Sole distributor of Fireball Cinnamon Whisky wins preliminary injunction in state court to stop sales by a competing distributor of Fireball Cinnamon Malt Beverage

Pan American Properties, Corp. v. Sazerac Company and CCI, 2025 WL 20448234 (TCA June 27, 2025), is an interesting case of conflicts in distribution over brand extensions (that is, when a new product of the same brand marketed at a lower price in the same trade channels is introduced and designed to displace an established but similar product of the same brand sold at higher prices).The impairment was not that the plaintiff-distributor had exclusivity over the malt beverage brand extension, but that the marketing and distribution of it through a competing distributor appropriated the goodwill and clientele created by the exclusive distributor for the brand’s whisky flavored line. For more than a decade, Pan American introduced and created a market in Puerto Rico for flavored whiskies branded Fireball Cinnamon. The trademark owner authorized Panamerican as a Puerto Rico distributor. Although the appointment letter did not specify that Panamerican was exclusive, Panamerican was, in fact, the sole distributor of this branded flavored whiskey and alleged it was the exclusive distributor from a course of dealings. The trademark owner decided to introduce a new product into the market which was a malt beverage with a whisky flavor but with both a lower alcohol content and price point. This malt beverage product, Fireball Cinnamon Malt Beverage, had similar packaging, labels, and sizes as the brand’s flavored whisky and potentially could cause consumer confusion. After much fanfare about the prospects of the new line, Panamerican placed a purchase order, which the supplier did not serve. Meanwhile, the supplier met with Panamerican to inform the distributor that it desired to terminate its exclusivity over the flavored whisky line because of alleged dissatisfaction with performance. Panamerican then placed a second purchase order for the malt beverage product which was again not served. The supplier denied the existence of exclusivity, and appointed CC1 as the exclusive distributor for the malt beverage line. Panamerican filed suit in state court against the supplier principally for impairment under Law 75 and against the competing distributor for tortious interference. Joinder of the Puerto Rico distributor destroyed jurisdiction for removal to federal court (and probably, leading to a different outcome). From review by certiorari of the granting of a preliminary injunction, the appellate court applied the standards of Next Step v. Bromedicon. First, the court held that the supplier appointed Panamerican as the exclusive distributor for Fireball flavored whisky and had protection as a Law 75 dealer. Second, the court held that the “impairment” from the introduction of the malt beverage line caused a reduction in its client base of 26% year to year and customer confusion. The court held that “the impairment of the market created, and clientele conquered by distributor are sufficient for a preliminary injunction.” This serves the purpose of Law 75 to provide remedies for the appropriation of the goodwill created by the distributor. The appellate court adopted the lower court’s reasoning that the introduction of the new brand extension was part of an intentional strategy to appropriate the market and clientele created by the distributor and cause customer confusion to cannibalize sales to favor the malt beverage whisky flavored line at a lower price point. The impairment was not necessarily that CCI did not have a right to distribute the brand extension or a claim that Panamerican was exclusive over the malt beverage product, but that the supplier’s sales and marketing strategy impaired the contractual rights of Panamerican by displacing the branded flavored whisky. The appellate court granted certiorari and affirmed the preliminary injunction under the balancing of interests of Next Step.