B.Y.O.B., Inc. v. State

• Decision Date: 03 August 2021
• Docket Number: DA 20-0459
• Court: Montana Supreme Court
• Parties: B.Y.O.B., INC., a Montana Corporation, Jim Glantz, Individually and as Personal Representative of the Estate of Donna Glantz, Deceased, On Behalf of the Estate of Donna Glantz, Barbara Riley, Meadow Lake Real Estate, a/b/n CYA, Inc., Gildo, LLC, a Montana Limited Liability Company, Terin Gilden, and Nathan Gilden, Plaintiffs and Appellants, v. STATE of Montana, a governmental entity, The Montana Department of Revenue, a political subdivision of the State of Montana, and Does A-Z, Defendants and Appellees.

405 Mont. 88

493 P.3d 318

B.Y.O.B., INC., a Montana Corporation, Jim Glantz, Individually and as Personal Representative of the Estate of Donna Glantz, Deceased, On Behalf of the Estate of Donna Glantz, Barbara Riley, Meadow Lake Real Estate, a/b/n CYA, Inc., Gildo, LLC, a Montana Limited Liability Company, Terin Gilden, and Nathan Gilden, Plaintiffs and Appellants,

v.STATE of Montana, a governmental entity, The Montana Department of Revenue, a political subdivision of the State of Montana, and Does A-Z, Defendants and Appellees.

DA 20-0459

Supreme Court of Montana.

Submitted on Briefs: April 28, 2021

Decided: August 3, 2021

For Appellants: Lee C. Henning, Rebecca J. Henning-Rutz, Ashley C. McCormack, Henning, Rutz & McCormack, P.L.L.C., Kalispell, Montana

For Appellee: Mikel L. Moore, Moore, Cockrell, Goicoechea & Johnson, P.C., Kalispell, Montana, Quinlan O'Connor, State of Montana, Helena, Montana

Justice Beth Baker delivered the Opinion of the Court.

¶1 This litigation involves the Agency Franchise Agreement ("AFA") for liquor sales that B.Y.O.B., Inc., held with the Montana Department of Revenue ("the Department"). After the Department took action to terminate the AFA for alleged violations of the Montana liquor laws, B.Y.O.B., Inc., began efforts to sell its interest and transfer ownership of the AFA. Those efforts did not succeed. Appellants brought suit, claiming that the Department tortiously, unconstitutionally, and in breach of contract interfered with B.Y.O.B., Inc.’s, attempts to transfer its interest and wrongfully executed an audit of B.Y.O.B., Inc., causing damages. The District Court found Appellants’ AFA transfer-related claims barred by quasi-judicial immunity or alternatively by the parties’ Settlement Agreement and granted summary judgment to the Department on those claims. The court denied summary judgment on the audit claims but limited their reach, and Appellants later dismissed their last remaining claim voluntarily. They now appeal the District Court's grant of summary judgment to the Department as well as its denial of their motions to compel discovery and for M. R. Civ. P. 54(b) certification. We affirm the District Court's Order and conclude that the remaining issues Appellants raise are moot. We consider the following restated issues:

1. Did the District Court err in its rulings related to BYOB's attempts to assign the AFA to third parties?

2. Did the District Court err in its rulings regarding alleged discrimination by the Department against Gildo?

3. Did the District Court abuse its discretion when it denied Appellants’ Rule 54(b) motion for certification?

FACTUAL AND PROCEDURAL BACKGROUND

¶2 The Department granted the AFA to B.Y.O.B., Inc., for its operation of Montana Agency Liquor Store Number 12, known as B.Y.O.B., Inc, in Kalispell. Beginning in April 1996, B.Y.O.B., Inc. was owned and operated by Donna Glantz. In 2008 the Department began auditing B.Y.O.B., Inc., and on May 1, 2009, the Department informed Donna that it intended to terminate the AFA because B.Y.O.B., Inc., had violated the Montana Alcoholic Beverage Code ("MABC"). After finding additional MABC violations, the Department initiated a second termination action against BYOB on February 16, 2010.¹

¶3 Shortly after the Department informed Donna that B.Y.O.B., Inc.’s, AFA would be terminated, Donna began attempting to sell the company and its AFA. In the meantime, BYOB contested both revocations. After administrative proceedings, the Department issued Final Agency Decisions in both cases ordering the termination of BYOB's AFA. BYOB appealed both revocations to the district court before the Hon. Ted Lympus. Judge Lympus stayed the first termination on March 18, 2011; after BYOB appealed the second Final Agency Decision, on December 23, 2011, Judge Lympus consolidated both matters and issued a stay on the AFA's termination for the duration of the appeal process.

¶4 Donna died in mid-2011; Jim Glantz, her husband and personal representative of the Estate, continued efforts to sell BYOB while the termination appeals were pending but was unable to finalize a sale. Gildo, LLC, co-owned by Terin and Nathan Gilden (collectively "Gildo"), was one of these potential buyers.

¶5 On December 23, 2011, B.Y.O.B., Inc., through Jim Glantz, voluntarily filed for Chapter 11 bankruptcy. According to Jim's deposition testimony, cited by the District Court and undisputed by Appellants on appeal, the reason BYOB sought bankruptcy protection was because "[the Department] was gung-ho about ... terminating [the AFA], and the only avenue that I and the attorneys and advisers could see was to put [B.Y.O.B., Inc.,] into bankruptcy to delay that and get the sale through to Gildo, Inc." The bankruptcy court, however, refused to order a stay of the district court proceedings.

¶6 BYOB eventually stipulated to the appointment of a bankruptcy trustee ("Trustee"). Through the Trustee, B.Y.O.B., Inc., entered into a Settlement Agreement with the Department regarding the litigation pending between them, converted the Chapter 11 bankruptcy into a Chapter 7 liquidation bankruptcy, and sold BYOB's interest in its AFA and its inventory at auction for $1,474,718. The Estate retained approximately $1,000,000 from the sale after creditors were paid. As B.Y.O.B., Inc., remained under audit by the Department, however, disbursement of the auction proceeds—initially held by the Department—was delayed until May 2014, when a court order approved a $750,000 distribution. The audit ended in June 2017, and Jim, as the Estate's personal representative, received a final refund check from the Department.

¶7 On January 29, 2015, Appellants filed the complaint in the present matter. The Fourth Amended Complaint contained claims relating both to the method by which the Department handled BYOB's attempts to sell the AFA and to how the Department conducted its audit. The four causes of action listed were Count I: Negligence; Count II: Tortious Interference; Count III: Breach of Contract/Breach of Covenant of Good Faith and Fair Dealing; and Count IV: Montana Constitutional Rights [sic]. Appellants filed a motion for partial summary judgment claiming that

1) [The Department] violated ... B.Y.O.B.’s constitutional rights to protection, and negligently interfered with the transfer and sale of the B.Y.O.B. [AFA] ..., and is thus liable for damages to ... Jim Glantz and the Estate ... in an amount to be determined at trial; 2) [the Department] violated ... Gildo's and Nathan and Terin Gilden's rights to equal protection and negligently interfered with their acquisition of the AFA and is thus liable for damages to Gildo and the Gildens in an amount to be determined at trial; and 3) [the Department] violated the constitution and Montana laws in its treatment of B.Y.O.B. as a taxpayer and is thus liable for damages to B.Y.O.B.

¶8 The Department likewise filed a motion for summary judgment seeking judgment in its favor on all counts because:

1. All of [the Department's] actions which form the basis of the Complaint are protected by quasi-judicial immunity ... a complete defense ....

2. Counts I, II, and IV of the Complaint fail as a matter of law pursuant to the public duty doctrine. ...

3. All AFA transfer-related claims, Counts I, II, III, and IV, ¶ 42.b, of the Complaint fail because the transfers alleged rely on illegal seller financing terms. This argument provides a complete defense to these Counts except as to the audit-related claim of Count IV, ¶ 42.a.

4. All Counts of Plaintiff's Complaint are time barred, in whole or in part. ...

5. Count II of Plaintiffs’ Complaint fails as a matter of law because [the Department] is not a stranger to BYOB's AFA—a requirement for a tortious interference claim. ...

6. Count III of Plaintiffs’ Complaint fails as a matter of law because oral contracts with the State are void pursuant to statute. ...

7. Count IV of Plaintiffs’ Complaint fails as a matter of law because Plaintiffs cannot identify similarly situated classes and any disparate treatment is rationally related to legitimate government interests. ...

8. Any claim for damages arising from Counts I, II, III, and IV, ¶ 42.b, of Plaintiffs’ Complaint fails as a result of BYOB being judicially estopped from asserting any claims in this matter. ...

¶9 The District Court issued a lengthy Order on Cross Motions for Summary Judgment ("Order") in which it carefully addressed Appellants’ claims. Regarding the claims relating to BYOB's attempts to transfer its AFA, the District Court concluded that the Department's actions relating to BYOB's efforts to sell the AFA were quasi-judicial in nature, entitling the Department to immunity, and that any discussion, negotiations, or alleged oral contracts between the Department and BYOB were akin to "plea-bargain type negotiations," also warranting immunity. The District Court also concluded that, even if BYOB's claims survived quasi-judicial immunity, the claims failed because the Settlement Agreement entered into between B.Y.O.B., Inc., and the Department superseded all earlier agreements. The District Court declined to further analyze Appellants’ AFA transfer-related claims or any of the Department's asserted defenses, concluding they were moot. The District Court therefore granted the portions of the Department's motion for summary judgment relating to Appellants’ AFA transfer-related claims and denied the portions of the Appellants’ motion for partial summary judgment relating to the same.

¶10 On Appellants’ claims relating to the Department's audit of B.Y.O.B., Inc., the District Court concluded that unlike the transfer-related claims, quasi-judicial immunity did not provide the Department immunity. The District Court also rejected the Department's public duty doctrine defense. The court concluded, however, that the doctrines of collateral estoppel, judicial estoppel, and res judicata limited the majority of the audit claims. The District Court stated that many of the...