D & G STOUT, INC. v. Bacardi Imports, Inc.
1992 WL 332608, 1992 U.S. Dist. LEXIS 17413, 805 F. Supp. 1434 (1992)
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Rule of Law:
Under the doctrine of promissory estoppel, a promise can be enforced to the extent of the promisee's reliance damages if the promisor should have reasonably expected the promise to induce action or forbearance of a definite and substantial nature, and injustice can only be avoided by its enforcement, even if the promise is conditional and part of an at-will relationship.
Facts:
- In early 1987, General Liquors, Inc. ('General'), a liquor distributor, lost two of its four major suppliers, Jim Beam and Brown-Foreman, which significantly reduced its business.
- David Stout, General's president, determined the company could remain viable if it retained its relationships with its remaining key suppliers, including Bacardi Imports, Inc. ('Bacardi').
- In early July 1987, National Wine & Spirits Corporation made a firm offer to purchase General's assets.
- On July 9, 1987, Stout met with Bacardi executives and explained that their continued business was necessary for General's survival. Bacardi vice president William Tovell promised that General would remain its distributor as long as it met sales expectations and market conditions did not change.
- Stout did not inform Bacardi about the specific purchase offer from National during the July 9 meeting.
- Relying on Bacardi's assurance, Stout rejected National's offer and, on July 22, announced to his management that General would continue operating.
- On July 29, Bacardi internally decided to appoint a single statewide distributor, which would require terminating its relationship with General.
- On July 30, Bacardi informed Stout of its decision. General was forced to re-open negotiations with National and ultimately sold its assets for a significantly lower price than the July offer.
Procedural Posture:
- D & G Stout, Inc. sued Bacardi Imports, Inc. in the U.S. District Court for the Northern District of Indiana, which is the trial court in this matter.
- The district court granted summary judgment in favor of the defendant, Bacardi Imports, Inc.
- The plaintiff, D & G Stout, Inc., as appellant, appealed the summary judgment ruling to the U.S. Court of Appeals for the Seventh Circuit.
- The Seventh Circuit, an intermediate federal appellate court, reversed the district court's decision and remanded the case for a trial on the merits.
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Issue:
Under Indiana law, can a promise be enforced under the doctrine of promissory estoppel when a liquor distributor relies on a supplier's verbal assurance of a continued at-will relationship by rejecting an offer to sell its business, even if the supplier was unaware of the specific purchase offer?
Opinions:
Majority - Miller, District Judge
Yes. A promise can be enforced under the doctrine of promissory estoppel under these circumstances. The court found that Bacardi's conditional assurance constituted an enforceable promise under Indiana's five-part test for promissory estoppel. First, Bacardi made a clear promise to continue the distributorship, even if conditional. Second, Bacardi should have reasonably expected General to rely on this promise by remaining in business, as the promise was given in direct response to General's expressed concerns about its viability; it was not necessary for Bacardi to know about the specific purchase offer from National. Third, General's reliance was reasonable because it acted shortly after receiving the assurance and market conditions had not materially changed. Fourth, General's reliance was definite and substantial, as it involved forgoing a concrete, multi-million dollar purchase offer. Finally, injustice could only be avoided by enforcing the promise, as General suffered significant financial loss due to its reliance. The court awarded reliance damages equal to the difference between the initial offer from National and the final, lower sale price.
Analysis:
This case demonstrates the power of promissory estoppel to provide a remedy for detrimental reliance on a promise even within an at-will business relationship, which is normally terminable without cause. The decision clarifies that the promisor's foreseeability of reliance is judged by an objective standard; the promisor need not know the specific opportunity the promisee will forgo, only that their promise would likely induce forbearance in general. It solidifies the principle that reliance damages, rather than expectation damages, are the appropriate remedy in such cases, aiming to restore the promisee to the position they would have been in had the promise not been made, rather than granting them the benefit of the bargain.
