Country Vintner of North Carolina, LLC v. E & J Gallo Winery, Inc. ( 2012 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 10-2289
THE COUNTRY VINTNER OF NORTH CAROLINA, LLC,
Plaintiff – Appellant,
v.
E & J GALLO WINERY, INC.,
Defendant – Appellee.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. W. Earl Britt, Senior
District Judge. (5:09-cv-00326-BR)
Argued: October 25, 2011 Decided: January 6, 2012
Before DAVIS, KEENAN, and DIAZ, Circuit Judges.
Affirmed by unpublished opinion. Judge Diaz wrote the opinion,
in which Judge Davis and Judge Keenan joined.
ARGUED: Stephen Donegan Busch, MCGUIREWOODS LLP, Richmond,
Virginia, for Appellant. Michael Keith Kapp, WILLIAMS MULLEN,
Raleigh, North Carolina, for Appellee. ON BRIEF: Lisa M.
Sharp, Kevin J. O’Brien, MCGUIREWOODS LLP, Richmond, Virginia;
Justin D. Howard, MCGUIREWOODS LLP, Raleigh, North Carolina, for
Appellant. Jonathan R. Bumgarner, WILLIAMS MULLEN, Raleigh,
North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
DIAZ, Circuit Judge:
We consider in this case whether, under the North Carolina
Wine Distribution Agreements Act, 1 (“Wine Act” or “Act”) a wine
wholesaler’s contractual right to distribute an imported wine
survives a change in the winery that imports the brand. The
district court declined to abstain from resolving this issue in
favor of a state court proceeding, and held that Appellant’s
distribution rights did not survive a change in importers. The
district court also dismissed Appellant’s separate claim under
the North Carolina Unfair and Deceptive Trade Practices Act. We
affirm.
I.
Bodegas Esmeralda is a foreign winery that produces Alamos,
an Argentinean brand of wine. Prior to January 2009, Billington
Imports was the primary American importer and source of supply
for Alamos in the United States. In July 2005, Billington
selected The Country Vintner of North Carolina, LLC as its
exclusive North Carolina wholesaler for Alamos.
1
N.C. Gen. Stat. §§ 18B-1200-18B-1216. We construe and
apply the statute as it existed in 2008 and 2009, the period
during which the relevant conduct occurred and the ensuing
litigation commenced.
2
Bodegas subsequently ended its relationship with Billington
and retained E & J Gallo Winery, Inc. as its new importer and
primary American source of supply for Alamos. Effective January
1, 2009, Gallo began supplying Alamos to its network of
wholesalers in North Carolina, which did not include Country
Vintner.
Displeased with this turn of events, Country Vintner first
sought administrative relief before the North Carolina Alcoholic
Beverage Control Commission (“Commission”), and later sued Gallo
in state court. Country Vintner’s complaint asserted three
claims under the Wine Act: unlawful termination or failure to
renew without notice, unlawful termination or failure to renew
without good cause, and illegal dual distributorships. Country
Vintner also filed a claim under the North Carolina Unfair and
Deceptive Trade Practices Act (“UDTPA”), seeking compensatory
and treble damages.
Gallo removed the action to the district court and moved to
dismiss. In response, Country Vintner asked the district court
to abstain from hearing the case in favor of a North Carolina
state court proceeding.
The district court declined to abstain and denied Gallo’s
motion to dismiss the Wine Act claims. The court did, however,
grant Gallo’s motion to dismiss the UDTPA claim, finding that
3
Gallo’s conduct was at most a violation of the Wine Act that,
without more, did not constitute a UDTPA violation.
Following discovery, the parties filed cross-motions for
summary judgment on the Wine Act claims. The district court
granted summary judgment in Gallo’s favor. Country Vintner
timely appealed.
II.
We review a district court’s refusal to abstain for abuse
of discretion. Richmond, Fredericksburg & Potomac R.R. Co. v.
Forst, 4 F.3d 244, 250 (4th Cir. 1993). “A district court
abuses its discretion whenever its decision is guided by
erroneous legal principles.” Martin v. Stewart, 499 F.3d 360,
363 (4th Cir. 2007) (internal quotation marks omitted).
We review de novo a district court’s ruling on a motion to
dismiss, assuming all well-pleaded facts to be true and drawing
all reasonable inferences in favor of the nonmoving party.
Nemet Chevrolet, Ltd. v. Consumersaffairs.com, Inc., 591 F.3d
250, 253 (4th Cir. 2009). We also review de novo a grant or
denial of summary judgment, applying the same standard applied
by the district court. Overstreet v. Ky. Cent. Life Ins. Co.,
950 F.2d 931, 938 (4th Cir. 1991).
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III.
We address first Country Vintner’s argument that the
district court abused its discretion when it declined to abstain
from hearing the case. We begin by emphasizing that “federal
courts have a strict duty to exercise the jurisdiction that is
conferred upon them by Congress.” Quackenbush v. Allstate Ins.
Co., 517 U.S. 706, 716 (1996). In this case, the district court
considered the Supreme Court’s seminal opinions governing
federal court abstention in Burford v. Sun Oil Co., 319 U.S. 315(1943), and La. Power & Light Co. v. City of Thibodaux, 360 U.S.
25 (1959), and concluded, we think correctly, that it need not
abstain.
Abstention under Burford is appropriate only when:
[F]ederal adjudication would “unduly intrude” upon
“complex state administrative processes” because
either: (1) “there are difficult questions of state
law . . . whose importance transcends the result in
the case then at bar”; or (2) federal review would
disrupt “state efforts to establish a coherent policy
with respect to a matter of substantial public
concern.”
Martin, 499 F.3d at 364 (quoting New Orleans Pub. Serv., Inc. v.
Council of New Orleans, 491 U.S. 350, 361-63 (1989)). Further,
federal “[c]ourts must balance the state and federal interests
to determine whether the importance of difficult state law
questions or the state interest in uniform regulation outweighs
the federal interest in adjudicating the case at bar.” Id.5
This “balance only rarely favors abstention.” Quackenbush, 517
U.S. at 726.
Abstention under Thibodaux is appropriate “where there have
been presented difficult questions of state law bearing on
policy problems of substantial public import whose importance
transcends the result in the case then at bar.” Colo. River
Water Conservation Dist. v. United States, 424 U.S. 800, 814
(1976). Thibodaux permits abstention in diversity cases where
state law is unsettled and “an incorrect federal decision might
embarrass or disrupt significant state policies.” Nature
Conservancy v. Machipongo Club, Inc., 579 F.2d 873, 875 (4th
Cir. 1978).
According to Country Vintner, this case satisfies the
abstention doctrines under both Burford and Thibodaux. Country
Vintner contends that the case “undoubtedly presents a difficult
question of state law,” a “state court decision would transcend
the case at bar,” and “a federal court’s misinterpretation of
the Wine Act would disrupt North Carolina’s effort to establish
a coherent policy of alcoholic beverage regulation.”
Appellant’s Br. 50-51. The district court, however, undertook a
detailed analysis of Burford and Thibodaux and found that
neither case compelled abstention under these circumstances.
Specifically, the district court determined that Burford
abstention was unwarranted because (1) this case did not present
6
any constitutional questions, (2) the Wine Act was unambiguous,
(3) “interpreting the provisions of the Wine Act would not
unduly intrude upon ‘complex state administrative processes’ or
disrupt ‘state efforts to establish a coherent policy with
respect to a matter of substantial public concern,’ ” J.A. 58
(quoting Martin, 499 F.3d at 364), and (4) the “Wine Act does
not contain a complex regulatory scheme,” id. The district
court further concluded that abstention under Thibodaux was not
appropriate, because “applying the Wine Act to the facts in this
case would not disrupt significant state policies or impede on
North Carolina’s sovereign prerogative to regulate alcohol.”
Id. at 59-60.
We believe the district court’s analysis was correct, and
we certainly can discern no abuse of discretion. On that score,
the district court was interpreting a straightforward regulatory
scheme that had not been the subject of much controversy in
prior state or federal cases. Further, it carefully
distinguished prior cases in which we held that abstention was
appropriate and found that the circumstances here were
inapposite. Moreover, a 2010 amendment to the Wine Act makes it
unlikely that the question presented in this appeal is likely to
recur. In sum, Country Vintner has failed to overcome the heavy
deference we accord district courts in deciding whether to
7
abstain from hearing a case. Accordingly, we affirm the
district court on this issue.
IV.
We turn now to the district court’s dismissal of Country
Vintner’s UDTPA claim. Here, the district court reasoned that
the cause of action was essentially a Wine Act claim packaged in
UDTPA language, “which without anything more, does not rise to
the level of egregious or aggravating conduct required to
establish a violation of [the UDTPA].” J.A. 65 (construing
Allied Distribs., Inc. v. Latrobe Brewing Co., 847 F. Supp. 376,
379-80 (E.D.N.C. 1993) (noting that a violation of the Beer
Franchise Law alone was not enough to support a UDTPA claim)).
Country Vintner is certainly correct that the violation of
a North Carolina regulatory statute governing business
activities may also constitute an unfair or deceptive trade
practice as a matter of law. See Walker v. Fleetwood Homes of
N.C., Inc., 653 S.E.2d 393, 398-99 (N.C. 2007). Additionally,
the violation of such a regulatory statute may be evidence of an
unfair or deceptive trade practice, even if it is not a per se
violation of the UDTPA. Id. at 399. Nevertheless, because we
agree with the district court that Gallo did not violate the
Wine Act, a UDPTA claim premised on those same facts cannot
survive. See, e.g., Allied Distribs., Inc., 847 F. Supp. at 380
8
(concluding that, where the substantive claim failed under the
Beer Franchise Law, the UDTPA claim premised on the same facts,
without any separate “factual basis for a Chapter 75 claim upon
which this court could find an unfair trade practice,” also
failed).
Country Vintner nevertheless contends that it has pleaded a
UDTPA claim even absent a Wine Act violation. According to
Country Vintner, its initial discussions with Gallo deceived it
into believing that Gallo would honor Country Vintner’s
distribution agreement with Billington. Specifically, Country
Vintner alleges that (1) Gallo knew that Country Vintner had an
existing exclusive distribution agreement in North Carolina when
Gallo secured the right to supply the Alamos brand, (2) Gallo
did not inform Country Vintner when it first became the primary
American source of supply for Alamos, and (3) Gallo unilaterally
appointed new wholesalers to distribute Alamos in North Carolina
without informing Country Vintner.
The district court carefully considered these allegations
and determined that they were merely repackaged Wine Act claims.
We agree, in no small part because the allegations presuppose
that Gallo was under some obligation to conduct its business in
a way that would have been more favorable to Country Vintner.
Because we are satisfied that Gallo had no such obligation, we
affirm the district court’s dismissal of the UDTPA claim.
9
V.
Finally, we consider the grant of summary judgment in favor
of Gallo on the Wine Act claims. The question presented here
is--as the district court aptly summarized--whether “a
wholesaler’s agreement to distribute an imported brand survives
a change in the winery that imports the brand.” Country Vintner
of N.C. LLC v. E. & J. Gallo Winery, Inc., No. 509CV326BR, 2010
WL 4105455, at *3 (E.D.N.C. Oct. 18, 2010) (internal quotation
marks omitted).
The Wine Act was enacted in 1983 “[t]o promote . . . the
continuation of wine wholesalerships on a fair basis,” “[t]o
protect wine wholesalers against unfair treatment by wineries,”
and “[t]o provide wine wholesalers with rights and remedies in
addition to those existing by contract or common law.” N.C.
Gen. Stat. § 18B-1200(b)(1)-(3). The Act directs reviewing
courts to construe and to apply its provisions “liberally . . .
to promote its underlying purposes and policies.” Id. § 18B-
2000(a).
The Wine Act favors the continuation of wholesalers’ rights
to distribute wine when an agreement exists between a wholesaler
and a winery. The Wine Act defines an “agreement” as “a
commercial relationship between a wine wholesaler and a winery.”
Id. § 18B-1201(1). Agreements need not be in writing and may be
of definite or indefinite duration. Id. Further, the Wine Act
10
provides that “[a]ny of the following constitutes prima facie
evidence of an ‘agreement’ ”:
a. A relationship whereby the wine wholesaler is
granted the right to offer and sell a brand offered by
a winery;
b. A relationship whereby the wine wholesaler, as an
independent business, constitutes a component of a
winery’s distribution system;
c. A relationship whereby the wine wholesaler’s
business is substantially associated with a brand
offered by a winery;
d. A relationship whereby the wine wholesaler’s
business is substantially reliant on a winery for the
continued supply of wine;
e. The shipment, preparation for shipment, or
acceptance of any order by any winery or its agent for
any wine or beverages to a wine wholesaler within this
State;
f. The payment by a wine wholesaler and the
acceptance of payment by any winery or its agent for
the shipment of any order of wine or beverages
intended for sale within this State.
Id.
When an agreement exists between a wholesaler and a winery,
a winery may terminate it only for good cause. Id. § 18B-1204.
Further, the winery must “provide a wholesaler at least 90 days
prior written notice of any intention to amend, terminate,
cancel, or not renew any agreement”; a wholesaler may then
rectify any reasons for termination stated in the notice, or
seek a good cause determination before the Commission when the
reasons for termination relate to conditions that the wholesaler
cannot rectify. Id. § 18B-1205(a)-(c).
11
In limited circumstances, the Act protects a wine
wholesaler even in the absence of an agreement. Specifically,
section 18B-1206 governs the transfer of a wine wholesaler’s
business. When that occurs, a winery may not “unreasonably
withhold or delay consent to [the] transfer,” provided that “the
wholesaler to be substituted meets the material and reasonable
qualifications and standards required of the winery’s
wholesalers.” Id. § 18B-1206(a). Section 18B-1213 addresses
the sale of a winery, and obligates the purchaser of the winery
to comply with “all the terms and conditions of an agreement in
effect on the date of the purchase . . . , except for good
cause.” Id. § 18B-1213. Under this provision, the acquirer
stands in the shoes of its predecessor and remains bound to
honor any preexisting agreements with wine wholesalers.
Applying the statutory text, the district court considered
whether an agreement existed between Gallo and Country Vintner.
The court noted that the Act defines an agreement as a
“commercial relationship,” which, according to the court,
“necessarily entails some form of commerce between the parties.”
Country Vintner, 2010 WL 4105455, at *3. The district court
concluded that “the undisputed evidence shows that Gallo has
never had a commercial relationship with Country Vintner.” Id.
at *4. We agree and similarly conclude that no agreement ever
existed between Gallo and Country Vintner. Further, although
12
the Wine Act does not require an agreement in the context of a
transfer of a wine wholesaler’s business or an acquisition of a
winery, neither circumstance is present here.
Resisting this rather straightforward application of the
statute, Country Vintner insists that the Wine Act’s protections
for wholesalers extend to this situation, particularly given the
liberal construction in favor of wholesalers that should be
accorded the Act’s terms. In effect, Country Vintner would have
us conclude that Gallo stood in Billington’s shoes and was
required to honor Country Vintner’s distribution agreement with
Billington. Only this outcome, Country Vintner contends, is
faithful to the letter and spirit of the statute.
Accepting this view of the Act, however, would require us
to read into the text an additional exception to the default
requirement of an “agreement” that is nowhere to be found. This
reading, in turn, would obligate a winery that obtains the
import rights of a wine brand to honor any extant agreements
with wholesalers. As the district court noted, it is axiomatic
under North Carolina law that “ ‘where the language of a statute
is clear and unambiguous, there is no room for judicial
construction and the courts must construe the statute using its
plain meaning.’ ” Id. at *5 (quoting In re Estate of Lunsford,
610 S.E.2d 366, 372 (N.C. 2005)). In such a case, courts “ ‘are
without power to interpolate, or superimpose, provisions and
13
limitations not contained’ in the statute itself.” Id. (quoting
State v. Camp, 209 S.E.2d 754, 756 (N.C. 1974)).
The Wine Act clearly and unambiguously provides that, with
two exceptions not applicable here, its protections apply only
when an agreement exists between a wine wholesaler and a winery.
In this case, Country Vintner was party to a distribution
agreement with Billington but had no such agreement with Gallo.
As a result, the Act offers no protection to Country Vintner on
the facts alleged in its Complaint.
Although we need look no further, our conclusion is
bolstered by the fact that, in 2010, the North Carolina General
Assembly amended section 18B-1213 of the Wine Act specifically
to grant (prospectively) the very type of protection that
Country Vintner seeks in this case. As amended, the section now
provides, “The purchaser of a winery, and any successor to the
import rights of a winery, is obligated to all the terms and
conditions of an agreement in effect on the date of the purchase
or other acquisition of the right to distribute a brand, except
for good cause.” N.C. Gen. Stat. § 18B-1213. Because Gallo is
the “successor to the import rights of a winery,” it would be
required to honor the agreement between Country Vintner and
Billington if the amendment applied to this dispute.
We agree with the district court that the “amendment
demonstrates that the North Carolina General Assembly knew how
14
to protect a wholesaler’s right to the continued distribution of
a brand, yet previously chose not to do so.” 2 Country Vintner,
2010 WL 4105455, at *5. In that regard, North Carolina law
teaches that “an amendment to an unambiguous statute indicates
the intent to change [rather than clarify] the law . . . .”
Childers v. Parker’s Inc., 162 S.E.2d 481, 483-84 (N.C. 1968).
That conclusion is even more compelling where, as here, the
legislature determined that the amendment would apply only
prospectively. See State ex rel. Utils. Comm’n v. Pub. Serv.
Co. of N.C., Inc., 299 S.E.2d 425, 429 (N.C. 1983) (“We also
consider it significant that . . . the amendment shall not be
applied retroactively. This is strong evidence that the
legislature understood that the amendment occasioned a change
in, rather than a clarification of, existing law.”).
2
Country Vintner also argues that the Wine Act should be
read in pari materia with the Beer Franchise Law, which provides
express protections for beer wholesalers in the face of a change
in a brewery-importer. The crux of this argument is that, given
the similar subjects sought to be regulated by the Wine Act and
the Beer Franchise Law and the similar schemes enacted in North
Carolina for the regulation of wine and beer, the protections
for wholesalers in the Beer Franchise Law, including its
protection for wholesalers when there is a change in brewery-
importer, should apply to the Wine Act. However, far from
persuading us to construe the statutes in pari materia, we view
the express language in the Beer Franchise Law as further
evidence that the North Carolina General Assembly knew how to
provide this protection, but chose not to in the Wine Act until
the effective date of the 2010 amendment.
15
Accordingly, we affirm the district court’s grant of
summary judgment in favor of Gallo on Country Vintner’s Wine Act
claims.
VI.
In sum, (1) the district court acted well within its
discretion when it refused to abstain from hearing the case in
favor of a state court proceeding, (2) Country Vintner has not
asserted a viable claim for relief under the UDTPA, and (3) the
version of the Wine Act applicable to this dispute affords
Country Vintner no relief on its statutory claims. Accordingly,
we affirm the judgment of the district court.
AFFIRMED
16