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Absolut Spirits Company, Inc. v. Monsieur Touton Selection

October 22, 2007

THE ABSOLUT SPIRITS COMPANY, INC., PETITIONER-RESPONDENT,
v.
MONSIEUR TOUTON SELECTION, LTD., RESPONDENT/CROSS-PETITIONER-APPELLANT,
v.
THE ABSOLUT SPRITS COMPANY, INC., JIM BEAM BRANDS CO. AND FUTURE BRANDS, LLC, THIRD-PARTY RESPONDENTS-RESPONDENTS.



On appeal from State of New Jersey Department of Law and Public Safety, Division of Alcoholic Beverage Control, Docket No. 02-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 10, 2007

Before Judges Cuff, Lihotz and Simonelli.

Monsieur Touton Selection, Ltd. (Touton), appeals from the final order of the Director of the Alcoholic Beverage Commission (ABC) that affirmed the initial decision of an Administrative Law Judge (ALJ) dated May 10, 2006. The ALJ granted the requests for relief sought by Absolut Sprits Company, Inc. (ASCI) in its petition before the ABC and dismissed all claims submitted by Touton in its cross-petition due to persistent discovery failures. We affirm the dismissal of Touton's cross-petition; however, for the reasons discussed, we reverse the grant of relief to ASCI, entered without presentation of proofs, and we remand to the ALJ for a hearing.

ASCI filed a petition with the ABC alleging that Touton, while an authorized wholesaler of Absolut Vodka (Absolut Blue), had implemented "a course of conduct detrimental to the brand" and ha[d] engaged in prohibited and improper trade practices. More specifically, ASCI asserted Touton had harmed the brand by pursuing "a business strategy to sell Absolut Blue as a loss leader" and refusing to provide marketing plans. ASCI maintained that these actions treated the brand as a "commodity brand" rather than a "premium brand" and were designed "to facilitate sales of [Touton's] premium wines to retailers in New Jersey."

ASCI requested an order declaring Touton had forfeited any protections as an authorized wholesaler under the Anti-Discrimination Law, N.J.S.A. 33:1-93.6, and confirming ASCI could terminate Touton as an authorized wholesaler of Absolut Blue. Alternatively, if Touton remained an authorized wholesaler, ASCI sought an order "[d]eclaring that ASCI is not required to supply Touton with Absolut Blue exceeding its average historical volume of 8,900 cases per year."

Initially, Touton responded to the petition by filing a motion for emergent relief on February 10, 2004. The application requested an order pursuant to N.J.S.A. 33:1-93.9 to prohibit all New Jersey wholesalers from purchasing vodka from ASCI and its affiliates until it complied with the ABC order dated July 18, 2002. This request was withdrawn and Touton filed an answer denying ASCI's allegations and a cross-petition against Future Brands, LLC, Jim Beam Brands Co. (Beam)*fn1 and ASCI. Touton's cross-petition requested that the ABC: 1) find that third-party respondents had discriminated against Touton; 2) direct third-party respondents to continue to sell all flavors of Absolut vodka to Touton; 3) oblige third-party respondents to fill Touton's February 2004 purchase orders, as well as future orders submitted prior to the ABC's final determination; 4) require third-party respondents to fill Touton's December 22, 2003 purchase order for Absolut Citron and Mandarin; 5) restrain all New Jersey wholesalers from purchasing any Absolut vodka or any other product from third-party respondents; and 6) prevent third-party respondents from eliminating Touton as an authorized wholesaler of Absolut vodka.

These parties had previously appeared before the ABC in 2002, on Touton's petition against ASCI's predecessor Beam, alleging a violation of the anti-discrimination law, after Beam eliminated Touton's designation as an authorized Absolut wholesaler. "Under the anti-discrimination law, once a supplier authorizes sales of a nationally advertised brand by a wholesaler, the wholesaler is entitled to continue to distribute the product absent exceptional circumstances." R & R Mktg., L.L.C., v. Brown-Forman Corp., 158 N.J. 170, 173 (1999). The ABC's final order in that proceeding, entered on July 18, 2002, required Touton to remain an authorized wholesaler of Absolut Blue. Touton asserts the July 18, 2002 order contained no limitation on the quantity of Absolut Blue supplied to Touton. Thereafter, in September 2003, ASCI, which replaced Beam, requested Touton to service B.J.'s Wholesale Club licensees in New Jersey, increasing the quantity of Absolut Blue Touton ordered from ASCI.

In the current action, the ABC issued its own order requiring ASCI to show cause "why [the ABC] should not issue an Order enjoining the [r]espondents from refusing to make available for purchase Absolut Vodka to [Touton] or . . . an Order stating that no wholesaler shall purchase such brand unless it is made available and sold to [Touton]." After argument, the ABC's order dated March 15, 2004, contained the following findings relevant to this disposition:

It is also clear from the facts presented to me that [Touton] sold Absolut Vodka to their retailer customers at a cost significantly less than the three other wholesalers dealing in the brand for the months of August, September and October 2003. In November and December 2003 and January and February 2004, [Touton's] prices were still less than their wholesale competiters, but not as markedly. While [Touton] did not sell Absolut below cost within the meaning of N.J.A.C. 13:2-24.8, it appears likely that it was sold below its economic cost.

I also find that, although there is some dispute as to the details, there is no question that ASCI put [Touton] in touch with representatives of B.J.'s Wholesale Club, a large volume retailer, when B.J.'s threatened to stop carrying Absolut unless it could get the lowest price, which was offered by [Touton]. [Touton] began selling Absolut to B.J.'s in [September] 2003. . . . ASCI appears to have made a conscious decision to tolerate the level of increased sales in 2002.

Touton's sales in 2002 totaled 16,000 cases.

The ABC's order concluded:

Nevertheless, the record to date is not clear on the implication of ASCI's conduct in allowing [Touton's] sales to grow to current levels. At the same time, ASCI has legitimate concerns about the meaning of product disparagement under Title 33. Emergent relief reflecting these competing interests is required.

ASCI was ordered to supply Touton's "normal requirements" of Absolut Blue "not to exceed 23,000 cases in calendar year 2004, which amount reflects the prior history from 1996 to 2001, a portion of increased sales in 2002 for which no objection was filed at the time, and sales to B.J.'s Wholesale Club[.]" The ABC noted that if evidence was uncovered during discovery revealing that there was no evidence of irreparable harm to Touton, the order could be reconsidered.

In a supplemental decision and order dated March 30, 2004, the ABC denied Touton's right to sell the various flavors of Absolut Blue concluding that each flavor was considered its own brand, pursuant to ...


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