Brown-Forman Corp. v. Alcoholic Beverages Control Commission

17 Mass. L. Rptr. 721
CourtMassachusetts Superior Court
DecidedJune 14, 2004
DocketNo. 031684
StatusPublished

This text of 17 Mass. L. Rptr. 721 (Brown-Forman Corp. v. Alcoholic Beverages Control Commission) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Brown-Forman Corp. v. Alcoholic Beverages Control Commission, 17 Mass. L. Rptr. 721 (Mass. Ct. App. 2004).

Opinion

Fabricant, J.

INTRODUCTION

This is an action for judicial review, pursuant to G.L.c. 30A, §14(7), of a decision of the Alcoholic Beverages Control Commission (ABCC), requiring the plaintiff Brown-Forman Corporation (Brown-Forman) to make regular sales of certain alcoholic beverage products to intervenor M.S. Walker, Inc. (Walker), pursuant to G.L.c. 138, §25E. Before the Court are cross motions for judgment on the pleadings of BrownForman and Walker.1 For the reasons that will be explained, the decision of the ABCC will be reversed.

BACKGROUND

The record of the administrative proceeding before the ABCC provides the following background. The proceeding arose from an application filed with the ABCC on October 11, 2001 by Walker seeking an order requiring Brown-Forman to continue making sales to Walker of certain brand items of rum produced by J. Wray & Nephew Limited (Wray). Walker filed its application upon receiving notice that Brown-Forman, having assumed the role of distributor of the Wray brands, would refuse to sell them to Walker. The ABCC held a hearing on the application on June 20, 20022 and issued its decision on March 25, 2003. The ABCC found and ruled as follows.

Wray produces and sells several types of rum. Beginning in October 1987, Carriage House Import Ltd. was the exclusive United States supplier of the Wray brands. Carriage House was owned by Rums International, Inc., which was owned by Richard Costa. Richard Costa’s father owned Wray. Effective January 1, 1993, Wray entered into an exclusive distribution agreement with Carriage House for a four-year period. Under the agreement, Carriage House was required to buy specified minimum quantities of the products, and to spend specified minimum amounts [722]*722for marketing and advertising Wray brand items. Wray was required to make specified cash contributions to Carriage House, based on the amounts purchased. Wray had the right to visit Carriage House’s distributors. The agreement designated Carriage House as Wray’s agent for purposes of compliance with alcoholic beverage laws of the states within the United States. In addition, Rums International, Inc. licensed to Carriage House exclusive use of the trademarks of the Wray brands. Under the trademark license, Rums International, Inc., had control over Carriage House’s use of the trademarks, as well as the right to receive a royalty based on the number of cases Carriage House purchased from Wray.3 Based on these provisions, the ABCC concluded that Wray had control of Carriage House’s marketing and sales activities of Wray’s products. On that basis, it concluded that Carriage House was Wray’s agent, and it imputed the sales made by Carriage House to Wray.

In October 1994, a corporate affiliate of Wray acquired all the stock of Carriage House, and Carriage House became a wholly owned subsidiary of that entity. The ABCC cited that relationship as a further basis for imputing Carriage House’s sales to Wray. Carriage House made regular sales to Walker between 1987 and 1997.

In January 1997, Wray entered into an exclusive distributorship agreement with an entity then known as Heublein, Inc., now known as UDV. The agreement included a number of terms that the ABCC characterized as “similar, if not identical, to” provisions that had appeared in the 1993 agreement between Wray and Carriage House and that, in the ABCC’s view, “continued to give Wray control of UDVs marketing and sales activities with the Brand Items.” Among these were that Wray continued to own all trademarks and associated goodwill; Wray continued to produce and bottle the products, and UDV did not bottle any product; UDV obligated itself to sell minimum quantities, failing which Wray had the right to terminate; the sales price was fixed as FOB Jamaica; the agreement required UDV to make specified minimum expenditures for advertising, marketing, and promoting the brands; and Wray was required to make specified financial contributions for advertising, marketing and promotion ventures undertaken by UDV. Based on these provisions, the ABCC concluded that “Wray held such sufficient control of UDVs marketing and sales activities with the Brand Items that UDV was the agent of Wray for the marketing and sale of the Brand Items.”

Additional provisions of the agreement between Wray and UDV contributed to the ABCC’s perception of an agency relationship. These included provisions for semi-annual approval by Wray of UDVs plan for advertising, marketing, and promoting the brands; a power in Wray to veto any activity by UDV “inconsistent” with the approved plan or that Wray determined was “reasonably likely to materially damage” Wray’s reputation; power in Wray to influence UDV’s allocation among its sales force of competing products; and a requirement that UDV employ one managerial employee “devoted substantially full-time” to Wray’s brands. On the basis of its finding of agency, the ABCC imputed UDVs sales to Wray.4

In the fall of 2001, the Federal Trade Commission expressed antitrust concerns in connection with a proposed acquisition by UDVs parent corporation. To allay those concerns, Wray and UDV terminated their agreement effective October 1, 2001. Wray then entered into an exclusive import agreement with Brown-Forman, effective that same date. Wray’s agreement with Brown-Forman, similar to its prior agreement with UDV, contains provisions that, in the ABCC’s view, “give[ ] Wray control of the marketing and sales activities with the Brand Items.” Such provisions include that Wray continues to own all trademarks, intellectual property, and associated goodwill; Wray continues to produce and bottle the products, and Brown-Forman does not bottle any product; Brown-Forman is required to sell minimum quantities, failing which it would lose the right to extend the agreement; the sales price is fixed as FOB Jamaica; the agreement establishes minimum expenditures by Brown-Forman for advertising, marketing, and promoting the brands; and Wray is required to contribute fifty percent of the expenses incurred by Brown-Forman for marketing, advertising, and promoting the brand items. Based on these provisions, the ABCC concluded that “Wray is again given sufficient control of marketing and sales activities with the Brand Items that [Brown-Forman] is the agent of Wray for the marketing and sale of the Brand Items.”

The ABCC identified additional contract provisions as bolstering its conclusion. These included provisions for approval by Wray of Brown-Forman’s plan for advertising, marketing, and promoting the brands; payment by Wray of fifty percent of expenses of administering the approved marketing plan; a specified budget for those activities, set as a percentage of Brown-Forman’s gross profits; a power in Wray to spend more by its unilateral choice; fluctuation of the budget for administering the marketing plan in proportion to the purchase price of the brand items; an agreed formula tying the purchase price of the brands charged by Brown-Forman to the price charged it by Wray; direct shipment by Wray to BrownForman’s customers, at the same price as sales by Brown-Forman; prior approval by Wray of BrownForman’s use of trademarks and intellectual property; and indemnification for claims arising out of discontinuance of a wholesaler. Based on these additional provisions, the ABCC found “that a relationship of principal and agent continues between the manufacturer of the Brand Items, Wray, and the United States distributor,” Brown-Forman.

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Cite This Page — Counsel Stack

Bluebook (online)
17 Mass. L. Rptr. 721, Counsel Stack Legal Research, https://law.counselstack.com/opinion/brown-forman-corp-v-alcoholic-beverages-control-commission-masssuperct-2004.