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Pamado, Inc., D/B/A Central Beverage Company, An Illinois Corporation v. Hedinger Brands

March 28, 2011


The opinion of the court was delivered by: Judge Robert M. Dow, Jr.


This lawsuit arises out of a trademark license and distributor's agreement between Pamado, Inc., d/b/a Central Beverage Company ("Central Beverage") and Hedinger Brands, LLC ("Hedinger") for the distribution of DAD'S® root beer. Before the Court are cross motions for partial summary judgment. Central Beverage's motion [58] asks the Court to find Hedinger liable on all aspects of its complaint and to find that Central Beverage is entitled to damages in an amount to be proven at trial. Conversely, Hedinger seeks summary judgment in its favor on Central Beverage's complaint [53]. For the following reasons, both parties' motions [53, 58] are granted in part and denied in part.

I. Background

The facts relevant to the disposition of the instant motion are straightforward and largely not in dispute.*fn1 Central Beverage distributes alcoholic and non-alcoholic beverages throughout the Chicago area. On or about February 6, 2006, Central Beverage entered into a Trademark License and Distributor's Agreement (the "Agreement") with a company called Monarch Beverage Company. At that time, Monarch owned the proprietary formulae, trademark, and distribution rights in DAD'S® root beer. The Agreement designated Central Beverage as the exclusive distributor of certain beverages (including all DAD'S® products) within a designated sales territory in the Chicago area, subject to the exception discussed below. On January 12, 2007, Monarch sold its rights in DAD'S® products to Hedinger. Hedinger thus became the assignee of the Agreement between Monarch and Central Beverage as it related to distribution of DAD'S® products.*fn2

Section 1.0 of the Agreement ("Grant of Right") is the provision that granted Central Beverage the exclusive right to distribute DAD'S® products within its sales territory. The provision reads:

1.0 Company grants the exclusive right, except as set forth below to Distributor, to distribute and sell only in the restricted territory, defined and described in Appendix "C" (the "Territory"), only the package sizes listed in Appendix "B", and only the beverages listed in Appendix "A" (hereinafter referred to as the "Beverages").

(a) The Distributor's right to sell and distribute Beverages in the Territory shall be exclusive except that the Company reserves the right to sell Beverages to chain or multiple outlets with operations in the Territory and one or more operations outside the Territory (hereinafter called the "National Account Customers") for an invasion fee of $1.00 per case for the accounts listed in Appendix D.

Appendix A lists a number of products, including "Dad's-All lines & Flavors." Appendix B provides: "All Packages." Appendix C describes Central Beverage's territory, which was a portion of Illinois that included the southern part of Chicago. Appendix D lists only one National Account Customer-Walgreens.

Section 7 of the Agreement sets forth the circumstances under which the Agreement could be terminated. Section 7.0 provides that Hedinger could terminate the Agreement in the event that Central Beverage became insolvent. Section 7.1 provides that Hedinger could terminate the Agreement if Central Beverage experienced a change in ownership or ownership control. Section 7.2 provides as follows:

7.2 This contract may be terminated for material breach of any obligation, representation, warranty, or covenant in this Agreement, as well as for the following reasons an in the following manner:

(a) By the mutual written consent of the parties;

(b) By the Company if the Distributor fails to make its best efforts to meet the minimum sales each year defined as 12,000 raw cases in 2006, 14,000 raw cases in 2007 and 16,000 raw cases in 2008.

(c) Notwithstanding anything to the contrary herein, in the event the Distributor shall discontinue its operations or fail to distribute or sell the Beverages for a period of fifteen (15) days, the Distributor shall be deemed to have abandoned its rights under this Agreement and Company shall have the option to cancel this Agreement on fifteen (15) days' written notice;

(d) Failure of the Distributor to pay the Company approved source the price or prices of the Beverages.*fn3

Section 7.3 provides as follows:

7.3 The Company may terminate this Agreement for any other reason than those listed in sections 7.0, 7.1, or 7.2 or for no reason at all, upon 90 days' written notice to the Distributor, or by virtue of non-renewal under section 1.4.

Such termination will be effective as of the expiration of such 90 day period. In lieu of any other claim Distributor may have with respect to such termination by the Company, Distributor shall be entitled to receive compensation for each case sold by Distributor during the twelve month period ending on the date termination of this Agreement becomes effective. In the event this Agreement has been in effect for less than 12 months, the cases sold for purposes of compensation will be annualized. This per case compensation shall be a minimum of one times per case gross margin. In the event this Agreement is terminated within 12 months of the sale or assignment of the Company's rights under this Agreement, this amount shall be doubled. The ...

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