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Monarch Beverage Co. v. Tyfield Importers Inc.

decided: July 15, 1987.


Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division, No. IP 84-34-C, S. Hugh Dillin, Judge.

Author: Ripple

Before BAUER, Chief Judge, FLAUM and RIPPLE, Circuit Judges.

RIPPLE, Circuit Judge. This diversity action arises from a contractual dispute between Monarch Beverage Co., Inc. (Monarch) and Tyfield Importers, Inc. (Tyfield). In the district court, Monarch filed a seven-count complaint for: 1) breach of contract, 2) premature termination of contract, 3) unreasonable notice of termination, 4) fraud and misrepresentation, 5) breach of duty of good faith and fair dealing, 6) price discrimination, and 7) promissory estoppel. Amended Complaint, R.5. The district court determined that Tyfield had breached its contract with Monarch and awarded Monarch $13,908 for Tyfield's failure to ship an order of goods. The district court entered judgment for the defendant on the remaining counts. In this appeal, Monarch raises three issues: 1) whether Tyfield gave unreasonable notice of its termination of the contract, 2) whether Tyfield committed fraud, and 3) whether Monarch can recover under the doctrine of promissory estoppel. For the reasons set forth below, we affirm in part, vacate in part and remand the case.



Monarch, an Indiana corporation, is a wholesaler of wine products. Tyfield, a Michigan corporation, is the exclusive importer in the United States of a brand of sparkling wine called Tosti Asti Spumante (Tosti). In October 1981, Monarch and Tyfield entered into an oral agreement providing that Monarch would become an Indiana distributor of Tosti. This agreement was terminable at will by either party, with or without cause. As a distributor, Monarch purchased Tosti from Tyfield and sold it to retail customers.

On July 5, 1983, William V. Graves, the regional sales manager of Tyfield, met with two employees of Monarch, Donald Hammond and Christopher Arn. Mr. Arn was Monarch's wine sales manager and Mr. Hammond was Monarch's sales manager. At this meeting, Mr. Graves informed Monarch that National Wine & Spirits, Inc. (National), the largest direct competitor of Monarch, was being appointed a distributor for Tosti in Monarch's market of central Indiana. At this meeting, Mr. Hammond opined to Mr. Arn, in Mr. Graves' presence, that he believed Monarch was being "dualed," meaning that Monarch and National would both be Tosti distributors in central Indiana. Mr. Graves failed to respond to Mr. Hammond's comment about the future status of Monarch and National as distributors. Mr. Graves neither stated that Monarch was being terminated nor specifically agreed that Monarch's future status would be that of a dual distributor.

On September 14, 1983, Mr. Hammond, on behalf of Monarch, ordered 1,200 cases of Tosti from Tyfield. The order was confirmed both by a telephone conversation and by a letter. Tyfield neither shipped the order to Monarch nor advised Monarch that it had no intention of doing so. Because the wine was imported from Italy, the shipment normally would have taken six to eight weeks to arrive.

Tyfield had told National that is distributorship would be exclusive. During September 1983, National experienced difficulties securing the business of prospective customers who were still purchasing Tosti from Monarch. National, therefore, requested a latter from Tyfield confirming its exclusive distributorship. In response to National's demand, Tyfield then sent it a letter dated September 21, 1983. This letter designated National a "master distributor" for Indiana, but failed to state that this distributorship was exclusive. Tyfield sent another letter, dated October 4, that added the word "exclusive." As a result of National's distributorship, Monarch's customers became confused as to its status as a distributor. Tyfield was aware of the confusion among Monarch's customers and Tyfield also knew that Monarch continued advertising the wine. Tyfield, however, never questioned Monarch about its representation that it was a Tosti distributor.

On November 3, 1983, Tyfield sent Monarch a letter stating that it was terminated "effective immediately" as a distributor. On the termination date, Monarch had no unfilled orders for wine products from Tyfield other than the September 14 order for 1,200 cases of Tosti. The sale of Tosti amounted to only one percent of less of Monarch's total business.


The District Court Opinion

The district court held that Tyfield breached its contractual duty to sell and deliver the September 14 order of 1,200 cases of Tosti to Monarch. In addition, the district court held that Tyfield breached its duty to give Monarch reasonable notice of its termination of the distributorship agreement. The district court found that a reasonable notice would have been 30 days notice. The district court calculated Monarch's damages resulting from Tyfield's breach to equal its gross profit for the sale of the 1,200 cases of Tosti. The profit would have been $11.59 per case, totaling $13,908. The district court further held that Monarch failed to prove its other claims of breach of good faith and ...

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