Court Opinion

ID: 620418
Source: CourtListenerOpinion
Date Created: 2012-01-06 19:53:49+00
Date Added: 2024-06-11T17:50:52.211338
License: Public Domain

UNPUBLISHED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Affirmed by unpublished opinion.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Unpublished opinions are not binding precedent in this circuit.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).

                                        4
                                      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