 2000 U.S. Dist. LEXIS 12347 (E.D.Pa) (stating that "[b]ecause the agreements at issue in this case do not cover the sale of specific goods and set forth definite terms regarding quantity and price, the CISG is inapplicable").See also UNCITRAL Digest of Case Law on the United Nations Convention on the International Sale of Goods ("UNCITRAL Digest") ("[m]ost courts considering the issue have concluded that the Convention does not apply to distribution agreements"). See UNCITRAL Digest, A/CN.9/SER.C/DIGEST/CISG/1 [8 June 2004], available at http:// www.cisg.law.pace.edu/cisg/text/digest-art-01.html# ud5.

Accordingly, since Plaintiffs' counsel has acknowledged that if the CISG does not apply, New York law would apply, see Transcript of Jan. 19, 2006 Hearing ("Tr.") at 50, and since all the draft distribution agreements (referred to in paragraph 24 of the Complaint) exchanged between the parties from November 1997 to April 1998 contain a choice of law provision for New York law, see Orr Exs. 8-14, and the choice of law provision in the Hellas Settlement Agreement provides that it shall be governed by New York law, see Hellas Settlement Agreement P 11, New York law governs the Plaintiffs' breach of contract claims.

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CONCLUSION

For the foregoing reasons, Plaintiffs' First Cause of Action for breach of the distribution agreement between Snapple and Multi-Juice and Plaintiffs' Fourth Cause of Action for breach of the Hellas Settlement Agreement are dismissed. Summary judgment is granted as to Defendant Snapple's counterclaim against Multi-Juice based on the U.C.C. for goods sold and delivered but denied as to Defendants' motion for summary judgment for breach of contract and attorneys' fees. In addition, Plaintiff New Age's motion for summary judgment against Mistic is denied because a genuine issue of material fact was raised as to New Age's being ready and willing to perform and because of Mistic's citation to evidence of New Age's abandonment of the contract.

IT IS SO ORDERED.}}

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