Esber Beverage Co. v. Labatt USA Operating Co., L.L.C.

2012 Ohio 1183
Ohio Court of Appeals·Decided March 12, 2012·No. 2011CA00113 2011CA00116·Published·Cited by 6 cases

Opinion

COURT OF APPEALS

STARK COUNTY, OHIO

FIFTH APPELLATE DISTRICT

: JUDGES:

ESBER BEVERAGE COMPANY : William B. Hoffman, P.J.

: Sheila G. Farmer, J.

Plaintiff-Appellee : Julie A. Edwards, J.

:

-vs- : Case Nos. 2011CA00113 and : 2011CA00116 :

LABATT USA OPERATING : COMPANY, LLC, et al. : OPINION

Defendants-Appellants

CHARACTER OF PROCEEDING: Civil Appeal from Stark County Court of Common Pleas Case No.

2009CV03142

JUDGMENT: Reversed and Remanded DATE OF JUDGMENT ENTRY: March 12, 2012 APPEARANCES: For Plaintiff-Appellee For Defendant-Appellant

LEE E. PLAKAS JAMES B. NIEHAUS GARY A CORROTO JENNIFER L. WHITNEY Tzangas, Plakas, Mannos & Raies, Ltd. Frantz Ward LLP 220 Market Avenue South 2500 Key Tower, 127 Public Square Eighth Floor Cleveland, Ohio 44114-1304 Canton, Ohio 44702

STANLEY R. RUBIN PAUL J. PUSATERI 437 Market Avenue, North Milligan Pusateri Co., LPA Canton, Ohio 44702 4684 Douglas Circle Canton, Ohio 44718

For Defendant-Appellant Superior Beverage Group, LTD

JAMES L. MESSENGER RICHARD J. THOMAS JERRY R. KRZYS 6 Federal Plaza Central, Suite 1300 Youngstown, Ohio 44503

Edwards, J.

{¶1} Appellants, Labatt USA Operating Co.; KPS Capital Partners, L.P.; North American Breweries, Inc.; Douglas Tomlin; and Superior Beverage Group, Ltd., appeal a judgment of the Stark County Common Pleas Court in favor of appellee Esber Beverage Company.

STATEMENT OF FACTS AND CASE

{¶2} Appellant KPS Capital Partners, L.P. (KPS) is a Delaware limited partnership in the business of providing management and investment services to private equity funds. Investment funds managed by KPS own North American Breweries Holdings, LLC, which in turn owns 100% of North American Breweries, Inc. (NAB). Labatt USA Operating Co. is an indirect, wholly owned subsidiary of NAB. Appellant Doug Tomlin is regional sales director of appellant Labatt USA Operating Co. Superior Beverage Group (Superior) is a family-owned distributor of alcoholic beverages located in Youngstown, Ohio, which distributed the Genesee brands of beer for NAB. Appellee

Esber Beverage Company (Esber) is a family-owned beer and wine distribution business located in Canton, Ohio, which distributed Labatt products in certain counties in Ohio.

{¶3} Esber has distributed the Labatt brands since the 1950’s. Prior to 1995, Esber acquired the Labatt products from the Labatt Brewing Company Ltd. (LBCL), a Canadian company. In 1995, Interbrew, a Belgian brewer, purchased LBCL and acquired control of the Labatt brands. Interbrew merged with AmBev in 2004 to form InBev N.V./S.A. At the time of the 2004 merger, Labatt products were imported to the United States by an entity called Labatt USA LLC, which is not the same company as appellant Labatt USA Operating Co.

{¶4} Following the Interbrew/AmBev merger, InBev N.V./S.A. merged Labatt USA LLC with Beck’s North America into a third subsidiary, Latrobe Brewing Company, and renamed the merged company InBev USA L.L.C. As of January 1, 2005, Esber acquired the Labatt brands from InBev USA (hereinafter, InBev) for distribution in Stark and surrounding counties. InBev notified Esber that it was terminating Esber’s franchise pursuant to R.C. 1333.85(D) because InBev was a “successor manufacturer” within the meaning of the statute and therefore had ninety days to terminate the franchise. Esber challenged the termination and this Court ultimately concluded that InBev was not a successor manufacturer, but rather the merger that took place was “more accurately defined as a restructuring and renaming of its U.S. business operations, with no products changing ownership control.” Esber Beverage Co. v. InBev USA LLC, Stark App. No. 2006CA00113, 2007-Ohio-927, ¶66.

{¶5} On November 30, 2007, InBev and Esber negotiated a new distribution agreement. This agreement appointed Esber as the exclusive distributor of Labatt products in ten Ohio counties for an indefinite term. Esber had the right of first refusal “to be appointed to carry any new brands or extensions of existing Brands that are produced in Canada or are imported into the United States by Supplier [InBev] or any successor in interest . . .” Distribution Agreement, §8(a)(i-x).

{¶6} In July of 2008, InBev agreed to acquire Anheuser-Busch Companies, Inc.

The United States Justice Department filed an anti-trust suit against InBev in November, 2008. To resolve the lawsuit, InBev agreed to transfer the Labatt brands to another entity with the ability to compete in the relevant markets. InBev agreed to sell the Labatt brands and related assets to a KPS affiliate. The Labatt brands were transferred to Labatt USA Operating, a KPS affiliate formed to acquire InBev’s assets related to the Labatt brands. Labatt USA Operating became a subsidiary of NAB, which also owned High Falls Operating Co., LLC, which distributed Genesee brands. Superior was the distributor of Genessee brands in the same general market where Esber distributed Labatt brands.

{¶7} Shortly after acquiring the Labatt brands, NAB invited both Esber and Superior to make a presentation regarding each distributor’s ability to distribute both the Labatt and Genesee brands in the relevant market. NAB decided to use Superior to distribute both Labatt and Genesee and notified Esber of its decision to terminate Esber’s distribution agreement on May 15, 2009.

{¶8} Esber filed the instant action on August 14, 2009, for declaratory judgment, injunctive relief and compensatory damages, alleging breach of contract,

promissory estoppel, tortious interference with business relations, conspiracy and antitrust violations.

{¶9} On December 1, 2009, the trial court granted Esber’s motion for a preliminary injunction, which allowed Esber to continue to distribute Labatt products during the pendency of the lawsuit. On cross-motions of the parties for summary judgment, the trial court granted partial summary judgment to Esber, finding that appellants were bound by the terms of the distribution agreement and that appellants did not have the right to terminate the agreement pursuant to R.C. 1333.85(D). The court found that R.C. 1333.85(D) did not apply because Labatt USA Operating had assumed the distribution agreement entered into between InBev and Esber and had no superseding statutory right to terminate the agreement. The court further found that even if R.C. 1333.85(D) did apply, Labatt USA Operating was not a successor manufacturer within the meaning of the statute. Judgment Entry, November 29, 2010.

{¶10} In May of 2011, Esber voluntarily dismissed its remaining claims. The trial court issued a final appealable order on May 12, 2011, which incorporated the November 29, 2010 judgment.

{¶11} Appellants Labatt USA Operating Co. ; KPS Capital Partners, L.P.; North American Breweries, Inc.; Douglas Tomlin filed a notice of appeal in case number 2011CA00113, assigning the following errors:

{¶12} “I. THE TRIAL COURT ERRED WHEN IT CONCLUDED THAT NONE OF THE APPELLANTS ‘CAN PROVE THAT THEY WERE MANUFACTURERS AT THE TIME OF THE PURCHASE OF THE ASSETS.’

{¶13} “II. THE TRIAL COURT ERRED AS A MATTER OF LAW WHEN IT CONCLUDED THAT THE APPELLANTS WERE REQUIRED TO BE MANUFACTURERS AT THE TIME OF THE PURCHASE OF ASSETS TO QUALIFY AS A ‘SUCCESSOR MANUFACTURER’ UNDER R.C. SECTION 1333.85(D).

{¶14} “III. THE TRIAL COURT ERRED WHEN IT FOUND THAT THE SALE OF ASSETS FROM INBEV USA, L.L.C. TO APPELLANT LABATT USA OPERATING CO, LLC WAS NOT A ‘CHANGE IN CORPORATE STRUCTURE, BUT SIMPLY THE SAME TYPE OF RESTRUCTURING OR TRANSFER DISAPPROVED OF BY THE FIFTH DISTRICT IN ESBER V. INBEV’ AND, THEREFORE, APPELLANT LABATT USA OPERATING CO, LLC IS NOT A SUCCESSOR MANUFACTURER UNDER R.C. SECTION 1333.85(D).

{¶15} “IV. THE TRIAL COURT ERRED WHEN IT CONCLUDED THAT R.C.

SECTION 1333.85(D) DOES NOT APPLY WHEN A PREDECESSOR’S WRITTEN DISTRIBUTION AGREEMENT IS TRANSFERRED TO A SUCCESSOR MANUFACTURER.

{¶16} “V. THE TRIAL COURT ERRED BY NOT GRANTING SUMMARY JUDGMENT TO APPELLANTS.”

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