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Mark IV Beverage Inc. v. Molson Breweries USA Inc.

May 19, 1998


Appeal by defendants from judgment entered 12 November 1996 by judge Melzer A. Morgan, Jr. in Rockingham County Superior Court. Heard in the Court of Appeals 8 January 1998.

The opinion of the court was delivered by: Timmons-goodson, Judge.

Defendants appeal from a judgment, wherein the trial court concluded that the term "brand," as used in the North Carolina Beer Franchise Law (hereinafter "BFL"), denotes a common identifying name, rather than a specific malt beverage. Defendants contend that the trial court's interpretation contravenes well-settled canons of statutory construction. However, having carefully reviewed defendants' assignments of error, we uphold the trial court's interpretation. The pertinent facts follow.

In North Carolina, malt beverages are distributed and sold by means of a three-tier system: The first tier is occupied by the supplier, who manufactures and/or imports the product; the second tier is occupied by the wholesale distributor, who purchases the product from the supplier and delivers it to the retailers; and the third tier is occupied by the retailer, who sells the product directly to the consumer. Plaintiff Mark IV Beverage, Inc. (hereinafter "Mark IV") is a wholesaler who began distributing malt beverages manufactured by Molson Breweries of Canada (hereinafter "Molson") in 1979. In 1990, Mark IV and Martlet Importing Company (hereinafter "Martlet"), a supplier of Molson's malt beverages, entered into a franchise agreement entitling Mark IV to distribute Molson Export Ale, Molson Golden, Molson Canadian and Molson Light in the cities of Thomasville, Liberty and Randleman, in the counties of Alamance, Caswell, Guilford, Person and Rockingham, and in the western portion of Stokes County (hereinafter "the Territory"). The 1990 agreement was filed with the North Carolina Alcoholic Beverage Control Commission (hereinafter "the ABC Commission"), as required by the BFL. At the time the parties executed the agreement, it covered all of the products then existing in the Molson family.

In April of 1993, Miller Brewing Company (hereinafter "Miller") acquired a twenty percent partnership interest in Molson. By virtue of this transaction, and through certain Miller subsidiaries, Miller obtained all of the Molson and Miller stock; thus, Martlet became a wholly-owned subsidiary of Miller. When this acquisition occurred, Miller already had a wholesale distribution system in place.

In 1993, Molson developed a new malt beverage called Molson Ice, and in August of that year, Martlet applied for and received approval from the ABC Commission to import Molson Ice into North Carolina. Martlet also submitted a Beer Analysis Form, which designated Mark IV as the wholesaler of Molson Ice, but failed to designate the territory in which it was authorized to distribute the product. Then, in October or November of 1993, legal counsel for Miller, Molson, and Martlet (collectively, hereinafter "supplier-defendants") informed the ABC Commission, in the course of a telephone conversation with its general counsel, Ann Fulton, that Martlet intended to withdraw its submission of Mark IV as a wholesaler of Molson Ice in North Carolina. In response to this information, Fulton advised supplier-defendants' attorney that Molson Ice was under the same brand as Molson Golden, Molson Canadian, and Molson Light; that Molson was the brand name; and that all products under the Molson name are of the same brand, and thus, Molson Ice should be assigned to Molson distributors who held existing franchise agreements with Martlet.

On 30 November 1993, counsel for supplier-defendants met with Fulton and other ABC Commission officials. During this meeting, supplier-defendants' attorney advised ABC Commission officers that with respect to Molson Ice, Martlet intended to enter into distribution agreements with the traditional Miller wholesalers, and not with the traditional Molson wholesalers in North Carolina. On that same day, supplier-defendants' attorney delivered to the ABC Commission a letter dated 29 November 1993, withdrawing Martlet's reference to Mark IV on the Beer Analysis Form for Molson Ice. In addition, Martlet provided the ABC Commission with a territorial agreement purporting to authorize I. H. Caffey Distributing Company, Inc. (hereinafter "Caffey"), a wholesaler of malt beverages supplied by Miller, to distribute Molson Ice in the Territory. Prior to executing this agreement, Martlet did not notify Mark IV of its intention to distribute Molson Ice through Caffey. Caffey has been distributing Molson Ice in the Territory since December of 1993.

Mark IV instituted an action in December of 1993, alleging that supplier-defendants violated the BFL, the common law of unfair trade practices, and North Carolina General Statutes section 75-1.1. The parties waived a trial by jury. Also, the parties agreed that the proceedings would be bifurcated and that the trial court would first address the "brand issue"--whether under the BFL, the word "brand" means common identifying trade name--and related constitutional questions. At the time supplier-defendants assigned Caffey the right to distribute Molson Ice in the Territory, the term "brand" was not defined anywhere in the BFL or in the ABC Commission's regulations. However, in August of 1994, the ABC Commission adopted a definition of "brand," effective 1 November 1994, which relevantly provides as follows:

For purposes of Article 13 of Chapter 18B, the Beer Franchise Law, a distribution agreement between a supplier and wholesaler applies to all products distributed by the supplier under the same brand name. Different categories of products manufactured and marketed under a common identifying trade name are considered to be the same brand; e.g., the "Old Faithful" brand manufactured by Yellowstone Brewery Co. would include "Old Faithful", "Old Faithful Light", "Old Faithful Draft", "Old Faithful Dry" and other products identified principally by and relying upon the "Old Faithful" name, but would not include "Old Teton" which was also manufactured by Yellowstone Brewery Co.

N.C. Admin. Code tit. 4, r. 2T.0103 (November 1994).

The matter was heard on 19 August 1996, at a special session of the Rockingham County Superior Court. At the hearing, Mark IV argued that, under the BFL, the term "brand" connotes the common identifying name used in marketing a product. Thus, as to "Molson Ice," Mark IV submitted that the common identifying name, "Molson," is the brand name and that the word "Ice" represents the specific product marketed under the Molson brand. Defendants maintained, on the other hand, that "brand," under the BFL, means the name of a specific malt beverage product. Following from this argument, defendants proposed that "Molson Ice" was a separate and distinct brand from "Molson Golden" or "Molson Light," and therefore, defendants were under no obligation to distribute Molson Ice through Mark IV.

At the close of Mark IV's evidence, and again at the close of all of the evidence, Caffey moved for Judgment of Involuntary Dismissal. On a record of stipulated facts, deposition testimony, and exhibits, the trial court entered a judgment, dated 12 November 1996, announcing, inter alia, the following Conclusions: (1) that "brand" means a common identifying trade name rather than the name of a specific malt beverage product; (2) that the 1990 agreement between Martlet and Mark IV constitutes a franchise agreement for the "Molson" brand, which includes Molson Ice; (3) that Martlet must distribute Molson Ice through Mark IV in the Territory; and (4) that the BFL, as interpreted by the trial court, is constitutional. Additionally, the trial court denied Caffey's motion. Caffey and supplier-defendants appeal.

This appeal involves issues of statutory construction, to wit: (1) whether the trial court erred in concluding that the BFL entitles one wholesaler to sue another, based upon an alteration or termination of a franchise agreement; and (2) whether the trial court erred in determining that "brand," as used in the BFL, means a common identifying name. For the reasons stated herein, we affirm the order of the trial court.

Where an appeal presents questions of statutory interpretation, full review is appropriate, and "the Conclusions of law `are reviewable de novo.'" N.C. Reinsurance Facility v. N.C. Insurance Guaranty Assn., 67 N.C. App. 359, 362, 313 S.E.2d 253, 256 (1984) (quoting Humphries v. City of Jacksonville, 300 N.C. 186, 187, 265 S.E.2d 189, 190 (1980)). Accordingly, we will consider de novo whether the BFL grants Mark IV a right to enjoin Caffey from distributing Molson Ice in the Territory and whether "brand" means the common identifying name under the BFL.


Caffey argues that the terms of the BFL must be strictly construed, because the statute derogates common law. With that, Caffey contends that because the BFL does not specifically prescribe injunctive relief against a competing wholesaler, the trial court erred in concluding that Mark IV had a statutory right to sue Caffey. Further, Caffey argues that relief based upon an altered, terminated, or unrenewed franchise agreement reaches suppliers only. We cannot agree.

"In matters of statutory construction, the task of the courts is to ensure that the purpose of the Legislature, the legislative intent, is accomplished." Ellis v. N.C. Crime Victims Compensation Comm., 111 N.C. App. 157, 163, 432 S.E.2d 160, 164 (1993). To determine the legislative intent, the courts must look to the language, spirit, and goal of the statute. State ex rel. Utilities Commission v. Public Staff, 309 N.C. 195, 210, 306 S.E.2d 435, 444 (1983). A well-settled rule of statutory construction provides that a facially clear and unambiguous statute requires no interpretation. Peele v. Finch, 284 N.C. 375, 200 S.E.2d 635 (1973). Furthermore, where a statute is explicit on its face, the courts ...

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