The Country Vintner of NC v. E & J Gallo Winery

Filing

UNPUBLISHED AUTHORED OPINION filed. Originating case number: 5:09-cv-00326-BR. Copies to all parties and the district court/agency. [998759229].. [10-2289]

Appeal: 10-2289

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Date Filed: 01/06/2012

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UNPUBLISHED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Affirmed by unpublished opinion.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Unpublished opinions are not binding precedent in this circuit.

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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

selected

in

The

the

United

Country

States.

Vintner

of

In
North

July

2005,

Carolina,

Billington
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

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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.
1,

2009,

Gallo

began

supplying

Alamos

Effective January

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

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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

summary judgment on the Wine Act claims.
granted

summary

judgment

in

Gallo’s

cross-motions

for

The district court

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).
abuses

its

discretion

whenever

erroneous legal principles.”

its

“A district court

decision

is

guided

by

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

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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.”
Co., 517 U.S. 706, 716 (1996).
considered

the

Supreme

Quackenbush v. Allstate Ins.

In this case, the district court

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.”

5

Id.

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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

abstention doctrines under both Burford and Thibodaux.

the

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

Burford

analysis

of

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
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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

7

in

deciding

whether

to

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abstain

from

Date Filed: 01/06/2012

hearing

a

case.

Page: 8 of 16

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

establish

of
a

egregious

violation

of

or

aggravating

[the

conduct

UDTPA].”

J.A.

required

65

to

(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

activities

Carolina

regulatory

may

constitute

also

practice as a matter of law.

statute
an

unfair

governing
or

business

deceptive

trade

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

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(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

distribution agreement with Billington.

Country

Vintner’s

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.
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V.
Finally, we consider the grant of summary judgment in favor
of Gallo on the Wine Act claims.
is--as

the

district

court

The question presented here

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.”
Gen.

Stat.

§

18B-1200(b)(1)-(3).

The

Act

directs

N.C.

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.
10

Id.

Further, the Wine Act

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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

cancel,

or

not

notice
renew

of
any

any

intention

agreement”;

to
a

amend,

wholesaler

terminate,
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).

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In

limited

Date Filed: 01/06/2012

circumstances,

Page: 12 of 16

the

Act

protects

wholesaler even in the absence of an agreement.

a

wine

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
wholesalers.”

and

standards

required

Id. § 18B-1206(a).

of

the

winery’s

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

“commercial

noted

that

the

relationship,”

Act

defines

which,

an

according

agreement
to

the

as

a

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.”
at *4.

Id.

We agree and similarly conclude that no agreement ever

existed between Gallo and Country Vintner.
12

Further, although

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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

accorded the Act’s terms.
us

conclude

that

Gallo

favor

of

wholesalers

that

should

be

In effect, Country Vintner would have
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.
reading,

in

turn,

would

obligate

a

winery

that

obtains

This
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)).
without

power

to

interpolate,

or
13

In such a case, courts “ ‘are
superimpose,

provisions

and

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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

Country Vintner seeks in this case.

type

of

protection

that

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
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to protect a wholesaler’s right to the continued distribution of
a brand, yet previously chose not to do so.” 2
2010 WL 4105455, at *5.

Country Vintner,

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

legislature

is

even

determined

prospectively.

more
that

compelling
the

where,

amendment

as

would

here,
apply

the
only

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 breweryimporter, 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.

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Accordingly,

Date Filed: 01/06/2012

we

affirm

the

Page: 16 of 16

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

Country Vintner no relief on its statutory claims.

affords

Accordingly,

we affirm the judgment of the district court.
AFFIRMED

16