Erwin and Shafer, Inc. v. Pabst Brewing Co., Inc.

• Decision Date: 01 September 1985
• Docket Number: No. 9,9
• Citation: 304 Md. 302,498 A.2d 1188
• Parties: ERWIN AND SHAFER, INC. v. PABST BREWING COMPANY, INC. Misc.,
• Court: Maryland Court of Appeals

Page 302

304 Md. 302

498 A.2d 1188

ERWIN AND SHAFER, INC. v. PABST BREWING COMPANY, INC.

Misc. No. 9, Sept. Term, 1985.

Court of Appeals of Maryland.

Oct. 22, 1985.

Lawrence E. Finegan, Frederick (Rosenstock, Burgee & Welty, P.A., Frederick, on brief), for appellant.

Robert M. Heller, New York City (Kramer, Levin, Nessen, Kamin & Frankel, New York City, on brief, Piper & Marbury, Baltimore, on brief), for appellee.

Argued before MURPHY, C.J., and SMITH, ELDRIDGE, COLE, RODOWSKY, COUCH and McAULIFFE, JJ.

COUCH, Judge.

The United States District Court for the District of Maryland has certified to us for determination the following questions.

1) Whether § 203E of the Maryland Beer Franchise Fair Dealing Act, Maryland Code (1974, 1981 Repl.Vol.), Article 2B, § 203A et seq., requires a beer franchisor to grant to a distributor of specified brands of beer in a given territory, the right to distribute a brand of beer which the franchisor acquired after the execution of the original distributorship agreement.

2) Whether § 203B of the Maryland Beer Franchise Fair Dealing Act, Maryland Code (1974, 1981 Repl.Vol.), Article 2B, § 203A et seq., grants a beer distributor the right to order and receive a brand of beer that is not covered by the distributor's franchise agreement.

The certification was pursuant to the Uniform Certification of Questions of Law Act, Maryland Code (1974, 1984 Repl.Vol.), Courts and Judicial Proceedings Article, § 12-601 et seq. ¹ A supplemental order of certification specified that Erwin and Shafer, Inc. ("E and S"), plaintiffs in the proceeding pending in the United States District Court, should be treated as appellants in this Court. We respond in the negative to each of the certified questions herein presented.

I

The questions arose in the United States District Court pursuant to the following allegations, which are taken from the statement of facts contained in the Order of Certification dated April 12, 1985. The Maryland Beer Franchise Fair Dealing Act, Maryland Code (1974, 1981 Repl.Vol.), Art. 2B, § 203A et seq. (the "Act") was enacted in 1974. In § 203A(a) of the Act, the General Assembly expressly recognized the problem confronting beer distributors. ² The Act protects beer distributors from unlawful inducements, threats and terminations by beer manufacturers. ³

Since 1974, however, the nature of beer distribution, in this State and nationwide has changed dramatically. There are now far fewer manufacturers of beer products, and distributors typically handle several brands of beer.

Appellant, E and S, is a Maryland corporation engaged in the distribution of beer products. Appellee, Pabst Brewing Company, Inc. ("Pabst") is a Delaware corporation which produces beer products.

On June 16, 1982, E and S entered into a Distribution Agreement with Pabst whereby E and S was granted the exclusive right to sell in Howard County, Maryland, four "labels" or brands of Pabst's products. ⁴ The Agreement did not expressly accord E and S the distribution rights in Pabst beer products other than those stated in the agreement.

In March of 1983, Pabst merged with Olympia Brewing Company ("Olympia"). Consequently, Pabst acquired the brands labelled "Hamm's," "Hamm's Special Light," "Olympia," "Olympia Light," and "Maxx Lager." This boosted Pabst's beer brand inventory to at least eleven. ⁵ Subsequent to its merger with Olympia, Pabst solicited marketing proposals from several beer distributors for the distribution of Hamm's and Hamm's Special Light in a selected number of Maryland distribution territories. E and S was one of approximately ten distributors to submit a marketing plan. After reviewing the plans, Pabst chose A.E. Davies, Inc. ("Davies"), rather than E and S, to distribute the Hamm's beers. ⁶ The agreement between Pabst and Davies which became effective April 12, 1983, granted to Davies the exclusive right to distribute Hamm's and Hamm's Special Light beers in Howard County, Maryland.

On or about March 31, 1983, E and S instituted this action for injunctive relief in the Circuit Court for Frederick County, Maryland, claiming that Pabst violated sections 203B and 203E. The case was removed to the United States District Court for the District of Maryland under 28 U.S.C. § 1332 (1982) on or about April 26, 1983. Judge Hargrove of that court certified questions to this Court on joint motion of the parties and further proceedings were stayed pending our resolution thereof.

II

(1)

Whether § 203E of the Maryland Beer Franchise Fair Dealing Act, Maryland Code (1974, 1981 Repl.Vol.), Article 2B, § 203A et seq., requires a beer franchisor to grant to a distributor of specified brands of beer in a given territory, the right to distribute a brand of beer which the franchisor acquired after the execution of the original distributorship agreement.

We are called upon to once again apply the familiar rules of statutory construction. This Court has repeatedly discussed and applied these well-founded principles. ⁷ The principles are particularly applicable to the instant appeal.

In resolving the first certified question before us we initially look to the language in the statute. ⁸ If it is clear and unambiguous, then we need look no further. See Mayor of Baltimore v. Hackley, 300 Md. 277, 283, 477 A.2d 1174, 1177 (1984).

Section 203E reads:

"Establishment of dual distributorships in same territory.

"No franchisor, who shall designate a sales territory for which any franchisee shall be primarily responsible or in which any franchisee is required to concentrate its efforts, shall enter into any franchise or agreement with any other beer distributor for the purpose of establishing an additional franchisee for its brand or brands of beer in the territory being primarily served or concentrated upon by a licensed franchisee."

Maryland Code (1974, 1981 Repl.Vol.).

E and S argues that the language set forth in § 203E requires a manufacturer of beer products to market all of its brands or "labels" through a single distributor in a given territory. ⁹ The reasonableness of this proposition is simple and clear to E and S: that, in enacting Article 2B, entitled "Alcoholic Beverages," of which §§ 203A et seq. are but one part, the legislature sought to put in place a comprehensive scheme designed to completely preempt freedom of contract in this area and regulate all relationships existing between manufacturers, wholesalers and distributors of alcohol. The result of this interpretation is equally reasonable and understandably attractive to E and S. A manufacturer would have to comply with the statute by providing all of its brands of beer, whether the subject of a franchise agreement or not, to a single distributor in a given territory, or not sell beer in that territory. To buttress its argument, E and S seizes the words "or brands" from the phrase "... for the purpose of establishing an additional franchisee for its brand or brands ..." to illustrate the legislature's intention that all brands of beer newly manufactured or subsequently acquired by a franchisor be provided to a single distributor in a particular sales territory. We disagree. We find subsection (a) of § 203A particularly instructive in our determination. ¹⁰ A plain reading of that section makes clear the concern of the legislature that temperance in alcohol consumption be promoted. To effectuate this intent, the legislature sought to protect the local beer distributor from those practices of manufacturers motivated to induce or coerce the weaker distributors into stimulating sales of beer products. ¹¹

In light of § 203A(a), we must construe § 203E, not only so as to render it effective, Pickett v. Prince George's County, 291 Md. 648, 661, 436 A.2d 449, 456 (1981), but with reference to the purposes the legislature sought to accomplish. See Cook v. State, 62 Md.App. 634, 642, 490 A.2d 1311, 1314 (1985); Howard County Ass'n for Retarded Citizens, Inc. v. Walls, 288 Md. 526, 530, 418 A.2d 1210, 1213 (1980). We conclude that the proper and intended interpretation of § 203E, that beer manufacturers are prohibited from selling any particular brand or brands of beer through more than one distributor in a particular territory, is consistent with those policy considerations enunciated in § 203A(a) and gleaned from the Act as a whole. Such an interpretation lends itself to the protection of local distributors and the promotion of temperance by limiting each distribution channel to a particular brand or brands of beer. Moreover, neither the distributor nor the manufacturer are in any way prejudiced by such a limitation. The distributor is assured that its franchise agreement will not be jeopardized or terminated by a manufacturer absent a showing of good cause under § 203C. Further, the manufacturer is assured that its distributor will focus its attention on promoting, marketing and selling the brand or brands of beer assigned exclusively to the distributor.

E and S presses that § 203E accomplishes more, suggesting a manufacturer must confine all of its brands to a single distributor in a given territory. We think this argument proves too much and presents a host of problems. A court must shun a construction of a statute which will lead to absurd consequences. Coerper v. Comptroller, 265 Md. 3, 6, 288 A.2d 187, 188 (1972); Doswell v. State, 53 Md.App. 647, 653, 455 A.2d 995, 999 (1983). We illustrate.

First, to adopt such an interpretation would be to bestow upon all distributors a right akin to a first refusal in all those brands of beer made or acquired by their manufacturers, without regard to existing franchise agreements ¹² or whether the new labels had been acquired by the manufacturer subsequent to execution of the franchise agreement. We are unable to construe any language of § 203E as granting such broad powers.

Second, were E and S to prevail, Pabst would be forced either to terminate existing Olympia distributors in...