Winner, LTD v. Pabst Brewing

Frederick P. Winner, LTD v. Pabst Brewing Company, Case No. 1882, September Term 2019. Opinion filed on January 29, 2021, by Berger, J. MARYLAND BEER FRANCHISE FAIR DEALING ACT - SUCCESSOR BEER MANUFACTURER - CHANGE IN OWNERSHIP AND AT CORPORATE GRANDPARENT LEVEL - CHANGE IN CORPORATE STRUCTURE The Maryland Beer Franchise Fair Dealing Act protects beer distributors by generally prohibiting not for cause terminations of distributorships by beer manufacturers. A “successor beer manufacturer” may terminate a distributorship under certain circumstances but is required to remunerate the terminated distributor. A change in the corporate structure and a change in ownership at a beer manufacturer’s corporate grandparent level did not render the entity a “successor beer manufacturer” under the statute when the entity with the right to sell, distribute, or import the brands of beer remained the same, and, therefore, was not replaced.

Circuit Court for Baltimore County Case No. 03-C-15-004824 REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1882 September Term, 2019 _____________________________________ FREDERICK P. WINNER, LTD v. PABST BREWING COMPANY _____________________________________ Kehoe, Berger, Reed, JJ. _____________________________________ Opinion by Berger, J. _____________________________________ Filed: January 29, 2021 Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. Suzanne Johnson 2021-01-29 13:18-05:00 Suzanne C. Johnson, Clerk This is the second time this case has been before us on appeal. This appeal arises from the termination by Pabst Brewing Company, Inc. (“Pabst Brewing”) of distribution rights that it had previously granted to beer distributor Frederick P. Winner, Ltd. (“Winner”). After Pabst Brewing came under new ownership in 2014, it terminated Winner’s distributorship.

Winner filed suit against Pabst Brewing in the Circuit Court for Baltimore County, alleging, inter alia, that the termination of Winner’s distribution rights violated the Maryland Beer Franchise Fair Dealing Act (“BFFDA”). 1 Winner subsequently filed an amended complaint in the circuit court. Pabst Brewing moved to strike the amended complaint, and the circuit court granted Pabst Brewing’s motion to strike. On appeal, we vacated the trial court’s order striking Winner’s amended complaint and remanded for further proceedings. On remand, the circuit court granted Pabst Brewing’s motion for summary judgment and denied Winner’s motion for partial summary judgment.

Winner again appealed. In this appeal, Winner presents four questions for our review. 2 We shall address only the following single issue because it is dispositive of the appeal: 1 At the time Pabst Brewing terminated Winner’s distribution rights, the BFFDA was codified at Md. Code, (1957, 2011 Repl. Vol.), Article 2B, § 17-101 et seq. (black volume).

Effective July 1, 2016, the BFFDA was recodified without substantive change at Md. Code (2016), § 5-101 et. seq. of the Alcoholic Beverages Article (red volume) (“AB”). The parties cite the prior code references in their briefs, but, in this opinion, we shall cite the current code sections. 2 The questions, as presented by Pabst Brewing, are: 1. Whether Pabst [Brewing] may terminate Winner’s distribution rights without cause, where Md. Code, Art. Whether the circuit court erred by determining that Pabst Brewing and its parent and grandparent companies satisfied the definition of “successor beer manufacturer” set forth in the BFFDA and, accordingly, that Pabst Brewing’s termination of Winner’s distributorship was permitted as a matter of law. As we shall explain, we shall reverse the judgment of the circuit court and remand for further proceedings.

FACTS AND PROCEEDINGS We previously set forth the relevant underlying facts in Frederick P. Winner, Ltd. v. Pabst Brewing Co., No. 1165, Sept. Term 2016 (filed Nov. 21, 2017) (unreported opinion), as follows: Factual Circumstances On April 30, 2014, Winner entered into a distributorship agreement (“2014 Agreement”) with Pabst [Brewing], a supplier of malt beverages operating in Maryland as a non- 2B, § 17-103 prohibits the termination of a beer distributor without cause? 2. Whether Pabst [Brewing] may terminate Winner’s distribution rights where no entity has “replace[d Pabst Brewing] with the right to sell, distribute, or import” the Pabst [Brewing] brands in Maryland, as required under Md. Code, Art. 2B, § 21-103? 3. Whether Pabst [Brewing] may terminate Winner’s distribution rights without first paying to Winner the fair market value of those distribution rights, as required by Md. Code, Art. 2B, § 21-103? 4. Whether the Circuit Court erred in granting summary judgment in favor of Pabst [Brewing], where Pabst [Brewing] is not entitled to judgment as a matter of law and there exist disputes of material fact? 2 resident dealer.

Under the 2014 Agreement, Winner had the right to sell twenty-two brands of Pabst [Brewing] products. The 2014 Agreement supplanted a previous distributorship agreement that Pabst had made with an earlier incarnation of Winner on January 31, 1994 (“1994 Agreement”). 3 When the parties entered into the 2014 Agreement, Pabst [Brewing] was a Delaware corporation and a wholly- owned subsidiary of Pabst Holdings Inc., which was, in turn, a wholly-owned subsidiary of Pabst Corporate Holdings, Inc. On November 13, 2014, Pabst [Brewing] became a Delaware limited liability company. On the same day, Pabst Corporate Holdings, Inc. sold its interest in Pabst Holdings, Inc. to Blue Ribbon, LLC. In the wake of the acquisition, Pabst [Brewing] replaced all of its directors and officers.

On March 9, 2015, Pabst [Brewing] informed Winner that it was terminating Winner’s distribution rights effective May 8, 2015. In Pabst [Brewing]’s view, Pabst [Brewing] had become a “successor beer manufacturer” as defined by the BFFDA and was, therefore, entitled to terminate its agreement with Winner. In response, Winner’s attorney sent a letter to Pabst [Brewing] asserting that Pabst [Brewing] was not a “successor beer manufacturer” and that, consequently, Pabst [Brewing] had no legal right to terminate the 2014 Agreement. Despite Winner’s protest, Pabst [Brewing] refused to rescind its termination letter.

Winner, supra, slip op. at 3-4. In its brief, Pabst Brewing provided a helpful chart illustrating the change in the Pabst Brewing Corporate Structure, which we have reproduced below: 3 The current incarnation of Winner is the result of a merger between Frederick P. Winner, Ltd. and MMA Beverage Inc. that occurred on April 28, 2014. Although this change in corporate form was apparently the catalyst for the 2014 Agreement between Winner and Pabst [Brewing], it is not relevant to our resolution of the case. [(Footnote in original.)] 3 Pabst Ownership Structure April 2014 Pabst Corporate Holdings, Inc. Pabst Holdings, Inc. Pabst Brewing Company Pabst Ownership Structure November 13, 2014 Blue Ribbon, LLC Pabst Holdings, Inc. Pabst Brewing Company We previously set forth much of the relevant procedural history of this case in our previous unreported opinion in this case as follows: Procedural History On May 4, 2015, Winner filed a complaint in the Circuit Court of Baltimore County asserting two causes of action: (1) an action for declaratory judgment; and (2) an action for breach of contract. The Initial Complaint sought the following forms of relief: (a) a declaration that Pabst [Brewing] had no basis to terminate Winner’s franchise; (b) a permanent injunction prohibiting Pabst [Brewing] from terminating Winner’s distributorship; (c) an order preliminarily and permanently enjoining Pabst [Brewing] from contracting with other distributors for Winner’s territories; (d) an order preliminarily and permanently enjoining Pabst [Brewing] from interrupting delivery of Pabst [Brewing] products to Winner, and (e) an award of damages Winner sustained as a result of Pabst [Brewing]’s violations of the BFFDA. 4 Winner’s Initial Complaint, however, contained a few mistakes.

Although Winner’s relationship with Pabst [Brewing] was governed by the 2014 Agreement, the Initial Complaint referred to the 1994 Agreement as the basis for Winner’s claims. The Initial Complaint did not explicitly mention the 2014 Agreement at all, although it contained language consistent with an ongoing contractual relationship. Winner also attached the 1994 Agreement, rather than the 2014 Agreement, to the Initial Complaint. On June 19, 2015, Pabst [Brewing] notified Winner that it was terminating product deliveries to Winner effective July 24, 2015, at which point the successor distributors would take over distribution of the Pabst [Brewing] brands.

On July 21, 2015, the circuit court issued a scheduling order. Under the scheduling order, discovery was to be closed by . . . January 9, 2016, and all motions (excluding motions in limine), were to be filed on or before January 24, 2016. On August 3, 2015, Pabst [Brewing] sent a letter to Winner reiterating that Winner’s distribution rights had been terminated and that henceforth its brands could only be distributed by the successor distributors.

On August 4, 2015, Winner filed a request for a temporary restraining order (“TRO”) against Pabst [Brewing]. The circuit court denied the request. Thereafter, Pabst [Brewing] completed the termination of Winner’s rights and entered into distribution agreements with seven local distributors. On January 21, 2016, Winner filed the Amended Complaint without leave of the circuit court.

The Amended Complaint left the basic claims of the Initial Complaint intact. It corrected the Initial Complaint, however, by referring to the 2014 Agreement as the basis for Winner’s contractual claims. The Amended Complaint also anticipated a [potential] finding that Pabst [Brewing] was, indeed, a “successor beer manufacturer,” arguing that such a finding would actually entitle Winner to an award of the fair market value of the distribution rights. Finally, the Amended Complaint revised the request for injunctive relief by seeking an order requiring Pabst [Brewing] to reinstate Winner and terminate the successor distributors. 5 On February 4, 2016, Pabst [Brewing] filed a motion to strike the Amended Complaint.

On January 27, 2016, Winner filed a motion for partial summary judgment. The same day, Pabst [Brewing] filed its own motion for summary judgment. On March 3, 2016, the clerk of the circuit court issued a notice setting a trial date for October 17, 2016. On April 26, 2016, the circuit court entertained a hearing on the open motions.

Thereafter, on June 28, 2016, the Circuit Court for Baltimore County issued a Memorandum Opinion on the parties’ motions. The circuit court granted Pabst [Brewing]’s motion to strike the Amended Complaint on the grounds that allowing it to stand would result in prejudice to Pabst [Brewing]. The circuit court then granted Pabst [Brewing]’s motion for summary judgment, finding that the Initial Complaint’s request for declaratory judgment was moot and that the contractual claim failed because the 1994 Agreement was no longer in force. Although the circuit court had stricken the Amended Complaint, it nonetheless proceeded to address Pabst [Brewing]’s arguments concerning the Amended Complaint.

Finally, the circuit court considered Winner’s motion for partial summary judgment, which it understood to be based on the contract claim in the Amended Complaint. The Circuit Court, siding with Pabst [Brewing] on the merits, denied Winner’s motion for partial summary judgment. Winner, supra, slip op. at 4-6. Winner appealed to this Court.

On appeal, we vacated the trial court’s order striking Winner’s amended complaint and remanded for further proceedings. On remand, Winner filed a Second Amended Complaint on January 16, 2018. Count I of the Second Amended Complaint claimed a violation of the BFFDA and sought an injunction reinstating Winner’s distribution rights as well as damages “including, but not limited to, the loss of the value of the . . . distributorship rights and a loss [of] the value of . . . Winner’s enterprise.” Count II of the Second Amended Complaint alleged a breach of contract and sought monetary 6 damages.

Winner moved for partial summary judgment on the Second Amended Complaint on February 6, 2018. Winner also produced supplemental interrogatory responses providing calculations of damages including the fair market value of Winner’s distribution rights, as well as details regarding how the termination of the distribution rights resulted in additional negative financial consequences for Winner. Pabst Brewing filed its own Motion for Summary Judgment on August 7, 2019. On November 22, 2019, the circuit court entered summary judgment in favor of Pabst Brewing and denied Winner’s motion for partial summary judgment.

The circuit court found that Pabst Brewing’s parent company, Blue Ribbon, was a successor beer manufacturer, and, therefore, that Pabst Brewing’s not-for-cause termination of Winner’s distribution rights was permitted as a matter of law. The circuit court found that Winner would have been entitled to an award of the fair market value of its distribution rights but concluded that Winner’s request for a fair market value award was time-barred. The circuit court additionally found that Pabst Brewing’s termination of Winner’s distribution rights did not constitute a breach of contract as a matter of law due to Pabst Brewing’s status as a successor beer manufacturer. Winner appealed.

Additional facts shall be addressed as necessitated by our discussion of the issues on appeal. STANDARD OF REVIEW The entry of summary judgment is governed by Maryland Rule 2-501, which provides: 7 The court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law. Md. Rule 2-501(f). The Court of Appeals has described the standard of review to be applied by appellate courts reviewing summary judgment determinations as follows: On review of an order granting summary judgment, our analysis “begins with the determination [of] whether a genuine dispute of material fact exists; only in the absence of such a dispute will we review questions of law.” D’Aoust v. Diamond, 424 Md. 549, 574 , 36 A.3d 941, 955 (2012) (quoting Appiah v. Hall, 416 Md. 533, 546 , 7 A.3d 536, 544 (2010)); O’Connor v. Balt.

Cnty., 382 Md. 102, 110 , 854 A.2d 1191, 1196 (2004). If no genuine dispute of material fact exists, this Court determines “whether the Circuit Court correctly entered summary judgment as a matter of law.” Anderson v. Council of Unit Owners of the Gables on Tuckerman Condo., 404 Md. 560, 571 , 948 A.2d 11, 18 (2008) (citations omitted). Thus, “[t]he standard of review of a trial court’s grant of a motion for summary judgment on the law is de novo, that is, whether the trial court’s legal conclusions were legally correct.” D’Aoust, 424 Md. at 574 , 36 A.3d at 955 . Koste v. Town of Oxford, 431 Md. 14, 24-25 (2013).

This case involves the interpretation of a Maryland statute. “The interpretation of a statute is a question of law that [Maryland appellate courts] review[] de novo.” Johnson v. State, 467 Md. 362, 371 (2020). The Court of Appeals has recently reiterated the well-established principles courts apply when interpreting statutes as follows: “This Court provides judicial deference to the policy decisions enacted into law by the General Assembly. We assume that the legislature’s intent is expressed in the statutory 8 language and thus our statutory interpretation focuses primarily on the language of the statute to determine the purpose and intent of the General Assembly.” Blackstone v. Sharma, 461 Md. 87, 113 , 191 A.3d 1188 (2018) (quoting Phillips v. State, 451 Md. 180, 196 , 152 A.3d 712 (2017)). The statutory construction analysis begins “with the plain language of the statute, and ordinary, popular understanding of the English language dictates interpretation of its terminology.” Id.

(quoting Schreyer v. Chaplain, 416 Md. 94, 101 , 5 A.3d 1054 (2010)). We read “the statute as a whole to ensure that no word, clause, sentence or phrase is rendered surplusage, superfluous, meaningless or nugatory.” Phillips, 451 Md. at 196-97 , 152 A.3d 712 (quoting Douglas v. State, 423 Md. 156, 178 , 31 A.3d 250 (2011)). “We, however, do not read statutory language in a vacuum, nor do we confine strictly our interpretation of a statute’s plain language to the isolated section alone.” Wash. Gas Light Co. v. Md. Pub. Serv.

Comm’n, 460 Md. 667, 685 , 191 A.3d 460 (2018) (quoting Lockshin v. Semsker, 412 Md. 257, 275 , 987 A.2d 18 (2010)). The plain language “must be viewed within the context of the statutory scheme to which it belongs, considering the purpose, aim or policy of the Legislature in enacting the statute.” State v. Johnson, 415 Md. 413, 421 , 2 A.3d 368 (2010) (quoting Lockshin, 412 Md. at 276 , 987 A.2d 18 ). Our search for legislative intent contemplates “the consequences resulting from one construction rather than another.” Blaine v. Blaine, 336 Md. 49, 69 , 646 A.2d 413 (1994) (citing Kaczorowski v. City of Balt., 309 Md. 505, 513 , 525 A.2d 628 (1987)). “We presume that the Legislature intends its enactments to operate together as a consistent and harmonious body of law, and, thus, we seek to reconcile and harmonize the parts of a statute, to the extent possible consistent with the statute’s object and scope.” Johnson, 415 Md. at 421-22 ,