Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—EDMo: Liquor Wholesaler Stated Colorable Claim Against Competing Wholesaler; Joinder Not Fraudulent, (May 2, 2013)

By Peter Reap, J.D., LL.M.

Major Brands, Inc., a liquor wholesaler who filed suit against manufacturer Bacardi, U.S.A., Inc. and a competing wholesaler, Mid-Continent Distributors, Inc., d/b/a Glazer’s Midwest ("Glazer’s"), shortly after Bacardi terminated its distribution agreement with Major Brands, adequately stated a claim for tortious interference against Glazer’s, the federal district court in St. Louis has determined (Major Brands, Inc. v. Bacardi, U.S.A., Inc., April 30, 2013, Fleissig, A.).

Therefore, Major Brands was entitled to an order remanding the suit to Missouri state court, after Bacardi and Glazer’s had removed it to the St. Louis federal district court, asserting that Glazer’s was fraudulently joined in order to defeat federal diversity jurisdiction. However, Major Brands’ request for an award of attorney fees and costs incurred in connection with its remand request was denied.

On March 5, 2013, Bacardi sent a letter to Major Brands, providing 90-days’ notice of the termination of their distribution agreement, citing as cause Major Brands’ disappointing performance and the failure to, among other things, grow net sales, adhere to Bacardi’s sales strategies, and comply with inventory requirements.

On March 7, 2013, Major Brands filed its eight-count suit in a Missouri state trial court against Bacardi and Mid-Continent. The first seven counts were against Bacardi for declaratory judgment that Bacardi violated the Missouri Franchise Act ("MFA") and the Missouri Liquor Control Act, damages for violation of the MFA, breach of contract, breach of the covenant of good faith and fair dealing, recoupment, unjust enrichment, and tortious interference with business expectancy.

Count eight was for tortious interference against Glazer’s and stated that Glazer’s was aware of Major Brands’ business expectancy in its continued distribution of Bacardi’s products to retailers and intentionally interfered with that expectancy by inducing Bacardi to breach its agreement with Major Brands and violate the MFA by terminating its agreement without good cause.

Fraudulent joinder. Under the doctrine of fraudulent joinder, "a plaintiff cannot defeat a defendant’s right of removal by fraudulently joining a [resident] defendant who has no real connection with the controversy. If a plaintiff has no legally viable claim against a putative defendant, that party has no real connection with the controversy." Donner v. Alcoa, Inc., 709 F.3d 694, 697 (8th Cir. 2013).

In resolving the fraudulent joinder issue, a court could consider materials outside of the pleadings to determine whether they established facts supporting the plaintiff’s claim, the court noted.

Under Missouri law, a plaintiff was required to plead and prove five elements in order to establish a claim for tortious interference with a contract or business expectancy: (1) a contract or a valid business expectancy; (2) defendant’s knowledge of the contract or relationship; (3) intentional interference by the defendant inducing or causing a breach of the contract or relationship; (4) absence of justification; and (5) damages resulting from defendant’s conduct.

Here, after reviewing the record and the parties’ arguments, the court could not say that Major Brands did not have a colorable claim for tortious interference against Glazer’s, the court ruled. As, indeed, Major Brands’ complaint itself was lacking in the factual basis to support its claim against Glazer’s, Major Brands’ request for attorney’s fees incurred in pursuing the motion to remand was denied.

The case is No. 4:13CV00706 AGF.

Attorneys: Evan Z. Reid (Lewis Rice) for Major Brands, Inc. Christopher Powers Kellett (Carmody MacDonald P.C.) for Bacardi U.S.A., Inc. Stephen B. Higgins (Thompson Coburn, LLP) for Mid-Continent Distributors, Inc., d/b/a Glazer’s Midwest.

Companies: Major Brands, Inc.; Bacardi U.S.A., Inc.; Mid-Continent Distributors, Inc.

Cases: FranchisingDistribution MissouriNews