Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—EDMo: Pernod Persuades Court to Expedite Declaratory Judgment Claim in Distributor Termination Dispute, (May 1, 2013)

By William Zale, J.D.

Wine and spirits maker Pernod Ricard’s request to bifurcate its declaratory judgment action from a terminated distributor’s counterclaim under the Missouri Franchise Act (MFA) was granted by the federal district court in St. Louis (Pernod Ricard USA, LLC v. Major Brands, Inc., April 30, 2013, Fleissig, A.). Pernod sought to expedite consideration of its declaratory judgment claim in light of pending legislation that would amend the MFA to make it applicable to Pernod.

In January 2013, Pernod terminated wine and spirits distributors Major Brands, Inc. and Mid-Continent Distributors, Inc. in Missouri effective April 14, 2013, and filed this action seeking a declaratory judgment that the termination did not violate the MFA. Major Brands filed counterclaims under the MFA and for breach of contract, breach of the covenant of good faith and fair dealing, recoupment, unjust enrichment, and tortious interference with business expectancy.

After the court preliminarily designated the litigation as a Track 2 case with anticipated resolution within 18 months, Pernod asked that the case be redesignated as a Track 1 case, with Pernod’s declaratory judgment claim bifurcated for resolution by the end of August 2013. Pernod argued that, if it prevailed on its declaratory judgment claim, there would be no need to try the merits of the counterclaims, on the theory that all of the counterclaims were premised on Major Brands’ position that the termination was improper under the MFA.

According to Pernod, the Missouri legislature is likely to enact a pending bill pursuant to which the MFA would apply to Pernod. If the declaratory judgment claim is not resolved before on August 28, 2013, when the bill could become law, Pernod asserted that Major Brands is likely to seek retroactive application of the new law to its distribution agreement with Pernod.

Rule 42(b) of the Federal Rule of Civil Procedure gives district courts considerable latitude in deciding the most efficient and effective method of disposing of the issues in a case, so long as a party is not prejudiced, according to the court. While Major Brands’ counterclaims for damages under MFA and for declaratory judgment were the only ones that were directly dependent on Pernod’s declaratory judgment claim, the court believed that bifurcation of the declaratory judgment claim and counterclaim from the state tort counterclaims was warranted.

Rule 57 provides that, in an action for declaratory judgment, "[t]he court may order a speedy hearing," the court added. The court decided to move forward with the declaratory judgment aspect of the case as quickly as reasonable, without directly taking into account the actions of the Missouri legislature, which the court viewed as speculative.

The case is No. 4:13CV00064 AGF.

Attorneys: Alan C. Veronick (Arnold and Porter, LLP) for Pernod Ricard USA, Inc. R. Brad Ziegler (Lewis Rice) for Major Brands, Inc.

Companies: Pernod Ricard USA, Inc.; Major Brands, Inc.; Mid-Continent Distributors, Inc.

Cases: FranchisingDistribution MissouriNews