Bloor v. Falstaff Brewing Corp

601 F.2d 609 (2nd Cir. 1979)

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Nature of the Case

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Facts

Ballantine had been a family-owned business, producing low-priced beers for New York, New Jersey, Connecticut, and Pennsylvania. Its sales began to decline in 1961, and it lost money from 1965 on. In 1969, Investors Funding Corporation (IFC), a real estate conglomerate with no experience in brewing, acquired substantially all the stock of Ballantine for $16,290,000. IFC increased advertising expenditures, leveling off in 1971 at $1 million a year. Sales grew, but Ballantine lost $15,500,000 for the 33 months of IFC ownership. Falstaff (D) then bought the rights to Ballantine's trademarks and other property except for the brewery for $4,000,000 plus a fifty cent royalty on each barrel of Ballantine brands sold between 1972 and 1978. D was to contractually use its best efforts to promote and maintain a high volume of sales of Ballantine products. The contract also contained a liquidated damages clause such that it would take effect if D ever discontinued the distribution of beer under the Ballantine name. D continued the $1 million a year advertising program, IFC's pricing policies, and also its policy of serving smaller accounts not solely through sales to independent distributors. D lost $22 million over three years in distributing the Ballantine products. A new brewer took control of D. He pumped almost $14 million more into the company and reduced the advertising, changed the distribution network from retail to wholesale, and pursued profit over volume. Ballantine sales fell dramatically, but D become profitable. Bloor (P), the reorganization trustee of Ballantine & Son, sued to recover damages for breach of contract. P claimed that D did not use his best efforts to maintain sales volumes. P claimed that the liquidated damages clause was invoked. The trial court found that D breached the contract but was not liable under the liquidated damages clause. Both parties appealed.