Opinion ID: 4570671
Heading Depth: 3
Heading Rank: 2

Heading: Transshipment Claim

Text: The district court granted summary judgment in favor of PepsiCo on the 20 11-5458 Compania Embotelladora Del Pacifico, S.A. v. Pepsi Cola Co. transshipment claim on the grounds that CEPSA had failed to prove damages, and, in the alternative, that PepsiCo had no duty to prevent or police transshipment. 10 CEPSA argues that both conclusions were erroneous. CEPSA asserts first that PepsiCo did in fact have a duty to police transshipment under the EBA. However, as the district court observed, the EBA is unambiguous on this point. Opinion and Order dated Sept. 4, 2009, Special App'x at 68. It prohibited PepsiCo from appointing another bottler to serve 10With respect to CEPSA's transshipment claim, amicus curiae, the IBA, urges us to address the district court's damages ruling and stop there. IBA Br. at 2. The IBA contends that the district court's contract interpretation was unnecessary to its decision and stray[ed] into industry-critical contract issues that are unnecessary to resolve this appeal. Id. We conclude that the IBA's assertion that we may decide this appeal without considering whether the EBA imposed a duty on PepsiCo to prevent or police transshipment is mistaken. Under New York law, nominal damages are always available in a breach of contract action even if a party cannot prove general or consequential damages. Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 95 (1993) (stating that [n]ominal damages are always available in breach of contract actions); see also Tradex Europe SPRL v. Conair Corp., 2008 WL 1990464, at  (S.D.N.Y. 2008) (denying summary judgment regarding breach of contract claim because defendant fail[ed] to address whether [p]laintiffs may . . . recover nominal damages even though they failed to produce evidence of any direct or consequential damages); Magu Realty Co. v. Spartan Concrete Corp., 658 N.Y.S.2d 45, 46 (2d Dep't 1997) ([A]lthough the plaintiffs have failed to demonstrate that they incurred any actual damages resulting from the alleged breach of contract . . . , they may still be entitled to nominal damages to vindicate their rights arising from the alleged breach of contract.); Hirsch Electric Co. v. Comm. Servs., Inc., 536 N.Y.S.2d 141, 143 (2d Dep't 1988) ([A]lthough the plaintiff has failed to demonstrate damages which would be recoverable at trial with respect to the lost profits claim, it is a well-settled tenet of contract law that even if the breach of contract caused no loss or if the amount of loss cannot be proven with sufficient certainty, the injured party is entitled to recover . . . nominal damages . . . .). 21 11-5458 Compania Embotelladora Del Pacifico, S.A. v. Pepsi Cola Co. CEPSA's exclusive territory or selling PepsiCo product directly into that territory, but it did not obligate[] PepsiCo to take affirmative steps to prevent other bottlers and third-parties from selling [Pepsi] in CEPSA's territory. Id. Because the EBA is straightforward and unambiguous, we may not consider extrinsic evidence or the parties' course of dealing, nor may we read additional requirements into unambiguous text in search of such an obligation. Id. at 67–68 (quoting Postlewaite v. McGraw-Hill, Inc., 411 F.3d 63, 67 (2d Cir. 2005)); see also id. at 68 (citing Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 73 (2d Cir. 1979) (Mansfield, J., concurring)). We must interpret the EBA according to its text and its text is clear — it imposed no such duty on PepsiCo. CEPSA contends that, notwithstanding the clear text of the EBA, PepsiCo had a duty to police transshipment under the implied covenant of good faith and fair dealing. PepsiCo argues that the covenant does not apply to the EBA because it is an at-will contract. Appellee's Br. at 50–51 (citing Coca-Cola N. Am. v. Crawley Juice, Inc., 2011 WL 1882845, at  (E.D.N.Y. May 17, 2011) (determining that under New York law, the covenant does not apply to an at-will distribution contract)). But assuming arguendo that the covenant applies, our conclusion remains the same. 22 11-5458 Compania Embotelladora Del Pacifico, S.A. v. Pepsi Cola Co. We agree with the district court that under New York law, the covenant of good faith and fair dealing does not give rise to new, affirmative duties on contracting parties. See, e.g., Broder v. Cablevision Sys. Corp., 418 F.3d 187, 199 (2d Cir. 2005) (concluding that the implied duty of good faith and fair dealing cannot be used to add[] to the contract a substantive provision not included by the parties (internal quotation marks omitted)); Vanlex Stores, Inc. v. BFP 300 Madison II LLC, 887 N.Y.S.2d 576, 581 (1st Dep't 2009) (stating that the implied covenant of good faith and fair dealing inherent in every contract cannot be used to create terms that do not exist in the writing). As noted, the EBA prohibited PepsiCo from appointing another bottler to serve CEPSA's exclusive territory or selling PepsiCo product directly into that territory, but it did not obligate[] PepsiCo to take affirmative steps to prevent other bottlers and third-parties from selling PepsiCo in CEPSA's territory. Opinion and Order dated Sept. 4, 2009, Special App'x at 68. Because the duty to police or protect against transshipment was not created or referred to in the writing, PepsiCo was not required to assume such a duty under the covenant. CEPSA argues that this conclusion conflicts with that of our sister circuit addressing the same issue in Pepsi-Cola Bottling Co. of Pittsburg, Inc. v. PepsiCo, 23 11-5458 Compania Embotelladora Del Pacifico, S.A. v. Pepsi Cola Co. Inc., 431 F.3d 1241 (10th Cir. 2005). In Pittsburg, the parties had entered into an exclusive bottler appointment agreement for the beverage Pepsi in 1959. See id. at 1248. From 1960 through 1998, they entered into nine additional such agreements for other beverages. See id. At issue was whether PepsiCo had breached the agreements by failing to protect against transshipment. See id. 1254. The Tenth Circuit applied the New York Uniform Commercial Code (UCC), which permits courts to consider parties' post-contract conduct, see N.Y.U.C.C. §§ 2–202(a), 2–208, cmt. 1, to decide the issue. Id. at 1259. To the extent that our sister circuit applied the UCC to bottler appointment agreements entered into prior to the effective date of the UCC, we think, respectfully, that this was error. The UCC became effective on September 27, 1964 and applies only to contracts entered into on or after that date. See NYUCC §§ 13–101, 13–105. In the case at bar, the EBA was entered into in 1952.11 The UCC therefore does not apply, and we can ignore it. We must therefore apply the New York common law of contracts. And 11CEPSA and PepsiCo entered into an additional EBA in 1993 for PepsiCo's Seven-Up products. See First Amended Complaint ¶ 13. But the allegations in the complaint are based only on the EBA; they do not refer to the Seven-Up Appointment. See id. ¶¶ 35– 45, 112–118. 24 11-5458 Compania Embotelladora Del Pacifico, S.A. v. Pepsi Cola Co. under New York common law, [w]here a 'contract is clear and unambiguous on its face, the intent of the parties must be gleaned from within the four corners of the instrument, and not from extrinsic evidence.' RJE Corp. v. Northville Indus. Corp., 329 F.3d 310, 314 (2d Cir. 2003) (quoting De Luca v. De Luca, 751 N.Y.S.2d 766, 766 (2d Dep't 2002)). We already have concluded that the EBA is clear and that we may not consider extrinsic evidence as the Tenth Circuit did in Pittsburg. The Tenth Circuit's conclusion, based on such extrinsic evidence, therefore does not guide our analysis or compel any particular result here. 12 Thus, CEPSA's assertion that PepsiCo's purported duty to police or prevent transshipment fails because we conclude that PepsiCo had no such duty. Accordingly, we need not reach CEPSA's third argument regarding damages and 12 In addition to the foregoing, there are salient factual differences between the case at bar and Pittsburg. Specifically, in Pittsburg, PepsiCo's obligations pursuant to a transshipment enforcement program (TEP), which protected the exclusive territories of its U.S. bottlers, were at issue. See Pittsburg, 431 F.3d at 1250, 1258. We are not aware of any such TEP program that protects bottlers in Peru. The Independent Bottlers Association (IBA), a non-profit corporation that represents PepsiCo's U.S. independent bottlers and amicus curiae in this case, contends that the EBA in this case is identical or substantially similar to the agreements between PepsiCo and IBA's member-bottlers. As a result, it warns, a decision affirming the district court would 'threaten[] to disrupt the long held expectations and obligations between PepsiCo and its [U.S. independent bottlers]. IBA Br. at 1. But agreements such as those of the IBA's members are not before us, and we do not consider them here. We decide this appeal on the basis of the specific agreement and circumstances before us. 25 11-5458 Compania Embotelladora Del Pacifico, S.A. v. Pepsi Cola Co. exclusion of evidence to affirm the judgment of the district court.