Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00101/USCOURTS-caed-1_05-cv-00101-13/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Contract Dispute

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

E. & J. GALLO WINERY, a California )

corporation, )

)

Plaintiff, )

)

v. )

)

ANDINA LICORES S.A., a corporation )

organized under the laws of Ecuador, )

)

Defendant )

____________________________________)

CV F 05-0101 AWI LJO

ORDER OF FINAL

JUDGMENT

Document # 177

On July 25, 2006, the court granted in part plaintiff E. & J. Gallo Winery’s

(“Gallo’s”) motion for summary judgment (the “July 25 Order”). In the July 25 Order, the

court ordered Plaintiff to submit proposed language for declaratory relief and for permanent

injunctive relief as well as its costs in defending the action brought by defendant Andina

Licores, S. A. (“Andina”) in Ecuador (the “Ecuador action”). Gallo filed proposed language

and a statement of costs and attorney fees in accordance with the July 25 Order on August 8,

2006. Andina submitted opposition to the form of proposed judgment on August 10, 2006,

and to the amount of damages claimed by Gallo on August 22, 2006. Gallo submitted a reply

on August 25, 2006.

I. Andina’s Objection as to Form of Judgment

As to the form of judgment, Andina objects to the wording in Gallo’s fourth proposed

statement of declaratory relief ( “proposed language”), which states, “The rights, obligations

Case 1:05-cv-00101-AWI-LJO Document 205 Filed 01/31/07 Page 1 of 9
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and duties of Gallo and Andina which are the subject of this action are DECLARED as

follows:”

[A . . . . E.]

F. Gallo did not breach the 1987 Agreement in the manner alleged

by Andina in the action filed by Andina on August 11, 2004, in

the Civil Courts of Guayaquil, Ecuador in the action entitled

Andina Licores, S.A. v. E. & J. Gallo Winery, Case No. 470-

D04.

Andina objects that the proposed language is unduly expansive in that the court only

declared that “Gallo did not breach the 1987 Agreement” in its July 25 Order. Andina

contends the broader language proposed by Gallo may prejudice any future action by Andina

against Gallo for tort or quasi-contract claims Andina may have against Gallo for disruption

of Andina’s relationship with Super-Maxi, Andina’s largest customer in Ecuador.

Andina alleged in its Ecuador action that Gallo breached the agreement by: (1) selling

wine directly to the grocery chain Super Maxi who had been Andina’s biggest customer; (2)

by delaying shipments of wine on three occasions, and (3) by raising the prices or

overcharging on its wines. The July 25 Order addressed each of these and found each

allegation unsupportable as a matter of law. With respect to Andina’s first theory of breach – 

that Gallo breached the Agreement by Selling directly to Super Maxi – Andina advanced

three theories of breach including: (1) prevention or hindrance of Andina’s performance of

the Agreement, (2) breach of “applicable law” (meaning Ecuadorian Decree 1038-A) which

forbids Gallo from impairing the relationship between a distributor of a foreign product and

the distributors customers; and (3) Gallo’s acts amounted to tortious interference with

Andina’s business opportunity.

The court reject each of Andina’s theories supporting their claim that Gallo breached

the 1987 Agreement. Of relevance to Andina’s claims for prevention of performance and

tortious interference, the court found:

Andina’s argument that Gallo’s actions prevented or hindered

Andina’s performance under the agreement fails because the Agreement does

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not require Andina to perform in a way that would be hindered or prevented

by Gallo’s sale of wine directly to Supermaxi. The Agreement requires

Andina to submit orders to Gallo in a certain format and to pay for the wines

shipped under specified terms, but the Agreement has no provisions requiring

Andina to sell the wine, or to sell any particular amount of wine to any

particular customer. Since the amount of wine Andina sells or the customers

to whom Andina sells its wine are not elements of performance under the

Agreement, Gallo’s sale of wine directly to Supermaxi could not have

impaired Andina’s performance.

[¶ . . . .¶]

Andina’s claim of interference is somewhat confusing. Although

Andina alludes to Gallo’s conduct as constituting tortious interference with

Andina’s relationship with Supermaxi, nowhere does Andina set forth any

legal framework for such a claim. Andina has not alleged tortious interference

as a counterclaim and has cited no statutory or case law to indicate the

elements of such a claim under California law. Finally, Andina has cited no

authority to support the implied contention that conduct amounting to a

producer’s interference with a wholesaler’s relationship with a third party

purchaser also amounts to breach of a contract for sale of goods between the

producer and wholesaler. 

Doc. # 174 at 26-27.

Although the July 25 Order addressed each of the theories advanced by Andina with

respect to their claim of breach against Gallo, the order itself simply stated that the court

declared “Gallo did not breach the 1987 Agreement.” Andina’s characterization of Gallo’s

proposed language as being more expansive than the language the court used in the July 25

Order is puzzling. By qualifying the scope of the court’s declaratory relief to those issues

actually decided by the court with respect to Andina’s claims against Gallo in the Ecuador

action, the scope of the declaratory relief requested by Gallo is narrower than the more

generalized statement made by the court and proposed by Andina. Further, the statement

proposed by Gallo is more technically accurate inasmuch as it addresses all theories of breach

actually asserted by Andina in its opposition to Gallo’s motion for summary judgment and

addressed by the court in its memorandum opinion.

Pursuant to the July 25 Order, Andina is bound by the 1987 Agreement to litigate any

disputes arising under the Agreement in the forum selected by the Agreement. Thus, to the

extent Andina had claims against Gallo for breach of the Agreement, Andina was required to

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initially bring those claims in this forum or in Stanislaus County Superior Court, or as

counterclaims in this action. Likewise, when Gallo requested a declaration of rights in this

court with respect to the issues raised by Andina through Andina’s allegations in the Ecuador

action, and then moved for summary judgment on the requested declaration of rights, Andina

was required to establish the existence of a genuine issue as to any material fact with respect

to those allegations or have the issue decided by the court in Gallo’s favor as a matter of law. 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); First Nat'l

Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968); Ruffin v. County of Los

Angeles, 607 F.2d 1276, 1280 (9th Cir. 1979). 

Andina does not, and could not, reasonably contend that Gallo did not have a right to

seek adjudication of its rights and obligations under the 1987 Agreement that formed the

basis of Andina’s claims in the Ecuador action. In essence, Gallo’s claims for declaratory

relief are simply a way of forcing Andina to adjudicate in this forum the same issues that

Andina had wrongfully attempted to assert in the Ecuadorian forum in violation of the

binding forum selection clause. Andina had both the obligation and opportunity to bring

forward material facts in its favor that would be sufficient to avoid summary judgment. 

Having had that opportunity, and having failed to carry its burden, Andina cannot now claim

that it would be prejudiced if this court declares Gallo’s rights under the 1987 Agreement in

accordance with the issues this court actually decided in the July 25 Order. 

By the same token, the court’s July 25 Order makes it clear that Andina is not bound

by the forum selection clause with respect to any claims it may have that arise outside

the1987 Agreement; including possibly claims of tortious interference. Thus, to the extent

Andina may seek relief on tort claims that do not arise under the 1987 Agreement, Gallo’s

proposed language will not impair those claims.

The court concludes that declaring the parties’ rights and obligations with respect to

the 1987 Agreement in the terms suggested by Gallo will not in any impair any claims for

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relief that Andina would have had under Andina’s proposed language. The court will

therefore accept Gallo’s proposed language.

II. Andina’s Objections as to Damages

In its July 25 Order, the court granted Gallo’s motion for summary judgment on its

claim that Andina breached the 1987 Agreement by bringing its claims in the Ecuador action

and ordered that Gallo file and serve an itemized schedule reflecting its costs resulting from

its defense in the Ecuador action. Gallo submitted its statement on August 8, 2006, claiming

attorney fees of $204,807.80 and expenses of $12,938.63, for a total damage claim of

$217,746.43.

Andina filed a document titled “Response and Objection to [Plaintiff’s] Damages

Resulting from Filing of the Ecuador Action” (hereinafter “Objection”). Andina’s primary

generalized complaint is that the damages Gallo is claiming as a result of the Ecuador action

were expended for the purpose of avoiding litigation on the merits; or, as characterized by

Andina, Gallo’s attorneys in Ecuador were being paid to do nothing. Andina also objects to

the amount claimed by Gallo for “coordination with the California Action” ($43,145.00), and

to individual expenses claimed by Gallo for initial review of the file ($2,800.00), visits to the

court in Ecuador and legal research and analysis ($117,644). 

As an initial matter it is important that the attorney fees and expenses awarded in this

case were awarded as consequential damages for breach of contract, not as post-judgment

attorney’s fees. As Gallo points out, where the attorney fees are awarded as damages, the

only relevant issues are whether the expenses or fees were actually incurred, whether the fee

rate is generally reasonable, and whether the attorney fees were proximately caused by

defendant’s wrongful conduct. See Hangarter v. Paul Revere Life Ins. Co., 236 F.Supp.2d

1069, 1101 (N.D. Cal. 2002), rev’d in part on other grounds 373 F.3d 998 (9 Cir. 2004)

(in suit to recover insurance benefits withheld in bad faith, prevailing plaintiff is entitled to

reasonable attorney fees incurred to obtain benefits). 

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Gallo alleges attorney fees were billed at $200.00 per hour. Although Andina

expresses concerns about the billing rate, Andina offers no evidence that any other rate is

reasonable, either with respect to Ecuadorian or domestic attorney fees. The court finds the

rate of $200.00 per hour for attorney fees is reasonable.

Andina also objects generally to attorney fees and expenses allocated to what Gallo

termed costs of coordination of the Ecuador action with the instant action. Basically, Andina

contends that such costs are not within the scope of expenses contemplated by the court’s

order awarding as damages the costs incurred by Gallo in defending the Ecuador action. The

court disagrees. The California action was occasioned by Andina’s instigation of the

Ecuador Action. Although the court will not allow Gallo to claim the costs of prosecution of

the California action as damages in this order, the court is of the opinion that those expenses

that arise at the intersection of the California and Ecuador actions; that is to say the expenses

incurred from coordinating the two actions, are part of the costs of defending in the Ecuador

action and are within the scope of damages ordered by this court.

Andina also objects to the time, and therefore the amount billed for certain other

functions claimed by Gallo in defending the Ecuador action. Andina does not claim that the

costs were not actually incurred by Gallo, and the court has, as noted previously, determined

that the rate assessed is reasonable. It is also not disputed that the costs are a result of Gallo’s

defense in the Ecuador action. Andina’s objections are therefore overruled.

The court accepts Gallo’s proposed judgment, both as to form and as to damages as

set forth below. Gallo’s request for costs and attorney fees with respect to the California

action will not be granted in this judgment. Gallo may make a separate application for costs

and attorney fees following the entry of this order of judgment in accordance with Local

Rules 54-292, and 54-293. 

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THEREFORE, in accordance with the foregoing discussion, IT IS HEREBY

ADJUDGED AND DECREED:

1. Gallo shall recover from Andina the sum of $217,746.43 with post-judgment interest

thereon at the rate of 4.94 percent as provided by 28 U.S.C., section 1961.

2. The rights, obligations and duties of Gallo and Andina which are the subject of this

action are DECLARED as follows:

A. The forum selection clause set forth at ¶ 8 if the 1987 distributor Agreement

between Gallo and Andina (the “1987 Agreement”) is binding on Andina and

Gallo and is enforceable.

B. The choice of law clause set forth in ¶ 8 of the 1987 Agreement designating

California Law as the law Governing the 1987 Agreement is binding on

Andina and Gallo and is enforceable.

C. Under ¶ 8 of the 1987 Agreement, CT Corporation is the agent designated for

service of process for both Gallo and Andina for any disputes arising out of

the 1987 Agreement.

D. Andina violated the 1987 Agreement by bringing and prosecuting the Ecuador

Action and violated the provisions of the 1987 Agreement designating CT

Corporation as the agent for service of process.

E. Under the 1987 Agreement Andina was/is a non-exclusive distributor of Gallo

products in Ecuador. And,

F. Gallo did not breach the 1987 Agreement in the manner alleged by Andina in

the action filed by Andina on August 11, 2004, in the Civil Courts og

Guayaquil, Ecuador in the action entitled Andina Licores S.A. v. E. & J. Gallo

Winery, Case No. 47-D04.

3. Subject only to subparagraph E., below, Andina and its officers, agents, servants,

employees and attorneys, and all those in active concert or participation with Andina,

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shall be permanently restrained and enjoined from:

A. Pursuing, and/or prosecuting the action entitled Andina Licores S.A. v. E. & J.

Gallo Winery, Case No. 47-D04.

B. Initiating, pursuing, prosecuting or taking any steps with respect to any appeal

or review (including, but not limited to review by cassation or “recurso de

casacion”) of any judgment , decree, order, or award rendered in the Ecuador

Action or any proceeding referred to in subparagraph C., including, but not

limited to: i) the appeal numbered 554-2005filed in the Superior Court of

Guayaquil, Ecuador and that was assigned to the Second Civil and

Commercial Chamber of the Superior Court of Guayaquil (“Second Appellate

Chamber”) ; and (ii) the proceeding numbered 554-2005-A filed by Andina on

or about July 14, 2006 in the Second Appellate Chamber against Judges Primo

Diaz Garaycoa, Jorge Blum Manzo and Jorge Jaramillo Jaramillo in which

Andina is seeking recusal of the aforementioned Judges of the Second

Appellate Chamber.

C. Initiating, pursuing, prosecuting or taking any steps in the courts of Ecuador

with respect to any action, case, claim, motion or proceeding that is based on,

related to, or arise out of either: (i) the facts which are the subject of the

claims set forth in the Ecuador Action; or, (ii) any of the actions, cases,

claims, motions or proceedings that have been initiated and/or are pending in

the courts of Ecuador and relating to the Ecuador Action, including, but not

limited to, the proceeding filed by Andina in or about October 2005 before the

President of the Superior Court of Guayaquil, Case No. 13-2005, against

Ukles Cornejo Bustos, the Second Civil Judge of Guayaquil.

D. Enforcing in any country or location, or taking any steps to enforce in any

country of location, any judgment, decree, order or award rendered, filed

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entered or issued by any Ecuador court in either the Ecuador Action, any

appeal or proceeding relating to such action, or in any proceeding referred to

in subparagraphs G., or C., above.

E. Subparagraphs 5 A, B, C, and D notwithstanding, Andina is permitted to

petition the appropriate Ecuadorian court for voluntary dismissal of the

Ecuador Action or any appeal or other action, case or claims initiated by

Andina and related to or arising from the Ecuador Action, provided that such

dismissal(s) is/are with prejudice.

F. This court retains jurisdiction for the purpose of implementing and enforcing

this permanent injunction, including by way of post-judgment discovery

related thereto. Gallo is permitted to conduct post-judgment discovery

directed to compliance with and enforcement of, this permanent injunction.

IT IS SO ORDERED.

Dated: January 29, 2007 /s/ Anthony W. Ishii 

0m8i78 UNITED STATES DISTRICT JUDGE

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