Opinion ID: 783045
Heading Depth: 4
Heading Rank: 1

Heading: New Agreement(s)

Text: 28 According to Appellants, neither Wisdom nor the district court identified a specific agreement that has been or will be entered in furtherance of the Beck's integration primarily because no such agreement has been or will be needed. Because LUSA, LF I, Labatt, Interbrew, and Beck are parties to, and operate under, the Labatt Distributor Agreement, the reasoning goes, and this agreement contemplates LUSA distributing new brands acquired by Labatt or Interbrew (such as Beck's brands), LUSA need not enter into any new agreement in order to effectuate the Beck's integration. Appellants contend that settling the details of the Beck's integration entails Interbrew, as the ultimate parent of both LUSA and Beck, simply acting unilaterally without the need for formal, commercial agreements. Absent a new agreement between LUSA and one of its affiliates, Wisdom's minority veto power is inapplicable. 29 We reject Appellants' contention that no new agreement has been identified and, particularly, Appellants' implication that failure to identify a specific written document compels the conclusion that no such agreement exists. 6 As we discuss below, the series of events occurring in connection with the Beck's integration, including discussions and negotiations between the parties thereto, supports the district court's finding that one or more agreements (which may not have been independently reduced to writing) have or, in all likelihood, will be entered. And, our caselaw instructs that, at least under New York law, oral agreements are binding and enforceable absent a clear expression of the parties' intent to be bound only by a writing. R.G. Group, Inc. v. The Horn & Hardart Co., 751 F.2d 69, 74-75 (2d Cir.1984). Likewise, an agreement does not lack formality simply because the parties may not have reduced its terms to writing. 30 That Wisdom was unable to identify a tangible document resembling an agreement during the abbreviated discovery period establishes nothing. Wisdom's veto power is conditioned only upon LUSA's entry into a related-party agreement, without regard to its form. For guidance, we naturally turn to the operative documents, primarily the LF I Agreement, governed by Delaware law, and the Labatt Distributor Agreement, governed by New York law. As an initial matter, we note that the law of Delaware and New York are identical regarding principles of contract construction, as both follow the common law rule. Thus, under either state's law, each operative agreement in this case is to be construed as a whole, giving full meaning and effect to all unambiguous terms and provisions therein according to their plain meaning and the parties' intent. See Gertrude L.Q. v. Stephen P.Q., 466 A.2d 1213, 1217 (Del.1983) (discussing Delaware law); PaineWebber, Inc. v. Bybyk, 81 F.3d 1193, 1199 (2d Cir.1996) (discussing New York law). 31 The evidence supports the district court's finding that LUSA entered into an agreement (albeit not resulting in a written document) in furtherance of the Beck's integration. Reading the LF I Agreement according to its plain language, section 2.9(v) deems fundamental any matter which necessitates LF I or LUSA entering an agreement with an affiliate. After its acquisition by Interbrew, Beck became one such affiliate. Beck, or Interbrew on behalf of Beck, agreed to shift Beck's distribution rights to LUSA and to use the same transfer pricing mechanisms as applied to other Labatt brands. LF I agreed, on behalf of LUSA, to accept those distribution rights. This is made clear by the Resolution itself which specifically approved, ratified and confirmed [t]he addition... of all Beck's brands ... to the Exclusive Distribution Agreement ... between Labatt (an affiliate) and LUSA. In other words, the Resolution presupposes a prior agreement (separate from the Labatt Distributor Agreement) to integrate Beck's brands into LUSA's portfolio and to adopt the Labatt Distributor Agreement as controlling Beck's distribution arrangement. 32 As we discuss in more detail below, Appellants concede that section 4 of the Labatt Distributor Agreement requires good faith negotiations when a new brand with a significant market presence (like Beck's brands) is sought to be added to LUSA's portfolio. Appellants admit that, presumably prior to presenting and voting on the Resolution, LUSA and Interbrew negotiated in good faith over terms and conditions on which the Beck's brands will be added to LUSA's portfolio and agreed to add Beck's to the existing [Labatt] Distributor Agreement on the same terms applicable to other brands. Appellants cannot and do not explain why this activity did not amount to making an agreement. 33 Moreover, the Resolution also authorized action in furtherance of the Beck's integration and, at a minimum, contemplated that the parties would execute additional agreements in the course of that integration. 7 Sufficient evidence supports the district court's findings that the Beck's integration necessarily would include other formal, commercial agreements between LUSA and an affiliate, thereby triggering Wisdom's minority veto power in section 2.9(v) of the LF I Agreement. Indeed, LUSA itself characterized the Beck's integration as a significant component of LUSA's planned reorganization and restructuring, which has been described by several witnesses as involving complex and complicated transactions. 8 34 The testimony of both Bryan Semkuley, LUSA's vice president of marketing, and John Lennon, president of Beck's NA, echo the notion that fully effectuating the Beck's integration either had required, or would likely require in the future, some formal agreement in connection with the transfer of distribution rights, the transfer price, the termination or reassignment of various LUSA and Beck employees, Beck's appointment of LUSA as its United States importer, Beck's reassignment of, and LUSA's acceptance of, Beck's wholesaler agreements, 9 and LUSA's assumption of Beck's media contracts. The shifting of substantial assets, together with evidence regarding the complex reorganization of LUSA in order to accommodate the addition of brands with a significant market presence in the United States and to integrate the operations of Beck's NA and LUSA, support the district court's finding that one or more agreements between LUSA and an affiliate have been entered or, in all likelihood, will be entered. As the district court aptly noted at oral argument, such complex matters are not accomplished with the snap of a finger. 35 Appellants concede that the right to distribute Beck's beer and the transfer price associated with this distribution arrangement require an agreement. However, Appellants contend that a new agreement was unnecessary because the Labatt Distributor Agreement, effective since 1994, dictates the terms of the exclusive distribution arrangement, including the transfer price for a new brand. Appellants erroneously assume that LUSA has only one of two choices: (1) to exercise its right of first refusal and decline to act as a new brand supplier's ( i.e., Beck) exclusive distributor; or (2) distribute the new brand under the pre-existing Labatt Distributor Agreement. However, under the Labatt Distributor Agreement, if Beck has a significant market presence, which Appellants concede it does, the parties are required to negotiate in good faith ... on terms and conditions ... [as the parties] deem equitable and appropriate under the circumstances. Labatt Distrib. Agmt., § 4, at 4-5. 10 By its terms, then, the Labatt Distributor Agreement expressly contemplates that certain parties to a proposed brand integration and distribution arrangement will negotiate (but not necessarily agree upon) whether to use the existing terms of the Labatt Distributor Agreement or to fashion different terms. Thus, LUSA could have negotiated for different terms than those in the Labatt Distributor Agreement. 36 The mere existence of the Labatt Distributor Agreement imposes no obligation to ultimately distribute Beck's brands through LUSA nor does it obviate the need for negotiation and agreement on the precise terms and conditions governing a new distribution arrangement. We find no evidence suggesting that acceptance of the Labatt Distributor Agreement lock, stock, and barrel is a foregone conclusion in a proposed integration of a new brand with a significant market presence. The only circumstance contemplated by the Labatt Distributor Agreement — and one which we find is a foregone conclusion — is that the parties to integration of a new brand with a significant market presence will negotiate in good faith over the terms and conditions of that integration. As in this case, LUSA and Interbrew negotiated, as required, and ultimately agreed to incorporate Beck's brands into LUSA's portfolio on the same terms as applicable to other brands. That constitutes an agreement, at least insofar as is necessary to support the district court's finding that the Beck's integration has required LUSA and an affiliate to enter an agreement. This agreement does not stand alone, however, as the Beck's integration is far from complete. As we stated above, other agreements will, in all likelihood, be necessary. 37 Appellants counter that any such agreements that have been or will be entered are nothing more than informal or colloquial agreements, which lack the degree of formality required in order to be covered by section 2.9(v). We disagree. Beneath the simplistic garb in which Appellants adorn the Beck's integration lies a complicated, multi-dimensional endeavor. Fully integrating Beck's brands into LUSA's portfolio is not equivalent to an ordinary, day-to-day business venture by a parent. 11 In addition to striking an agreement regarding the distribution rights and the transfer price, LUSA and an affiliate will need to agree on matters relating to employment downsizing and the reassignment of portions of the workforce, wholesaler contracts, and marketing schemes, which may reasonably be said to be constituent components of the Beck's integration and all of which require more than a waive of the wand. Thus, finalizing the details of any such agreement — involving the integration of business and coordination of nationwide distribution efforts of a major beer supplier — into a workable scheme is a herculean task. The evidence supports the district court's finding that the parties to the transaction have entered or will likely enter one or more agreements in fully effectuating the Beck's integration. We therefore reject Appellants' contention that no new formal agreement has been entered or will be entered in the course of fully effectuating the Beck's integration. 38