Heard: September 5, 2019.
action commenced in the Superior Court Department on August
24, 2017. The case was heard by Rosemary Connolly, J., on
motions for judgment on the pleadings.
Mark Dickison for the plaintiff.
E. O'Neal for Constellation Brands, Inc., & another.
Julie E. Green, Assistant Attorney General, for Alcoholic
Beverages Control Commission.
William F. Coyne, Jr., for M.S. Walker, Inc., & another,
amici curiae, was present but did not argue.
Present: Rubin, Massing, & Englander, JJ.
statute, when a licensed Massachusetts wholesaler of
alcoholic beverages has been distributing a particular brand
name item for more than six months, the supplier cannot
discontinue sales of the brand to the wholesaler without good
cause. See G. L. c. 138, § 25E (§ 25E). When the
supplier sells the brand to a new owner in an
arm's-length transaction, however, the new owner is
generally not required to assume the prior supplier's
obligations to its Massachusetts wholesaler. In this case,
the producer and supplier of a popular brand of California
wine sold the brand to a new owner through an asset purchase
agreement. At issue is whether this transaction, which did
not produce an immediate, clean break between the operations
of the prior supplier and the new owner, created a continuing
affiliation such that the prior supplier's § 25E
obligations must be imputed to the new owner. The Alcoholic
Beverages Control Commission (commission) determined that it
did not, and a judge of the Superior Court agreed. We
plaintiff, Martignetti Grocery Co., Inc., doing business as
Carolina Wine Company (Carolina), is a Massachusetts
wholesaler of alcoholic beverages licensed under G. L. c.
138, § 18. Carolina had been the Massachusetts
distributor of Meiomi wines, a brand produced and sold by
Copper Cane, LLC (Copper Cane), until Copper Cane sold the
brand to defendant Constellation Brands U.S. Operations,
Inc., a wholly owned subsidiary of defendant Constellation
Brands, Inc. (collectively, Constellation). Shortly after the
asset purchase agreement between Constellation and Copper
Cane was completed, Constellation notified Carolina, as
required under § 25E, that Constellation intended to
discontinue sales of Meiomi wines to Carolina. Carolina
promptly appealed Constellation's notice of
discontinuance to the commission. See § 25E
("Either party may appeal to the commission for a
hearing on the notice of discontinuance and the commission
shall make a determination after hearing on the issue of good
cause for discontinuance"). As the commission decided
the appeal on cross motions for summary decision, we
summarize the facts in the light most favorable to
Wagner, a fifth-generation Napa Valley, California,
winemaker, began selling the Meiomi brand in 2007. The brand,
and particularly its Pinot Noir, a variety that was
experiencing a dramatic rise in popularity, was very
successful. Carolina began distributing Meiomi wines in
Massachusetts in 2012 and continued doing so in 2014 after
Wagner formed Copper Cane to produce and sell the brand.
August 2015 Constellation and Copper Cane entered into an
asset purchase agreement, whereby Constellation purchased all
of Copper Cane's assets and inventory associated with the
Meiomi brand, including trade secrets, brand names, designs,
procedures, good will, and its existing stock of wine in all
states of production. Constellation also assumed certain
contracts Copper Cane had with grape growers. At the same
time, the parties entered into a number of transitional
agreements to ensure the uninterrupted production and
consistent quality of the brand through the transition in
ownership. Because the production and bottling of the 2014
vintages were ongoing at the time of the acquisition, Copper
Cane and Wagner agreed to continue the work necessary to
complete bringing those wines to market for Constellation,
which took until May 2016. This work required Copper Cane to
maintain its Federal basic permit as well as its California
winemaker's license. Constellation also assumed Copper
Cane's agreements with a winery and a bottling company
that were integral in the production, storage, and bottling
of the 2014 vintages. In addition, Copper Cane and Wagner, as
an independent contractor, entered into a two-year consulting
agreement with Constellation, in which they agreed to provide
advice with respect to production and marketing of the
brand. Wagner, in his personal capacity, also
agreed to allow Constellation to use his name and likeness in
marketing and advertising the 2014, 2015, and 2016 vintages.
parent company of Constellation, which possessed a
certificate of compliance issued under G. L. c. 138, §
18B, allowing it to distribute alcoholic beverages in
Massachusetts, assumed responsibility for sales of the brand.
Intending to engage Horizon Beverage Company, with which it
had a preexisting distribution agreement, as its
Massachusetts wholesaler, Constellation gave notice to
Carolina that it would be discontinuing sales of the Meiomi
brand to Carolina.
appealed the notice of discontinuance to the commission,
arguing that Copper Cane's and Wagner's continued
involvement with the brand amounted to a continuing
affiliation with Constellation, such that Copper Cane's
obligations to Carolina under § 25E should be imputed to
Constellation. On the parties' cross motions for summary
decision, the commission determined that Constellation's
asset purchase agreement with Copper Cane was a bona fide,
arm's-length transaction, and that the transitional
agreements among Constellation, Copper Cane, and Wagner were
not intended to evade § 25E and did not amount to a
continuing affiliation. Accordingly, the ...