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NATURAL JUICE CO. v. ORCHID ISLAND JUICE CO.

May 4, 2004.

NATURAL JUICE CO., Plaintiff,
v.
ORCHID ISLAND JUICE CO., Defendant



The opinion of the court was delivered by: HARRY LEINENWEBER, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Natural Juice Company (hereinafter, "Natural") brought this action against defendant Orchid Island Juice Company (hereinafter, "Orchid") seeking damages for breach of contract (Count I) and a declaratory judgment (Count II) of its contractual rights. Pending before the Court is Orchid's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief may be granted.

I. BACKGROUND

  Natural is an Illinois corporation engaged in the business of selling and distributing fresh squeezed fruit and vegetable juice products. Natural has filed a two-count complaint against Orchid, one of its juice suppliers, alleging that Orchid has breached its obligations under an Amended and Restated Exclusive Supply and Independent Distributor Master Agreement (the "Revised Agreement").

  According to Natural's Amended Complaint, prior to entering the Revised Agreement, Natural was party to an exclusive distributorship agreement (the "Original Agreement") with the Fresh Juice Company (hereinafter, "FJC"). FJC was subsequently bought by a company called Saratoga Beverage Group, which was then bought by a company called North Castle Partners (hereinafter, "North Castle"). A few months later, North Castle purchased Orchid and consolidated the manufacturing and packaging operations of FJC, Saratoga, Orchid, and North Castle.

  Shortly thereafter a dispute arose regarding the performance of North Castle and its affiliated companies under the Original Agreement. Natural subsequently filed suit in January 2001 against North Castle, Saratoga, FJC, and Orchid for breach of the Original Agreement. Within about a month of filing suit, however, Natural entered into the Revised Agreement with FJC; Orchid; California Day-Fresh Foods, Inc.; Fantasia Fresh Juice Company; and M. H. Zeigler and Sons, Inc. (each individually a "party-company" or collectively the "party-companies"). According to Natural, the parties settled the litigation and Natural dismissed its claims in return for the party-companies' entering into the Revised Agreement.

  The Revised Agreement provided that the party-companies would use commercially reasonable efforts to supply Natural with juice products for Natural to distribute exclusively within the territory covered by the agreement. Moreover, the party-companies were to supply products from a party-company maintaining a Florida-based production facility when commercially feasible. According to Natural, the only party-company with a Florida-based production facility was and is Orchid.

  The agreement did not obligate Natural to buy any minimum quantity of juice from the party-companies. However, the agreement required Natural to use commercially reasonable efforts to increase its sales. In addition, the agreement provided that if Natural failed to purchase at least 20,000 gallons of juice in any given month, the party-companies could terminate the Revised Agreement without penalty.

  Under the Revised Agreement, Natural paid for its requirements on "cost plus $1.30" basis. In other words, for every gallon of juice supplied, Natural paid the supplier $1.30 plus the cost of the fruit, packaging, labeling, and pasteurization.

  The Revised Agreement also permitted the "Companies" (i.e., the party-companies) to terminate the agreement "without cause." To exercise this provision, the party-companies would have to provide Natural with 60 days written notice, and pay a contractually-specified termination fee. The Revised Agreement initially set this fee at $2.5 million, with the fee declining by roughly $21,000 per month between March 1, 2004 and February 28, 2011, when the fee would reach zero. The parties disagree as to whether the agreement required payment of a termination fee for any without cause termination, or only for without cause terminations that met the contractually-specified conditions (i.e., 60 days written notice, apparent breach by all the party-companies collectively).

  On October 31, 2003, following a dispute with Orchid concerning alleged overcharges, Natural demanded assurances from Orchid that it would continue to perform under the Revised Agreement. Orchid responded in a November 4, 2003 letter, stating that it "intends to perform pursuant to the Agreement," and that one its employees "is calling [Natural] to schedule a pricing conference." Representatives of both parties attended such a meeting on November 12, 2003. At this meeting, Natural claims that Orchid stated that it neither would pay the overcharge credits requested by Natural, nor continue to sell products to Natural at the price specified in the Revised Agreement. In addition, Natural claims that Orchid threatened that if Natural did not renegotiate its pricing, Orchid would supply product from third-party vendors. These alleged statements and threats by Orchid form the basis of Natural's suit.

  II. LEGAL STANDARD

  The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency of a complaint, not the merits of the case. Triad Assocs., Inc. v. Chicago Hous. Auth., 892 F.2d 583, 586 (7th Cir. 1989); Majchrowski v. Norwest Mortgage, Inc., 6 F. Supp.2d 946, 952 (N.D. Ill. 1998). When considering a motion to dismiss pursuant to Rule 12(b)(6), the Court considers "whether relief is possible under [any] set of facts that could be established consistent with [the] allegations." Bartholet v. Reishauer A.G. (Zurich), 953 F.2d 1073, 1078 (7th Cir. 1992).

  The Court views all the facts alleged in the complaint, as well as any reasonable inferences drawn from those facts, in the light most favorable to Plaintiff. Stachon v. United Consumers Club, Inc., 229 F.3d 673, 675 (7th Cir. 2000). Dismissal is appropriate only where it appears beyond doubt that under no set of facts would Plaintiff's allegations entitle him to relief. Henderson v. Sheahan, 196 F.3d 839, 846 (7th Cir. 1999); Kennedy v. National Juvenile Del. Ass'n, 187 F.3d 690, 695 (7th Cir. 1999). The complaint, however, must allege that each element of a cause of action exists in order to withstand a motion to dismiss. Lucien v. Preiner, 967 F.2d 1166, 1168 (7th Cir. 1992). Furthermore, Plaintiff "cannot satisfy federal pleading requirements merely by attaching ...


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