E & J Gallo Winery v. Morand Bros. Beverage Co.

• Decision Date: 13 February 2003
• Docket Number: No. 02 C 4599.,02 C 4599.
• Citation: 247 F.Supp.2d 979
• Court: U.S. District Court — Northern District of Illinois
• Parties: E & J GALLO WINERY, Plaintiff/Counter-Defendant, v. MORAND BROS. BEVERAGE CO., d/b/a Romano Bros. Beverage Co., an Illinois corporation, Central Wholesale Co., Inc., an Illinois corporation, Mueller Distributing Co., Inc., an Illinois corporation, and Paramount Distributing Company, Inc., an Illinois corporation, Defendants/Counter-Plaintiffs.

247 F.Supp.2d 979

E & J GALLO WINERY, Plaintiff/Counter-Defendant, v. MORAND BROS. BEVERAGE CO., d/b/a Romano Bros. Beverage Co., an Illinois corporation, Central Wholesale Co., Inc., an Illinois corporation, Mueller Distributing Co., Inc., an Illinois corporation, and Paramount Distributing Company, Inc., an Illinois corporation, Defendants/Counter-Plaintiffs.

No. 02 C 4599.

United States District Court, N.D. Illinois, Eastern Division.

February 13, 2003.

David L. Doyle, Thomas P. Cimino, Jr., Chad Allen Schiefelbein, Vedder, Price, Kaufman & Kammholz, Chicago, IL, for plaintiff.

Peter Charles McCabe, III, Cornelius Moore Murphy, Catherine L. Crisham, Winston & Strawn, Chicago, IL, David K. Schmitt, Jeffrey Michael Glass, Margaret Anne Gisch, Field, Golan & Swiger, Chicago, IL, for defendants.

MEMORANDUM OPINION AND ORDER

ST. EVE, District Judge.

Plaintiff/Counter-Defendant E & J Gallo Winery has moved to strike or dismiss Defendants' First Amended Counterclaim. For the reasons set forth below, Plaintiffs motion is granted in part and denied in part.

BACKGROUND

Plaintiff E & J Winery ("E & J"), a California corporation with its principal place of business in Modesto, California, and Defendants Morand Brothers Beverage Company ("Morand"), Central Wholesale Company ("Central"), Mueller Distributing Company, Inc. ("Mueller") and Paramount Distributing Company, Inc. ("Paramount")¹ were longstanding business partners. Each Defendant had various agreements with E & J to distribute E & J's products in Illinois, including E & J's wines, malt beverage coolers and similar flavored malt beverage products such as Bartles & Jaymes Wine Coolers.

In late 2001, the business relationship between E & J and Romano started to deteriorate. This deterioration of the relationship began with the anticipated sale by Romano of its business to Southern Wine & Spirits of Illinois, Inc. ("Southern") and the proposed transfer of Romano's agreements with E & J to Southern. Further details concerning the background behind this litigation are set forth in the Court's opinion in E & J Gallo Winery v. Morand Bros. Beverage Co., No. 02 C 4599, 2002 WL 31557516 (N.D.Ill. Nov.15, 2002).

Two types of written agreements governed the business relationship between the parties. First, the parties entered certain agreements whereby Defendants would distribute E & J's wine products in Illinois (the "Wine Agreements"). Second, in 1998, E & J and Defendants entered certain malt beverage distributorship agreements (the "Malt Agreements") under which Defendants distributed E & J's malt beverages in Illinois. Both the Wine Agreements and Malt Agreements contained contain a forum selection clause whereby the parties agreed to bring any cause of action between the parties in California. The parties also had various oral agreements covering their relationship.

On June 27, 2002, Plaintiff filed this case premised on the Malt Agreements in the Northern District of Illinois against Morand, Central, Mueller and Paramount. Later that same day, Plaintiff filed a similar action based on the Wine Agreements in the United States District Court for the Eastern District of California, E & J Winery v. Morand Bros. Beverage Co., et al, No. CIVF-02-5776 (hereinafter the "California case"), naming the same parties as defendants.

After filing the complaint in this district, E & J subsequently moved to enforce the forum selection clause in the Malt Agreements and transfer this case to the Eastern District of California. This Court denied that motion, holding that the forum selection clause in the Malt Agreements is unenforceable in light of Illinois' strong public policy to have litigation under the Illinois Beer Industry Fair Dealing Act, 815 ILCS 720.1, et seq, (the "Beer Act") adjudicated in Illinois. See E & J Gallo Winery, 2002 WL 31557516 at *3^. A motion to transfer the California ease to this district is pending in California.

On November 1, 2002, Defendants filed a First Amended Counterclaim in this case alleging a breach of Plaintiffs fiduciary duty to Romano, violations of the Beer Act and the Sherman Antitrust Act, tortious interference with prospective economic advantage, promissory fraud and breach of contract. The counterclaims pertain to both the Wine Agreements and the Malt Agreements. Plaintiff now seeks to dismiss or strike the counterclaims.

ANALYSIS

Defendants' First Amended Counterclaim contains eight counts. Count one alleges that E & J breached its fiduciary duty to Romano. Count two alleges violations of the Illinois Beer Act. Count three seeks recovery for antitrust violations under the Sherman Act, 15 U.S.C. § 1, et seq. Counts four through six allege that E & J tortiously interfered with prospective and contractual relations. Count seven alleges promisory fraud, and count eight alleges breach of contract. E & J seeks to dismiss or strike each of these counterclaims. E & J argues that a substantial portion of the First Amended Counterclaim falls within the California forum selection clause in the Wine Agreements and is thus inappropriately before this Court.

I. Legal Standards

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint, not the merits of the case. Triad Assocs., Inc. v. Chicago Hons. Auth., 892 F.2d 583, 586 (7th> Cir.1989); Majchrowski v. Norwest Mortgage, Inc., 6 F.Supp.2d 946, 952 (N.D.Ill.1998). When considering a motion to dismiss pursuant to Rule 12(b)(6), the Court considers "whether relief is possible under [any] set of facts that could be established consistent with [the] allegations." Bartholet v. Reishauer A.G. (Zurich), 953 F.2d 1073,1078 (7th> Cir.1992).

The Court views all the facts alleged in the complaint, as well as any reasonable inferences drawn from those facts, in the light most favorable to the plaintiff. Stachon v. United Consumers Club, Inc., 229 F.3d 673, 675 (7th> Cir.2000); Tatz v. Nanophase Techs. Corp., No. 01 C 8440, 2002 WL 31269485, at *3 (N.D.Ill. Oct.9, 2002). Any ambiguities in the complaint are construed in favor of the plaintiff. Kelley v. Crosfield Catalysts, 135 F.3d 1202, 1205 (7th> Cir.1998). Dismissal is appropriate only where it appears beyond doubt that under no set of facts would plaintiffs allegations entitle him to relief. Henderson v. Sheahan, 196 F.3d 839, 846 (7th Cir.1999); Kennedy v. National Juvenile Det. Ass'n, 187 F.3d 690, 695 (7th Cir.1999). The complaint, however, must allege that each element of a cause of action exists in order to withstand a motion to dismiss. Lucien v. Preiner, 967 F.2d 1166, 1168 (7th Cir.1992). Furthermore, a plaintiff "cannot satisfy federal pleading requirements merely by attaching bare legal conclusions to narrated facts which fail to outline the bases of their claims." Collins v. Snyder, No. 02 C 4493, 2002 WL 31749173, at *1 (N.D.Ill. Dec.2, 2002) (citations and quotations omitted).

Rule 12(f) provides that a court may strike from any pleading "any insufficient defense or any redundant, immaterial, impertinent or scandalous matter." Generally, motions to strike are disfavored. Porter v. International Bus. Machs. Corp., 21 F.Supp.2d 829, 831 (N.D.Ill.1998) (citations omitted). The party moving to strike has the burden of showing that the "challenged allegations are so unrelated to plaintiffs claim as to be devoid of merit, unworthy of consideration, and unduly prejudicial." Carroll v. Chicago Transit Auth., No. 01 C 8300, 2002 WL 206064, at *1 (N.D.Ill. Feb.8, 2002). The decision whether to strike material under Rule 12(f) is within the discretion of the district court. Alvarado-Morales v. Digital Equip. Corp., 843 F.2d 613, 618 (1st Cir.1988).

II. Forum Selection Clause

As an initial matter, E & J argues that five of the eight counterclaims—counts three, and five through eight—are barred under the forum selection clauses in the Winery Agreements because they deal "almost exclusively" with issues pertaining to the distribution of wine under the Wine Agreements. E & J claims that the Court should dismiss these claims because they are governed by the forum selection clause and therefore must be litigated in California. Romano argues that the Court should not enforce the forum selection clause and that the counterclaims are not easily divided into wine claims and malt claims.

The forum selection clause in the Wine Agreements provides that "any cause of action between the parties, whether under this agreement or otherwise, must be brought only in a court having jurisdiction and venue at the home office of winery," namely California. The Court previously held that the essentially identical California forum selection clause in the Malt Agreements was unenforceable because of Illinois' stated public policy governing Beer Act litigation.² E & J now seeks to have the forum selection clause enforced as to counterclaims under the Wine Agreements.

The Seventh Circuit addressed a similar issue in Publicis Comm. v. True N. Comms., Inc., 132 F.3d 363, 366 (7th Cir. 1997), where related cases were pending in federal court in the Northern District of Illinois and in state court in Delaware. The parties had executed a "pooling agreement" which contained a forum selection clause requiring the parties to file any claims arising out of the pooling agreement in Delaware. True North sued Publicis in Delaware over the pooling agreement. Publics subsequently brought suit against True North in federal court in Chicago on the basis that True North had violated a duty to its investors. In response, True North filed counterclaims in Chicago that arose under the pooling agreement and Publicis sought to dismiss these counterclaims as violating the forum selection clause. The Seventh Circuit agreed with Publicis and stated that the pooling agreement counterclaims should have been brought in Delaware pursuant to the forum selection clause "whether or not they would be `compulsory' counterclaims" in...