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Silver Foam Distributing Co. v. Labatt Brewing Trading Company, Ltd.

United States District Court for the Eastern District of Michigan
2021 WL 859043 (2021)

Written by Angela Patrick, JD

Facts

Labatt Brewing Trading Company, Ltd. (Labatt) (defendant) and Silver Foam Distributing Co. (Silver Foam) (plaintiff) entered into a five-year agreement. Under this contract, Silver Foam agreed to package Miller beer in the United States and ship it to Canada “as required” by Labatt. During the first two years, Silver Foam spent more than $1 million, with Labatt’s knowledge, purchasing the equipment and developing the systems necessary to perform the requested services. Labatt then used Silver Foam’s services for several months. About halfway through the contract, Labatt’s parent company, Anheuser Busch, sold the Miller beer brands to Molson Coors. As a result, Labatt lost the right to sell Miller beer in Canada and no longer needed Silver Foam’s services. Labatt stopped placing any orders under the contract. Silver Foam sued Labatt in federal district court, alleging that the parties had a requirements contract and that Labatt had breached this contract by failing to order anything for the last 2.5 years of the contract. Labatt moved to dismiss the claim, arguing that (1) the parties’ contract was not a requirements contract and (2) even if it were a requirements contract, Labatt had a permissible, good-faith reason for reducing its requirements to zero. The district court considered the motion.

Rule of Law

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Holding and Reasoning (Michelson, J.)

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