E. & J. Gallo Winery v. Andina Licores S.A., CV F 05-0101 AWI LJO.

• Decision Date: 25 July 2006
• Docket Number: No. CV F 05-0101 AWI LJO.,CV F 05-0101 AWI LJO.
• Citation: 440 F.Supp.2d 1115
• Court: U.S. District Court — Eastern District of California
• Parties: E. & J. GALLO WINERY, a California corporation, Plaintiff, v. ANDINA LICORES S.A., a corporation organized under the laws of Ecuador, Defendant.

440 F.Supp.2d 1115

E. & J. GALLO WINERY, a California corporation, Plaintiff, v. ANDINA LICORES S.A., a corporation organized under the laws of Ecuador, Defendant.

No. CV F 05-0101 AWI LJO.

United States District Court, E.D. California.

July 25, 2006.

Tod L. Gamlen, Keith Lee Wurster, Baker & McKenzie LLP, Palo Alto, CA, Jill Patrice Sazama, Curtis and Arata, Modesto, CA, for Plaintiff.

J. David Petrie, Borton Petrini and Conron, Fresno, CA, for Defendant.

MEMORANDUM OPINION AND ODER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT OR SUMMARY ADJUDICATION

ISHII, District Judge.

INTRODUCTION

In this memorandum opinion, the court takes up the second of two dispositive motions in this action for damages and declaratory relief by plaintiff E. & J. Gallo Winery ("Gallo") against defendant Andina Licores S.A. ("Andina"). In the first of the motions considered by the court, Andina moved to dismiss the complaint in this action pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. In a prior memorandum opinion and order filed by the court on June 30, 2006, the court dismissed Gallo's claims for abuse of process and for unfair business practices under California Business and Professions Code, section 17200. The court denied Andina's motion to dismiss Gallo's claims for breach of contract and for declaratory relief.

In the instant motion, Gallo moves for summary judgment on all of its claims against Andina. Because Gallo's claims for abuse of process and unfair business practice have been dismissed, the court will only consider the remaining claims for breach of contract and for declaratory relief. Diversity Jurisdiction exists pursuant to 28 U.S.C. § 1332. Venue is proper in this court.

PROCEDURAL HISTORY

The California action commenced in this court with the removal of the case from the Stanislaus Superior Court on January 24, 2005. In the California action, Gallo requests declaratory judgment and alleges claims for abuse of process, unfair competition under California law, and breach of contract. Andina filed a motion to dismiss for lack of personal jurisdiction on the same day the case was removed to this court. Andina's motion to dismiss was denied without prejudice because Andina failed to properly notice the motion. Gallo filed a motion to remand on February 23, 2005, which was subsequently denied on April 15, 2005. Andina filed its second motion to dismiss on April 28, 2005. Gallo filed its opposition to Andina's motion and a cross-motion for preliminary injunction and letter rogatory on May 23, 2005. On June 27, 2005, the court filed a memorandum opinion and order denying Andina's motion to dismiss and denying Gallo's motion for preliminary injunction and letter rogatory. Gallo appealed the court's denial of Gallo's request for preliminary injunction. The Ninth Circuit Court of Appeal reversed the court's denial by an order dated May 1, 2006. Pursuant to the order of the appellate court, this court issued a preliminary anti-suit injunction prohibiting Andina's prosecution of the Ecuador action on May 4, 2006.

Andina filed its motion for judgment on the pleadings on February 24, 2006. On June 30, 2006, this court filed a memorandum opinion and order granting Andina's motion to dismiss as to Gallo's claims for abuse of process and unfair business practices (The "June 30 Order"). Andina's motion to dismiss was denied as to Gallo's claims for declaratory relief and breach of contract. Gallo filed the instant motion for summary judgment on February 25, 2006. Andina's opposition was filed March 27, 2006, and Gallo's reply was filed on April 18, 2006.

GENERAL FACTUAL BACKGROUND

Gallo is a large, family-owned winery whose headquarters are located in Modesto, California. Gallo manufactures a variety of wine products in facilities located in California and markets its products worldwide. In 1978 Gallo entered into an agreement with Andina, then a limited liability company, to distribute certain of Gallo's products in Ecuador. Of significance, pursuant to the Agreement, the parties agreed that all legal disputes arising under the Agreement would be litigated in Stanislaus County or in the federal district court having jurisdiction in Stanislaus County. The Agreement also provided that any disputes between the parties would be resolved pursuant to California law. Gallo alleges the Agreement provides that CT Corporation would serve as Gallo's agent in Ecuador for service of process.

In 1987 Andina changed its structure to become a corporation and updated its distributor agreement with Gallo (hereinafter, the "Agreement") to reflect the change. On April 5, 2004, Gallo received correspondence from Andina that alleged Gallo had breached the Agreement by violating Andina's exclusive distributorship right, that Gallo had delayed shipment of products and had overcharged. Gallo answered Andina's correspondence by pointing out that the Agreement does not provide Andina exclusive distributorship rights. Gallo also denied the other allegations. Andina commenced the Ecuador action on or about August 11, 2004, by filing a lawsuit in the Second Civil Court of Guayaquil, Ecuador, alleging causes of action for breach of the Agreement.

Gallo's complaint alleges it was never served notice of the Ecuador action in conformity with Ecuadorian or American law and only became aware of the action when it received a letter from the curador dativa on September 16, 2004. Gallo alleges they were informed that the Ecuador action involved an extremely foreshortened discovery period which ended one day after Gallo received notice of the action. Because the curador dativa presented only generalized denials of the allegations contained in Andina's Ecuador action, Gallo alleges it was prevented from presenting any affirmative defenses, including defenses pertaining to inadequate service of process and forum and choice of law provisions of the agreement. In this court the parties have represented that the Ecuador action was subsequently dismissed for lack of proper jurisdiction, but that Andina has appealed that dismissal.

The California action commenced in this court with the removal of the case from the Stanislaus Superior Court on January 24, 2005. In the California action, Gallo requests declaratory judgment and alleges claims for abuse of process, unfair competition under California law, and breach of contract. In the June 30 Order, the court granted Andina's motion to dismiss Gallo's claims for abuse of process and unfair business practices because those claims are barred by California's "litigation privilege." Gallo's claims for declaratory relief and breach of contract were not dismissed.

UNDISPUTED MATERIAL FACTS

The following undisputed material facts are proffered by Gallo and are admitted by Andina unless otherwise noted. Proffered undisputed material facts that are not relevant to the discussion that follows are omitted.

Gallo is a winery headquartered in Modesto, California; it is a worldwide producer and marketer of wine and wine-based spirits. Andina is an Ecuadorian corporation, located in Guayaquil, Ecuador, and is engaged in the business of acting as a wine and liquor distributor. In 1978 Gallo entered into a non-exclusive distributorship agreement ("the 1978 Agreement" or "Agreement") with Andina Licores CIA LTDA, a limited liability company, which was Andina's predecessor entity.

Under the 1978 Agreement Andina Licores CIA LTDA was appointed a nonexclusive distributor of certain Gallo wine products in Ecuador. Andina admits the Agreement designates Andina Licores as a non-exclusive distributor, but contends that notwithstanding this designation, Ecuadorian Decree 1038-A makes it unlawful for Gallo to sell its wines to Andina's customers.

By 1987 Andina Licores CIA LTDA had changed its structure to become corporation, and changed its name to Andina Licores, S.A. (i.e., Andina). In 1987 a distributor agreement ("the 1987 Agreement") was executed between Andina and Gallo in which Andina was substituted for Andina Licores CIA LTDA as Gallo's distributor of the Gallo products referred to in the Agreement in Ecuador.

The 1978 Agreement and 1987 Agreement contained a forum selection clause in paragraph 8 which provided that "... any cause of action arising between the parties, whether under the Agreement, or otherwise, shall be brought only in a Court having jurisdiction and venue at the home office of Gallo...." The 1978 Agreement and 1987 Agreement each contained a choice of law clause in paragraph 8 that the Agreement was "entered into under the laws of California and shall be construed thereunder; ...." The 1978 Agreement and 1987 Agreement stated that the parties "agree that Distributor is to be a non-exclusive distributor" for the products of Gallo referred to in each of the respective agreements; and, ¶ 5 of each agreement states that "Nothing herein shall be deemed to give Distributor any exclusive rights within any part of the area described above."

Both the 1978 Agreement and 1987 Agreement were signed by Andres Naranjo. Gallo contends that prior to signing the 1978 Agreement Naranjo had sufficient time to read and review it, or have it reviewed by Andina's lawyers. Gallo alleges Naranjo likewise had time to review the 1987 Agreement before signing it. Andina contends there was insufficient time to review the documents in that they had to be translated into Spanish and they were presented to Naranjo on a "take it or leave it basis." The court accepts Gallo's proffered undisputed fact as established with respect to the 1987 Agreement. Since the 1987 agreement essentially reiterated the provisions of the 1978 Agreement, and given that Andina had operated under that Agreement for nine years before the 1987 Agreement was signed, the court must presume Naranjo was familiar with the contents of both Agreements by the time he signed the 1987 Agreement.

In August 2004 Andina...