Bak-a-lum Corp. of America v. ALCOA Bldg. Prods., Inc.
Supreme Court of New Jersey
351 A.2d 349 (1976)
Bak-a-lum (BAL) (plaintiff) had served for years as ALCOA's (defendant's) exclusive distributor under an oral agreement, and shortly before ALCOA appointed four additional distributors in BAL's territory, BAL had signed a new lease for a much larger warehouse to support its ALCOA distribution business. The trial court found ALCOA had deliberately kept its decision to end exclusivity secret so as not to discourage BAL from continuing to aggressively sell ALCOA products, found the distributorship terminable only after a reasonable notice period, set that period at seven months, and awarded BAL $35,000 based on $5,000 in monthly lost profits; both parties appealed.
Whether an exclusive distributor's implied covenant of good faith and fair dealing is breached, and a longer notice-of-termination period is warranted, when the supplier secretly decides to end exclusivity while continuing to encourage the distributor's ongoing investment and sales efforts.