Brown-Forman Corp. v. Sims Wholesale Co, Inc ( 1995 )

COURT OF APPEALS OF VIRGINIA
Present: Judges Willis, Bray and Fitzpatrick
Argued at Alexandria, Virginia
BROWN-FORMAN CORPORATION
OPINION BY
v. Record No. 0304-94-4 JUDGE RICHARD S. BRAY
MAY 23, 1995
SIMS WHOLESALE COMPANY, INC., ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Jane Marum Roush, Judge
Thomas F. Farrell, II (Charles M. Sims; McGuire, Woods,
Battle & Boothe, on briefs), for appellant.
John Patrick Griffin, Assistant Attorney General (James S.
Gilmore, III, Attorney General; Michael K. Jackson, Senior
Assistant Attorney General, on brief), for appellee
Virginia Alcoholic Beverage Control Board.
Philip F. Abraham (Walter A. Marston, Jr.; Randolph A.
Sutliff; Hazel & Thomas, P.C.; Miles & Stockbridge, on
brief), for appellee wine wholesalers.
Brown-Forman Corporation (Brown-Forman), a winery, sought to
terminate distribution agreements with certain wholesalers
(wholesalers) of its products in accordance with the provisions of
the Wine Franchise Act, Code §§ 4.1-400, et seq. (the Act).
Wholesalers challenged the termination as a violation of the Act
and petitioned the Virginia Alcoholic Beverage Control Board (the
Board) for relief. See Code §§ 4.1-407, -409. A panel designated
by the Board ruled that termination of such agreements was
permitted by the Act only for "wholesaler deficiency" or
"situations of like character," circumstances not proven by Brown-
Forman. On appeal by Brown-Forman to the Board, the Board adopted
the panel decision. Brown-Forman sought judicial review pursuant
to the Virginia Administrative Process Act, Code § 9-6.14:1, et
seq.
The trial court disagreed with the Board's construction of the
Act but reached the same result, concluding that Brown-Forman had
failed to establish "sufficient good cause to terminate." Before
this Court, Brown-Forman contends that the evidence justified
termination as a matter of law. Although we concur in the trial
court's construction of the Act, we reverse the disposition and
remand the proceeding to the Board for reconsideration of the issue
of good cause.
The parties proceeded by "Stipulated Facts." Wholesalers
distributed several "brands of . . . wines" within "established
territories" throughout the Commonwealth under exclusive agreements
with Brown-Forman, as supplier/winery. See Code § 4.1-404.
Incidental to a "major reorganization of its sales organization,"
Brown-Forman determined that marketing of its products by "fewer
wholesalers over broader geographical areas" would increase "market
penetration, sales . . . and profits for both Brown-Forman and
[its] wholesalers" and, therefore, "view[ed] consolidation from
eighteen [Virginia] wholesalers . . . to four as a material
benefit" to "its own economic . . . interest." Accordingly, Brown-
Forman terminated existing distribution agreements with
wholesalers, intending to thereafter "appoint and contract" with
"fewer wholesalers over broader geographic areas." See Code
§ 4.1-407.
The parties agreed that Brown-Forman's decision was not
prompted by the "deficiency" of any wholesaler but, rather, a "good
faith exercise" of Brown-Forman's "business judgment," calculated
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to promote its "self interest." Consequently, the parties
stipulated that "the sole issue presented . . . is whether the good
faith exercise of business judgment by [Brown-Forman], absent any
evidence of deficiency in the performance of the [wholesalers], is
'good cause' pursuant to the [Act] for [Brown-Forman] to terminate
unilaterally its agreements with [wholesalers]."
The Wine Franchise Act regulates the business relationship of
the parties, as winery and wholesaler, through a comprehensive
statutory scheme intended:
1. To promote the interests of the parties and
the public in fair business relations between
wine wholesalers and wineries, and in the
continuation of wine wholesalerships on a fair
basis;
2. To preserve and protect the existing three-
tier system for the distribution of wine
. . . ;
3. To prohibit unfair treatment of wine
wholesalers by wineries, promote compliance
with valid franchise agreements, and define
certain rights and remedies of wineries in
regard to cancellation of franchise agreements
with wholesalers;
4. To establish conditions for creation and
continuation of all wholesale wine
distributorships . . . .
Code § 4.1-400. The Act "shall be liberally construed and applied
to promote [these] underlying purposes and policies." Id.
In furtherance of such "purposes and policies," the Act
permits a winery to terminate an agreement with a wholesaler only
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upon "good cause," Code § 4.1-406, and in accordance with Code
§ 4.1-407. 1 Id. Unless expressly excused by statute, Code
§ 4.1-407(F), a winery must provide a wholesaler timely written
notice of its intention to terminate an agreement which "state[s]
all the reasons" for such action. Code § 4.1-407(A). Thereafter,
the wholesaler is assured an opportunity to rectify the "condition"
cited by the winery, if possible. Code § 4.1-407(B). If the
"reason relates to a condition which may not be rectified by the
wholesaler," or remediation is in dispute, the wholesaler may
request a hearing before the Board to determine if the winery acted
upon "good cause." Code §§ 4.1-407(C), -407(D).
In a proceeding before the Board on this issue, "the winery
shall have the burden of proving the existence of good cause."
Code § 4.1-407(E). The statute specifies that "[g]ood cause shall
not include the sale or purchase of a winery," a transaction
governed by Code § 4.1-405, but expressly "shall include," though
"not limited to," several enumerated circumstances, termed
"wholesaler deficiencies" by the parties, none of which occurred in
this instance. Code § 4.1-406 (emphasis added). Termination
without the requisite "good cause" may result in reinstatement of
the agreement or in payment by the winery to the wholesaler of
"reasonable compensation for the value of [the] agreement"
determined in accordance with the statute. Code § 4.1-409.
In addressing the instant dispute on the stipulated facts, the
1
Compliance with the notice and remedial provisions of Code
§ 4.1-407 is not in issue.
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Board, by reference to the earlier panel decision, concluded that
"[t]he act contains no language that permits a winery's unilateral
cancellation of agreements with wholesalers in order to consolidate
its distributors and to enhance its economic interests in the
absence of wholesaler deficiency" (emphasis added). Applying the
doctrine of ejusdem generis, the Board concluded that the several
specific examples of "good cause" set forth in Code § 4.1-406
manifested a legislative intent to permit termination only upon
wholesaler deficiency and "situations of like character,"
irrespective of Brown-Forman's "self interest."
On judicial review, the trial court concluded that the Board's
construction was unduly restrictive and that statutory "'good
cause' does not require in every instance a showing of wholesaler
deficiencies." The court reasoned that the specific statutory
exclusion from "good cause" of "one situation" not involving
wholesaler deficiency, the sale or purchase of a winery, "suggests
that there are . . . actions by the winery which could" constitute
statutory good cause, although unrelated to wholesaler deficiency.
Nevertheless, the trial court determined that the "business
judgment exercised by Brown-Forman in this case . . ., without
more[,] . . . is not sufficient 'good cause' under the statute" and
affirmed the decision of the Board. (Emphasis added.)
Judicial review of "[a]ll proceedings under [the Act] shall be
held in accordance with the Virginia Administrative Process Act
(§ 9-6.14:1 et seq.)." Code § 4.1-410; see Code § 9-6.14:16. "The
burden shall be upon the party complaining of agency action to
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designate and demonstrate an error of law subject to review by the
court." Code § 9-6.14:17. The reviewing court must accord
considerable deference to an agency's resolution of factual issues,
"ascertaining [only] whether there was substantial evidence in the
. . . record upon which the agency as the trier of the facts could
reasonably find them to be as it did." Id.; see EDF v. State Water
Control Bd., 15 Va. App. 271, 277-78, 422 S.E.2d 608, 611 (1992)
(citation omitted).
"In contrast, judicial review of a 'legal issue' requires
'little deference,' unless it . . . 'falls within an agency's area
of particular expertise.'" EDF, 15 Va. App. at 278, 422 S.E.2d at
612 (quoting Johnston-Willis, Ltd. v. Kenley, 6 Va. App. 231,
243-46, 369 S.E.2d 1, 8 (1988)). This distinction "recognizes the
'special competence' of the judiciary to decide issues of 'common
law,' 'constitutional law' or 'statutory interpretation'" and a
concommitant responsibility not to "'merely rubber-stamp an agency
determination.'" Id. "We are required to construe the law as it
is written" and "'[a]n erroneous construction by those charged with
its administration cannot be permitted to override the clear
mandates of a statute.'" Commonwealth v. May Bros., Inc., 11 Va.
App. 115, 119, 396 S.E.2d 695, 697 (1990) (quoting Hurt v.
Caldwell, 222 Va. 91, 97, 279 S.E.2d 138, 142 (1981)). The
intention of the legislature must always control. Last v. Va.
State Bd. of Medicine, 14 Va. App. 906, 910, 421 S.E.2d 201, 205
(1992) (citation omitted).
It is well established that "[t]he province of [statutory]
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construction lies wholly within the domain of ambiguity, and that
which is plain needs no interpretation." Winston v. City of
Richmond, 196 Va. 403, 408, 83 S.E.2d 728, 731 (1954). "Words are
ambiguous if they admit to 'being understood in more than one
way[,]' refer to 'two or more things simultaneously[,]' are
'difficult to comprehend,' 'of doubtful import,' or lack 'clearness
and definiteness.'" Diggs v. Commonwealth, 6 Va. App. 300, 301-02,
369 S.E.2d 199, 200 (1988) (quoting Brown v. Lukhard, 229 Va. 316,
321, 330 S.E.2d 84, 87 (1985)). If "the words of [a] statute are
clear and unambiguous," we "give them their plain meaning," and the
2
"general rules of statutory construction" are unnecessary. Diggs,
6 Va. App. at 302, 369 S.E.2d at 200; see May Bros., 11 Va. App. at
118, 396 S.E.2d at 696. The judiciary may not "change or amend
[legislative] enactments under the guise of construing them."
Winston, 196 Va. at 407-08, 83 S.E.2d at 731.
Here, we find nothing complex or unclear in the term "good
cause" as it relates to termination of a distribution agreement
under the Act. Considered together and in proper context, the
words simply mean a "well-founded" "reason." Webster's Ninth New
Collegiate Dictionary 527, 217 (1989). This very ordinary
definition of plain words, used nontechnically, comports perfectly
with a statutory scheme intended at once to protect wholesalers
from "unfair treatment . . . by wineries" and "promote . . . fair
2
The doctrine of ejusdem generis relied upon by the Board and
wholesalers is a rule of statutory construction unnecessary to
ascertain clear legislative intent.
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business relations between . . . wholesalers and wineries, and
. . . the continuation of . . . wholesalerships on a fair basis."
Code § 4.1-400. In the event of dispute, the Board has statutory
responsibility to "determine if there is good cause" to terminate
in such instance, with the burden of proof on the winery. Code
§ 4.1-407.
Contrary to wholesalers' contention, the statutory references
to circumstances which expressly do or do not constitute the
contemplated "good cause" introduce no ambiguity to the analysis.
Rather, the legislature simply elected to specifically exclude "the
sale or purchase of a winery" from the broad sweep of "good cause"
and to include certain specific instances of wholesaler deficiency.
These express inclusions and exclusions embrace diverse and
unrelated circumstances and clearly impose no limitation on one
another or any unmentioned good causes for termination under the
Act.
Accordingly, we concur with the trial court that the Board
erroneously restricted statutory "good cause" to instances of
wholesaler deficiency. However, mindful that the Act reserves a
determination of disputed good cause to the Board, we remand these
proceedings to it for reconsideration of that issue consistent with
this opinion. 3 See Virginia Supermarkets v. George, 18 Va. App.
452, 453, 445 S.E.2d 156, 157 (1994).
Reversed and remanded.
3
A determination of good cause and related analysis must
address the stipulated facts specific to this case.
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