Mission Beverage Co. v. Pabst Brewing Co.

• Decision Date: 25 September 2017
• Docket Number: B271781
• Citation: 223 Cal.Rptr.3d 547,15 Cal.App.5th 686
• Court: California Court of Appeals Court of Appeals
• Parties: MISSION BEVERAGE COMPANY, Plaintiff and Respondent, v. PABST BREWING COMPANY, LLC, Defendant and Appellant.

15 Cal.App.5th 686

223 Cal.Rptr.3d 547

MISSION BEVERAGE COMPANY, Plaintiff and Respondent,

v.PABST BREWING COMPANY, LLC, Defendant and Appellant.

B271781

Court of Appeal, Second District, Division 2, California.

Filed September 25, 2017

McDermott Will & Emery, Richard K. Welsh, Gregory R. Jones, and Jeffrey A. Zuidema, Los Angeles, for Defendant and Appellant.

Morgan Lewis & Bockius, Thomas M. Peterson, Brian C. Rocca, Phillip J. Wiese, San Francisco, and Seth M. Gerber, Santa Monica, for Plaintiff and Respondent.

HOFFSTADT, J.

A brewer of beer decided to replace one of its distributors, and sent that distributor a letter terminating their distribution contract and invoking the statutory procedure requiring an existing distributor to negotiate and, if necessary, arbitrate with its successor to settle the "fair market value" of its distributorship rights ( Bus. & Prof. Code, § 25000.2 ).¹ The ousted distributor sued the brewer for breaching the contract's termination-for-cause requirement and for declaratory relief. The brewer responded with a motion to strike the entire complaint under the anti-SLAPP² statute ( Code Civ. Proc., § 425.16 ). This appeal presents two questions: (1) Does a brewer's cancellation of a contract, when that cancellation will be followed by negotiation and possibly arbitration under section 25000.2, qualify as "protected activity" within the meaning of the anti-SLAPP statute?; and (2) Does the ousted distributor's lawsuit for breach of contract and declaratory relief lack minimal merit on the ground that section 25000.2 immunizes successor brewers from liability for breach of contract because it affirmatively grants those brewers a right to terminate distribution contracts and provides full compensation for the ousted distributor? We conclude that the answer to both questions is "no," and accordingly affirm the trial court's denial of the brewer's anti-SLAPP motion in this case.

FACTS AN PROCEDURAL BACKGROUND

I. Facts

Defendant and appellant Pabst Brewing Company, LLC (Pabst) is a brewer of beers; among others, Pabst brews such American classics as Pabst Blue Ribbon, Colt 45 Malt Liquor, Old Milwaukee, Schlitz, and Stroh's.

In January 2009, Pabst entered into a written Distributor Agreement (Agreement) with plaintiff and respondent Mission Beverage Company (Mission). Pabst granted Mission the exclusive right to distribute many of its beers within specifically delineated boundaries within Los Angeles County. In turn, Mission promised to "aggressively promote, encourage, and increase" the sales of, and "customer satisfaction" with, those beers. The parties' powers to terminate the contract were not the same: Mission could terminate the contract with 60 days' notice and irrespective of cause, while Pabst could terminate the contract only for one of ten enumerated reasons and then only if it gave Mission an opportunity to cure. One of those ten reasons, memorialized in section 8.2.10 of the Agreement, permits Pabst to terminate the Agreement if Pabst has a "right to terminate" under "applicable state or federal law, statute or regulation." The Agreement also provides that any and all litigation should occur in court, and contemplates that Mission recover attorney's fees if it prevails in litigation against Pabst.

In November 2014, Pabst came under new ownership. Three months later, in February 2015, Pabst sent Mission a letter "commencing termination" of the Agreement "pursuant to ... [section] 25000.2 and Section 8.2.10 of [the] ... Agreement." Pabst stated that Classic Distributing & Beverage Group, Inc. (Classic) and Beauchamp Distributing Company (Beauchamp) would be replacing Mission as Pabst's distributor.³ Pabst did not cite any other basis for terminating the Agreement.

As discussed more fully below, section 25000.2 provides that when a brewer who acquires the right to manufacture beer "cancels any of [an] existing beer wholesaler's rights to distribute [a] product," that successor brewer's designated replacement distributors must negotiate in good faith—and, failing that, arbitrate—with the existing distributor "to determine the fair market value of the affected distribution rights." ( § 25000.2, subds. (b), (d), (e) & (f).) Adhering to these procedures, Pabst's designated distributors tried to negotiate with Mission and, when that failed, in March 2015, sent Mission a letter initiating arbitration.

II. Procedural Background

In April 2015, Mission sued Pabst for (1) breach of contract, and (2) declaratory relief. Specifically, Mission alleged that Pabst breached the Agreement by "attempting to terminate" the Agreement on the basis of section 25000.2, which did not "provide an independent right to terminate...." Mission also sought a declaration that there was no valid "termination" of the Agreement.

Mission made several attempts to halt the ongoing arbitration between itself and Pabst's newly designated distributors, all to no avail. Mission made an ex parte motion to stay the arbitration, but that motion was denied "without prejudice" to filing a noticed motion. Mission thereafter filed a noticed motion, but that motion was also denied. Not deterred, Mission also asked the arbitrator to dismiss the arbitration, but the arbitrator refused.

The arbitrator issued a final award in October 2015. In the award, the arbitrator made clear that his order "contain[ed] no findings, declarations or damages determinations regarding Mission's [pending civil] cause of action ... that Pabst breached the ... Agreement." However, the arbitrator fixed the fair market value of the distributorship rights conferred by the Agreement.⁴ Mission did not appeal the award, and Classic and Beauchamp thereafter paid Mission the amount fixed by the arbitrator.

Pabst then filed a motion to strike Mission's lawsuit under the anti-SLAPP statute.⁵ Pabst argued that the "linchpin" of Mission's lawsuit was Pabst's "invo[cation of] the statutorily-mandated arbitration process under [s]ection 25000.2," which Pabst asserted was "protected activity" under the anti-SLAPP statute. Pabst further contended that Mission's lawsuit lacked minimal merit because no "legally viable or non-duplicative remedy" remained once Mission had accepted the payment reflecting the fair market value of its distributorship rights from Classic and Beauchamp.

The trial court denied the motion. The court acknowledged that "protected activity" under the anti-SLAPP statute included activities related to "official proceeding[s]" such as "statutorily required ... arbitration[s]," but concluded that Mission's lawsuit was separate and distinct from the arbitration: The lawsuit was "for breach of the contract between [Mission and Pabst]," while the arbitration was "between the distributors," and the primary issue in the lawsuit—"whether the [Agreement] was validly terminated"—is "an issue separate [from] (and prerequisite to) the arbitration, ... not part of [it]."

After the trial court entered its order, Pabst filed this timely appeal.

DISCUSSION

Pabst argues that the trial court erred in denying its anti-SLAPP motion. We independently review the trial court's ruling. ( Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1067, 217 Cal.Rptr.3d 130, 393 P.3d 905 ( Park ).) Because this case lies at the intersection of the anti-SLAPP statute and the Alcoholic Beverage Control Act (§ 23000 et seq.), we will discuss the pertinent portions of each before turning to the merits of this appeal.

I. The Anti-SLAPP Statute

The anti-SLAPP statute "provides a procedure for weeding out, at an early stage, meritless claims arising from protected activity." ( Baral v. Schnitt (2016) 1 Cal.5th 376, 384, 205 Cal.Rptr.3d 475, 376 P.3d 604 ( Baral ).) Specifically, the anti-SLAPP statute protects—and thus "subject [s] to a special motion to strike"—any "cause of action ... arising from any act of [a] person in furtherance of the person's right to petition or free speech under the United States Constitution or the California Constitution in connection with a public issue." ( Code Civ. Proc., § 425.16, subd. (b)(1).)

When a party moves to strike a cause of action (or portion thereof) under the anti-SLAPP statute, a trial court has two tasks. ( Barry v. State Bar of California (2017) 2 Cal.5th 318, 321, 212 Cal.Rptr.3d 124, 386 P.3d 788 ( Barry ).)

First, the court must evaluate whether the moving party has "made a threshold showing that the challenged cause of action arises from protected activity." ( Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056, 39 Cal.Rptr.3d 516, 128 P.3d 713.) This evaluation turns on two subsidiary questions: (1) What conduct does the challenged cause of action "arise [ ] from"; and (2) is that conduct "protected activity" under the anti-SLAPP statute?

A cause of action "arises from" protected activity when the "cause of action itself " is "based on " protected activity. ( City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78, 124 Cal.Rptr.2d 519, 52 P.3d 695 ( City of Cotati ); Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1114, 81 Cal.Rptr.2d 471, 969 P.2d 564 ( Briggs ) ["arises from" means "based upon"].) Whether a cause of action is itself based on protected activity turns on whether its " ‘ "principal thrust or gravamen " ’ " is protected activity—that is, whether the " ‘core injury-producing conduct’ " warranting relief under that cause of action is protected activity. ( Colyear v. Rolling Hills Community Assn. of Rancho Palos Verdes (2017) 9 Cal.App.5th 119, 134, 214 Cal.Rptr.3d 767.)

"[W]hether [activity] is protected under the anti-SLAPP statute" turns "not [on] First Amendment law, but [rather on] the statutory definitions in [Code of Civil Procedure] section 425.16, subdivision (e)." ( City of Montebello v. Vasquez (2016) 1 Cal.5th 409, 422, 205 Cal.Rptr.3d 499, 376 P.3d 624 ( City of Montebello ).) Code of Civil Procedure section 425.16, subdivision (e) defines four categories of protected activity. Two...