Scher Enterprises, Inc. v. Bronco Wine Co., 00-CV-74824.

Decision Date11 December 2001
Docket NumberNo. 00-CV-74824.,00-CV-74824.
PartiesSCHER ENTERPRISES, INC., f/k/a Viviano Wine Importers, Inc., Plaintiff, v. BRONCO WINE COMPANY, Defendant.
CourtU.S. District Court — Eastern District of Michigan

Timothy D. Wittlinger, Clark Hill, Detroit, MI, for Scher Enterprises, Inc. John D. Pirich, Honigman, Miller, Lansing, MI, for Bronco Wine Co.

MEMORANDUM AND ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

COHN, District Judge.

I. Introduction

This is a commercial dispute under the Michigan Liquor Control Code of 1998, P.A. No. 58, eff. April 14, 1998, M.C.L. § 436.1101, et seq (the Liquor Control Code), formerly the Michigan Liquor Control Act, M.C.L. § 436.1, et seq. Plaintiff Scher Enterprises, Inc. f/k/a Viviano Wine Importers, Inc. (Viviano) is suing defendant Bronco Wine Company (Bronco) over Bronco's refusal to consent to the transfer of a wine supplier agreement between Viviano and Bronco to J. Lewis Cooper Company (Cooper). Viviano and Cooper are wine wholesalers/distributors operating in Michigan; Bronco is a wine supplier based in California. Viviano claims that Bronco's actions violate § 436.1403(16) of the Liquor Control Code which prohibits a supplier from withholding its consent to a transfer of a wholesaler's business if the proposes transferee (Cooper) "meets the material and reasonable qualifications and standards required by the supplier." Viviano also claims that Bronco's failure to honor orders placed by Viviano prior to the sale, but not yet delivered as of the time Bronco learned of the impending transfer, violates §§ 436.1305(3) and 1305(7) which prohibit a supplier from withholding deliveries.1 As a result of Bronco's refusal to consent to the transfer and allow Cooper to distribute Bronco's wine products, Viviano says it was forced to sell its business to Cooper at a greatly reduced price.2

Before the Court is Bronco's motion for summary judgment on the grounds that there is no genuine issue of material fact that Cooper failed to meet Bronco's material and reasonable qualifications and standards and Bronco properly refused to consent to the transfer. Viviano argues that there is a factual dispute on this issue. For the reasons which follow, the motion is DENIED.

II. Background

For a substantial period of time (not specified in the parties' papers), Viviano and Bronco had a wine supplier agreement providing that Bronco would sell certain brands of its wine to Viviano, including Forest Glen, Estrella, Silver Ridge, Fox Hollow, and Hacienda.

At some point, Viviano was interested in selling its wine distribution business. On July 26, 2000, Cooper signed a Letter of Intent addressed to Viviano reflecting their discussion regarding the terms of Cooper's purchase of Viviano's business. On September 29, 2000, Cooper and Viviano executed an asset purchase agreement, later amended dated October 5, 2000, with a closing scheduled from October 17, 2000. Section 4.1.15, entitled Suppliers provides:

Schedule 4.1.15 sets forth the names and addresses of all suppliers of the Seller, the brands and brand names and quantities of each sold by each supplier to Seller, and the amount for which each supplier invoiced the Seller during the 36 month period ending June 30, 2000, and all purchase order, or commitments outstanding as of June 30, 2000, or which have accrued thereafter. Seller is no engaged in any disputes with any suppliers of the Business, and not supplier of the Business has informed the Seller that it intends to terminate or materially alter its relationship with the Seller and, to the best knowledge of Seller, no supplier is considering or has any basis for the termination, cancellation, non-renewal, or material alteration of its relationship with Seller. Since December 31, 1999, no supplier has termination or materially altered its relationship with Seller. To the best of Seller's knowledge, no supplier has otherwise threatened to take any action described in the preceding sentence as a result of a consummation of the transaction contemplated by the Agreement and the Collateral Agreements. Except as set forth in Schedule 4.1.15, Seller does not have any agreement or understanding with any supplier that restricts Seller's ability to sell the products of that supplier or any other supplier.

See Bronco's Ex. 7.

Schedule 4.1.15 has not been provided to the Court, but it is presumed that Schedule 4.1.15 lists Bronco as a supplier.

On October 12, 2000, Mark E. Scher (Scher), a Viviano representative, Jim Abdella, Operations Manager of Viviano, J. Lewis Cooper, III, President and CEO of Cooper, and Juilian Bryzinski, Sales Manager of Cooper, attended a meeting in California with Fred Franzia (Franzia), CFO of Bronco. At the meeting, Bronco was informed of the impending sale to Cooper. According to Viviano, Bronco did not express any concerns regarding Cooper.

Viviano says that on October 16, 2000, a letter (undated) was delivered to Bronco notifying them of the sale and requesting approval of the transfer of the distributorship to Cooper.

On October 25, 2000, Bronco wrote to Viviano stating that it would not approve of the transfer in part because had Viviano not provided sufficient notice to Bronco as required under the Liquor Control Code and because Cooper already distributes wine from Bronco's largest competitor (Gallo wine). The letter state in part:

[A]s a matter of national policy, we consciously avoid placement of our product lines in distributorships which carry the lines of our largest competitors. Additionally, we consider these requirements to constitute reasonable qualifications within the meaning of M.C.L. § 436.1305(1)(f) and have consistently enforced these requirements for many years. In our case, you have sold your business to a distributorship which already represents our single largest competitor. It is simply not in the best interests of our brands to play "second fiddle" to any product line where other alternatives are available.

Accordingly, given the lack of adequate notice and the competitive brand lineup of the purchaser of your business, we are unable to approve the transfer of our brands at this time. We will, however, continue to monitor the market closely, and if circumstances warrant, we may reconsider our position in the future.

Apparently, this letter was delivered while Franzia and another Bronco representative were in Detroit to discuss the sale. At that time, Viviano says it offered to have Cooper explain in greater detail how Cooper could market Bronco's products and meet Bronco's material and reasonable qualifications. Viviano says that Bronco refused to meet with Cooper.

On October 26, 2000, Cooper wrote to Bronco to express "extreme disappointment in our 30-second meeting today where you disapproved the transfer" of Bronco brands to Cooper. Cooper then attempted to convince Bronco of its ability to distribute Bronco's wines and requested Bronco meet with them to discuss any concerns.

At some point, Bronco contracted with another supplier, L & L, as its replacement Michigan distributor.

Thereafter, Viviano says it had to sell its distribution business to Cooper at a reduced price of $1,650,000.00.

On November 2, 2000, Viviano filed its complaint, claiming violations of the Liquor Control Code, set forth above.

III. Summary Judgment

Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. Employers Ins. of Wausau v. Petroleum Specialties, Inc., 69 F.3d 98, 101 (6th Cir.1995). The Court must decide "whether the evidence presents a sufficient disagreement to require submission to a fact finder or whether it is so one-sided that one party must prevail as a matter of law." In re Dollar Corp., 25 F.3d 1320, 1323 (6th Cir.1994) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Summary judgment is improper if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Nonetheless, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

IV. Analysis
A. The statute

M.C.L. § 436.1305 provides in relevant part:

436.1305. Structure for business relationship between wine wholesaler and supplier

(1) The purpose of this section is to provide a structure for the business relations between a wholesaler of wine and a supplier of wine. Regulation in this area is considered necessary for the following reasons:

(a) To maintain stability and healthy competition in the wine industry in this state.

(b) To promote and maintain a sound, stable, and viable 3-tier distribution system of wine to the public.

(c) To recognize the marketing distinctions between beer and wine.

(d) To promote the public health, safety, and welfare.

(2) As used in this section, unless the context requires otherwise:

(a) "Agreement" means any agreement between a wholesaler and a supplier, whether oral or written, whereby a wholesaler is granted the right to offer and sell a brand or brands of wine sold by a supplier.

....

(c) "Designated member" means the spouse,...

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