Berliner Foods Corp. v. Pillsbury Co.
1986 U.S. Dist. LEXIS 26431, 633 F. Supp. 557 (1986)
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Rule of Law:
A distributorship agreement, as a contract for personal services, is not assignable without the consent of the other party, especially when the proposed assignment is to a competitor and the original agreement is silent on the matter of assignment.
Facts:
- In approximately 1974, Berliner Foods Corporation entered into an oral agreement with Haagen-Dazs to distribute its ice cream.
- Reuben Mattus, then the owner of Haagen-Dazs, promised Berliner Foods they would remain distributors as long as they met performance standards, but the topic of transferring ownership was never discussed.
- In 1983, The Pillsbury Company acquired Haagen-Dazs.
- In December 1985, the owners of Berliner Foods contracted to sell the company to Dreyer's Grand Ice Cream, Inc., a manufacturer of a competing premium ice cream.
- The Berliner family did not inform Pillsbury of the sale to Dreyer's until after the transaction was final.
- Upon learning of the sale, Pillsbury notified Berliner Foods that its distributorship for Haagen-Dazs would be terminated because it did not want its distribution controlled by a competitor.
Procedural Posture:
- Berliner Foods Corporation and Dreyer's Grand Ice Cream, Inc. (plaintiffs) sued Haagen-Dazs and The Pillsbury Company (defendants) in the U.S. District Court, seeking injunctive relief and monetary damages.
- Plaintiffs initially requested a temporary restraining order (TRO) to prohibit defendants from terminating the distributorship.
- On March 31, 1986, the District Court denied the TRO.
- Following expedited discovery, plaintiffs filed a motion for a preliminary injunction, asking the court to require defendants to maintain them as a non-exclusive distributor pending the outcome of the litigation.
- A preliminary injunction hearing was held on April 17, 1986.
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Issue:
Does the sale of a distributorship to a direct competitor of the manufacturer constitute a valid assignment of the distributorship agreement when the original oral agreement was silent on the issue of assignability?
Opinions:
Majority - Motz, District Judge
No. The sale of the distributorship does not constitute a valid assignment because contracts for personal services, including distributorship agreements, which are silent on assignability, cannot be assigned without the prior consent of the other party. The court reasoned that it is hornbook law that personal service contracts are not assignable without consent. Allowing assignment to a competitor defies common sense, as a manufacturer cannot be required to entrust the distribution of its products to a company controlled by a rival. The original promise from Haagen-Dazs's founder regarding performance did not imply a right to sell the distributorship to anyone, particularly a competitor, as this would undermine the relationship of mutual trust inherent in such agreements.
Analysis:
This decision reaffirms the traditional common law principle that personal service contracts are presumptively non-assignable without consent. It specifically applies this rule to modern distributorship agreements, emphasizing the element of trust and loyalty essential to the manufacturer-distributor relationship. The ruling provides strong support for manufacturers seeking to terminate distribution rights when a distributor is acquired by a competitor, establishing that a manufacturer has a legitimate interest in controlling its distribution channels and preventing conflicts of interest, even if not explicitly stated in the original agreement.
