Tuesday, June 12, 2018
Here’s a nice little case that lends itself well to classroom use.
The Robertson family owned Duck Commander, Inc. (“DC”), a hunting supplies company that eventually morphed into an iced tea maker after Si Robertson ("Uncle Si") became known for the its members’ affinity for ice tea on a reality TV show about duck hunting. This was broadcast on the A&E network.
In late 2013, DC contracted with Chinook USA, LLC (“Chinook”), a ready-to-drink beverage company, to produce and market the Robertson family’s ice teas in cooperation with the Robertsons. A fairly elaborate contract is drawn up. This spells out the corporations’ mutual obligations in relation to “iced tea,” “ready-to-drink [RTD] teas,” and “RTD beverages.” This includes an integration clause purporting to make the agreement the “entire understanding between the parties.”
A few months later, in the summer of 2014, sales of iced tea apparently did not go as well as the parties had hoped and planned for. The Robertson family thus branched out into energy drinks and vitamin water. DC contracted with another marketer of those products. Chinooks sued DC for breach of contract, among other things claiming that the contractual terms “iced tea,” “ready-to-drink teas,” and “RTD beverages” also encompassed vitamin water and energy drinks and that DC should thus also have dealt with Chinook in relation to those products.
The contract was held to be ambiguous. Parol evidence was brought in showing that during the contract negotiations, iced tea accounted for about 95% of the focus of the negotiations with coffee products for the other 5%. No mention had been made of energy drinks or similar products. After contract execution, a Chinook negotiator sent Chinook an email stating “[T]hank you for taking the time to ask for a confirmation of Chinook USA’s rights as our exclusive licensee of tea …. This email confirms the same.”
Oops, it’s difficult to claim afterthe fact that when you yourself – a seasoned company with professional negotiators – get a deal for “tea,” you really intended something more than that. The appellate court thus also affirmed the district court’s judgment against Chinook on its breach of contract claims (see Chinook USA, L.L.C. v. Duck Commander, Incorporated, 2018 WL 1357986). https://law.justia.com/cases/federal/appellate-courts/ca5/17-30596/17-30596-2018-03-15.html
This case lends itself well to students issue-spotting issues such as contract interpretation, ambiguity, the PER, etc., but could also be used to discuss bargaining powers, party sophistication, and the smartness of, if nothing else, sending confirmatory memos… only they should, of course, be drafted such that they truly represent the parties’ intent. If that was the case in this matter, was Chinook simply regretting not getting a broader agreement at a point when sales of the originally intended product was already known to falter? This appears to be the case here.