Vintage Imp., Ltd. v. Joseph E. Seagram & Sons, Inc.

• Decision Date: 11 March 1976
• Docket Number: Civ. A. No. 75-568-N.
• Citation: 409 F. Supp. 497
• Court: U.S. District Court — Eastern District of Virginia
• Parties: VINTAGE IMPORTS, LTD., Plaintiff, v. JOSEPH E. SEAGRAM & SONS, INC. and Gold Seal Vineyards, Inc., Defendants.

409 F. Supp. 497

VINTAGE IMPORTS, LTD., Plaintiff, v. JOSEPH E. SEAGRAM & SONS, INC. and Gold Seal Vineyards, Inc., Defendants.

Civ. A. No. 75-568-N.

United States District Court, E. D. Virginia, Norfolk Division.

March 11, 1976.

COPYRIGHT MATERIAL OMITTED

Morris H. Fine, Lewis Allen Fine, Fine, Legum & Fine, Norfolk, Va., for plaintiff.

Thomas G. Johnson, Jr., James R. Warner, Jr., Willcox, Savage, Lawrence, Dickson & Spindle, Norfolk, Va., for Joseph E. Seagram & Sons, Inc.

Conrad M. Shumadine, David Y. Faggert, Kaufman, Oberndorfer & Spainhour, Norfolk, Va., for Gold Seal Vineyards, Inc.

MEMORANDUM OPINION AND ORDER

CLARKE, District Judge.

Vintage Imports, Ltd. (hereinafter "Vintage"), a duly licensed wholesale wine distributor, alleges that Joseph E. Seagram & Sons, Inc. (hereinafter "Seagram") and Gold Seal Vineyards, Inc. (hereinafter "Gold Seal") ceased selling Vintage its products in derogation of its obligations pursuant to Section 4-80.2 Code of Virginia (1950, as amended). Vintage filed suit in the Circuit Court of the City of Virginia Beach, Virginia, on October 15, 1975. Defendants filed a petition for removal on November 6, 1975, pursuant to 28 U.S.C. 1441(a). Jurisdiction is attained pursuant to the Court's authority to preside over disputes among citizens of different states. 28 U.S.C. § 1332. Venue is established because the events in issue occurred within the Eastern District of Virginia.

Defendants aver that the Virginia statute upon which plaintiff is proceeding is unconstitutional. Three grounds are forwarded to support this conclusion. First, the defendants argue that the statute is allegedly void for vagueness. Another purported infirmity of the statute is that the state legislature exceeded the scope of its police power authority by enacting the legislation. Finally, the statute is arguably proscribed by the Virginia Constitution prohibition against special or exclusive legislation.

Section 4-80.2 of the Code of Virginia (1950, as amended) provides:

"§ 4-80.2. Coercing or inducing beer or wine wholesaler to violate certain provisions; cancelling agreement or franchise to sell beer or wine; injunctive relief. — (a) It shall be unlawful for any wholesaler, vintner, winery or brewery, or any officer, agent or representative of any winery or brewery:

"(1) To coerce, or attempt to coerce, or persuade any person licensed to sell beer, wine or beverages at wholesale, to enter into any agreements or to take any action which will violate or tend to violate any provisions of chapters 1 (§ 4-1 et seq.), 1.1 (§ 4-98.1 et seq.) or 2 (§ 4-99 et seq.) of Title 4 of the Code of Virginia, or any rules or regulations issued in accordance therewith; or

"(2) Unfairly, without due regard to the equities of such wholesaler, vintner, winery or brewery and without just cause or provocation, to cancel or terminate in whole or in part, any agreement or contract, written or oral, or the franchise of such wholesaler, vintner, winery or brewery existing on January one, nineteen hundred sixty-four, or hereafter entered into, to sell the beer or wine manufactured or distributed by the winery or brewery; provided, also, that on and after June one, nineteen hundred seventy-four, this provision shall be a part of any franchise, contract, agreement, or understanding, whether written or oral, between any wholesale dealer in beer, wine or beverages licensed to do business in Virginia, and any brewery, vintner or winery doing business with such licensed wholesaler, just as though said provisions had been specifically agreed upon between said wholesaler and said brewery, vintner or winery.

"(a1) The doing or accomplishment of any of the following acts shall constitute prima facie evidence of a contractual franchise relationship within the contemplation of this section, as between a licensed beer, wine or beverage wholesaler and a brewery, vintner or winery, to wit:

"(1) The shipment, preparation for shipment or acceptance of any order by any brewery, vintner or winery or its agent for any beer, wine or beverages to a licensed wholesale distributor within the State of Virginia.

"(2) The payment by a licensed wholesale distributor in the State or the acceptance of payment by any brewery, vintner or its agent for the shipment of an order of beer, wine or beverages intended for sale within the State.

"(b) The circuit courts in this State having jurisdiction are hereby vested with jurisdiction and power to enjoin the cancellation or termination of a franchise or agreement between a wholesaler of beer, wine and a brewery, vintner or winery at the instance of such wholesaler, vintner, winery or brewery who is or would be adversely affected by such cancellation or termination. In granting such an injunction, the court shall provide that no brewery, vintner or winery shall supply the customers or territory of the wholesaler through servicing said territory or customers through other distributors or means while the injunction is in effect.

"(c) The Alcoholic Beverage Control Board is empowered to investigate any violations of this section and to furnish to the Commonwealth's attorney of the county or city having jurisdiction of the offense information with respect to any violations of this section. The Board shall have the power to enforce conformance with the provisions of any injunction granted by the court under the terms of this section, and, if the court finds that there has been a violation of the provisions of any injunction granted by it, the Board may revoke or suspend the permit of any wholesaler and the permission of any brewery, vintner or winery to ship beer, wine and beverages into the State of Virginia.

"(d) As used in subsection (a)(2) hereof, the words `cancel or terminate in whole or in part' shall be deemed to include the splitting or dividing by the brewery, vintner or winery of all or part of the territory or area of primary responsibility assigned to an existing wholesaler, and further, be deemed to include the granting by the brewery, vintner or winery of another dual franchise distributorship for the same or part of the same territory or area of primary responsibility assigned to an existing wholesaler. (1964, c. 649; 1968, c. 728; 1974, c. 460.)"

The Court is confronted by the threshold question of whether it should abstain to permit the state court to interpret the challenged statute.¹ The abstention issue is complicated by the fact that the Court's jurisdiction is premised on diversity of citizenship requiring the Court to apply Virginia law. On a theoretical level, this Court should not be expected to render a different result on the merits than the Virginia state court. However, defendants sought to avoid the state court of the Commonwealth of Virginia by their invocation of 28 U.S.C. § 1441. It would indeed appear cyclic to require defendants to litigate their claims in the very state court they seek to avoid. Nevertheless, there is not any constitutional or statutory obstacle to abstaining in diversity of citizenship cases.²

Abstention is a judicially created vehicle designed to avoid premature constitutional decisions of matters relating to state law. The doctrine of abstention was first enunciated in Railroad Commission v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941). Abstention is appropriate to avoid "the waste of a tentative decision as well as the friction of a premature constitutional adjudication," Pullman, supra at 500, 61 S.Ct. at 645, 85 L.Ed. at 974. Abstention contemplates remitting issues raising questions of state law to the state courts to permit state construction or limiting interpretation thereby potentially alleviating a premature constitutional determination by the Federal courts. Harrison v. NAACP, 360 U.S. 167, 79 S.Ct. 1025, 3 L.Ed.2d 1152 (1959). The state court decision may resolve the state law issues in a manner mooting the Federal constitutional issues. This policy fosters the concepts of federalism and comity in circumventing needless friction with state policy.

Although the abstention policy had its genesis in Pullman, its application has been broadened to encompass circumstances where a complex state regulatory scheme is coupled with a clearly delineated state procedure for handling the issues in controversy. Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). The Burford approach is appropriate when a Federal court decision may disrupt a state's management of affairs uniquely within its purview.

Abstention has been raised sua sponte by the Court. In oral argument, both parties urged the Court to consider the case on its merits and not to abstain.³ A succinct recitation of the facts is necessary to put this case in context.

Vintage, a wine wholesaler, received wine products from Gold Seal for distribution in the environs of Virginia Beach, Virginia, until August 1, 1975. On that date, Seagram assumed the position of the national distributor of Gold Seal products.⁴ After August 1, 1975 Vintage was unable to purchase Gold Seal products. Vintage claims that its termination was in direct contravention of Section 4-80.2 of the Code of Virginia (1950, as amended).

The Court must determine whether the circumstances in the instant case dictate that the Court abstain. The very statute in controversy had been challenged previously in AFA Distributing Co., Inc. v. Pearl Brewing Co.,⁵ 470 F.2d 1210 (4th Cir. 1973). In AFA Distributing, the plaintiff beer distributing company attempted to prevent the beer manufacturer from terminating an exclusive franchise to distribute a specific brand of beer in Northern Virginia. The wholesaler invoked Section 4-80.2, Code of Virginia (1950, as amended) to prohibit the termination. The United States District Court construed the statute in favor of the manufacturer and dismissed the wholesaler's Complaint. The District Court construed the statute to apply only to contracts entered into...