LAW 350 University of Miami Nalley Inc Food Distributor Case Discussion

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Nalley’s, Inc. (Nalley’s), was a major food distributor with its home office in the state of Washington. Jacob Aronowicz and Samuel Duncan approached Nalley’s about the possibility of their company manufacturing a line of sliced meat products to be distributed by Nalley’s. When Nalley’s showed considerable interest, Aronowicz and Duncan incorporated as Major Food Products, Inc. (Major).

Meetings to discuss the proposal continued at length with Charles Gardiner, a vice president and general manager of the Los Angeles division of Nalley’s. Gardiner delivered a letter to Major, agreeing to become the exclusive Los Angeles and Orange County distributor for Major’s products, but he stated in the letter “should we determine your product line is not representative of, or is not compatible with, our operation, we are free to terminate our agreement within 30 days.” Based on Gardiner’s assurances, Major leased a plant, modified the plant to its specifications, purchased and installed equipment, signed contracts to obtain meat to be processed, and hired personnel. Both Aronowicz and Duncan resigned from their positions at other meat-processing companies to devote their full time to the project.

Financing was completed when Aronowicz and Duncan used their personal fortunes to purchase the stock of Major. Gardiner and other representatives of Nalley’s visited Major’s plant and expressed satisfaction with the premises. Major obtained the necessary government approvals regarding health standards and immediately achieved full production. Because Nalley’s was to pick up the finished products at Major’s plant, drivers employed by Nalley’s visited Major’s plant to acquaint themselves with its operations.

Gardiner sent the final proposal regarding the Nalley’s and Major relationship to the Nalley’s home office for final approval. One week later, the Nalley’s home office in Washington made a decision not to distribute Major’s products. Nalley’s refused to give any reason to Major for its decision. No final agreement was ever executed between the parties. Immediate efforts by Major to secure other distribution for its products proved unsuccessful. Further, because Major owned no trucks itself and had no sales organization, it could not distribute the products itself.

In less than six months, Major had failed, and Aronowicz’s and Duncan’s stock in Major was worthless. Major, Aronowicz, and Duncan sued Nalley’s for damages under the doctrine of promissory estoppel. Will they win? Why?