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R & R Marketing, L.L.C. v. Jim Beam Brands Co.

February 23, 2006

R & R MARKETING, L.L.C., PETITIONER-RESPONDENT, AND ROYAL DISTRIBUTORS & IMPORTERS, LTD., INC., AND REITMAN INDUSTRIES, PETITIONERS,
v.
JIM BEAM BRANDS CO. AND FUTURE BRANDS, L.L.C., RESPONDENTS-APPELLANTS.



On appeal from a Final Order of the Division of Alcoholic Beverage Control, Docket No. ABCOT-05902-97.

The opinion of the court was delivered by: Lefelt, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued telephonically December 16, 2005

Before Judges Lefelt, Hoens and R. B. Coleman.

Since prohibition, New Jersey has utilized a three-tier alcoholic beverage distribution system. See Grand Union Co. v. Sills, 43 N.J. 390, 399 (1964); Public Safety and Defense Committee Statement, L. 1985, c. 258; N.J.S.A. 33:1-3, -9. The three-tiers include retailers, wholesalers, and suppliers. The term supplier includes manufacturers, importers, blenders, distillers, rectifiers, and wineries. See N.J.S.A. 33:1-93.6; N.J.S.A. 33:1-3.1(b)(8) (the public policy of New Jersey is to maintain the three tiered system). To prohibit arbitrary discrimination by suppliers in the sale to authorized wholesalers of any "nationally advertised brands" of alcoholic liquors, the Legislature in 1942, during a period of wartime liquor shortages, passed N.J.S.A. 33:1-93.1, the first wholesaler anti-discrimination law. L. 1942, c. 264; Canada Dry Ginger Ale, Inc. v. F&A Distrib. Co., 28 N.J. 444, 460 (J. Francis concurring) (1958). Although the Legislature repealed the 1942 law in 1966, L. 1966, c. 59, and substituted a new wholesaler anti-discrimination statute, N.J.S.A. 33:1-93.6, the substituted formulation retained the phrase "nationally advertised brand." Thus, to this day, the anti-discrimination statute bars "any discrimination [in the supply of nationally advertised brands of alcohol] to wholesalers in the protected class." American B & D Co. v. House of Seagram, Inc., 107 N.J. Super. 264, 267 (App. Div. 1969), aff'd, 56 N.J. 164 (1970). A wholesaler company enters the protected class when a supplier designates the company "as an authorized distributor." R&R Marketing, L.L.C. v. Brown-Forman Corp., 158 N.J. 170, 174 (1999).

This appeal causes us to address the meaning of "nationally advertised," which is undefined in the wholesaler anti-discrimination law and has never been amended by the Legislature or interpreted by any appellate court in a reported decision in over sixty years.*fn1 We conclude that to be a "nationally advertised brand," under the statute, the brand must be popular or widely known, sought-after, and have had some form of national promotion. To qualify as nationally advertised under the statute, no particular amount of money must be spent on traditional media ads, and any promotional activities directed at consumers or the public generally and projected nationally beyond local or regional markets can qualify, including, for example, sponsorship of national sports teams or events, national point-of-sale advertising, and national billboard promotions.

I.

Before setting forth how the dispute over the meaning of the phrase "nationally advertised brand" developed in this case, we first set forth the legislative context in which the phrase must be construed. A general review of the legislation and the implementing regulations concerning alcoholic beverages in New Jersey reveals a long-standing legislative plan aimed at "curbing relationships and competitive practices which improperly stimulate sales and thereby impair the State's policy favoring trade stability and the promotion of temperance." Heir v. Degnan, 82 N.J. 109, 114 (1980).

The wholesaler anti-discrimination law passed in 1942 was part of a legislative plan to ensure trade stability and protect "the public through the promotion of temperance and elimination of the racketeer and bootlegger." Canada Dry, supra, 28 N.J. at 455. The statement attached to the 1942 bill heralded its purpose as insuring "an equitable basis for competition between all licensed wholesalers of alcoholic beverages in New Jersey and to prevent any monopolistic freezing-out of one wholesaler by another by preventing the sale of certain products to him."

L. 1942, c. 264.

In 1966, the Director of the Division of Alcoholic Beverage Control (Division or ABC Division) ruled that the 1942 anti-discrimination statute did not cover wines. Hoffman Import & Distrib. Co. v. Frederick Wildman & Sons, ABC Bulletin 1682 (May 18, 1966) (slip op. at 10). Shortly thereafter,*fn2 the Legislature repealed the 1942 statute and substituted the present formulation, which precludes "discrimination*fn3 in the sale of any nationally advertised brand of alcoholic beverage other than malt alcoholic beverage, by importers, blenders, distillers, rectifiers and wineries, to duly licensed wholesalers of alcoholic beverages who are authorized by such [suppliers] to sell such nationally advertised brand in New Jersey." N.J.S.A. 33:1-93.6 (1966) (emphasis added).

The current statute not only retained the phrase "nationally advertised brand," from the 1942 statute, but also repeated the phrase twice. Compare N.J.S.A. 33:1-93.1 (1942) with N.J.S.A. 33:1-93.6. Thus, we conclude that whatever meaning the Legislature intended for "nationally advertised brand" in 1942 remained the same when embodied within the 1966 enactment.

II.

With this statutory framework in mind, we move on to explicate the current dispute. In May 1997, Jim Beam Brands Company, a supplier, advised Royal Distributors & Importers, Ltd., Inc., and Reitman Industries, New Jersey wholesalers of alcoholic beverages, that it was terminating their distribution relationship. Royal and Reitman, along with a joint venture that they had recently formed, R&R Marketing, L.L.C., petitioned the ABC Division, claiming Jim Beam was violating the anti-discrimination statute, N.J.S.A. 33:1-93.6, and its implementing regulations.

Petitioners sought from the Division and obtained an order directing Jim Beam to continue to sell nationally advertised alcoholic beverages to them during the pendency of the action. In response, Jim Beam claimed that almost all of the disputed brands were not nationally advertised and continued to refuse to supply these brands to petitioners. Shortly thereafter, the ABC Director interlocutorily ordered Jim Beam to continue to supply all products to Royal and Reitman pending a plenary hearing, which was to be conducted by an administrative law judge (ALJ) from the Office of Administrative Law (OAL).

In the transmittal of this matter to the OAL, the ABC Director stated that the administrative case law regarding "what constitutes a nationally advertised brand" has "varied over the years." The Director instructed that "[i]n light of modern technology, cable television and internet activities, and the supplier's and wholesaler's use of point-of-sale promotional supports, a fresh look at what constitutes a nationally advertised brand may be in order."

The Director's interlocutory order, requiring that Jim Beam continue to sell to R&R, remained in effect while the discrimination dispute was held in abeyance pending the outcome of related litigation concerning the creation of R&R and whether Royal and Reitman had forfeited their statutory protections by transferring all of their operations to R&R. See R&R Marketing, L.L.C. v. Brown-Forman Corp., 307 N.J. Super. 474 (App. Div. 1998), rev'd, 158 N.J. 170 (1999).

Eventually, R&R was found to have succeeded to the statutory protections held by Royal and Reitman and the discrimination dispute was reactivated. R&R, Royal, and Reitman filed unsuccessful motions for summary judgment; Future Brands L.L.C.,*fn4 another supplier, was added to the pending anti-discrimination litigation; and the parties agreed that should discrimination be found, R&R would be the sole party entitled to any relief.

The ALJ assigned to hear this matter by the OAL conducted multi-day hearings regarding the meaning of "nationally advertised brands." The specific issue addressed by the ALJ was whether Jim Beam in 1997 could have legally refused to sell to R&R the following brands of alcoholic beverages: Jim Beam Rye Whiskey; Calvert Gin and Extra Blended Whiskey; Clear Springs Grain Alcohol; Don Q Rum Cristal and Gold; Gilbey's Gin and Vodka; Kamora Coffee Liqueur; Lord Calvert Canadian Whiskey; Old Grand-Dad Straight Bourbon Whiskey 86 and 100; several flavors of Leroux brandies, liqueur, Sloe Gin, and schnapps; several flavors of DeKuyper schnapps, margarita, and liqueur; and Nocello Walnut Liqueur.*fn5 It was conceded that Jim Beam Bourbon and Booker Noe's were nationally advertised brands. Consequently, they are not at issue in this appeal, and Jim Beam will continue to supply these products to R&R.

The ALJ considered testimony, either live or transcribed from prior proceedings, from two Senators who sponsored the 1966 amendment to the discrimination law, wholesaler representatives, a former Director of the Division, an officer and consultant of R&R, an officer and other representatives of the suppliers, retailer representatives, and experts in advertising and marketing.

Jim Beam argued vigorously that the testimony and prior administrative decisions established that nationally advertised has a well known meaning. It consists of media advertising on a nationwide basis, which is national in scope, sustained and recent, and geared and oriented toward the general public. Other self-promoting activities are merely consumer or trade promotions. According to Jim Beam, point-of-sale material is not advertising but is promotional material. Point-of-sale materials are used to catch a consumer's attention in a retail store. Such materials appear where products are displayed and can include information on how to make certain cocktails or such materials as condiment trays, napkin holders for ...


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