Brown-Forman Corp. v. Sims Wholesale Co, Inc

COURT OF APPEALS OF VIRGINIA

Present: Judges Willis, Bray and Fitzpatrick
Argued at Alexandria, Virginia

BROWN-FORMAN CORPORATION
OPINION BY
v. Record No. 0304-94-4 JUDGE RICHARD S. BRAY
MAY 23, 1995
SIMS WHOLESALE COMPANY, INC., ET AL.

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Jane Marum Roush, Judge

Thomas F. Farrell, II (Charles M. Sims; McGuire, Woods,
Battle & Boothe, on briefs), for appellant.
John Patrick Griffin, Assistant Attorney General (James S.
Gilmore, III, Attorney General; Michael K. Jackson, Senior
Assistant Attorney General, on brief), for appellee
Virginia Alcoholic Beverage Control Board.

Philip F. Abraham (Walter A. Marston, Jr.; Randolph A.
Sutliff; Hazel & Thomas, P.C.; Miles & Stockbridge, on
brief), for appellee wine wholesalers.

Brown-Forman Corporation (Brown-Forman), a winery, sought to

terminate distribution agreements with certain wholesalers

(wholesalers) of its products in accordance with the provisions of

the Wine Franchise Act, Code §§ 4.1-400, et seq. (the Act).

Wholesalers challenged the termination as a violation of the Act

and petitioned the Virginia Alcoholic Beverage Control Board (the

Board) for relief. See Code §§ 4.1-407, -409. A panel designated

by the Board ruled that termination of such agreements was

permitted by the Act only for "wholesaler deficiency" or

"situations of like character," circumstances not proven by Brown-

Forman. On appeal by Brown-Forman to the Board, the Board adopted

the panel decision. Brown-Forman sought judicial review pursuant

to the Virginia Administrative Process Act, Code § 9-6.14:1, et

seq.
 The trial court disagreed with the Board's construction of the

Act but reached the same result, concluding that Brown-Forman had

failed to establish "sufficient good cause to terminate." Before

this Court, Brown-Forman contends that the evidence justified

termination as a matter of law. Although we concur in the trial

court's construction of the Act, we reverse the disposition and

remand the proceeding to the Board for reconsideration of the issue

of good cause.
The parties proceeded by "Stipulated Facts." Wholesalers

distributed several "brands of . . . wines" within "established

territories" throughout the Commonwealth under exclusive agreements

with Brown-Forman, as supplier/winery. See Code § 4.1-404.

Incidental to a "major reorganization of its sales organization,"

Brown-Forman determined that marketing of its products by "fewer

wholesalers over broader geographical areas" would increase "market

penetration, sales . . . and profits for both Brown-Forman and

[its] wholesalers" and, therefore, "view[ed] consolidation from

eighteen [Virginia] wholesalers . . . to four as a material

benefit" to "its own economic . . . interest." Accordingly, Brown-

Forman terminated existing distribution agreements with

wholesalers, intending to thereafter "appoint and contract" with

"fewer wholesalers over broader geographic areas." See Code

§ 4.1-407.

The parties agreed that Brown-Forman's decision was not

prompted by the "deficiency" of any wholesaler but, rather, a "good

faith exercise" of Brown-Forman's "business judgment," calculated

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to promote its "self interest." Consequently, the parties

stipulated that "the sole issue presented . . . is whether the good

faith exercise of business judgment by [Brown-Forman], absent any

evidence of deficiency in the performance of the [wholesalers], is

'good cause' pursuant to the [Act] for [Brown-Forman] to terminate

unilaterally its agreements with [wholesalers]."

The Wine Franchise Act regulates the business relationship of

the parties, as winery and wholesaler, through a comprehensive

statutory scheme intended:
1. To promote the interests of the parties and

the public in fair business relations between

wine wholesalers and wineries, and in the

continuation of wine wholesalerships on a fair

basis;

2. To preserve and protect the existing three-
tier system for the distribution of wine
. . . ;

3. To prohibit unfair treatment of wine
wholesalers by wineries, promote compliance
with valid franchise agreements, and define
certain rights and remedies of wineries in
regard to cancellation of franchise agreements
with wholesalers;

4. To establish conditions for creation and
continuation of all wholesale wine
distributorships . . . .

Code § 4.1-400. The Act "shall be liberally construed and applied

to promote [these] underlying purposes and policies." Id.
In furtherance of such "purposes and policies," the Act

permits a winery to terminate an agreement with a wholesaler only

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upon "good cause," Code § 4.1-406, and in accordance with Code

§ 4.1-407. 1 Id. Unless expressly excused by statute, Code

§ 4.1-407(F), a winery must provide a wholesaler timely written

notice of its intention to terminate an agreement which "state[s]

all the reasons" for such action. Code § 4.1-407(A). Thereafter,

the wholesaler is assured an opportunity to rectify the "condition"

cited by the winery, if possible. Code § 4.1-407(B). If the

"reason relates to a condition which may not be rectified by the

wholesaler," or remediation is in dispute, the wholesaler may

request a hearing before the Board to determine if the winery acted

upon "good cause." Code §§ 4.1-407(C), -407(D).
In a proceeding before the Board on this issue, "the winery

shall have the burden of proving the existence of good cause."

Code § 4.1-407(E). The statute specifies that "[g]ood cause shall

not include the sale or purchase of a winery," a transaction

governed by Code § 4.1-405, but expressly "shall include," though

"not limited to," several enumerated circumstances, termed

"wholesaler deficiencies" by the parties, none of which occurred in

this instance. Code § 4.1-406 (emphasis added). Termination

without the requisite "good cause" may result in reinstatement of

the agreement or in payment by the winery to the wholesaler of

"reasonable compensation for the value of [the] agreement"

determined in accordance with the statute. Code § 4.1-409.

In addressing the instant dispute on the stipulated facts, the
1
Compliance with the notice and remedial provisions of Code
§ 4.1-407 is not in issue.

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Board, by reference to the earlier panel decision, concluded that

"[t]he act contains no language that permits a winery's unilateral

cancellation of agreements with wholesalers in order to consolidate

its distributors and to enhance its economic interests in the

absence of wholesaler deficiency" (emphasis added). Applying the

doctrine of ejusdem generis, the Board concluded that the several

specific examples of "good cause" set forth in Code § 4.1-406

manifested a legislative intent to permit termination only upon

wholesaler deficiency and "situations of like character,"

irrespective of Brown-Forman's "self interest."
On judicial review, the trial court concluded that the Board's

construction was unduly restrictive and that statutory "'good

cause' does not require in every instance a showing of wholesaler

deficiencies." The court reasoned that the specific statutory

exclusion from "good cause" of "one situation" not involving

wholesaler deficiency, the sale or purchase of a winery, "suggests

that there are . . . actions by the winery which could" constitute

statutory good cause, although unrelated to wholesaler deficiency.

Nevertheless, the trial court determined that the "business

judgment exercised by Brown-Forman in this case . . ., without
more[,] . . . is not sufficient 'good cause' under the statute" and

affirmed the decision of the Board. (Emphasis added.)

Judicial review of "[a]ll proceedings under [the Act] shall be

held in accordance with the Virginia Administrative Process Act

(§ 9-6.14:1 et seq.)." Code § 4.1-410; see Code § 9-6.14:16. "The

burden shall be upon the party complaining of agency action to

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designate and demonstrate an error of law subject to review by the

court." Code § 9-6.14:17. The reviewing court must accord

considerable deference to an agency's resolution of factual issues,

"ascertaining [only] whether there was substantial evidence in the

. . . record upon which the agency as the trier of the facts could

reasonably find them to be as it did." Id.; see EDF v. State Water

Control Bd., 15 Va. App. 271, 277-78, 422 S.E.2d 608, 611 (1992)

(citation omitted).
"In contrast, judicial review of a 'legal issue' requires

'little deference,' unless it . . . 'falls within an agency's area

of particular expertise.'" EDF, 15 Va. App. at 278, 422 S.E.2d at

612 (quoting Johnston-Willis, Ltd. v. Kenley, 6 Va. App. 231,

243-46, 369 S.E.2d 1, 8 (1988)). This distinction "recognizes the

'special competence' of the judiciary to decide issues of 'common

law,' 'constitutional law' or 'statutory interpretation'" and a

concommitant responsibility not to "'merely rubber-stamp an agency

determination.'" Id. "We are required to construe the law as it

is written" and "'[a]n erroneous construction by those charged with

its administration cannot be permitted to override the clear

mandates of a statute.'" Commonwealth v. May Bros., Inc., 11 Va.

App. 115, 119, 396 S.E.2d 695, 697 (1990) (quoting Hurt v.

Caldwell, 222 Va. 91, 97, 279 S.E.2d 138, 142 (1981)). The

intention of the legislature must always control. Last v. Va.

State Bd. of Medicine, 14 Va. App. 906, 910, 421 S.E.2d 201, 205

(1992) (citation omitted).

It is well established that "[t]he province of [statutory]

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construction lies wholly within the domain of ambiguity, and that

which is plain needs no interpretation." Winston v. City of

Richmond, 196 Va. 403, 408, 83 S.E.2d 728, 731 (1954). "Words are

ambiguous if they admit to 'being understood in more than one

way[,]' refer to 'two or more things simultaneously[,]' are

'difficult to comprehend,' 'of doubtful import,' or lack 'clearness

and definiteness.'" Diggs v. Commonwealth, 6 Va. App. 300, 301-02,

369 S.E.2d 199, 200 (1988) (quoting Brown v. Lukhard, 229 Va. 316,

321, 330 S.E.2d 84, 87 (1985)). If "the words of [a] statute are

clear and unambiguous," we "give them their plain meaning," and the
2
"general rules of statutory construction" are unnecessary. Diggs,

6 Va. App. at 302, 369 S.E.2d at 200; see May Bros., 11 Va. App. at

118, 396 S.E.2d at 696. The judiciary may not "change or amend

[legislative] enactments under the guise of construing them."

Winston, 196 Va. at 407-08, 83 S.E.2d at 731.

Here, we find nothing complex or unclear in the term "good

cause" as it relates to termination of a distribution agreement

under the Act. Considered together and in proper context, the

words simply mean a "well-founded" "reason." Webster's Ninth New

Collegiate Dictionary 527, 217 (1989). This very ordinary

definition of plain words, used nontechnically, comports perfectly

with a statutory scheme intended at once to protect wholesalers

from "unfair treatment . . . by wineries" and "promote . . . fair

2
The doctrine of ejusdem generis relied upon by the Board and
wholesalers is a rule of statutory construction unnecessary to
ascertain clear legislative intent.

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business relations between . . . wholesalers and wineries, and

. . . the continuation of . . . wholesalerships on a fair basis."

Code § 4.1-400. In the event of dispute, the Board has statutory

responsibility to "determine if there is good cause" to terminate

in such instance, with the burden of proof on the winery. Code

§ 4.1-407.

Contrary to wholesalers' contention, the statutory references

to circumstances which expressly do or do not constitute the

contemplated "good cause" introduce no ambiguity to the analysis.

Rather, the legislature simply elected to specifically exclude "the

sale or purchase of a winery" from the broad sweep of "good cause"

and to include certain specific instances of wholesaler deficiency.

These express inclusions and exclusions embrace diverse and

unrelated circumstances and clearly impose no limitation on one

another or any unmentioned good causes for termination under the

Act.
Accordingly, we concur with the trial court that the Board

erroneously restricted statutory "good cause" to instances of

wholesaler deficiency. However, mindful that the Act reserves a

determination of disputed good cause to the Board, we remand these

proceedings to it for reconsideration of that issue consistent with

this opinion. 3 See Virginia Supermarkets v. George, 18 Va. App.

452, 453, 445 S.E.2d 156, 157 (1994).

Reversed and remanded.

3
A determination of good cause and related analysis must
address the stipulated facts specific to this case.

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