Sorry for the delay in posting this update to the website. MillerCoors has filed its oppositionto the motion to dismiss filed by Chesbay and Reyes. It also filed a group of supporting exhibits purporting to questions facts and defeat the application of a motion to dismiss at this stage. The filing is curious in many respects giving the recent NBWA Convention, public comments about not challenging any state law and various discussion of the litigation at that meeting in both public and private. MillerCoors notes that the court need not reach their Lanham Act preemption claim clarifying it in relation to the contract claim, “In this case, however, the Court need not reach such a conclusion—unless Chesbay’s attempt to expand the scope of BFA Section 4.1-507A makes consideration of preemption necessary.”
(earlier post-Reyes Seeks to Intervene in VA Case; Files Motion to Dismiss)
Reyes Holding LLC has filed a motion to intervene as well as a motion to dismiss/judgement on the pleadings in the Chesbay matter. Reyes argues that it is entitled to intervene as a matter of right as an affected party under FRCP 24. Reyes notes that it qualifies under the rule because it “claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant’s ability to protect its interest.”
Furthermore, provided they are granted the right to intervene, Reyes has filed a motion to dismiss the case or in the alternative,for judgement on the pleadings. In arguments that further the arguments of Chesbay, Reyes notes that the Lanham Act does not preempt state laws, there is no breach of contract, MillerCoors has waived any potential breach, the VA beer Franchise controls this matter, and finally notes there is the 21st Amendment to be considered.
The motions also contained many affidavits and exhibits highlighting the public statements of MillerCoors professing that state law would control in any dispute and the repeated awards/approvals by MillerCoors for the Reyes Companies and their MillerCoors beer distribution businesses. It is unclear what theory or facts MillerCoors will pursue to justify their claims, especially the Lanham Act claim.
(earlier post) Chesbay Files Motion To Dismiss the Complaint of MillerCoors
Well we posted some generalized thoughts a few hours ago and they are already out of date as later this afternoon Chesbay filed its Motion to Dismiss in federal court. As they explain in their memorandum in support of the motion to dismiss, Chesbay believes the court should dismiss the complaint on at least seven different basis ; 1) MillerCoors fails to state a claim as the Virginia Beer Franchise Act is incorporated into and supersedes any conflicting provision of the MillerCoors’ Contract; 2) MillerCoors fails to claim that Chesbay has failed to meet the requirements of the Virginia Beer Franchise Act in any way; 3) MillerCoors’ claim of breach of contract fails as a matter of law as it is based on provisions superseded by the Virginia Beer Franchise Act; 4) MillerCoors’ Lanham Act claim fails because they assert opinion, not specific legal claims necessary for pleading; 5) MillerCoors’ preemption claim is without merit as a matter of law based on well settled preemption case law including very relevant cases in the 4th Circuit; 6) Chesbay points out that this court doesn’t need to get to the 21st Amendment to engage in any balancing of interests analysis because of the previous six arguments; 7) Finally, Chesbay points out that they are properly using MillerCoors’ trademark now and there is no allegation that this matter would suddenly create any “confusion” to the consumer, a necessary element of a claim.
The ball is back in MillerCoors’ court.
(earlier post) Some Partial Thoughts On The Chesbay Lawsuit
There has been much industry discussion regarding the Amended Complaint filed by MillerCoors in the Chesbay litigation. Obviously, there has not been much insight on why this theory was advanced by Miller Coors nor are we privy to the corporate/legal thinking behind this approach. Also, we are not sure of the cost/benefit ratio analysis of uniting the American beer distribution industry against the course of action chosen by MillerCoors. Nevertheless, it is filed. What next? As with everything here on this site, these are some quick and partial observations and not legal advice on this much discussed case. The litigation itself will smoke out more detail.
First of all the “Rocket Docket” of the Eastern District of Virginia won’t tolerate much delay as the median time between complaint and trial in this federal district court is only 11.3 months, the fastest of any district court in the country. Despite the coverage in press or statements, the court calendar marches on with a strong prejudice against delay.
Many are doubtful of MillerCoors chances as there are at least two probably fatal flaws for MillerCoors to advance this theory. 1). There is a strong presumption against preemption and no obvious theory of preemption applies here (there is no express, implied or conflict preemption). Although the Lanham Act (regulating trademarks) does have a preemptive section, its text clearly does not apply to this case. The Virginia Beer Franchise Act (not mentioned in either of MillerCoors complaints) is not in conflict with this federal statute in any way. Also, MillerCoors already allows
the prospective purchaser the right to use the very same trademark in dispute in the very same state of Virginia. This distributor also happens to sell the most MillerCoors beer in the country. 2) A quick review of the case law again illustrates the weakness of MillerCoors’ preemption claim. For example, in Mobil Oil Corp. v. Virginia Gasoline Marketers & Automotive Repair Ass’n, 34 F.3d 220 (4th Cir.1994), cert. denied, 513 U.S. 1148 (1995) the 4th Circuit held the Lanham Act did not preempt a Virginia law governing service stations/ supplier relations. The Chesbay lawsuit filed in the Eastern District is in the very same 4th Circuit. And we can add a tentative third point. 3) If Miller Coors does somehow make it through the first two hurdles, there is of course the 21st Amendment which grants states the primary right to regulate alcohol. The 21st Amendment shouldn’t even be a factor in this case but theoretically it could come in as an additional consideration down the road. The Supreme Court has noted that states have “virtually complete control” under the Twenty-First Amendment “over . . . how to structure the liquor distribution system.” Cal. Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980) and that state laws “are supported by a strong presumption of validity and should not be set aside lightly.” North Dakota v. U.S., 495 U.S. 423, 433 (1990).
Since this court expects action and abhors delays, there will be updates on a regular basis. We’ll post updates as we get them.
(Earlier Post) MillerCoors Tries Federal Preemption Play in Virginia
MillerCoors has amended its complaint in federal court in the Eastern District of Virginia trying to bar the sale of the Chesbay Distributing Company to another Virginia distributor. MillerCoors now claims that the Lanham Act preempts state laws. Although, neither the amended complaint nor the original complaint cite to or even acknowledge the presence of the Virginia Beer Franchise Act, the Amended Complaint claims preemption of “state law” that requires the assignment of licenses. One of the Virgina statutes presumably sought to be preempted by the supplier: 4.1-507. Transfer of business. A. No brewery shall unreasonably withhold or delay consent to any transfer of the wholesaler’s business, or transfer of the stock or other interest in the wholesalership, whenever the wholesaler to be substituted meets the material and reasonable qualifications and standards required of its wholesalers.
MillerCoors has tried to have it both ways on its controversial proposed supplier agreement it issued following the joint venture in 2008. On one hand it has repeatedly told everyone that would listen, “state law controls” when it comes to conflicts between state laws and their proposed contract. On the other hand they make the argument filed today which contradicts those pronouncements and have in other forums tried to deflect attention to how the proposed supplier agreement violates state law. Past adjudications have not been favorably inclined to support the MillerCoors attempts to remain selectively vague, for example here is a ruling in Michigan disagreeing with the MillerCoors view on how the contract attempted to treat the sale of a distributorship.
I am sure there will be much more on this one.
[…] the sale under federal trademark protection rights. The National Beer Wholesalers Association has a good roundup of the initial legal jockeying between these parties, as well third-party Reyes. Additionally, Beer […]