Hornell Brewing Co. v. Spry

Spry (defendant) approached Vultaggio, the Chairman of the Board of Hornell Brewing Co. (plaintiff) seeking distribution rights for Arizona Tea in Canada. Hornell granted Spry exclusive distribution rights and Spry established Arizona Iced Tea, Ltd. in Canada. The agreement was oral. In reliance on the agreement, Spry hired counsel to assist with beginning distribution, gained approval for labeling, and obtained importation approval. Spry had problems timely remitting payment for shipments. Spry owed over $100,000 to Hornell and a check to Hornell for $31,000 was returned for insufficient funds. Hornell and Spry had meetings, telephone calls, and letter communications regarding Spry’s invoices and the need for Spry to obtain a line of credit so that the business relationship could remain secure. Spry later provided Hornell a letter stating that a financing group had approved Spry for a $1.5 million line of credit. Spry continued to miss payment deadlines. Hornell sent Spry a letter which provided that Spry was indebted to Hornell for almost $80,000. The letter also provided that, if Spry would pay that amount, Hornell would continue the distributorship agreement and allow up to $300,000 in outstanding balances if all invoices were paid. Vultaggio learned that Spry’s warehouse in Canada was empty; there was no managerial, sales, or office staff; and that Spry had no distribution trucks. Spry eventually remitted payment in response to the letter. Upon confirmation of that payment, Spry ordered $390,000 to $450,000 of product. Through a second letter, Hornell acknowledged receipt of the payment and that it would extend up to $300,000 of credit if Spry would confirm that he had secured the $1.5 million line of credit. Spry did not respond. Vultaggio met with Spry to discuss termination of the business relationship. Vultaggio presented Spry with a letter of agreement regarding the termination, but Spry did not sign it. Hornell sought a declaratory judgment action with the Supreme Court of New York County that the distribution rights of Spry and Arizona had been properly terminated.