Major Brands, Inc. v. Mast-Jagermeister US, Inc. ( 2024 )

United States Court of Appeals
For the Eighth Circuit
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No. 22-2979
No. 22-3067
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Major Brands, Inc.
lllllllllllllllllllllPlaintiff - Appellee/Cross Appellant
v.
Mast-Jägermeister US, Inc.; Southern Glazers Wine and Spirits, LLC;
Southern Glazers Wine and Spirits of Missouri, LLC
lllllllllllllllllllllDefendants - Appellants/Cross Appellees
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American Craft Spirits Association; Brewers Association; Wine Institute;
Distilled Spirits Council of the United States; Missouri Craft Brewers Guild
lllllllllllllllllllllAmici on Behalf of Appellant(s)
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Appeals from United States District Court
for the Eastern District of Missouri - St. Louis
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Submitted: February 15, 2024
Filed: November 8, 2024
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Before LOKEN, COLLOTON,1 and KELLY, Circuit Judges.
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LOKEN, Circuit Judge.
Major Brands, Inc. (“Major Brands”) is a Missouri-licensed liquor distributor.
It operates only in Missouri, where it is the second-largest liquor distributor in the
State, with a portfolio of over one thousand brands. Mast-Jägermeister US, Inc.
(“MJUS”) is a supplier of the German-made herbal liqueur Jägermeister.2 Major
Brands began distributing Jägermeister in Missouri in the 1970s and was the brand’s
exclusive Missouri distributor until 2018. Over the course of these forty-plus years,
Major Brands and MJUS never entered into a written contract governing their
distribution relationship.
Southern Glazers Wine and Spirits, LLC (“Southern Glazers”) is a liquor
distributor with a national footprint, operating in more than forty States including
Missouri. By 2017 Southern Glazers was distributing Jägermeister in twenty-one
States, accounting for approximately one half of all of MJUS’s distribution. In April
2017, Southern Glazers proposed a national consolidation whereby Southern Glazers
would serve as MJUS’s sole distributor in the United States. MJUS eventually
agreed, and in January 2018, MJUS and Southern Glazers signed a five-year
agreement appointing Southern Glazers as national distributor, including in
Missouri.3 MJUS terminated Major Brands as its Missouri distributor, effective
1
Judge Colloton became chief judge of the Circuit on March 11, 2024. See 28
U.S.C. § 45(a)(1).
2
From 1974 to 2016, Jägermeister was imported and sold to U.S. wholesalers
by Sidney Frank Importing Co. In 2017, Sidney Frank Importing Co. became MJUS.
3
The parties signed a separate indemnification agreement in which Southern
Glazers agreed to indemnify MJUS against any claim “in any way relating to or
arising out of any termination or cessation of business with [an] existing distributor.”
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March 31, 2018, and appointed Southern Glazers Missouri, a wholly owned
subsidiary of Southern Glazers and a Major Brands competitor, as Jägermeister’s
exclusive distributor in the State of Missouri.
Major Brands brought this action in state court against MJUS, Southern
Glazers, and Southern Glazers Missouri (collectively, “Defendants”), alleging
wrongful termination in violation of Missouri franchise law, conspiracy to violate
Missouri franchise law, and tortious interference with the MJUS-Major Brands
franchise relationship. Defendants removed the case to federal court. After the
district court dismissed additional defendants Major Brands had fraudulently joined
to defeat diversity jurisdiction, the case proceeded to a six-day jury trial. The jury
returned an $11.75 million verdict for Major Brands, and the district court denied
Defendants’ motions for judgment as a matter of law or a new trial. Defendants
appeal, raising numerous issues. Concluding that the district court prejudicially erred
in instructing the jury on an essential element of a claim under the Missouri Franchise
Act, we reverse and remand for a new trial.
I. The Claims at Issue
Six claims were submitted to the jury: (1) violation of Missouri franchise law
against MJUS; (2) tortious interference with a franchise relationship against Southern
Glazers Missouri; (3) tortious interference with a franchise relationship against
Southern Glazers; (4) civil conspiracy to violate Missouri franchise law against
MJUS and Southern Glazers Missouri; (5) civil conspiracy to violate Missouri
franchise law against MJUS and Southern Glazers; and (6) unjust enrichment against
MJUS (the district court instructed the jury to find for MJUS if they found in favor
of Major Brands on the franchise violation claim). The jury returned a verdict for
Major Brands on the first five counts, assessing Major Brands’s damages at $11.75
million. Defendants moved for judgment as a matter of law or, in the alternative, for
a new trial and/or remittitur, arguing that Major Brands failed to substantiate its
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claims and that Defendants are entitled to a new trial because of prejudicial
instructional and evidentiary errors. The district court upheld the jury verdict and
subsequently granted Major Brands’s motion for an award of attorney’s fees. See
Mo. Rev. Stat. § 407.413(3). Defendants appealed and Major Brands filed timely
notice of a conditional cross-appeal challenging two of the district court’s Missouri
franchise law rulings. See Fed. R. App. P. 4(a)(3).
We review the denial of a motion for judgment as a matter of law de novo,
using the same standard as the district court. Wash Sols., Inc. v. PDQ Mfg., Inc., 395
F.3d 888, 892 (8th Cir. 2005). “We review the district court’s denial of a motion for
a new trial for abuse of discretion.” Id.II. Missouri Franchise Law
Central to Major Brands’s action is its allegation that the business relationship
between MJUS and Major Brands was one of franchisor-franchisee under the
Pyramid Sales Schemes subchapter of the Missouri Merchandise Practices Act, Mo.
Rev. Stat. §§ 407.400-.420. Like other State franchise laws, Missouri’s laws were
“designed to regulate the marketplace to the advantage of those traditionally thought
to have unequal bargaining power,” an effort “to protect those that could not
otherwise protect themselves.” High Life Sales Co. v. Brown-Forman Corp., 823
S.W.2d 493, 498 (Mo. banc 1992), quoting Elec. & Magneto Serv. Co. v. AMBAC
Int’l Corp., 941 F.2d 660, 663 (8th Cir. 1991). The statute affords franchisees
protections such as requiring the franchisor to provide 90-days written notice of
termination (with limited exceptions). See § 407.405.
Missouri employs a statutory “three-tier” liquor distribution model. A liquor
supplier such as MJUS cannot sell directly to Missouri retailers or consumers.
Rather, it must sell its products to Missouri-licensed liquor wholesalers such as Major
Brands, who in turn sell and deliver liquor products to retailers who are licensed to
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sell alcohol to consumers. See Liquor Control Law, Mo. Rev. Stat. Ch. 311; see
generally Sarasota Wine Mkt., LLC v. Schmitt, 987 F.3d 1171, 1176 (8th Cir.), cert.
denied, 142 S. Ct. 335 (2021). A 1975 amendment to the Missouri franchise laws
expressly included liquor wholesalers and suppliers in the definition of “franchise,”
§ 407.400(1), and provided that a liquor supplier franchisor may only terminate a
liquor wholesaler franchisee for “good cause,” § 407.413(2). Major Brands alleges
that its relationship with MJUS was a protected franchise under § 407.400(1) and that
MJUS terminated the relationship without “good cause” in violation of § 407.413(2).
To prove this claim, Major Brands must establish that its relationship with
MJUS fell within Missouri’s statutory definition of a franchise. Three elements are
required to meet the general definition: (1) the parties must have a “written or oral
arrangement for a definite or indefinite period;” (2) one party must grant to another
“a license to use a trade name, trademark, service mark, or related characteristic;” and
(3) there must be “a community of interest in the marketing of goods or services.”
Mo. Rev. Stat. § 407.400(1).
III. Franchise Law Jury Instruction Issues
The district court instructed the jury on the elements of a liquor distribution
franchise relationship under Missouri law in Instructions 13 and 14. Instruction 13
is the required verdict director for Major Brands’s claim of a Missouri franchise law
violation, and Instruction 14 provides relevant definitions:
Instruction No. 13
On plaintiff Major Brands, Inc.’s claim for violation of the
Missouri Franchise Act against defendant [MJUS], your verdict must be
for plaintiff Major Brands if you believe:
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First, Major Brands is a wholesaler licensed . . . to sell at
wholesale intoxicating liquor to retailers duly licensed in Missouri, and
Second, [MJUS] is a supplier engaged in the business as a
manufacturer . . . whose brands of intoxicating liquor are distributed
through duly licensed wholesalers in Missouri, and
Third, a written or oral commercial relationship of definite
duration or continuing indefinite duration existed between Major Brands
and Mast-Jägermeister wherein:
(a) Major Brands was granted the right to offer, sell, and
distribute within Missouri or any designated area thereof
[MJUS’s] brands of spirit(s);
(b) Mast-Jägermeister granted Major Brands a license, as that
term is defined in Instruction No. 14, to use Mast-Jägermeister’s
trade names, trademarks, or related characteristics, and
(c) there was a community of interest, as that phrase is defined in
Instruction No. 14, between Mast-Jägermeister and Major Brands
in the marketing of Mast-Jägermeister’s brand(s) of spirits at
wholesale, retail, by lease, agreement, or otherwise . . . .
Instruction No. 14
The term “license,” as used in Instruction No. 13, means
permission to use Mast-Jägermeister’s trade names, trademarks, or
related characteristics in such a manner as to create a reasonable belief
on the part of alcohol retailers or the consuming public that there was a
connection between Mast-Jägermeister and Major Brands by which
Mast-Jägermeister vouched for the activity of Major Brands relating to
the Mast-Jägermeister brand(s) of spirits.
The phrase “community of interest,” as used in Instruction No. 13,
means Major Brands’ investments in the Mast-Jägermeister brand(s) of
spirits were substantially specific to the brand(s), and Major Brands was
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required to make those investments by the parties’ agreement or the
nature of the business.
On appeal, Defendants raise multiple challenges to Instructions 13 and 14, only
one of which requires discussion. In a diversity action, “Missouri law applies to the
substance of the instructions. Federal law governs the review of the discretion
exercised in refusing or admitting such instructions.” Scott v. Dyno Nobel, 108 F.4th
615, 628 (8th Cir. 2024) (quotation omitted). “We consider whether the instructions,
taken as a whole and viewed in light of the evidence and applicable law, fairly and
adequately submitted the issues in the case to the jury.” Vaidyanathan v. Seagate US
LLC, 691 F.3d 972, 976 (8th Cir. 2012) (quotation omitted). We will reverse only
if an instruction error affected a party’s substantial rights. Id.MJUS argues that “Instructions 13 and 14 were improper because they did not
fairly or adequately explain the Missouri Franchise Act’s community of interest”
requirement. We considered the community-of-interest requirement in Missouri
Beverage Co. v. Shelton Bros., 669 F.3d 873, 879-81 (8th Cir. 2012) (Shelton).
Noting “the absence of any discussion by the Missouri courts” regarding this element,
we turned for guidance to judicial interpretations of the New Jersey Franchise
Practices Act, N.J. Stat. Ann. § 56:10-3, and the Wisconsin Fair Dealership Law, Wis.
Stat. § 135.02, State statutes that similarly define a franchise as requiring a
community-of-interest between franchisor and franchisee. Id. at 879.4
In Cooper Distributing Co. v. Amana Refrigeration, Inc., the Third Circuit
developed a two-part test for determining whether, under New Jersey law, the
community-of-interest requirement had been met: “(1) the distributor’s investments
4
Courts interpreting Missouri franchise law have often looked to States with
similar statutory definitions -- most often New Jersey and Wisconsin. See, e.g., Am.
Bus. Interiors, Inc. v. Haworth Inc., 798 F.2d 1135, 1139-41 (8th Cir. 1986); Brown-
Forman Distillers Corp. v. McHenry, 566 S.W.2d 194, 196 (Mo. banc 1978).
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must have been substantially franchise-specific, and (2) the distributor must have
been required to make these investments by the parties’ agreement or the nature of the
business.” 63 F.3d 262, 269 (3d Cir. 1995) (citations and quotations omitted). The
Seventh Circuit, interpreting the Wisconsin Fair Dealership Law, similarly concluded
that a community of interest may exist in one of two circumstances: (1) “when a large
proportion of an alleged dealer’s revenues are derived from the dealership,” or (2)
“when the alleged dealer has made sizable investments (in, for example, fixed assets,
inventory, advertising, training) specialized in some way to the grantor’s goods or
services, and hence not fully recoverable upon termination.” Frieburg Farm Equip.,
Inc. v. Van Dale, Inc., 978 F.2d 395, 399 (7th Cir.1992) (citations omitted).
We concluded in Shelton, “[g]iven the strong similarities between the
‘franchise’ definitions in Missouri, New Jersey, and Wisconsin, we believe that the
Missouri Supreme Court would determine the existence of a ‘community of interest’
under a standard commensurate” with the Cooper and Frieburg tests. 669 F.3d at 880.
The Supreme Court of Missouri has not issued an opinion concerning the parameters
of community of interest under Missouri law subsequent to our opinion in Shelton.
At first blush, Instruction 14’s definition of community of interest appears to
be consistent with the two-part test articulated in Cooper, whose first prong requires
that “the distributor’s investments must have been substantially franchise-specific.”
63 F.3d at 269. But Instruction 14 contains a significant modification -- it requires
that Major Brands’s investments in the Jägermeister brand(s) of spirits be
“substantially specific to the brand(s).” MJUS argues that instructing the jury that
“community of interest” simply means that Major Brands’s investments in the
Jägermeister brand were “substantially specific to the brand” failed to “instruct the
jury to determine whether Major brands made substantial investments not recoverable
upon termination,” which are the “only [] types of investments [that] indicate a
community of interest.” We agree.
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In formulating its test in Cooper, the Third Circuit looked to the Supreme Court
of New Jersey’s explanation of community of interest:
Community of interest exists when the terms of the agreement between
the parties or the nature of the franchise business requires the licensee,
in the interest of the licensed business’s success, to make a substantial
investment in goods or skills that will be of minimal utility outside the
franchise.
63 F.3d at 269 (emphasis added), quoting Instructional Sys., Inc. v. Comput.
Curriculum Corp., 614 A.2d 124, 142 (N.J. 1992) (ISI). The first Cooper prong --
“the distributor’s investments must have been substantially franchise-specific” --
encompasses all of the distributor’s investments in the franchised business, not just
those investments in the supplier’s brand(s).5
Community of interest is a “broad, elastic and elusive” concept, but “its import
can be understood in the context of the nature of franchising and the abuses to which
this form of business enterprise is singularly susceptible and which were intended to
be remedied” by franchise laws. Neptune T.V. & Appliance Serv., Inc. v. Litton
Microwave Cooking Prods. Div., 462 A.2d 595, 600-01 (N.J. Super. App. Div. 1983).
The community of interest concept “is critical in distinguishing franchises from other
types of business relationships.” ISI, 614 A.2d at 140. The community-of-interest
5
Looking to the Seventh Circuit’s Frieburg test -- a standard we concluded in
Shelton was also applicable to Missouri franchise law -- confirms the scope of the
first prong of the Cooper test. The Frieburg court determined that a community of
interest may exist in one of two circumstances under the Wisconsin Fair Dealership
Law, the second being “when the alleged dealer has made sizable investments (in, for
example, fixed assets, inventory, advertising, training) specialized in some way to the
grantor’s goods or services, and hence not fully recoverable upon termination.” 978
F.2d at 399. Again, the focus of the test is on whether the investments are
substantially specialized to the franchisee’s business.
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requirement serves to limit the application of franchise laws and “ensures that [their]
protections apply only to those business relationships that involve a higher level of
financial interdependence than the typical vendor-vendee relationship.” Baldewein
Co. v. Tri-Clover, Inc., 606 N.W.2d 145, 151 (Wis. 2000).
Our decision in Shelton adopted this understanding of Cooper and Frieburg.
We determined that “[the distributor] was not required to make -- and did not make --
any sizeable investments particular to [the supplier]” and thus concluded that “[the
distributor’s] investments cannot reasonably be deemed substantially franchise-
specific.” 669 F.3d at 880 (emphasis added). We noted that “[t]he community of
interest signaling a franchise relationship . . . is based on the complex of mutual and
continuing advantages which induced the franchisor to reach his ultimate consumer
through entities other than his own which, although legally separate, are nevertheless
economically dependent upon him.” Id. at 879, quoting Neptune, at 600-01. “[T]he
peculiar tension in the franchise relationship is that a true franchisee devotes much
of its capital to investments that are only valuable to it if it remains a licensee.” N.J.
Am., Inc. v. Allied Corp., 875 F.2d 58, 62 (3d Cir. 1989).
Applying the Cooper or Frieburg standard, we concluded there was no
community of interest in the marketing of the supplier’s liquor products because the
supplier’s products never exceeded 1.16% of the distributor’s annual sales and the
distributor was not required to make, and did not make, any sizeable investments
particular to the supplier:
In light of these circumstances, [the distributor’s] investments cannot
reasonably be deemed substantially franchise-specific, and [the
distributor] cannot reasonably be deemed economically dependent on
[the supplier] or to have unequal bargaining power in the relationship.
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In sum . . . [the supplier/distributor] relationship was not that of
franchisor-franchisee under Missouri law.
669 F.3d at 880.
Applying this controlling authority, we conclude that Instruction 14 did not
adequately define the community-of-interest requirement. By instructing the jury to
consider only whether Major Brands’s investments “were substantially specific to the
brand(s),” the instruction failed to require consideration of the distributor’s degree of
economic dependence on this particular supplier relationship and whether, if the
supplier ended the relationship, the distributor would suffer “severe economic
consequences.” Frieburg, 978 F.2d at 399. To accurately assess whether the
community of interest required by Missouri franchise law exists, the inquiry should
not be limited to the distributor’s investments in the supplier’s brand. Though we do
not hold that “economic dependence” is a separate element that must be found for a
community of interest to exist, “economic dependence [is] perhaps the most important
factor in determining whether a community of interest exists.” Cooper, 63 F.3d at
272 (quotation omitted). It is a distributor’s substantial investments in the franchise
supplier’s brands that make it economically dependent on the supplier and create “the
consequent vulnerability of the [distributor] to an unconscionable loss of his tangible
and intangible equities.” Neptune, 462 A.2d at 601.6
We further conclude that this instruction error affected Defendants’ substantial
rights because it “misled the jury or had a probable effect on a jury’s verdict.”
Vaidyanathan, 691 F.3d at 978 (quotation omitted). The parties spent significant time
at trial addressing Major Brands’s investments. The incorrect community of interest
6
That a distributor has substantial franchise-specific investments or derives a
high proportion of its revenue from the franchise relationship are separate indicators
of economic dependence, as the Frieburg court recognized in adopting an either/or
test. See Shelton, 669 F.3d at 880, quoting Frieburg, 978 F.2d at 399.
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instruction misstated Missouri law and improperly broadened the scope of Missouri’s
statutory definition of a franchise. Moreover, the prejudicial error in Instruction 14
had a domino effect on all claims submitted to the jury. The Instruction 14
definitions were incorporated by reference in Instruction 13, the verdict director on
the franchise claim. Instruction 13 was incorporated into Instructions 15 and 16 that
governed the conspiracy to violate Missouri franchise law claim. Instructions 17 and
18 instructed that the existence of a Missouri franchise is an element of Major
Brands’s tortious interference claims. See Mo. Rev. Stat. § 407.413(2); Stehno v.
Sprint Spectrum, L.P., 186 S.W.3d 247, 250-52 (Mo. banc 2006). Therefore, the error
in Instruction 14 requires us to vacate the judgment and remand for a new trial on all
claims. See Gross v. FBL Fin. Servs., Inc., 588 F.3d 614, 621 (8th Cir. 2009) (“if
claims and counterclaims are inextricably intertwined, then it could be unfair to order
a new trial on only a portion of the case.”).
Major Brands argues that any economic dependence requirement, whether
explicit or implicit, by requiring consideration of all of a distributor’s investments,
would “violate Missouri’s three-tier system for the distribution of liquor, in which
liquor wholesalers like Major Brands are part of an independent middle tier that is
not controlled by, or dependent upon, liquor suppliers.” We disagree. Missouri’s
three-tier system prohibits members of one tier from having a “financial interest” in
a member of a higher or lower tier but does not require complete independence; some
level of dependence is inherent in a supplier/distributor business relationship. See
Mo. Rev. Stat. § 311.060; see generally Sarasota Wine Mkt., 987 F.3d at 1176. The
community of interest required to qualify as a Missouri franchise relationship
involves a relationship in which the supplier has no financial interest but exerts
economic control over a distributor through implicit or explicit threats of termination.
This interpretation of the Missouri Franchise Act bolsters the independence of the
three tiers by ensuring that distributors are protected from abusive pressures.
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In its cross-appeal, Major Brands further argues the district court erred by
requiring Major Brands to meet the general definition of franchise in Mo. Rev. Stat.
§ 407.400(1), as well as the definition specific to liquor wholesalers in § 407.413.
As Major Brands acknowledges, we explicitly rejected this argument in Shelton,
holding that “the plain language of the Missouri franchise statute . . . unambiguously
requires that the general definition of ‘franchise’ applies to liquor supplier-wholesaler
relationships.” 669 F.3d at 875. Major Brands cites no subsequent decision by the
Supreme Court of Missouri that calls this holding into question. Rather, it argues we
“must overturn” our decision in Shelton, which was based on a “material misreading”
of the Supreme Court of Missouri’s 1992 decision in High Life Sales v.
Brown-Forman. This contention is without merit. “[A]bsent an intervening opinion
by a [state] court, we are bound by a prior panel’s interpretation of state law.”
Neidenbach v. Amica Mut. Ins. Co., 842 F.3d 560, 566 (8th Cir. 2016) (quotation
omitted). We deny Major Brands’s motion to supplement the record with court
records allegedly supporting this foreclosed argument.
Because we remand the case for a new trial, we decline to consider the
remaining arguments raised by Defendants on appeal, including alleged evidentiary
errors and additional instruction errors. On remand, these issues are virtually certain
to recur on a different trial record, and we decline to issue an advisory opinion based
on this trial record. See Ventura v. Kyle, 825 F.3d 876, 891 n.13 (8th Cir. 2016)
(Smith, J., concurring), cert. denied, 580 U.S. 1054 (2017); United States v. Fawbush,
634 F.3d 420, 421 n.2 (8th Cir. 2011) (evidentiary issue).
For the foregoing reasons, we reverse the district court’s denial of Defendants’
motions for a new trial, vacate the jury’s verdict and the court’s award of attorney’s
fees and costs to Major Brands, and remand to the district court for a new trial.
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