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Luxco Inc. v. Jim Beam Brands Co.

United States District Court, N.D. Illinois, Eastern Division

October 24, 2016

LUXCO, INC., Plaintiff/Counter-Defendant,
v.
JIM BEAM BRANDS CO., Defendant/Counter-Plaintiff.

          MEMORANDUM OPINION AND ORDER

          AMY J. ST. EVE United States District Court Judge.

         On June 6, 2016, the Court granted in part and denied in part Defendant/Counter-Plaintiff Jim Beam Brands Co.'s (“Beam”) motion for summary judgment, and, on June 9, 2016, the Court set a bench trial for November 28, 2016. The remaining claims in this lawsuit include: (1) Count I of the First Amended Complaint in which Plaintiff/Counter-Defendant Luxco, Inc. (“Luxco”) alleges that Beam breached the express warranty in Section 3.14 of the parties' Asset Purchase Agreement (“APA”); and (2) Beam's breach of contract Counterclaim, in which Beam alleges that Luxco breached the parties' Transaction Services Agreement (“TSA”).[1] The Court presumes familiarity with its earlier orders in this lawsuit, including the September 14, 2014 motion to dismiss order, the June 6, 2016 summary judgment ruling, and the September 6, 2016 ruling under Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993).

         Before the Court is Beam's motion in limine to exclude evidence of pre-contractual representations and the parties' due diligence. Also before the Court is Luxco's request to present deposition testimony at trial of former Beam officers John Lee and Kevin Cooke - who will also be live witnesses at the bench trial - pursuant to Federal Rule of Civil Procedure 32(a)(3). For the following reasons, the Court, in its discretion, denies Beam's motion in limine to bar evidence of pre-contractual representations and the parties' due diligence. Furthermore, the Court, in its discretion, grants Luxco's request to present deposition testimony of former Beam officers John Lee and Kevin Cooke. To ensure that the Cooke and Lee designations are not repetitious or immaterial in light of their live trial testimony, the parties must provide the Court with the written transcripts of these depositions highlighting the proposed testimony and a detailed explanation of why the designations are or are not repetitious or immaterial by no later than November 14, 2016.

         BACKGROUND

         Beam is an Illinois-based producer and bottler of alcoholic beverages and sells its products to a nationwide network of independent distributors. Luxco, which is based in St. Louis, Missouri, is also one of the nation's leading beverage alcohol companies. In March 2012, the parties began discussing Beam's potential sale to Luxco of the exclusive right to sell thirteen brands of alcoholic beverages. On January 18, 2013, Luxco and Beam executed the relevant APA. On January 31, 2013, the parties closed on the transaction.

         During the initial due diligence period, Luxco's Chief Executive Officer emailed a list of requests to Beam's Vice President of North American Strategy, John Lee, and Beam's Senior Director for North American Strategy and Revenue Management requesting information about the “Annual Marketing Spend by Brand” and a “List of programs, pricing promotions, free goods and entity grants by state (distributor) costs by year.” In general, Beam uses entity grants and local marketing funds (“LMF”) as incentive programs to support marketing and distribution of its brands. Beam and some of its distributors, for example, pay LMF funds for local advertising, merchandising materials, and price support to retailers. At summary judgment, Luxco presented evidence creating a genuine issue of material fact for trial that it was not until after the execution of the parties' APA that it discovered Beam was financing its distributors to use the Acquired Brands as free goods in order to induce sales of Beam's other brands.

         Likewise, before the execution of the APA, Beam provided credits to distributors to maintain sales of Wolfschmidt vodka in Florida and Arizona in 2012. In particular, Beam agreed to provide its distributors with credits against Beam's annual sales targets in those two states. At summary judgment, Luxco presented evidence that without the Wolfschmidt credits, sales of Wolfschmidt vodka would have significantly declined during 2012.

         On November 1, 2012, Luxco and Beam met at Beam's Deerfield, Illinois offices where the parties outlined the draft of the APA. On November 12, 2012, as part of a letter of intent, Beam provided Luxco with a Brand Detail Sheet that reported by brand the total shipment cases, net sales, gross profit, brand investment, and brand contribution for 2009 through 2011, as well as the trailing twelve month period ending October 31, 2012 (“TTM October 2012”). On November 18, 2012, Luxco e-mailed a Term Sheet, Due Diligence & Closing Checklist and the Brand Detail Sheet provided by Beam six days earlier, which recited the tentative terms of the deal. Luxco's November 18, 2012 Due Diligence and Closing Checklist included a request for copies of Beam's Distributor Agreements, which Beam did not turnover. Also, Luxco requested that Beam identify its “retail account incentives/programs by brand by retailer and distributor, ” to which Beam responded “No incentives or BI [Brand Incentive] dollars go toward the [Acquired Brands].”

         Luxco and Beam executed the APA on January 18, 2013, pursuant to which Luxco would acquire from Beam the exclusive right to sell the Acquired Brands. As part of the APA negotiations, Luxco bargained for and purchased representations and warranties from Beam regarding the Acquired Brands. More specifically, Luxco bargained for and purchased the representations and warranty in Section 3.14 of the APA, which states:

Brand Detail Sheet. The Brand Detail Sheet provided by the Seller to the Purchaser attached as Schedule 3.14 is true, complete and accurate in all material respects.

         Schedule 3.14 entitled “Brand Detail Sheet” is a spreadsheet that lists the shipped cases and net sales for the years 2009 through 2011 and TTM October 2012 for all of the Acquired Brands. At summary judgment, it was undisputed that the parties relied upon the “Brand Detail Sheet” during their contract negotiations.

         Relevant to the present in limine motion, the APA also states:

10.5. Entire Agreement. This Agreement (including the Exhibits and Schedules hereto) and the Ancillary Documents, when executed and delivered, constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the ...

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