Commercial – Contract – N.C. Wine Distribution Agreements Act

The Country Vintner of North Carolina v. E. & J. Gallo Winery, Inc. (Lawyers Weekly No. 10-02-1031, 13 pp.) (W. Earl Britt, J.) U.S.E.D.

The District Court denied plaintiff’s motion for summary judgment and granted defendant’s motion for summary judgment because there was no prima facie evidence showing that the plaintiff had a wholesaler’s distribution agreement with defendant under the North Carolina Wine Distribution Agreements Act, and thus the plaintiff was not entitled to judgment as a matter of law.  

In October 2008, defendant became the new U.S. importer and primary supplier of Alamos wines. Previously, a different company had the rights to import and sell Alamos wines in the U.S., supplying plaintiff with Alamos wines for distribution in North Carolina. Following the transfer of importing rights to defendant, plaintiff was not able to continue distributing the wines, since defendant had used other wholesalers in North Carolina.

Plaintiff alleged that defendant violated the North Carolina Wine Distribution Agreements Act G.S. § 18B-1200 (Wine Act) in that the defendant terminated or failed to renew the wholesaler’s distribution agreement with plaintiff without the required statutory notice; terminated the agreement without good cause to do so, and appointed new distributors of Alamos brand imported wines for territories covered by the agreement with plaintiff while that agreement was in force.

In response, defendant argued that it had not violated the Wine Act because it never had an “agreement” with plaintiff as defined under the Wine Act. Defendant insisted that plaintiff’s agreement to distribute Alamos was with a different wine-importer, and defendant was never a party to that agreement. Since defendant had no agreement with plaintiff, defendant contends that it cannot be liable to plaintiff for terminating a nonexistent “agreement.”

According to the Wine Act, an “agreement” is a commercial relationship between a wine wholesaler and a winery. The agreement may be of a definite or indefinite duration and is not required to be in writing. The question at hand was whether a wholesaler’s agreement to distribute an imported brand survives a change in the winery that imports the brand. Plaintiff argued that it had a legally enforceable agreement with the winery supplying Alamos wines- regardless of who was the importer. He argued that an agreement existed simply by virtue of the wholesaler’s distribution of a particular brand of wine.

The court disagreed. The Wine Act does not state, either expressly or by implication, that an agreement exists simply by virtue of a wholesaler’s distribution of a brand. Instead, the statute clearly requires a “commercial relationship” between a winery and a wholesaler. A commercial relationship necessarily entails some form of commerce between the parties. Here, the undisputed evidence showed that defendant had never had a commercial relationship with plaintiff. Prima facie evidence of an “agreement” between the two parties was not shown, since at least one of the requirements for an “agreement” under the Wine Act was never proven: The defendant never granted the plaintiff the right to sell a brand offered by defendant and plaintiff was never a part of defendant’s distribution system. The plaintiff was never substantially reliant on the defendant for a continued supply of wine, and plaintiff’s business was not substantially associated with a brand offered by defendant. Also, defendant never shipped, or prepared for shipment, an order for wine or beverages to plaintiff. Finally, defendant never accepted an order for wine from plaintiff, and it also never accepted any payment from plaintiff for the shipment of any order of wine or beverages intended for sale.

In summary, the court concluded that plaintiff did not have an agreement with defendant as defined under the Wine Act. As a result, the Wine Act did not apply to this case, and Plaintiff’s claims regarding notice of termination, termination of the agreement without good cause, and illegal dual distributorships fail as a matter of law.

Plaintiff’s motion for partial summary judgment was denied; defendant’s motion for summary judgment was granted.