Operating v. Friends Beverage Group (Mar. 17, 2025)

Case details
Full caption
Labatt USA Operating v. Friends Beverage Group
Country
United States
Jurisdiction
New York (NY)
Court
New York Court of Appeals
Decided
Mar. 17, 2025
Disposition
Motion Granted
Panel
Hon; Bannon (Justice)
Labatt USA Operating Co., LLC v. Friends Beverage Group, LLC, 2025 WL 4049222... © 2026 Thomson Reuters. No claim to original U.S. Government Works.12025 WL 4049222 (N.Y.Sup.) (Trial Order)Supreme Court of New York.New York CountyLABATT USA OPERATING CO., LLC, Plaintiff,v.FRIENDS BEVERAGE GROUP, LLC, Fun Wine (USA) LLC, Defendants.No. 651590/2022.December 30, 2025.*1 Part 61MMotion Date 04/21/2025Motion Seq. No. 005Decision + Order on MotionPresent: Hon. Nancy M. Bannon, Justice.The following e-filed documents, listed by NYSCEF document number (Motion 005) 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88,89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 118, 123,124, 203, 209, 213, 216, 218 were read on this motion to/for JUDGMENT - SUMMARY.I. INTRODUCTIONIn this breach of contract action, the plaintiff moves pursuant CPLR 3212 for summary judgment on all causes of action of theamended complaint, dismissal of the defendants' counterclaims, damages of $1,106,281.00 plus attorney's fees. The defendantsopposed the motion and cross-moved for partial summary judgment on the issue of liability for storage expenses. By interimorder dated March 17, 2025, the court struck the defendants' opposition and cross-motion for having twice used artificialintelligence in drafting its filings, which contained hallucinated case citations. As such, the motion is unopposed.II. BACKGROUNDOn April 1, 2019, the parties entered into a Distribution Agreement, whereby the plaintiff, a beverage distributor, would purchaselow-alcohol flavored wine products (the “Fun Wine Product”) from the defendants, Fun Wine (USA) and it subsidiary, FriendsBeverage Group, LLC, and sell it to downstream distributors. This comprehensive contract included provisions for minimumproduct orders and profit sharing, The defendant to receive 50% of all net profits and reimburse plaintiff for 50% of any“negative net profit.” Paragraph 7.4 provides that the plaintiff “shall have no right to return conforming products accepted by[it].” Paragraph 15.3 precludes any party to the contract from seeking to hold another party “liable for consequential, indirect,incidental, special, exemplary, punitive or enhanced damages, lost profits or revenues or diminution in value, arising out of orrelating to any breach of this agreement.” Paragraph 15.2 entitles the parties to recover attorney's fees incurred in enforcingany term of condition of the agreement. After the parties agreed to wind down and terminate their relationship and the plaintiffplaced its last order of Fun Wine Product in June of 2020, this agreement was modified.
Labatt USA Operating Co., LLC v. Friends Beverage Group, LLC, 2025 WL 4049222... © 2026 Thomson Reuters. No claim to original U.S. Government Works.2On July 24, 2020, the parties entered into the First Amendment to the Distribution Agreement by which the parties agreed toterminate their relationship by December 31, 2020. Under paragraph 9, the defendants were obligated to take possession andreimburse the plaintiffs for all unsold Fun Wine Product and point-of-sale materials remaining in the plaintiff's possession ordesignate a location for the plaintiff to ship the unsold Fun Wine Product or arrange for a mutually agreed upon time for thedefendants to retrieve the Product, at the expense of the defendants, within 45 days after the termination date. Paragraph 10of the First Amendment provides that both parties agreed that, as of July 2020, neither party was in material breach of theirobligations under the Distribution Agreement.*2 The parties' relationship terminated as planned on December 31, 2020, leaving the plaintiff with more than 30,000 casesof unsold Fun Wine Product, for which it had paid. The defendants also continued to ship product to the plaintiff after beinginformed that no further deliveries were needed. However, after several demands by the plaintiff, the defendants refused to takepossession of the product or reimburse the plaintiff for that and for point-of-sale marketing material the plaintiff had purchasedin an attempt to sell the product and refused to provide a location for the plaintiff to send the product within 45 days afterDecember 31, 2020.As a result, the plaintiff was forced to store the Fun Wine Product for two years, from February 15, 2021, until February 1, 2023,incurring substantial storage costs $.75 per case per month, totaling $529,342.06. The defendants eventually took possessionof the unsold Fun Wine Product in February of 2023, and thereupon transferred it to a third party, ICON, in exchange foradvertising credits. By that time, the defendants had replaced the product sold to the plaintiff with a new competing product.On March 6, 2023, the plaintiff sent the defendants a final statement of account, including all storage costs and product costs,a total of $1,106,281.00. No payment was made.The plaintiff commenced this action on April 5, 2022, alleging two causes of action - for breach of contract and breach of theimplied covenant of good faith and fair dealing. The plaintiff was permitted to add a third cause of action, for unjust enrichmentin regard to the storage fees paid and costs incurred for marketing materials by an amended complaint filed on March 18, 2024(MOT SEQ 001). The defendants asserted two counterclaims, for breach of contract and breach of the implied covenant of goodfaith and fair dealing, seeking $10,000,000.00 in damages. This motion ensued.III. DISCUSSIONOn a motion for summary judgment, the moving party must make a prima facie showing of its entitlement to judgment as amatter of law by submitting evidentiary proof in admissible form sufficient to establish the absence of any material, triableissues of fact. See CPLR 3212(b); Jacobsen v New York City Health & Hosps. Corp., 22 NY3d 824 (2014); Alvarez v ProspectHosp., 68 NY2d 320 (1986); Zuckerman v City of New York, 49 NY2d 557 (1980). In opposition, the nonmoving party mustdemonstrate by admissible evidence the existence of a triable issue of fact. See Alvarez v Prospect Hospital, supra; Zuckermanv City of New York, supra. The plaintiff met its burden to the extent indicated herein and the defendants, whose oppositionwas stricken, wholly failed to meet their burden.A. First Cause of Action: Breach of the First AmendmentThe plaintiff's motion is granted as to its first cause action since it established a prima facie cause of action for breach of contract(1) the existence of a contract, (2) the party's performance under the contract; (3) the opposing party's breach of the contract,and (4) resulting damages. See Second Source Funding, LLC v Yellowstone Capital, LLC, 144 AD3d 445 (1st Dept. 2016);Harris v Seward Park Housing Corp., 79 AD3d 425 (1st Dept. 2010). As there is no dispute as to the existence of a contract,the plaintiff's performance and resultant damages, the element at issue here is the defendants' breach.The plaintiff submits the deposition testimony of eight witness, including David Simoni, the plaintiff's general counsel, RichardAndrews, plaintiff's general manager, Joshua Krebs and Jennifer McCauley, plaintiff's brand managers, and Douglas Smith,
Labatt USA Operating Co., LLC v. Friends Beverage Group, LLC, 2025 WL 4049222... © 2026 Thomson Reuters. No claim to original U.S. Government Works.3plaintiff's vice-president of wholesale development, as well as documentary evidence. In an affirmation, David Simoni explainsthat at the time the First Amendment was entered, the Fun Wine Products were not selling well, perhaps due in part to theCovid-19 pandemic, and that the new agreement, the First Amendment, was intended to address some of the plaintiff's risk incontinuing to do business with the defendants. According to Simoni and the plaintiff's other witnesses, the plaintiff continuedits efforts to market and distribute Fun Wine Product from execution of the First Amendment through December 31, 2020.The testimony also established that the plaintiff requested the defendants to take back the unsold Fun Wine Product and pointof sale materials, as required by paragraph 9 of the First Amendment, on January 4, 11, 13, 26, and May 18, 2021. However,the defendants failed to take possession or provide the plaintiff a location to send these materials by February 15, 2021, thecontractual deadline. Indeed, the plaintiff also submits deposition transcripts of defendants' representatives, Joseph Peleg andJoseph Bernstein, who both testified that they never took possession of the unsold Fun Wine Product and never reimbursed theplaintiff. Thus, the plaintiff's submissions demonstrate, prima facie, the defendants' breach of the First Amendment.*3 As for damages, Simoni avers that the plaintiff expended $576,938.99 to purchase Fun Wine Product and point-of-salematerials, which remained unsold after December 31, 2020. This amount is supported by invoices dated from February 2021to February 2023, which show that $26,840.13 of this amount was for point-of-sale materials, including sample cups and bottledisplays, while $550,098.68 was the price the plaintiff paid for the ultimately unsold Fun Wine Product. Thus, the plaintiffestablished breach of contract damages of $576,938.99.1B. Second Cause of Action: Breach of the Implied Covenant of Good Faith and Fair DealingThe plaintiff's motion is denied as to its second cause of action, as it is duplicative of its breach of contract claim and indeed,seeks the same amount of damages. “[A] breach of the covenant of good faith and fair dealing is a breach of the contractitself” (Parlux v Carter Enterp., LLC, 204 AD3d 72, 92 [1st Dept. 2022]) such that a breach of the implied covenant of goodfaith and fair dealing claim must be dismissed as duplicative if it arises out of the same facts as a breach of contract claim.See MDRN Intelligence Living Wolfhome v Hartford Fin. Svcs. Group, Inc., 216 AD3d 409 (1st Dept. 2023); Ahsanuddin vAddo, 175 AD3d 1213 (1st Dept. 2019).C. Third Cause of Action: Unjust EnrichmentUnjust enrichment is an equitable remedy available to a plaintiff where there is no adequate legal remedy. See Clark-Fitzpatrick,Inc. v Long Is. R.R. Co., 70 NY2d 382 (1987); Empire Outlet Builders LLC v Constr. Res. Corp. of New York, 170 AD3d 582,583 (1st Dept. 2019). The plaintiff must show that: “(1) the [defendant] was enriched, (2) at [plaintiff's] expense, and (3) thatit is against equity and good conscience to permit the [defendant] to retain what is sought to be recovered”. Georgia Malone& Co., Inc. v. Rieder, 19 NY3d 511, 516 (2012); see Schroeder v Pinterest Inc., 133 AD3d 12 (1st Dept. 2015). By grantingthe plaintiff's motion to amend the complaint to add an unjust enrichment claim seeking reimbursement for the storage fees,the court found that claim was not devoid of merit as pleaded. On this motion, the plaintiff supports that cause of action withproof in admissible form. The plaintiff's submissions establish that the defendants were “enriched” not only by retaining boththe price the plaintiff's paid to the defendants for the unsold Fun Wine Product and the substantial credit it received from ICONfor the same product, but for transferring the costs of storage in the interim upon the plaintiff. Quite clearly, this was done at theplaintiff's expense. Additionally, under the circumstances presented, allowing the defendants to retain this enrichment wouldbe against “equity and good conscience” Georgia Malone & Co., Inc. v. Rieder, supra at 516.The plaintiff's invoices dated from February 2021 to February 2023 show that plaintiff incurred $529,342.06 in storage fees.Peleg's deposition testimony includes an admission that the defendants refused to take back the Fun Wine Product because theyhad made the decision to and did replace it with a new competitive beverage containing a different type of sweetener whichwas stored by them in their warehouse. Simoni testified that he also became aware that around that time the defendants wereseeking to reduce their own storage costs. Both Peleg and Bernstein testified at their deposition that the defendants ultimately
Labatt USA Operating Co., LLC v. Friends Beverage Group, LLC, 2025 WL 4049222... © 2026 Thomson Reuters. No claim to original U.S. Government Works.4transferred the Fun Wine Product to ICON in exchange for advertising credits of approximately $650,000.00-$700,000.00,effectively being paid twice for the same product.*4 To be sure, “unjust enrichment is not a catchall cause of action to be used when others fail. It is available only in unusualsituations when, though the defendant has not breached a contract nor committed a recognized tort, circumstances create anequitable obligation running from the defendant to the plaintiff.” Corsello v Verizon New York, Inc., 18 NY3d 777, 790 (2012);see Realty Group, LLC v Lamar Advertising Co., 193 AD3d at 589 (1st Dept. 2021); Maya NY, LLC v Hagler, 109 AD3d583, 585 (1st Dept. 2013). This case presents one of those unusual situations. The defendants' failure to reimburse the plaintifffor storage fees was not an express breach of the parties' agreement as storage fees fell outside the scope of the agreement.See Ashwood Capital v OTG Mgmt, Inc., 99 AD3d 1 (1st Dept. 2012). Nor did it constitute a recognizable tort. However,the circumstances created an equitable obligation of the plaintiff to reimburse the plaintiff. Thus, even if Paragraph 15.3 ofthe Distribution Agreement had survived, it would not preclude the plaintiff's recovery of the storage fees under the equitabletheory of unjust enrichment. Having no opposition, the defendants proffer no argument to the contrary.D. The Defendants' CounterclaimsThe plaintiff establishes a prima facie case for dismissal of the defendants' breach of contract counterclaim. The defendantsallege that the plaintiff failed to generate sales for the Fine Wine Product from April 1, 2019, until December 31, 2020, a periodwhich largely predates the First Amendment executed in July 2020. However, this argument is precluded by Paragraph 10 ofthe First Amendment which provides that, as of July 2020, neither party was in material breach of their obligations under theDistribution Agreement.Nor do the agreements include any provision in either the Distribution Agreement or First Amendment that require the plaintiffto meet particular goals in selling or distributing Fun Wine Product, but only that it be “committed to supporting the promotionand sale of the products.” And this was shown. The plaintiff's submissions demonstrate that it made significant efforts todistribute and market Fun Wine Product throughout the United States for the duration of the agreement. For example, in hisaffirmation, Simoni explains that during the period from July to December of 2020, the plaintiff exposed the Fun Wine Productas a brand in 24 states, secured a deal with Wal-Mart to sell Fun Wine Product through a sales incentive program, and investedin television and radio advertising in several states. The plaintiffs' general manager, Richard Andrews, and two of the plaintiff'sbrand managers, Joshua Krebs and Jennifer McCauley, testified that the Fun Wine Product was given a proportionate amountof resources devoted to marketing and distribution. Vice-President Douglas Smith testified that these efforts continued throughDecember 31, 2020. The plaintiff's proof also established that it set up a sales support team to advertise in various markets,hired a legal team to ensure compliance with local product regulations and secured licensing agreements with other distributors.The defendant's counterclaim for breach of the implied covenant of good faith and fair dealing fails for the same reasons theplaintiff's cause of action based on that theory fails.E. Attorneys' FeesIt is well settled that attorneys' fees are recoverable where, as here, there is a specific contractual provision for that relief.See Flemming v Barnwell Nursing Home and Health Facilities, Inc., 15 NY3d 375 (2010). Paragraph 15.2 of the DistributionAgreement provides for such relief. However, the plaintiff has not established the amount of fees incurred on the paperssubmitted. The plaintiff may submit supplemental papers within 30 days to establish the amount of fees incurred, or theapplication will be deemed waived.IV. CONCLUSIONAccordingly, upon the foregoing papers, it is
Labatt USA Operating Co., LLC v. Friends Beverage Group, LLC, 2025 WL 4049222... © 2026 Thomson Reuters. No claim to original U.S. Government Works.5ORDERED that the plaintiff's motion is granted to the extent that it is granted summary judgment on the first and third causesof action of the complaint, dismissal of the defendants' counterclaims and attorneys, and it is further*5 ORDERED that the Clerk shall enter judgment in favor of the plaintiff, Labatt USA Operating Co., LLC, and againstthe defendants, Friends Beverage Group. LLC, and Fun Wine (USA) LLC, jointly and severally, in the principal sum of$1,106,281.05, plus statutory interest from March 6, 2023, and it is furtherORDERED that plaintiff may file supplemental papers, within thirty (30) days of the date of this order, to establish the amount ofattorneys' fees incurred, and shall notify the Part 61 Clerk at SFC-Part61-Clerk@nycourts.gov of any such filing; and it is furtherORDERED that the Clerk shall mark the file accordingly.This constitutes the Decision and Order of the court.12/30/2025DATE<<signature>>NANCY M. BANNON, J.S.C.Footnotes1The plaintiff cannot seek additional breach of contract damages to recover the storage fees it incurred in warehousing Fun WineProduct and point-of-sale material for two years as the parties' agreement does not expressly support such relief. However, as setforth below, the plaintiff may recover the fees under an unjust enrichment theory.End of Document© 2026 Thomson Reuters. No claim to original U.S. Government Works.
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