Archive | October 24, 2011

Battle of the Beers

October 24, 2011


Sports Litigation Alert (Volume 8, Issue 19) just published a short piece I wrote entitled, ‘Battle of the Beers.’ It is reproduced below:


In a country where ice hockey and cold beer go hand in glove, two of Canada’s biggest breweries have been battling it out over sponsorship rights as the official beer of the National Hockey League. On 3 June 2011, Newbould J. of the Ontario Superior Court of Justice held that the NHL and Labatt Brewing Company Limited reached a binding sponsorship agreement on 12 November 2010 which would have run from July 1, 2011 — June 30, 2014. As such, the NHL was consequently not free to enter into a similar but superior agreement with Molson Coors Canada Inc. on 8 February 2011. The NHL and Molson appealed and the court held in their favor on 12 July 2011.

In a ruling which has left Labatts all wet (and sudsy), the Court of Appeal for Ontario found that Newbould J. erred by making his finding in a manner not anchored to the pleadings, evidence, positions or submissions of any of the parties to the case. It was accordingly “procedurally unfair, or contrary to natural justice” for this conclusion to be reached [5]. Citing Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74 (C.A.), the court held that a theory of liability which emerges for the first time in the reasons for judgment is never tested in the crucible of the adversarial process and thus raises concerns about the reliability of that theory [6].

It is noteworthy that Labatt did not plead that the parties had reached a binding sponsorship agreement on 12 November 2010 [12]. Labatt did not assert during the application hearing that a binding sponsorship agreement existed between the parties and expressly disavowed that it had reached a binding sponsorship agreement with the NHL [13]. The appeals court accepted the NHL’s submission that if it had known that the existence of a binding sponsorship agreement between the NHL and Labatt was at issue, it would have conducted its defence to Labatt’s application in a very different fashion [15].

While hockey is a small fish in the big frozen pond of professional sport relative to their much larger counterparts in football, baseball and basketball, there is still significant money to be made (and lost). Kyle Norrington, marketing director of Budweiser and regional brands for Labatt in Canada, commented in an affidavit filed with the Ontario Superior Court of Justice on the relationship of hockey and beer: “The NHL and the access it provides to Labatt … is the single greatest opportunity to grow Labatt’s share in Canada. The nexus of sports / heritage / emotional / tradition in hockey has no other Canadian comparable.” In contrast to the $37.2 million over three years agreement that Labatt was pursuing, the Molson deal is worth a reported $375 million over seven years.

It is the combination of the trial judge’s analysis of the renewal option in the 2002 Labatt/NHL agreement and his conclusion that a binding agreement was reached at the 12 November 2010 meeting that created the procedural unfairness problem [18]. Quoting Cronk J.A. in Grass (Litigation Guardian of) v. Women’s College Hospital (2005), 75 O.R. (3d) 85 (C.A.), leave to appeal refused, [2005] S.C.C.A. No. 310, the appeals court held that, “at the end of the day, the issues between the parties are defined by and confined to those pleaded” [53]. Since this did not happen, the NHL and Molson were denied procedural fairness and the judgment of Newbould J. was set aside.

Revenge is a beverage best served cold. Earlier this year, Coors Light lost the bragging and sponsorship rights as the official beer of the National Football League to Anheuser-Busch for $1.2 billion over six years. The $375 million Molson Coors/NHL deal reportedly includes approximately $100 million for the rights, $100 million in guaranteed advertising buys and $100 million in activation costs for staging special promotions to capitalize on its rights.

On 6 October 2011, Labatt disclosed that it had received confirmation that the Ontario Superior Court of Justice had dismissed its suit against the NHL and Molson Coors thus ending this round of the battle of the beers. The court plans to release the reasons behind its decision at a later date and Labatt said it would review its legal options at that time.

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