Theatrical Services & Supplies, Inc. v. GAM Products, Inc.

Theatrical Services & Supplies, Inc. (Theatrical) (plaintiff) was a New York company that was in the business of selling theatrical supplies. GAM Products, Inc. (GAM) (defendant) was a California company that made specialty lighting products for use in the entertainment industry. In 2007, Theatrical began negotiations with GAM to become a distributor of GAM’s products on the East Coast. On September 1, 2007, the parties signed a written distributor agreement that gave Theatrical a nonexclusive right to sell GAM’s products to retail end users. The written agreement contained a merger clause, which provided that all agreements between the parties were “contained in this agreement which supersedes and terminates all other agreements between the parties.” According to Theatrical, the parties also separately entered into an oral master-distributor agreement, as evidenced by emails predating September 2007. Under the oral agreement, Theatrical had the right to sell to small East Coast distributors, GAM agreed not to compete with Theatrical for sales to these smaller distributors, and GAM agreed to engage in actions to transition Theatrical into the role of an exclusive master distributor. In reliance on the oral agreement, Theatrical ordered $30,000 worth of GAM’s products, which Theatrical was subsequently unable to sell. Theatrical sued GAM, alleging breaches of the oral and written agreements and fraudulent inducement as to the oral agreement. GAM moved to dismiss the complaint, arguing that Theatrical could not introduce evidence of an oral contract that contradicted the written contract.