Country Vintner of North Carolina, LLC v. E & J Gallo Winery, Inc.

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 10-2289

THE COUNTRY VINTNER OF NORTH CAROLINA, LLC,

Plaintiff – Appellant,

v.

E & J GALLO WINERY, INC.,

Defendant – Appellee.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. W. Earl Britt, Senior
District Judge. (5:09-cv-00326-BR)

Argued: October 25, 2011 Decided: January 6, 2012

Before DAVIS, KEENAN, and DIAZ, Circuit Judges.

Affirmed by unpublished opinion. Judge Diaz wrote the opinion,
in which Judge Davis and Judge Keenan joined.

ARGUED: Stephen Donegan Busch, MCGUIREWOODS LLP, Richmond,
Virginia, for Appellant. Michael Keith Kapp, WILLIAMS MULLEN,
Raleigh, North Carolina, for Appellee. ON BRIEF: Lisa M.
Sharp, Kevin J. O’Brien, MCGUIREWOODS LLP, Richmond, Virginia;
Justin D. Howard, MCGUIREWOODS LLP, Raleigh, North Carolina, for
Appellant. Jonathan R. Bumgarner, WILLIAMS MULLEN, Raleigh,
North Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
DIAZ, Circuit Judge:

We consider in this case whether, under the North Carolina

Wine Distribution Agreements Act, 1 (“Wine Act” or “Act”) a wine

wholesaler’s contractual right to distribute an imported wine

survives a change in the winery that imports the brand. The

district court declined to abstain from resolving this issue in

favor of a state court proceeding, and held that Appellant’s

distribution rights did not survive a change in importers. The

district court also dismissed Appellant’s separate claim under

the North Carolina Unfair and Deceptive Trade Practices Act. We

affirm.

I.

Bodegas Esmeralda is a foreign winery that produces Alamos,

an Argentinean brand of wine. Prior to January 2009, Billington

Imports was the primary American importer and source of supply

for Alamos in the United States. In July 2005, Billington

selected The Country Vintner of North Carolina, LLC as its

exclusive North Carolina wholesaler for Alamos.

1
N.C. Gen. Stat. §§ 18B-1200-18B-1216. We construe and
apply the statute as it existed in 2008 and 2009, the period
during which the relevant conduct occurred and the ensuing
litigation commenced.

2
 Bodegas subsequently ended its relationship with Billington

and retained E & J Gallo Winery, Inc. as its new importer and

primary American source of supply for Alamos. Effective January

1, 2009, Gallo began supplying Alamos to its network of

wholesalers in North Carolina, which did not include Country

Vintner.

Displeased with this turn of events, Country Vintner first

sought administrative relief before the North Carolina Alcoholic

Beverage Control Commission (“Commission”), and later sued Gallo

in state court. Country Vintner’s complaint asserted three

claims under the Wine Act: unlawful termination or failure to

renew without notice, unlawful termination or failure to renew

without good cause, and illegal dual distributorships. Country

Vintner also filed a claim under the North Carolina Unfair and

Deceptive Trade Practices Act (“UDTPA”), seeking compensatory

and treble damages.

Gallo removed the action to the district court and moved to

dismiss. In response, Country Vintner asked the district court

to abstain from hearing the case in favor of a North Carolina

state court proceeding.

The district court declined to abstain and denied Gallo’s

motion to dismiss the Wine Act claims. The court did, however,

grant Gallo’s motion to dismiss the UDTPA claim, finding that

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Gallo’s conduct was at most a violation of the Wine Act that,

without more, did not constitute a UDTPA violation.

Following discovery, the parties filed cross-motions for

summary judgment on the Wine Act claims. The district court

granted summary judgment in Gallo’s favor. Country Vintner

timely appealed.

II.

We review a district court’s refusal to abstain for abuse

of discretion. Richmond, Fredericksburg & Potomac R.R. Co. v.

Forst, 4 F.3d 244, 250 (4th Cir. 1993). “A district court

abuses its discretion whenever its decision is guided by

erroneous legal principles.” Martin v. Stewart, 499 F.3d 360,

363 (4th Cir. 2007) (internal quotation marks omitted).

We review de novo a district court’s ruling on a motion to

dismiss, assuming all well-pleaded facts to be true and drawing

all reasonable inferences in favor of the nonmoving party.

Nemet Chevrolet, Ltd. v. Consumersaffairs.com, Inc., 591 F.3d

250, 253 (4th Cir. 2009). We also review de novo a grant or

denial of summary judgment, applying the same standard applied

by the district court. Overstreet v. Ky. Cent. Life Ins. Co.,

950 F.2d 931, 938 (4th Cir. 1991).

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 III.

We address first Country Vintner’s argument that the

district court abused its discretion when it declined to abstain

from hearing the case. We begin by emphasizing that “federal

courts have a strict duty to exercise the jurisdiction that is

conferred upon them by Congress.” Quackenbush v. Allstate Ins.

Co., 517 U.S. 706, 716 (1996). In this case, the district court

considered the Supreme Court’s seminal opinions governing

federal court abstention in Burford v. Sun Oil Co., 319 U.S. 315

(1943), and La. Power & Light Co. v. City of Thibodaux, 360 U.S.

25 (1959), and concluded, we think correctly, that it need not

abstain.

Abstention under Burford is appropriate only when:

[F]ederal adjudication would “unduly intrude” upon
“complex state administrative processes” because
either: (1) “there are difficult questions of state
law . . . whose importance transcends the result in
the case then at bar”; or (2) federal review would
disrupt “state efforts to establish a coherent policy
with respect to a matter of substantial public
concern.”

Martin, 499 F.3d at 364 (quoting New Orleans Pub. Serv., Inc. v.

Council of New Orleans, 491 U.S. 350, 361-63 (1989)). Further,

federal “[c]ourts must balance the state and federal interests

to determine whether the importance of difficult state law

questions or the state interest in uniform regulation outweighs

the federal interest in adjudicating the case at bar.” Id.

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This “balance only rarely favors abstention.” Quackenbush, 517

U.S. at 726.

Abstention under Thibodaux is appropriate “where there have

been presented difficult questions of state law bearing on

policy problems of substantial public import whose importance

transcends the result in the case then at bar.” Colo. River

Water Conservation Dist. v. United States, 424 U.S. 800, 814

(1976). Thibodaux permits abstention in diversity cases where

state law is unsettled and “an incorrect federal decision might

embarrass or disrupt significant state policies.” Nature

Conservancy v. Machipongo Club, Inc., 579 F.2d 873, 875 (4th

Cir. 1978).

According to Country Vintner, this case satisfies the

abstention doctrines under both Burford and Thibodaux. Country

Vintner contends that the case “undoubtedly presents a difficult

question of state law,” a “state court decision would transcend

the case at bar,” and “a federal court’s misinterpretation of

the Wine Act would disrupt North Carolina’s effort to establish

a coherent policy of alcoholic beverage regulation.”

Appellant’s Br. 50-51. The district court, however, undertook a

detailed analysis of Burford and Thibodaux and found that

neither case compelled abstention under these circumstances.

Specifically, the district court determined that Burford

abstention was unwarranted because (1) this case did not present

6
any constitutional questions, (2) the Wine Act was unambiguous,

(3) “interpreting the provisions of the Wine Act would not

unduly intrude upon ‘complex state administrative processes’ or

disrupt ‘state efforts to establish a coherent policy with

respect to a matter of substantial public concern,’ ” J.A. 58

(quoting Martin, 499 F.3d at 364), and (4) the “Wine Act does

not contain a complex regulatory scheme,” id. The district

court further concluded that abstention under Thibodaux was not

appropriate, because “applying the Wine Act to the facts in this

case would not disrupt significant state policies or impede on

North Carolina’s sovereign prerogative to regulate alcohol.”

Id. at 59-60.

We believe the district court’s analysis was correct, and

we certainly can discern no abuse of discretion. On that score,

the district court was interpreting a straightforward regulatory

scheme that had not been the subject of much controversy in

prior state or federal cases. Further, it carefully

distinguished prior cases in which we held that abstention was

appropriate and found that the circumstances here were

inapposite. Moreover, a 2010 amendment to the Wine Act makes it

unlikely that the question presented in this appeal is likely to

recur. In sum, Country Vintner has failed to overcome the heavy

deference we accord district courts in deciding whether to

7
abstain from hearing a case. Accordingly, we affirm the

district court on this issue.

IV.

We turn now to the district court’s dismissal of Country

Vintner’s UDTPA claim. Here, the district court reasoned that

the cause of action was essentially a Wine Act claim packaged in

UDTPA language, “which without anything more, does not rise to

the level of egregious or aggravating conduct required to

establish a violation of [the UDTPA].” J.A. 65 (construing

Allied Distribs., Inc. v. Latrobe Brewing Co., 847 F. Supp. 376,

379-80 (E.D.N.C. 1993) (noting that a violation of the Beer

Franchise Law alone was not enough to support a UDTPA claim)).

Country Vintner is certainly correct that the violation of

a North Carolina regulatory statute governing business

activities may also constitute an unfair or deceptive trade

practice as a matter of law. See Walker v. Fleetwood Homes of

N.C., Inc., 653 S.E.2d 393, 398-99 (N.C. 2007). Additionally,

the violation of such a regulatory statute may be evidence of an

unfair or deceptive trade practice, even if it is not a per se

violation of the UDTPA. Id. at 399. Nevertheless, because we

agree with the district court that Gallo did not violate the

Wine Act, a UDPTA claim premised on those same facts cannot

survive. See, e.g., Allied Distribs., Inc., 847 F. Supp. at 380

8
(concluding that, where the substantive claim failed under the

Beer Franchise Law, the UDTPA claim premised on the same facts,

without any separate “factual basis for a Chapter 75 claim upon

which this court could find an unfair trade practice,” also

failed).

Country Vintner nevertheless contends that it has pleaded a

UDTPA claim even absent a Wine Act violation. According to

Country Vintner, its initial discussions with Gallo deceived it

into believing that Gallo would honor Country Vintner’s

distribution agreement with Billington. Specifically, Country

Vintner alleges that (1) Gallo knew that Country Vintner had an

existing exclusive distribution agreement in North Carolina when

Gallo secured the right to supply the Alamos brand, (2) Gallo

did not inform Country Vintner when it first became the primary

American source of supply for Alamos, and (3) Gallo unilaterally

appointed new wholesalers to distribute Alamos in North Carolina

without informing Country Vintner.

The district court carefully considered these allegations

and determined that they were merely repackaged Wine Act claims.

We agree, in no small part because the allegations presuppose

that Gallo was under some obligation to conduct its business in

a way that would have been more favorable to Country Vintner.

Because we are satisfied that Gallo had no such obligation, we

affirm the district court’s dismissal of the UDTPA claim.

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 V.

Finally, we consider the grant of summary judgment in favor

of Gallo on the Wine Act claims. The question presented here

is--as the district court aptly summarized--whether “a

wholesaler’s agreement to distribute an imported brand survives

a change in the winery that imports the brand.” Country Vintner

of N.C. LLC v. E. & J. Gallo Winery, Inc., No. 509CV326BR, 2010

WL 4105455, at *3 (E.D.N.C. Oct. 18, 2010) (internal quotation

marks omitted).

The Wine Act was enacted in 1983 “[t]o promote . . . the

continuation of wine wholesalerships on a fair basis,” “[t]o

protect wine wholesalers against unfair treatment by wineries,”

and “[t]o provide wine wholesalers with rights and remedies in

addition to those existing by contract or common law.” N.C.

Gen. Stat. § 18B-1200(b)(1)-(3). The Act directs reviewing

courts to construe and to apply its provisions “liberally . . .

to promote its underlying purposes and policies.” Id. § 18B-

2000(a).

The Wine Act favors the continuation of wholesalers’ rights

to distribute wine when an agreement exists between a wholesaler

and a winery. The Wine Act defines an “agreement” as “a

commercial relationship between a wine wholesaler and a winery.”

Id. § 18B-1201(1). Agreements need not be in writing and may be

of definite or indefinite duration. Id. Further, the Wine Act

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provides that “[a]ny of the following constitutes prima facie

evidence of an ‘agreement’ ”:

a. A relationship whereby the wine wholesaler is
granted the right to offer and sell a brand offered by
a winery;
b. A relationship whereby the wine wholesaler, as an
independent business, constitutes a component of a
winery’s distribution system;
c. A relationship whereby the wine wholesaler’s
business is substantially associated with a brand
offered by a winery;
d. A relationship whereby the wine wholesaler’s
business is substantially reliant on a winery for the
continued supply of wine;
e. The shipment, preparation for shipment, or
acceptance of any order by any winery or its agent for
any wine or beverages to a wine wholesaler within this
State;
f. The payment by a wine wholesaler and the
acceptance of payment by any winery or its agent for
the shipment of any order of wine or beverages
intended for sale within this State.

Id.

When an agreement exists between a wholesaler and a winery,

a winery may terminate it only for good cause. Id. § 18B-1204.

Further, the winery must “provide a wholesaler at least 90 days

prior written notice of any intention to amend, terminate,

cancel, or not renew any agreement”; a wholesaler may then

rectify any reasons for termination stated in the notice, or

seek a good cause determination before the Commission when the

reasons for termination relate to conditions that the wholesaler

cannot rectify. Id. § 18B-1205(a)-(c).

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 In limited circumstances, the Act protects a wine

wholesaler even in the absence of an agreement. Specifically,

section 18B-1206 governs the transfer of a wine wholesaler’s

business. When that occurs, a winery may not “unreasonably

withhold or delay consent to [the] transfer,” provided that “the

wholesaler to be substituted meets the material and reasonable

qualifications and standards required of the winery’s

wholesalers.” Id. § 18B-1206(a). Section 18B-1213 addresses

the sale of a winery, and obligates the purchaser of the winery

to comply with “all the terms and conditions of an agreement in

effect on the date of the purchase . . . , except for good

cause.” Id. § 18B-1213. Under this provision, the acquirer

stands in the shoes of its predecessor and remains bound to

honor any preexisting agreements with wine wholesalers.

Applying the statutory text, the district court considered

whether an agreement existed between Gallo and Country Vintner.

The court noted that the Act defines an agreement as a

“commercial relationship,” which, according to the court,

“necessarily entails some form of commerce between the parties.”

Country Vintner, 2010 WL 4105455, at *3. The district court

concluded that “the undisputed evidence shows that Gallo has

never had a commercial relationship with Country Vintner.” Id.

at *4. We agree and similarly conclude that no agreement ever

existed between Gallo and Country Vintner. Further, although

12
the Wine Act does not require an agreement in the context of a

transfer of a wine wholesaler’s business or an acquisition of a

winery, neither circumstance is present here.

Resisting this rather straightforward application of the

statute, Country Vintner insists that the Wine Act’s protections

for wholesalers extend to this situation, particularly given the

liberal construction in favor of wholesalers that should be

accorded the Act’s terms. In effect, Country Vintner would have

us conclude that Gallo stood in Billington’s shoes and was

required to honor Country Vintner’s distribution agreement with

Billington. Only this outcome, Country Vintner contends, is

faithful to the letter and spirit of the statute.

Accepting this view of the Act, however, would require us

to read into the text an additional exception to the default

requirement of an “agreement” that is nowhere to be found. This

reading, in turn, would obligate a winery that obtains the

import rights of a wine brand to honor any extant agreements

with wholesalers. As the district court noted, it is axiomatic

under North Carolina law that “ ‘where the language of a statute

is clear and unambiguous, there is no room for judicial

construction and the courts must construe the statute using its

plain meaning.’ ” Id. at *5 (quoting In re Estate of Lunsford,

610 S.E.2d 366, 372 (N.C. 2005)). In such a case, courts “ ‘are

without power to interpolate, or superimpose, provisions and

13
limitations not contained’ in the statute itself.” Id. (quoting

State v. Camp, 209 S.E.2d 754, 756 (N.C. 1974)).

The Wine Act clearly and unambiguously provides that, with

two exceptions not applicable here, its protections apply only

when an agreement exists between a wine wholesaler and a winery.

In this case, Country Vintner was party to a distribution

agreement with Billington but had no such agreement with Gallo.

As a result, the Act offers no protection to Country Vintner on

the facts alleged in its Complaint.

Although we need look no further, our conclusion is

bolstered by the fact that, in 2010, the North Carolina General

Assembly amended section 18B-1213 of the Wine Act specifically

to grant (prospectively) the very type of protection that

Country Vintner seeks in this case. As amended, the section now

provides, “The purchaser of a winery, and any successor to the

import rights of a winery, is obligated to all the terms and

conditions of an agreement in effect on the date of the purchase

or other acquisition of the right to distribute a brand, except

for good cause.” N.C. Gen. Stat. § 18B-1213. Because Gallo is

the “successor to the import rights of a winery,” it would be

required to honor the agreement between Country Vintner and

Billington if the amendment applied to this dispute.

We agree with the district court that the “amendment

demonstrates that the North Carolina General Assembly knew how

14
to protect a wholesaler’s right to the continued distribution of

a brand, yet previously chose not to do so.” 2 Country Vintner,

2010 WL 4105455, at *5. In that regard, North Carolina law

teaches that “an amendment to an unambiguous statute indicates

the intent to change [rather than clarify] the law . . . .”

Childers v. Parker’s Inc., 162 S.E.2d 481, 483-84 (N.C. 1968).

That conclusion is even more compelling where, as here, the

legislature determined that the amendment would apply only

prospectively. See State ex rel. Utils. Comm’n v. Pub. Serv.

Co. of N.C., Inc., 299 S.E.2d 425, 429 (N.C. 1983) (“We also

consider it significant that . . . the amendment shall not be

applied retroactively. This is strong evidence that the

legislature understood that the amendment occasioned a change

in, rather than a clarification of, existing law.”).

2
Country Vintner also argues that the Wine Act should be
read in pari materia with the Beer Franchise Law, which provides
express protections for beer wholesalers in the face of a change
in a brewery-importer. The crux of this argument is that, given
the similar subjects sought to be regulated by the Wine Act and
the Beer Franchise Law and the similar schemes enacted in North
Carolina for the regulation of wine and beer, the protections
for wholesalers in the Beer Franchise Law, including its
protection for wholesalers when there is a change in brewery-
importer, should apply to the Wine Act. However, far from
persuading us to construe the statutes in pari materia, we view
the express language in the Beer Franchise Law as further
evidence that the North Carolina General Assembly knew how to
provide this protection, but chose not to in the Wine Act until
the effective date of the 2010 amendment.

15
 Accordingly, we affirm the district court’s grant of

summary judgment in favor of Gallo on Country Vintner’s Wine Act

claims.

VI.

In sum, (1) the district court acted well within its

discretion when it refused to abstain from hearing the case in

favor of a state court proceeding, (2) Country Vintner has not

asserted a viable claim for relief under the UDTPA, and (3) the

version of the Wine Act applicable to this dispute affords

Country Vintner no relief on its statutory claims. Accordingly,

we affirm the judgment of the district court.

AFFIRMED

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