Surdyk's Liquor, Inc. v. Mgm Liquor Stores, Inc., No. Civ. 99-1953 (DSD/JMM).

• Decision Date: 09 February 2000
• Docket Number: No. Civ. 99-1953 (DSD/JMM).
• Citation: 83 F.Supp.2d 1016
• Parties: SURDYK'S LIQUOR, INC., a Minnesota corporation, Plaintiff, v. MGM LIQUOR STORES, INC., a Minnesota corporation, Defendant.
• Court: U.S. District Court — District of Minnesota

83 F.Supp.2d 1016

SURDYK'S LIQUOR, INC., a Minnesota corporation, Plaintiff, v. MGM LIQUOR STORES, INC., a Minnesota corporation, Defendant.

No. Civ. 99-1953 (DSD/JMM).

United States District Court, D. Minnesota.

February 9, 2000.

COPYRIGHT MATERIAL OMITTED

Richard A Duncan, Elizabeth Hendricks Schmiesing, Michael D Beach, Faegre & Benson, Minneapolis, MN, for Surdyk's Liquor Inc.

Alan Marshall Anderson, C Eric Hawes, Larkin Hoffman Daly & Lindgren, Bloomington, MN, for MGM Liquor Stores, Inc.

ORDER

DOTY, District Judge.

This matter is before the court on (1) the parties' cross-motions to supplement the record and (2) plaintiff's motion for preliminary injunction. Based on a review of the file, record, and proceedings herein, the court (1) grants the parties' cross-motions to supplement the record and (2) grants plaintiff's motion for preliminary injunction.

BACKGROUND

Plaintiff Surdyk's Liquor, Inc. ("Surdyk's") and defendant MGM Liquor Stores, Inc. ("MGM") are rival Twin Cities wine and liquor retailers. Surdyk's owns and operates a liquor store in Northeast Minneapolis. MGM is the franchisor for a chain of 36 area liquor stores operating under the name "MGM Liquor Warehouse." The individual MGM stores are owned and operated by six different franchisees. As part of the franchise relationship, defendant MGM orchestrates joint advertising campaigns when the MGM store owners decide to conduct a coordinated sale.

In the fall of 1999, MGM published a multiple-page advertising flyer for a wine and liquor sales event called the "29th Anniversary Wine, Liquor & Beer Sale." Twenty-three MGM stores were advertised as participating in the event, which was scheduled to run from September 30 through October 20, 1999. The flyer was published by the Star Tribune and circulated widely throughout the Twin Cities metropolitan region. On September 29, 1999, the day before the sale was to begin, three private investigators hired by Surdyk's visited ten different MGM stores and attempted to purchase case quantities of 18 wines advertised for sale in the Anniversary Sale flyer. The investigators found that at each of the MGM stores surveyed the wines requested were either out of stock or stocked in very small quantities. At about half of the stores, an MGM employee stated that the requested wines could be specially ordered and delivered within two days to a week.

On October 8, 1999, Surdyk's filed a complaint with the Minnesota Attorney General's Office about MGM's advertising in connection with the Anniversary Sale. On October 14, 1999, the Attorney General's Office sent a letter to MGM, reminding MGM that several Minnesota statutes prohibit false or deceptive advertising and that "[t]he State is empowered to seek an injunction, restitution, civil penalties and attorneys' fees in the event your company violated these statutes." Letter from Erik A. Lindseth, Assistant Attorney General, to MGM (Oct. 14, 1999) (Beach Aff., Ex. C.) The letter also stated:

The state hereby requests that you respond immediately to this complaint. In particular, please provide evidence that the wines referenced above were available during the sale, and in what quantities they were available.....

If the wines referenced above were not available at the outset of the sale or have not been available in reasonable quantities throughout the sale, the State requests that you cease further use of your "29th Anniversary" print advertisements for the remainder of the sale, and reconsider your use of such advertisements in future sales.

Id. On October 21, 1999, MGM responded to the letter from the Attorney General's Office with the following explanation:

When MGM prepared its advertising circular (and sales of this nature are planned more than a month in advance), it listed for sale only products which appeared on price lists distributed by its suppliers. In response to your letter, MGM confirmed with its suppliers that all the wines listed in your letter were available at the time this advertising circular was prepared. It would not be unusual, however, when dealing with wines of limited availability, for there to be some wines that are not available at a subsequent date. In this case, apparently only 4 of about 1,000 wines listed in the advertisements were not available at the time checked by Surdyk's representative.

Letter from Charles S. Modell, Counsel for MGM, to Minnesota Attorney General's Office, at 2 (Oct. 21, 1999) ("MGM Letter") (Beach Aff., Ex. D).

In November 1999, MGM again prepared a multiple-page flyer to be published in local newspapers in connection with another sales event, "The Millenium Holiday Wine, Liquor & Beer Sale." The Millennium Sale involved 33 MGM stores and was scheduled to run from November 29 through December 11, 1999. On November 30, 1999, Surdyk's sent an investigator to visit a number of participating MGM stores using a list of two dozen wines and liquors. Again, the investigator found that, for the most part, the products requested were either out of stock or stocked in small quantities. Again, the employees at many of the MGM stores suggested that the items could be special ordered and delivered within two days to a week.

On November 24, 1999, Surdyk's filed a complaint in Hennepin County District Court alleging that the MGM flyers constitute false advertising in violation of section 43(a) of the federal Lanham Act (codified at 15 U.S.C. § 1125(a)); the Minnesota Uniform Deceptive Trade Practices Act, Minn.Stat. § 325D.44; Minn.Stat. § 325F.67 (prohibiting false advertising), and Minn.Stat. 325F.69 (prohibiting consumer fraud). On December 6, 1999, MGM removed the complaint to federal court. Surdyk's now moves for a preliminary injunction. The parties also bring cross-motions to supplement the record with material not submitted to the court during briefing of the preliminary injunction motion.

DISCUSSION

A. Cross-Motions to Supplement the Record

The parties have brought cross-motions to supplement the record with affidavits from local consumers who have recently attempted to purchase wine from MGM and Surdyk's. Because the parties have adequately explained why they did not include these materials with the original motion papers, and because these materials shed helpful light on the merits of plaintiff's false advertising claim, the court will grant the cross-motions.

B. Mootness and Party Joinder

MGM makes two threshold arguments in opposition to the motion for preliminary injunction by Surdyk's. First, MGM contends that the dispute is moot in light of the fact that the Anniversary and Millennium Sales have now ended. As the Supreme Court recently stated, however, "[i]t is well-settled that `a defendant's voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.'" Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., ___ U.S. ___, ___, 120 S.Ct. 693, 708, ___ L.Ed.2d ___ (2000) (citing City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 289, 102 S.Ct. 1070, 71 L.Ed.2d 152 (1982)). Moreover, while a defendant's voluntary cessation "is an important factor bearing on the question of whether a court should exercise its power to enjoin defendant," City of Mesquite, 455 U.S. at 283, 102 S.Ct. 1070, see also LensCrafters, Inc. v. Vision World, Inc., 943 F.Supp. 1481, 1497 (D.Minn.1996) ("[T]he need for injunctive relief is obviated when the party accused of using false or misleading advertising represents that the advertisements will not be repeated."), MGM has given no indication to the court that it intends to halt or modify its past advertising practices from this point forward. Indeed, MGM's decision to publish the Millennium flyer even in the face of a false advertising complaint by Surdyk's and a cautionary letter from the Minnesota Attorney General's Office suggests just the opposite. Given these circumstances, the court concludes that neither the present action nor the pending motion for preliminary injunction is moot.

Second, MGM contends that the court cannot order the injunctive relief requested because Surdyk's has failed to join the six MGM franchisees who separately control the inventory at the 36 MGM stores. This argument ignores the critical point, however, that the Surdyk's suit is specifically directed at MGM's advertising practices, not its inventory control procedures. And it is undisputed that MGM, rather than its franchisees, is responsible for "manag[ing] an advertising fund" and "conduct[ing] advertising in the best interests of all of its franchisees." See Maglich Aff. at ¶ 4; see also Setter Aff. ¶¶ 2, 3 (describing the "internal time and effort" expended by MGM in "put[ting] together an advertising circular listing the products that would be included" in both sales). Accordingly, the court concludes that joinder of the MGM franchisees is not a prerequisite to the issuance of the injunctive relief sought here.

C. Preliminary Injunction

Surdyk's brings a motion for preliminary injunction, asking the court to enter an order halting MGM's alleged false advertising practices. In evaluating a motion for preliminary injunction, the court considers the four factors set forth by the Eighth Circuit in Dataphase Systems, Inc. v. CL Systems, Inc.: (1) the likelihood of the movant's success on the merits; (2) the threat of irreparable harm to the movant in the absence of relief; (3) the balance between that harm and the harm that the relief would cause to the other litigants; and (4) the public interest. 640 F.2d 109, 112-114 (8th Cir.1981). The court weighs the four factors to determine whether injunctive relief is warranted. See id. at 113; West Pub. Co. v. Mead Data Cent., Inc., 799 F.2d 1219, 1222 (8th Cir.1986), cert. denied, 479 U.S. 1070, 107 S.Ct. 962, 93 L.Ed.2d 1010 (1987). The plaintiff bears the burden of proof concerning each of them. See Gelco Corp. v. Coniston Partners, 811 F.2d 414, 418 ...