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Sutter Home Winery Inc. v. Selections

filed: July 31, 1992.

SUTTER HOME WINERY, INC., A CALIFORNIA CORPORATION, PLAINTIFF-COUNTERDEFENDANT- APPELLEE,
v.
VINTAGE SELECTIONS, LTD., AN ARIZONA CORPORATION, DEFENDANT-COUNTERCLAIMANT- APPELLANT. SUTTER HOME WINERY, INC., A CALIFORNIA CORPORATION, PLAINTIFF-COUNTERDEFENDANT- APPELLANT, V. VINTAGE SELECTIONS, LTD., AN ARIZONA CORPORATION, DEFENDANT-COUNTERCLAIMANT- APPELLEE.



Appeal from the United States District Court for the District of Arizona. D.C. No. CV-89-1740-WPC. D.C. No. CV-89-01740-WPC. William P. Copple, Senior District Judge, Presiding. This Opinion Substituted by Court for Withdrawn Opinion of May 4, 1991

Before: William A. Norris and David R. Thompson, Circuit Judges, and David Alan Ezra, District Judge.*fn* Opinion by District Judge Ezra; Partial Concurrence, Partial Dissent by Judge Thompson.

Author: Ezra

EZRA, District Judge:

OVERVIEW

Vintage Selections, Ltd. ("Vintage") appeals the district court's grant of judgment on the pleadings in favor of Sutter Home Winery, Inc. ("Sutter Home") on all claims made by Sutter Home against Vintage in its complaint, and all causes of action alleged by Vintage in its counterclaim. In so ruling, the district court determined that California law would apply based on the choice of law provision in the parties' distributer agreement.

Sutter Home cross appeals the district court's denial of its motion for attorney's fees.

BACKGROUND

Sutter Home is a California corporation that sells wine throughout the United States through a network of distributors. Vintage is an Arizona corporation which distributed wine for Sutter Home and other wineries in Arizona. Sutter Home and Vintage had an ongoing business relationship from 1976 through 1989, whereby Vintage was granted the exclusive franchise rights to sell Sutter Home's wine in Arizona.

The parties' relationship was based on an oral agreement for the sale of Sutter Home's wine from 1976 through 1985. In 1985, Sutter Home submitted a written distributor agreement to Vintage for its execution. The agreement set forth the terms of the parties' franchise relationship and provided that it formed the entire understanding of the parties with regard to the distributorship. The agreement also provided that: "Except as otherwise required by applicable law, this Agreement shall be governed by the law of the State of California."

The distributor agreement was signed by Vintage in June of 1985. Vintage alleges that the agreement was obtained under duress in an unlawful and unconscionable manner and did not modify the parties' pre-existing duties. Despite believing the agreement was unlawful, Vintage alleges it was forced to execute the agreement or risk losing a significant portion of its business. Subsequent extensions of the agreement were executed by Vintage through June 30, 1989.

In December, 1988, Sutter Home allegedly began making inordinate demands upon Vintage which went beyond the obligations specified in the distributor agreement, in an attempt to terminate the exclusive distributor arrangement under which the parties had been operating. At the same time that Sutter Home was making these new demands, it was also allegedly collecting Vintage's customer lists and contacting Vintage's competitors in Arizona to discuss the transfer of the distributorship.

On April 28, 1989, Sutter Home notified Vintage that it would not further extend the agreement because Vintage had failed to meet the distributor agreement objectives and because irreconcilable differences in marketing philosophy existed between the parties.*fn1

On October 29, 1989, Sutter Home filed its complaint against Vintage alleging that it shipped certain wine to Vintage during its business relationship, that Vintage refused to pay for same, and that Vintage had an outstanding account balance with Sutter Home of $68,857.97, which amount was due and owing.

Vintage responded to the complaint with a verified answer and counterclaim. Vintage admitted that it refused to pay Sutter Home for certain wine ordered and admitted an account balance of $68,857.97; however, Vintage denied that this amount was due and owing to Sutter Home. Vintage also affirmatively alleged that it had validly refused to pay for the wine based on Sutter Home's breach of its obligations to Vintage.

Vintage's counterclaim alleges that the termination by Sutter Home was wrongful, made in bad faith and resulted in the loss of approximately $1.5 million to Vintage. Specifically, Vintage's counterclaim alleges violations of (1) Arizona's Spirituous Liquor Franchise Act, A.R.S. § 44-1565 et seq. ; (2) acts of unfair competition; (3) violation of Arizona's Consumer Fraud Act, A.R.S. § 44-1522; (4) tortious breach of the implied covenant of good faith and fair dealing; and (5) equitable theories including breach of implied contract, unjust enrichment and promissory estoppel.

On March 19, 1990, the district court granted Sutter Home's motion for judgment on the pleadings with regard to all claims in Sutter Home's complaint and all causes of action in Vintage's counterclaim. In so ruling, the court held that the California choice of law provision in the distributor agreement controlled. The district court also denied Sutter Home's application for attorney's fees incurred in connection with its work in obtaining judgment on the pleadings on July 14, 1990. The court certified its March 1990 order a final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure on July 17, 1990. We have jurisdiction pursuant to 28 U.S.C. § 1291.

STANDARD OF REVIEW

We review de novo a grant of judgment on the pleadings, taking all material allegations of the non-moving party as contained in the pleadings as true, and construing the pleadings in the light most favorable to that party. Bagley v. CMC Real Estate Corp., 923 F.2d 758, 760 ...


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