No. 3081 Philadelphia, 1982, No. 3082 Philadelphia, 1982, Appeal from the Order Entered on December 19, 1982 in the Court of Common Pleas of Chester County, Civil Division, No. 97 Equity 1982
Richard S. Watt, Norristown, for appellants (at No. 3081) and appellees (at No. 3082).
John S. Halsted, West Chester, for appellant (at No. 3082) and for appellees (at No. 3081).
Norman P. Zarwin, Philadelphia, for Matt Lamb, appellee.
Olszewski, Popovich and Cercone, JJ. Popovich, J., concurred in the result.
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The Pennsylvania Liquor Code, 47 P.S. § 4-431(d)(4) (Supp. 1984-85) vests jurisdiction and the power to enjoin in the court of common pleas any termination of a franchise or agreement between a malt and brewed beverages manufacturer and its distributor, subject to certain exceptions. Appellee Matt Lamb and Sons, Inc. (Lamb) sought an injunction against appellant Christian Schmidt Brewing Company, et al. (Schmidt) to prevent Schmidt's attempted termination of certain distribution rights of Lamb. The chancellor in equity, Hon. Leonard Sugerman, granted a preliminary injunction and, after a hearing, continued the injunction until final hearing. Schmidt appealed the continuation of
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the injunction pursuant to Pa.R.A.P. 311(a)(4), Interlocutory Appeals as of Right.*fn1
Schmidt raises three issues on appeal. (1) Whether the court of common pleas has jurisdiction under the section of the Liquor Code, supra, to enjoin termination of an agreement between a manufacturer and a distributor; (2) whether Lamb clearly established that its status was not terminated for good cause; (3) whether Lamb established that an award of damages would be inadequate to compensate Lamb sufficient to show that an injunction should issue.
The facts underlying this cause of action are contained in the chancellor's opinion and are as follows:
"At all relevant dates, Schmidt, a Pennsylvania corporation with its principal office in Philadelphia, Pennsylvania was and remains a manufacturer of malt and brewed beverages, licensed as such by the Pennsylvania Liquor Control Board ('PLCB'), pursuant to the Liquor Code, 47 P.S. §§ 1-101, et seq. ('The Code'). At the same dates, Lamb, a Pennsylvania corporation, as well, with its principal office in Chester County, Pennsylvania, was and remains a distributor of malt and brewed beverages, licensed as such by the PLCB pursuant to The Code.
"By letter agreement dated December 30, 1963, executed on January 3, 1964, Schmidt constituted Lamb a 'primary' or 'original' supplier of certain of Schmidt's products in a designated territory encompassing sections of Chester, Lancaster and Berks Counties. [It is undisputed that Lamb has been a distributor of Schmidt's products, under various letter agreements, since at least 1934.] Such agreement was made pursuant to The Code, § 4-431, permitting a Pennsylvania manufacturer to constitute a licensed distributor as the primary or original supplier of its products within a designated geographical area.
"A distributor who has been constituted a primary or original supplier by a manufacturer enjoys a competitive
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advantage within its designated geographical area, as the manufacturer's products may only be sold through the primary supplier, and other distributors who wish to sell the manufacturer's products within the primary supplier's designated territory are required to purchase such products from or through the primary supplier.
"In any event, subsequent to the execution of the letter agreement of December 30, 1963, Lamb continued to distribute Schmidt's products within its designated territory [In 1981, Lamb purchased additional territory in Chester County from another of Schmidt's primary suppliers.] as a primary supplier without incident until The Code was amended in 1980. The amendment enacted June 22, 1980, to become effective on August 22, 1980, inter alia, added subsections (d)(1), -(4), and -(5), to Section 4-431 of The Code, and provided:
'(d)(1) All distributing rights as hereinabove required shall be in writing, shall be equitable in their provisions and shall be substantially similar to terms and conditions with all other distributing rights agreements between the manufacturer and giving such agreement and its other importing distributors and distributors shall not be modified, canceled, terminated or rescinded by the manufacturer without good cause, and shall contain a provision in substance or effect as follows: "The manufacturer recognizes that the importing distributor and distributor are free to manage their business in the manner the importing distributor and distributor deem best and that this prerogative vests in the importing distributor and distributor the exclusive right to establish a selling price, to select the brands of malt or brewed beverages they wish to handle and to determine the efforts and resources which the importing distributor and distributor will exert to develop and promote the ...