Mountain Crest SRL, LLC v. Anheuser-Busch InBev SA/NV

• Decision Date: 05 September 2019
• Docket Number: No. 18-2327,18-2327
• Parties: MOUNTAIN CREST SRL, LLC, Plaintiff-Appellant, v. ANHEUSER-BUSCH INBEV SA/NV, individually and as successor to InBev SA/NV and Interbrew S.A., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

937 F.3d 1067

MOUNTAIN CREST SRL, LLC, Plaintiff-Appellant,

v.ANHEUSER-BUSCH INBEV SA/NV, individually and as successor to InBev SA/NV and Interbrew S.A., et al., Defendants-Appellees.

No. 18-2327

United States Court of Appeals, Seventh Circuit.

Argued November 2, 2018

Decided September 5, 2019

Rehearing En Banc Denied October 3, 2019^*

Charles E. Benoit, Attorney, Washington, DC, for Plaintiff-Appellant.

Kendall W. Harrison, Attorney, Kevin James O'Connor, Attorney, Godfrey & Kahn S.C., Madison, WI, Steven C. Sunshine, Attorney, James Moore, III, Attorney, Tara L. Reinhart, Attorney, Skadden, Arps, Slate, Meagher & Flom LLP, Washington, DC, for Defendant-Appellee Anheuser-Busch InBev SA/NV, individually and as successor to InBev SA/NV and Interbrew S.A.

Donald Karl Schott, Attorney, Stacy Ann Alexejun, Attorney, Quarles & Brady LLP, Madison, WI, Matthew I. Bachrack, Attorney, David Irving Gelfand, Cleary, Gottlieb, Steen & Hamilton LLP, Washington, DC, James Eric Goldschmidt, Attorney, Quarles & Brady LLP, Milwaukee, WI, for Defendant-Appellee Molson Coors Brewing Company CL B, individually and as successor to Molson Canada Inc.

Makan Delrahim, Attorney, Noel J. Francisco, Attorney, Nickolai G. Levin, Attorney, Department of Justice, Washington, DC, for Invitee.

Before Ripple, Kanne, and Rovner, Circuit Judges.

Ripple, Circuit Judge.

Mountain Crest SRL, LLC ("Mountain Crest"), brought this action, alleging that Anheuser Busch InBev SA/NV ("Anheuser-Busch") and Molson Coors Brewing Company ("Molson Coors") had conspired to damage Mountain Crest’s beer exports to Ontario, Canada, in violation of the Sherman Antitrust Act, 15 U.S.C. §§ 1 – 2. Mountain Crest also alleged that Anheuser-Busch and Molson Coors were enriched unjustly in violation of Wisconsin law.

Much, although not all, of this dispute centers around two agreements: an agreement in 2000 between two Canadian entities, Brewers Retail, Inc. ("BRI"), and the Liquor Control Board of Ontario ("LCBO"); and an agreement in 2015 between Anheuser-Busch, Molson Coors, BRI, the LCBO and the government of Ontario. Mountain Crest alleged that Anheuser-Busch and Molson Coors had conspired to restrain trade in the Ontario beer market and had engaged in monopolistic behavior through the two agreements. Among other things, Anheuser-Busch and Molson Coors carried on a group boycott to force the LCBO to enter the agreement in 2000 to ensure that BRI, an entity Anheuser-Busch and Molson Coors control, was the only retailer in Ontario selling beer in packages larger than six containers. Mountain Crest further claimed the conspiracy extended into 2014 and 2015 when Anheuser-Busch and Molson Coors used a variety of tactics to continue the retail arrangement between BRI and the LCBO, including a threat to bring expropriation litigation under the North American Free Trade Agreement ("NAFTA"). Mountain Crest contends that these agreements, as well as BRI’s policy of promoting sales of Anheuser-Busch’s and Molson Coors’ products in its stores to the detriment of American competition, inhibited its ability to compete in the Ontario beer market.¹

Anheuser-Busch and Molson Coors moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) on multiple grounds. The district court ruled that the act of state doctrine required dismissal of the federal claims and granted the motion; it did not address Anheuser-Busch and Molson Coors’ other grounds for dismissal of the federal claims.² The district court then relinquished supplemental jurisdiction over the state-law unjust enrichment claim and dismissed the case without prejudice to Mountain Crest’s bringing that claim in state court. Mountain Crest timely appealed.³ For the reasons set forth in this opinion, we affirm in part and vacate in part the judgment of the district court and remand the case for proceedings consistent with this opinion.

I.BACKGROUND

A.

Mountain Crest is an independently owned brewery based in Monroe, Wisconsin.

In 2009, Mountain Crest began exporting its beer to Ontario, Canada, seeking to compete in the low-value segment of the beer market there.

The Second Amended Complaint alleges⁴ that Anheuser-Busch is a corporation organized under the laws of Belgium and headquartered there.⁵ Labatt, a Canadian brewery, is currently a subsidiary of Anheuser-Busch, and through Labatt, Anheuser-Busch has about a forty-three percent market share in the Canadian beer market. Mountain Crest claims that senior executives based out of St. Louis, Missouri, manage Labatt through its "North America" zone and that they and their predecessors oversaw and were involved intimately in the alleged antitrust conspiracy.

Molson Coors is a Delaware corporation with principal places of business in Denver, Colorado, and Montreal, Quebec. Molson Coors is the product of a 2005 merger between Molson, Inc. and the Adolph Coors Company. According to Mountain Crest, Molson Coors’ Canadian subsidiary, Molson, controls roughly thirty-four percent of the Canadian beer market. Mountain Crest alleges that Molson Coors’ senior executives participated in the alleged conspiracy with Anheuser-Busch and its predecessors and acted to ensure the conspiracy’s continued operation.

Under a Canadian law, the provinces regulate and control the sale of alcohol within their boundaries.⁶ Under this scheme, the LCBO, a Crown agency wholly owned by the government of Ontario, has the authority to control the importation of beer, wine, and spirits into Ontario, and to determine the "nature, form and capacity of all packages to be used for containing liquor to be kept or sold." Liquor Control Act, R.S.O. 1990, c. L.18 § 3(j) (Can.).⁷ It is further authorized, by statute, to operate retail alcohol stores across the province. Id . § 3(d).

At the time relevant to this suit, Ontario’s Minister of Consumer and Commercial Relations had oversight of the LCBO. As such, "[t]he LCBO was expected to implement Governmental policy with regard to the distribution and sale of alcohol within the parameters set out by the Liquor Control Act and related legislation." Hughes v. Liquor Control Bd. of Ontario , 2018 CarswellOnt 3969, para. 84 (Can. Ont. S.C.J.) (WL), aff’d 145 O.R.3d 401 (Can. Ont. C.A.). Thus, "[t]he government exercised considerable control over the LCBO" and "[c]omplex, high-level decisions were made from time-to-time by the senior Government officials or in some cases, through the enactment of legislation by the Legislative Assembly that directed the activities of the LCBO." Id.

BRI is a cooperative of Ontario brewers, authorized by the LCBO to serve as a beer distributor, wholesaler, and retailer in Ontario. Under the Liquor Control Act, the LCBO controls the sale and delivery of beer at BRI stores and establishes specific terms and conditions related to the operation of such stores. See R.S.O. 1990, c. L.18 §§ 3(1)(d), 3(1)(e.1), 3(1)(e); Sale of Liquor in Government Stores, O. Reg. 232/16 § 6 (Can.). Mountain Crest alleges that Labatt and Molson gained control of BRI over many years by acquiring original members of the cooperative; that each now owns forty-nine percent of BRI⁸ ; and that some of their employees serve as BRI directors. BRI sells beer in stores known as The Beer Store and allegedly enjoys a seventy-five percent market share of beer sales in the province.⁹

In sum, there are two places to buy beer in Ontario: LCBO stores and The Beer Store. The LCBO operates three different types of stores. "Ordinary" stores are in larger communities where BRI operates The Beer Store. Consistent with historical practice, LCBO "ordinary" stores sell wine and spirits as well as beer in packages of six or fewer, while BRI is responsible for selling large packages of beer. LCBO "combination" stores, by contrast, sell beer in packages larger than six, as well as wine, spirits, and small packages of beer, because they are in smaller communities that do not have The Beer Store. Under this arrangement, as a community grows, BRI can request to open a store in the locality; if the LCBO grants that request, the LCBO combination store reverts to an ordinary store. LCBO "agency" stores serve Ontario’s smallest communities; these stores are private businesses such as grocery stores that are permitted to sell alcohol.

Beyond selling different package sizes of beer, BRI and the LCBO traditionally sold different types of beer. LCBO ordinary stores sold imported beer and some beer brewed in Ontario; The Beer Store only sold beer brewed in Ontario. Additionally, LCBO ordinary stores did not distribute any beer brands sold by BRI to restaurants and bars holding alcohol licenses. Since The Beer Store allegedly had a seventy-five percent market share and only sold domestic products, most of the beer sold in Ontario was brewed in Ontario. In the late 1980s and early 1990s, the United States, invoking the General Agreement on Tariffs and Trade ("GATT"), complained that these practices were discriminatory and, as a result of the settlement in 1993, foreign brewers were permitted to sell their beer in The Beer Store. Foreign brewers could also access BRI’s large beer distribution network.¹⁰ The settlement did not affect the LCBO’s practice of selling beer in packages of six or fewer in its ordinary stores.

As the GATT challenge was settled, disputes began to emerge between the LCBO and BRI. Pertinent to the present case, the LCBO expressed a desire to begin selling larger packages of beer in its ordinary stores. BRI and Brewers of Ontario, an unincorporated trade association consisting solely of Labatt and Molson, opposed this plan because such sales would "cannibalize BRI’s volume."¹¹ This dispute and its resolution is central to many of Mountain Crest’s claims; the events described here are as outlined in Mountain Crest’s Second Amended Complaint.

Responding to the LCBO’s wish to sell larger packages of beer, the Executive Director of Brewers of Ontario noted in a 1992 letter to the President...