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Martignetti Grocery Co., Inc. v. Alcoholic Beverages Control Commission

Appeals Court of Massachusetts, Suffolk

December 17, 2019

MARTIGNETTI GROCERY CO., INC.[1]
v.
ALCOHOLIC BEVERAGES CONTROL COMMISSION & others.[2]

          Heard: September 5, 2019.

          Civil 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.

          J. Mark Dickison for the plaintiff.

          Mary 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.

          MASSING, J.

         By 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 affirm.[3]

         Background.

         The 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 Carolina.[4]

         Joseph 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.

         In 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[5] 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.[6] 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.

         The 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.[7]

         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 ...


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