(CN) – Miller Brewing Co. did not breach a license agreement with a Canadian “virtual brewer” when it refused to re-inspect and approve the company’s breweries in India, the 7th Circuit ruled.
Miller and India Breweries Inc. struck a deal in 1999 allowing India Breweries to brew and distribute Miller-branded beer in India. Based in Canada, India Breweries acts as a “virtual brewer” that acquires the rights to various beers and teams up with other companies that actually brew them. For its contract with Miller, India Breweries intended to produce the beer through its Indian brewing partner, Mohan Meakin.
The Miller agreement gave the Milwaukee brewer the right to inspect the Indian breweries before initial production.
During inspection, Miller executives found the breweries unsanitary and under-equipped. Miller refused to inspect more breweries until the Mohan breweries had the minimum equipment for brewing Miller beer.
Miller’s director of international operation, Giorgio Sega, estimated that updating the breweries in Delhi and Madras would take seven to 10 months and large amounts of capital.
While updating the two locations, India Breweries announced the addition of two new breweries: Rajasthan and Him Neel. Miller determined that the new breweries also lacked the necessary equipment and declined to inspect them until they fixed the problem.
In 2001 India Breweries and Miller’s contract automatically terminated, because India Breweries neither owned a brewery or had a contract brewing agreement.
India Breweries sued in Wisconsin, claiming Miller’s refusal to inspect the breweries constituted a breach of contract.
Miller counterclaimed that India Breweries had fraudulently induced it to enter the deal in the first place, in part by misrepresenting its assets and financial status.
A federal judge sided with Miller, and the 7th Circuit in Chicago affirmed.
“If Miller can unilaterally disapprove a brewery … it makes no sense to require it to inspect proffered breweries that will assuredly — and objectively — come up short,” Judge John Tinder wrote for the three-judge panel.
Miller agreed to dismiss its counterclaims against India Breweries.