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Absolut Spirits Company, Inc. v. Monsieur Touton Selection

August 3, 2010

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



On appeal from a Final Decision of the Division of Alcoholic Beverage Control, Docket No. 02-06; and an appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-1048-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: June 3, 2010

Before Judges Cuff, Payne and Fasciale.

These consolidated appeals concern a long-standing dispute between The Absolut Spirits Company, Inc. (Absolut), a manufacturer of vodka, and Monsieur Touton Selection, LTD. (M.Touton), a distributor of wines and a wholesaler of Absolut Blue, one of the licensed brands of vodka produced by Absolut. The current dispute commenced in 2004, when Absolut sought to terminate M.Touton as a wholesaler by filing a petition with the Alcohol Beverage Commission (ABC). M.Touton initiated an action in the Superior Court, Chancery Division, soon thereafter. After granting emergency relief, including an order requiring M.Touton to deposit $92,725.57 pending resolution of the dispute between them, the civil action was dismissed and the matter proceeded in the Office of Administrative Law. This matter returns to this court following our October 2007 remand to allow the ABC Director to make findings of fact in support of his decision allowing Absolut to terminate M.Touton as a wholesaler.

The ABC Director held that certain conduct by M.Touton constituted disparagement of product and unfair trade practices.

M.Touton argues that competitive pricing, i.e., selling product below economic cost, does not constitute disparagement of product and certainly did not justify termination as a wholesaler. It also contends that the evidence adduced on remand does not support the finding that it committed unfair trade practices. M.Touton also appeals from two orders entered by Judge Suter on March 20, 2007, denying M.Touton's motion to reinstate its Law Division complaint and releasing the funds on deposit to Absolut.*fn2 Finally, M.Touton insists that it is entitled to pursue its contract claims against Absolut in the Law Division. We affirm.

The agency decision we review in this appeal requires us to discuss briefly the regulatory context of the dispute and the Director's decision. Absolut is a manufacturer of premium vodkas. It manufactures several different kinds of vodkas, such as Absolut Blue, Absolut Vodka 100 (Absolut Red), and different flavors, such as Absolut Citron, and Absolut Mandarin. Each is registered as a separate brand. M.Touton has been a registered wholesaler of a single brand, Absolut Blue, for many years and is not permitted to sell any brand other than Absolut Blue.

The relationship between manufacturers, such as Absolut, and wholesalers, such as M.Touton, is strictly regulated by statute, which prohibits discrimination by importers and distillers between and among wholesalers. The Anti-Discrimination Act, N.J.S.A. 33:1-93.6, provides

There shall be no discrimination 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 importers, blenders, distillers, rectifiers and wineries to sell such nationally advertised brand in New Jersey.

The purpose of the statute is to "'ensure an equitable basis for competition between supplier franchised wholesalers of alcoholic beverages in New Jersey.'" R & R Mktg., L.L.C. v. Brown-Forman Corp., 158 N.J. 170, 176 (1999) (quoting Joseph H. Reinfeld, Inc. v. Schieffelin & Co., 94 N.J. 400, 408 (1983)).

The protections provided by the Anti-Discrimination Act do not prevent a supplier from terminating its relationship with a wholesaler in all instances. There may be exceptional circumstances that warrant termination, such as when a wholesaler has materially altered its authorization and is no longer the same type of company with which the supplier originally contracted; in that case termination may be permissible. Id. at 178.

Additionally, ABC's regulatory provisions outline ten scenarios in which a supplier's refusal to continue selling to a wholesaler is not discrimination. N.J.A.C. 13:2-18.1(b). Those scenarios include bankruptcy, lack of financial resources, improper trade practices, and product disparagement. Ibid. Disparagement is defined as "the specific suggestion that the product of the refusing seller not be purchased, or demonstration of a course of conduct that would lead a reasonable person to believe that the product of the refusing seller should not be purchased, and when called to the attention of key management personnel of the wholesaler, no reasonable corrective action is taken." N.J.A.C. 13:2-18.1(b)(8).

In its January 30, 2004 petition seeking permission to terminate M.Touton as a wholesaler of Absolut Blue, Absolut alleged that M.Touton engaged in a course of conduct detrimental to the brand by engaging in unfair trade practices, specifically treating the brand as a "loss leader" by selling it at discounted prices to enhance the sale of its wine products. Absolut argued that this tactic had a detrimental effect on the premium status of the brand and the long-term ...


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