United States Court of Appeals

For the Eighth Circuit 

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No. 20-1065

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Northern Bottling Co., Inc.

 Plaintiff - Appellant

v.

Pepsico, Inc.

 Defendant - Appellee

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Independent Bottlers Association; Pepsi-Cola Bottlers’ Association

 Amici on Behalf of Appellant(s)

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Appeal from United States District Court 

for the District of North Dakota - Bismarck 

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Submitted: March 17, 2021

Filed: July 22, 2021

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Before COLLOTON, GRUENDER, and GRASZ, Circuit Judges. 

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GRASZ, Circuit Judge.

Northern Bottling Co., Inc. (“Northern”) brought claims against Pepsico, Inc. 

(“PepsiCo”), alleging that PepsiCo failed to protect Northern’s interests under their 
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exclusive bottling contracts. The district court1 granted summary judgment to 

PepsiCo, concluding that the contracts between the parties did not expressly require 

PepsiCo to protect against certain shipments of PepsiCo’s products into Northern’s 

territory. We affirm.

I. Background

PepsiCo sells carbonated beverages. For many years, PepsiCo has relied on 

a network of local, independent bottlers tasked with purchasing syrup from PepsiCo, 

manufacturing and bottling the carbonated beverages, and selling and distributing 

the carbonated beverages to retail purchasers. 

Each independent bottler executes a generic bottling contract with PepsiCo, 

outlining the bottler’s territory and PepsiCo’s specifications for production. The 

bottling contracts require the bottler to purchase syrup for the carbonated beverages 

from PepsiCo and give the bottler exclusive rights to distribute PepsiCo products 

within its assigned geographic territory. 

Northern joined PepsiCo’s network of independent bottlers in 1955. 

Northern’s original territory included several counties in North Dakota, but was later 

expanded to include additional counties in both North and South Dakota. Northern

estimates that it services more than 2,000 customers. 

Northern’s initial bottling contract was for Pepsi-Cola; however, over the 

course of Northern’s more than sixty-five-year relationship with PepsiCo, Northern 

has acquired bottling contracts for additional PepsiCo products. Each product is 

governed by its own bottling contract, and the bottling contracts at issue on appeal 

are Northern’s contracts pertaining to Pepsi-Cola, Diet Pepsi, Mountain Dew, and 

Diet Mountain Dew. The bottling contracts contain choice-of-law provisions stating 

that disputes arising from the contracts are governed by New York law. 

1

The Honorable Daniel L. Hovland, United States District Judge for the 

District of North Dakota.
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“Transshipping” in this context occurs when carbonated beverage products 

from one bottler’s territory are transported and sold in another bottler’s exclusive 

territory. Transshipment often occurs when, after the initial delivery of product from 

a bottler to a retailer, the retailer re-sells the product to a separate distributor. That 

distributor might then transport and sell the products in another bottler’s territory. 

This problem often negatively impacts an independent bottler’s bargained-for rights 

under its bottling contracts. PepsiCo has faced decades of litigation over its efforts 

to battle transshipping. However, none of the bottling agreements mention 

transshipment or include any language requiring PepsiCo to prevent transshipment 

of competing products into Northern’s territory. 

In 1980, Congress passed the Soft Drink Interbrand Competition Act, which 

reinforced soft drink companies’ ability to control the manufacture, sale, and 

distribution of their products. See 15 U.S.C. § 3501 et seq. In response to the Soft 

Drink Act, PepsiCo developed the “PepsiCo Transshipment Enforcement Program” 

(“TEP”), which created a process by which PepsiCo investigated and fined bottlers 

whose product had been transshipped. Under the TEP, if a bottler suspects that 

products have been transshipped into its territory, it can report the offense to 

PepsiCo. PepsiCo then assigns an independent investigator to verify the presence of 

transshipped products in the complainant’s territory. If a violation is discovered, the 

TEP requires the offending bottler to pay a fine, which would then be credited to the 

victim bottler, as well as the costs of the investigation. A customer that is the source

of transshipped product could face penalties ranging from a warning to suspension 

or termination of its ability to purchase PepsiCo products. 

Northern claims its problems with transshipping greatly increased in 2010

when PepsiCo purchased many of its independent bottlers and created the Pepsi 

Bottling Company, a subsidiary of PepsiCo. After this vertical integration, PepsiCo 

owned approximately 80% of its own bottling and sales capacity. This altered the 

interests of the market participants, which Northern claims impacted PepsiCo’s

enforcement of the TEP. 
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Northern alleges that since the formation of the Pepsi Bottling Company, 

PepsiCo has been causing or allowing transshipment to take place without protecting 

the interests of its independent bottlers. Northern also alleges the PepsiCo product 

transshipped into its territory increased from fewer than 1,000 transshipped cases of 

product between 2008 and 2010 to 6,500 cases in 2015. Northern admits that around 

2015, it had pricing disputes with some of its customers. And, around that time, a 

company named Core-Mark, who obtained Pepsi Bottling Company products from 

brokers, began selling PepsiCo products to its own customers within Northern’s 

territory. During the pricing dispute, four of Northern’s customers stopped 

purchasing products from Northern and began purchasing products from Core-Mark. 

Northern reported Core-Mark to PepsiCo on multiple occasions. In response, 

PepsiCo investigated, determined the identity of the source bottlers, assessed and 

collected fines from each such bottler, and then credited those payments to Northern. 

PepsiCo also sent a cease-and-desist letter to Core-Mark regarding its unauthorized 

sales in Northern’s territory. PepsiCo also tracked down the customers who were 

the source of the product that eventually ended up in Core-Mark’s hands, and 

PepsiCo sanctioned them. 

Northern sued PepsiCo in 2015, alleging causes of action for breach of the 

bottling contracts and tortious interference with the bottling contracts, among other 

claims. PepsiCo moved for summary judgment. The district court granted

PepsiCo’s summary judgment motion. The district court reasoned that since the 

express terms of the bottling contracts did not create a duty for PepsiCo to take any 

steps to prevent transshipping, Northern’s claims failed as a matter of law. Northern 

appeals. 

 

II. Discussion

We review de novo a district court’s grant of summary judgment. Guardian 

Fiberglass, Inc. v. Whit Davis Lumber Co., 509 F.3d 512, 515 (8th Cir. 2007). 

Summary judgment is appropriate when there is no genuine issue as to any material 

fact and the moving party is entitled to judgment as a matter of law. Id. “When 
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reviewing a grant or denial of summary judgment, we consider the evidence in the 

light most favorable to the nonmoving party and draw all reasonable inferences in 

that party’s favor.” Id. (cleaned up) (quoting Mettler v. Whitledge, 165 F.3d 1197, 

1200 (8th Cir. 1999)). 

A. New York Common Law 

We must first decide what law governs Northern’s breach of contract claim:

New York common law or New York’s Uniform Commercial Code (“UCC”). 

“Federal district courts sitting in diversity . . . must apply the forum state’s 

substantive law, including its conflict of law rules.” Guardian, 509 F.3d at 515. 

North Dakota law “honor[s] choice-of-law provisions” in contracts, and it is 

undisputed that the terms of the bottling contracts state that New York law governs 

any conflict arising from the contracts. Chapman v. Hiland Partners GP Holdings,

LLC, 862 F.3d 1103, 1108 (8th Cir. 2017); accord Am. Hardware Mut. Ins. Co. v. 

Dairyland Ins. Co., 304 N.W.2d 687, 689 n. 1 (N.D. 1981) (“Parties may stipulate 

as to choice of law.”). 

 The analysis of whether PepsiCo owed a duty to prevent transshipping differs 

depending on whether New York common law or the UCC applies. In short, if New 

York common law applies to this dispute—as the district court believed—then 

PepsiCo did not breach the bottling agreements. Alternatively, if we conclude that 

the UCC applies to the bottling agreements, then Northern has a stronger argument 

that PepsiCo had a contractual duty to prevent transshipping. 

PepsiCo asserts that Northern has waived its argument regarding the 

applicability of the UCC because Northern did not raise it before the district court. 

We agree. 

It is well settled that a party’s failure to raise an argument before a trial court 

typically waives that argument on appeal. Heuton v. Ford Motor Co., 930 F.3d 1015, 

1022 (8th Cir. 2019) (“Absent exceptional circumstances . . . we cannot consider 

issues not raised in the district court.” (quoting Platte Valley Bank v. Tetra Fin. Grp., 
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LLC, 682 F.3d 1078, 1086 (8th Cir. 2012))). Here, Northern failed to argue for 

application of the UCC before the district court. Not only that, but when PepsiCo 

attacked the Tenth Circuit’s application of New York’s UCC in a case involving 

nearly identical PepsiCo bottling agreements, Northern responded by arguing that 

New York common law allowed the same result implicated by the UCC even in a 

contract not governed by the UCC. Pepsi-Cola Bottling Co. of Pittsburg v. PepsiCo, 

Inc., 431 F.3d 1241, 1256 n. 7 (10th Cir. 2005). 

Northern argues against waiver by claiming that its citation to the Pepsi-Cola 

Bottling Co. of Pittsburgh case throughout its response, and the district court’s 

decision to address the Uniform Commercial Code versus common law issue in its 

decision, shows that its UCC argument was squarely before the district court and 

thus not waived. We find Northern’s argument unpersuasive. Happening to cite to 

a case involving the same issue without developing an argument is not enough to 

preserve an issue for appeal.2

 

Northern was obligated to challenge the application of New York common 

law in its response to PepsiCo’s motion for summary judgment. It cannot rely on 

the district court’s analysis of the issue to preserve arguments it failed to raise. We 

conclude that all of the arguments arising out of Northern’s suggested application of 

the UCC also fail, and we uphold the district court’s application of New York 

common law. 

2

On appeal, Northern argues that the district court failed to properly analyze 

this issue under the Erie doctrine. Because we conclude that Northern waived its 

UCC arguments, we need not move forward with an Erie analysis.
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B. Breach of Contract 

1. New York Common Law

Applying New York common law, it is evident PepsiCo did not owe a duty to 

prevent transshipping under the express terms of the bottling contracts, and, 

therefore, Northern’s breach claim fails as a matter of law. 

It is undisputed that the plain terms of the bottling contracts do not create an 

express duty for PepsiCo to prevent transshipping of products into Northern’s 

territory. “New York follows the common law rule that, in interpreting a contract, 

the intent of the parties governs, and therefore a contract should be construed so as 

to give full meaning and effect to all of its provisions.” Novamedix, Ltd. v. NDM 

Acquisition Corp., 166 F.3d 1177, 1181 (Fed. Cir. 1999) (cleaned up and quotation 

omitted); accord W.W.W. Assocs., Inc. v. Giancontieri, 566 N.E.2d 639, 642 (N.Y. 

1990) (“[W]hen parties set down their agreement in a clear, complete document, 

their writing should as a rule be enforced according to its terms. Evidence outside 

the four corners of the document . . . is generally inadmissible to add to or vary the 

writing.”). 

 “In interpreting a contract, ‘[w]ords and phrases are given their plain meaning. 

Rather than rewrite an unambiguous agreement, a court should enforce the plain 

meaning of that agreement.’” Novamedix, 166 F.3d at 1181 (quotation omitted). 

“[W]hether contract provisions are ambiguous is a question of law . . . .” Ali v. Fed. 

Ins. Co., 719 F.3d 83, 89 n. 9 (2d Cir. 2013). “[W]here ‘the intent of the parties can 

be determined from the face of the agreement, interpretation is a matter of law,’ and 

a claim turning on that interpretation may thus be determined by summary judgment 

or by dismissal.” Novamedix, 166 F.3d at 1181 (quotation omitted). Thus, because 

we apply New York common law and focus on the express terms of the bottling 

agreements, we conclude PepsiCo had no duty to prevent transshipping of products 

into Northern’s territory.
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2. Covenant of Good Faith and Fair Dealing

“[U]nder New York law, every contract contains an implied covenant of good 

faith and fair dealing,” and the duty to exercise good faith and fair dealing can be 

rooted in both New York common law and the UCC. Arbitron Inc. v. Tralyn Broad., 

Inc., 526 F. Supp. 2d 441, 447–48 (S.D.N.Y. 2007). “New York courts have 

repeatedly affirmed that a party may be in breach of an implied duty of good faith 

and fair dealing, even if it is not in breach of its express contractual obligations, 

when it . . . deprive[s] the other party of the fruit of its bargain.” Duration Mun. 

Fund, L.P. v. J.P. Morgan Sec. Inc., 2009 WL 2999201, at *6 (N.Y. Sup. Ct. Sept. 

16, 2009) (unpublished). But, “[a] claim of implied duty of good faith and fair 

dealing cannot create new duties under a contract or substitute for an insufficient 

contract claim.” Duration, 2009 WL 2999201, at *7; accord Lehman Bros. Int’l 

(Europe) v. AG Fin. Prod., Inc., 2013 WL 1092888, *2 (N.Y. Sup. Ct. Mar. 12, 

2013) (unpublished) (“[T]he covenant of good faith and fair dealing cannot be 

construed so broadly as to effectively nullify other express terms of the contract, or 

to create independent contractual rights.” (citation omitted)). 

 A claim for the breach of the covenant of good faith and fair dealing is not “a 

substitute for a nonviable breach of contract claim.” Triton Partners LLC v. 

Prudential Sec. Inc., 752 N.Y.S.2d 870, 870 (N.Y. App. Div. 2003). “[T]he implied 

covenant of good faith and fair dealing only precludes each party from engaging in 

conduct that will deprive the other party of the benefits of their agreement.” 

Arbitron, 526 F. Supp. 2d at 448 (alteration in original) (quotation omitted). The 

covenant “merely brings to light implicit duties to act in good faith already 

contained, although not [] specified in the contract. . . . [F]or the implied duty of 

good faith and fair dealing to stand as a cause of action, there must be an underlying 

contractual obligation between the parties.” Duration, 2009 WL 2999201, at *7. 

Even if PepsiCo was bound to avoid conduct that would deprive Northern of 

its benefits under the EBA with PepsiCo, Northern’s claim that PepsiCo breached 

the implied duty of good faith and fair dealing cannot survive summary judgment. 

There is no dispute of material fact with respect to PepsiCo’s conduct, and a 
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reasonable factfinder could not find that PepsiCo engaged in conduct that deprived 

Northern of its benefits under the EBA. PepsiCo implemented and enforced the TEP 

even though it was not required to do so under the plain terms of the bottling 

agreements. And, Northern does not dispute that PepsiCo followed up on Northern’s 

complaints against Core-Mark or that PepsiCo reprimanded the offending bottlers 

who were the source of products that went to Core-Mark. PepsiCo’s enforcement 

of the TEP demonstrates that it acted in good faith to protect Northern’s territory 

under the bottling agreements. However, those actions do not manifest or arise out 

of an implied duty to prevent transshipping. We conclude that Northern cannot rely 

on an implied duty to create obligations that are not expressly included in the bottling 

contracts, and that duty cannot provide a basis for Northern’s breach of contract 

claim.

3. Alleged Factual Disputes

Northern argues the district court erred in finding that there was no genuine 

dispute of material fact on its breach of contract claim because the magistrate judge 

assigned to this matter found that there were issues of fact. Without the parties’ 

consent, magistrate judges cannot issue binding decisions on dispositive motions. 

See Roell v. Withrow, 538 U.S. 580, 585 (2003); see also United States v. Raddatz, 

447 U.S. 667, 673 (1980). Furthermore, the discovery orders Northern clings to are 

clearly interlocutory orders, not decisions on the merits. See Gander Mountain Co. 

v. Cabela’s, Inc., 540 F.3d 827, 830 (8th Cir. 2008) (“[A] discovery ruling is 

‘clearly’ an interlocutory decision.” (citing FirsTier Mortg. Co. v. Invs. Mortg. Ins. 

Co., 498 U.S. 269, 276 (1991))). Thus, Northern’s argument that the magistrate 

judge’s rulings create issues of fact fails. 

Because the bottling agreement is unambiguous and fails to confer a 

contractual duty on PepsiCo to prevent transshipping, and given Northern’s inability 

to establish that PepsiCo owed a duty to prevent transshipment of products into 

Northern’s territories, there is no genuine dispute of material fact and Northern’s 

breach of contract claim was properly disposed of on summary judgment. 
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C. Tortious Interference

Finally, Northern argues that the district court erred in granting summary 

judgment on its tortious interference claim because (1) in the event that Northern’s 

breach of contract claim fails, its tort claim survives, and (2) the issue of causation 

was properly reserved for a jury. 

Both parties agree that North Dakota law governs Northern’s tort claim. 

[I]n order to prevail on a claim for unlawful interference with business, 

a plaintiff must prove the following essential elements: (1) the 

existence of a valid business relationship or expectancy; (2) knowledge 

by the interferer of the relationship or expectancy; (3) an independently 

tortious or otherwise unlawful act of interference by the interferer; 

(4) proof that the interference caused the harm sustained; and (5) actual 

damages to the party whose relationship or expectancy was disrupted. 

Lochthowe v. C.F. Peterson Estate, 692 N.W.2d 120, 126 (N.D. 2005) (quoting

Trade ‘N Post, L.L.C. v. World Duty Free Americas, Inc., 628 N.W.2d 707, 717 

(N.D. 2001)). “It is not enough for a plaintiff to show a mere possibility that he 

would have obtained some economic benefit in the absence of a defendant’s 

interference . . . . Rather, the plaintiff must show he would have obtained the 

economic benefit in the absence of the interference.” Carlson v. Roetzel & Andress, 

No. 3:07–cv–33, 2008 WL 873647, at *13 (D.N.D. Mar. 27, 2008) (unpublished) 

(internal citations omitted). 

Northern’s tort claim immediately fails because its tort allegations are rooted 

in the contractual dispute between it and PepsiCo. Van Sickle v. Hallmark & Assocs., 

Inc., 744 N.W.2d 532, 540 (N.D. 2008) (“[I]f the defendant’s conduct . . . would 

give rise to liability only because it breaches the parties’ agreement, the plaintiff’s 

claim ordinarily sounds only in contract.”). 
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Northern argues that its tort claim arises not from the contract, but from 

PepsiCo’s failure to prevent transshipping. Northern contends its customers knew 

that transshipped goods were widely available for purchase within Northern’s 

territory, which allowed the customers to jump ship from Northern to Core-Mark 

(for a while). We are unpersuaded. Not only does this argument fail to connect 

PepsiCo to Northern’s alleged injury, but the undisputed facts show that PepsiCo 

took reasonable steps to educate its customers against transshipment. 

 The undisputed record demonstrates that PepsiCo took reasonable measures 

to enforce the TEP and to prevent transshipment of products into Northern’s 

territory. Northern does not dispute PepsiCo’s representations that it investigated 

each of Northern’s complaints against Core-Mark and that it followed the procedures 

set forth in the TEP by tracking down the source of the transshipped products and 

sanctioning the customers responsible for selling-off their purchased PepsiCo 

products. We therefore agree with the district court that PepsiCo is entitled to 

judgment as a matter of law on Northern’s breach of contract claim. Therefore, we 

agree with the district court that no genuine dispute of material fact exists as to 

Northern’s tort claim. Accordingly, we uphold the district court’s award of summary 

judgment on Northern’s tortious interference claim. 

III. Conclusion

The judgment of the district court is affirmed. 

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