Southern Wine & Spirits v. Mountain Valley Spring Co.
646 F.3d 526
| 8th Cir. | 2011Background
- Contractual distributor relationship from 1993 giving Southern exclusive rights in 17 Nevada counties.
- In 2004, Mountain Valley was acquired by Clear Mountain, rebranded to target premium water segment.
- Mountain Valley allegedly failed to support high-end glass bottled water line and resisted brand repositioning.
- In 2007 disputes: Mountain Valley claimed price/terms changes; Southern claimed termination by Mountain Valley.
- June 2007 meeting and subsequent actions led to Mountain Valley allegedly terminating; Nevada Beverage Company later took over distribution in Southern’s territory.
- Jury awarded Southern breach of contract and related claims; Mountain Valley won one counterclaim for implied covenant; district court granted JML on Mountain Valley’s counterclaim but denied Mountain Valley’s JML on Southern’s claims; final judgment to Southern was entered; appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Term of the Agreement | Mountain Valley seeks termination at will. | Southern contends perpetual term unless terminated by explicit terms. | Perpetual term enforced; termination only by mutual consent or specified default. |
| Post-verdict JML on Southern implied covenant claim | District court erred in denying Mountain Valley’s JML on Southern’s implied covenant claim. | Evidence supported the implied covenant claim damages separate from contract. | District court did not err in denying Mountain Valley’s JML on Southern’s implied covenant claim. |
| Damages for Southern's implied covenant claim | Mountain Valley argued damages lacked linkage to the covenant breach and relied on global damages. | Griffiths’s methodology linked lost sales and over-performance to the covenant breach; damages were proper. | District court erred in vacating the jury’s damages; damages supported by Griffiths’s method and over half of calculated amount awarded by jury. |
Key Cases Cited
- Bell v. Leven, 90 P.3d 1286 (Nev. 2004) (perpetual-duration contracts enforced when language clearly so provides)
- Dahl, 961 P.2d 865 (Or. App. 1998) (perpetual contracts enforced where language contemplates perpetual duration)
- Phillips v. Mercer, 579 P.2d 174 (Nev. 1978) (contract interpretation to give effect to all words)
- Hilton Hotels Corp. v. Butch Lewis Prods., Inc., 808 P.2d 919 (Nev. 1991) (implied covenant exists to prevent arbitrary acts that disadvantage the other party)
- Frantz v. Johnson, 999 P.2d 351 (Nev. 2000) (implied covenant exists in Nevada contracts; forbids arbitrary acts)
- Overhead Door Co. of Reno v. Overhead Door Corp., 734 P.2d 1233 (Nev. 1987) (implied covenant forbids arbitrary action by one party that disadvantages the other)
- Davis v. Nev. Nat’l Bank, 737 P.2d 503 (Nev. 1987) (court construing contract to effectuate the parties' intent)