Opinion ID: 783045
Heading Depth: 2
Heading Rank: 2

Heading: The Dispute Brews

Text: 12 In August 2001, Interbrew announced a deal to purchase Beck, a German brewer. At the time Interbrew acquired Beck, Beck's North America (Beck's NA), a wholly-owned subsidiary of Beck, was, and continues to be, the exclusive United States distributor of the Beck's brands of beer. Initially, Interbrew considered an acquisition of Beck's NA, but abandoned the idea when FEMSA voiced opposition to the proposal. Interbrew then sought to terminate the distribution arrangement between Beck and Beck's NA and, instead, have LUSA distribute Beck's brands directly. Since acquiring Beck, however, Interbrew has been operating two parallel United States distribution operations for the imported brands it owns: LUSA and Beck's NA. 13 In the months following Interbrew's August 2001 announcement, FEMSA attempted to obtain more information about the deal in order to enable Wisdom to make an informed decision about whether or not to approve the Beck's integration. It is clear that, even in these early stages, the parties disagreed regarding the degree to which Wisdom could veto the integration. FEMSA and Wisdom posited that such an acquisition would require, at a minimum, LUSA agreeing to distribute Beck's brands which, in turn, constitutes a fundamental matter under section 2.9 of the LF I Agreement requiring a super-majority vote. Despite these concerns, Appellants proceeded with preliminary steps to effectuate the Beck's integration. 14 In April 2002, Wisdom requested a meeting of the LF I Board to vote on the proposed integration. On April 25, 2002, a Board meeting convened during which Labatt, on behalf of its parent Interbrew, presented a resolution to integrate Beck's brands into LUSA's portfolio (the Resolution). The Resolution stated: 15 1. The addition by [LF I] of all Beck's brands currently distributed by [Beck's NA] (the Beck's Brands) to the Exclusive Distribution Agreement between [Labatt], [LUSA], et al, dated as of December 1, 1994, is hereby approved, ratified and confirmed. 16 2. Any two officers or directors of [LF I] are authorized and directed to execute and deliver for and in the name of and on behalf of [LF I] and under its corporate seal or otherwise, all such certificates, instruments, agreements, amendments, bills of sale, notices, affidavits, and other documents and to do all such other acts and things as, in the opinion of such persons, may be necessary or desirable in connection with the integration of Beck's Brands and with the performance by [LF I] of its obligations hereunder. 17 Four Labatt directors (one Labatt directorship was vacant at the time of the vote) voted in favor of the Resolution, while the two Wisdom directors voted against it. 18 Labatt and Interbrew perceived the vote as a success, continuing to maintain that only a simple majority vote was required to approve the action. Wisdom, on the other hand, continued to believe what it had urged in the months preceding the vote on the Resolution: that the Beck's integration involved fundamental matters, thereby requiring the approval of six LF I directors. However, Labatt intimated an intent to proceed with the Beck's integration despite not having obtained Wisdom's approval. After the vote, the Wisdom directors included in the LF I Board meeting minutes a statement reiterating Wisdom's position. Appellants nonetheless proceeded with the integration which included, among other things, a general restructuring and reorganization of LUSA as outlined in LUSA's Long Range Plan 2003-2005 (Long Range Plan). 19 On April 29, 2002, Wisdom filed a complaint alleging breach of the LF I Agreement. Wisdom sought a temporary restraining order and a preliminary injunction to enjoin the Beck's integration.