68 F. Supp. 3d 317
E.D.N.Y2014Background
- Kellogg Sales Company seeks to terminate its distribution agreement with Two Locks, Inc. d/b/a Premier Snack Distributors in 2014; Plaintiff moves for a preliminary injunction to prevent termination and related adverse actions.
- Plaintiff has long distributed Kellogg’s snack products in the NY metro area since 2000 and previously worked with other distributors; by 2014 Premier is Kellogg’s principal and largest distributor by volume in the U.S.
- The 2009 Distribution Agreement contains a term in Section 2 and a termination mechanism in Section 12; the parties previously negotiated a 2008 version that also allowed termination on 90 days’ notice.
- Kellogg served a 90-day termination notice on June 30, 2014, claiming termination under Section 2; negotiations for a successor agreement extended into 2014.
- Plaintiff asserts breach of contract, breach of implied covenant of good faith, and declaratory judgment claims; the Court must decide whether Section 2 permits termination and whether Plaintiff is likely to succeed on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 2 authorizes termination without Section 12 approval | Premier contends Section 2, read with 'Subject to Section 12', renders all termination rights subject to Section 12. | Kellogg argues Section 2’s 90-day termination right survives after December 31, 2010 and is not fully conditioned by Section 12. | Section 2 is interpreted to preserve 90-day non-cause termination after 2010, subject to Section 12; Defendant’s termination is permissible. |
| Whether Section 2 is ambiguous and whether extrinsic evidence should resolve it | Ambiguity exists; extrinsic evidence should resolve whether all termination rights are subject to Section 12. | Section 2 is not ambiguous; extrinsic evidence would not change the meaning. | Court finds no ambiguity or, alternatively, extrinsic evidence does not compel Plaintiff’s interpretation; Defendant’s interpretation is more reasonable. |
Key Cases Cited
- Moore v. Consol. Edison Co. of New York, 409 F.3d 506 (2d Cir. 2005) (preliminary injunction standard and irreparable harm considerations)
- Morse/Diesel, Inc. v. Trinity Indus., Inc., 67 F.3d 435 (2d Cir. 1995) (requirement to harmonize contract terms; consideration of whole agreement)
- Tom Doherty Assocs., Inc. v. Saban Entm’t, Inc., 60 F.3d 27 (2d Cir. 1995) (ultimate relief exception and balance of equities in injunctions)
- Bank of New York v. Amoco Oil Co., 35 F.3d 643 (2d Cir. 1994) (contract interpretation and canons of construction)
- LaSalle Bank Nat. Ass’n v. Nomura Asset Capital Corp., 424 F.3d 195 (2d Cir. 2005) (avoid interpretation that renders a clause meaningless)