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The Odom Corp. v. Pabst Brewing Company, LLC

United States District Court, W.D. Washington

May 26, 2017


          ORDER ON MOTIONS DKT. ##10, 13


         THIS MATTER is before the Court on Defendant Pabst Brewing Company's Motion to Dismiss [Dkt. #10] and Plaintiff Odom Corporation's Motion for Partial Summary Judgment [Dkt. #13].[1] This case concerns whether, when a beer supplier terminates its distributor's contract without cause, Washington's Wholesale Distributors and Suppliers of Spirits or Malt Beverages Act, chapter 19.126 RCW, provides the distributor with a single remedy: "compensation from the successor distributor for the laid-in cost of inventory and for the fair market value of the terminated distribution rights." RCW 19.126.040(4). Pabst notified Odom of its plan to terminate their agreement on February 16, 2017. On February 24, Pabst terminated Odom's distributor contract, and the next day, arranged for Columbia Distributing to service Odom's former territory. Columbia purchased Odom's existing inventory, but Columbia and Odom have yet to agree on the fair market value of Odom's lost distribution rights.

         Odom sued Pabst for its lost profits, business interruption, lost investment, reliance damages, and other losses, alleging Pabst breached their contract by terminating it without cause and by failing to provide sixty days written notice of its intent to terminate. Pabst asks the Court to dismiss Odom's complaint because under the Act, Odom's only viable, remaining claim is against Columbia Distributing for the fair market value of Odom's terminated distribution rights. Alternatively, Pabst asks the Court to stay or abate the case until Odom and Columbia have arbitrated the fair market value of those rights.

         Odom disagrees that its sole recourse for Pabst's termination of their agreement is against third-party Columbia Distributing. It argues the Act does not authorize terminations without cause and includes no statement of exclusivity. It contends RCW 19.126.040(4) provides a cumulative remedy for distributors whose contracts have been terminated wrongfully: statutory compensation from the successor distributor (in addition to the common law breach-of-contract damages they might receive from their supplier). Odom asks the Court to resolve two legal questions: (1) whether the Act authorizes suppliers to terminate distributors' contracts without cause and (2) whether RCW 19.126, 040(4) provides Odom's sole remedy for relief.[2]


         A. Standards of Review.

         1. Dismissal under Rule 12(b)(6).

         First, Pabst asks the Court to dismiss Odom's complaint because, it argues, Odom cannot sustain a claim against Pabst, only against Columbia. Dismissal under Rule 12(b)(6) may be based on either the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A plaintiffs complaint must allege facts to state a claim for relief plausible on its face. See Aschcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). A claim has "facial plausibility" when the party seeking relief "pleads factual content that allows the Court to draw the reasonable inference mat the defendant is liable for the misconduct alleged." Id. "[A] plaintiffs obligation to provide the 'grounds' of his 'entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations and footnotes omitted). This requires a plaintiff to plead "more than an unadorned, the-defendant-unlawfully-harmed-me-accusation." Iqbal, 129 S.Ct. at 1949 (citing Twombly).

         On a 12(b)(6) motion, "a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Cook, Perkiss & Liehe v. N. Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990). However, where the facts are not in dispute, and the sole issue is whether there is liability as a matter of substantive law, the Court may deny leave to amend. See Albrecht v. Lund, 845 F.2d 193, 195-96 (9th Cir. 1988).

         2. Summary Judgment.

         Second, Odom asks the Court to grant it partial summary judgment, declaring Pabst's interpretation of the Act incorrect, because RCW 19.126.040(4) does not eliminate Odom's opportunities for relief under the common law. Summary judgment is appropriate when, viewing the facts in the light most favorable to the nonmoving party, there is no genuine issue of material fact which would preclude summary judgment as a matter of law. Once the moving party has satisfied its burden, it is entitled to summary judgment if the non-moving party fails to present, by affidavits, depositions, answers to interrogatories, or admissions on file, "specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). "The mere existence of a scintilla of evidence in support of the non-moving party's position is not sufficient." Triton Energy Corp, v. Square D Co., 68 F.3d 1216, 1221 (9th Cir. 1995). Factual disputes whose resolution would not affect the outcome are irrelevant to the consideration of a motion for summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In other words, "summary judgment should be granted where the nonmoving party fails to offer evidence from which a reasonable [fact finder] could return a [decision] in its favor." Triton Energy, 68 F.3d at 1220.

         B. Termination of a Distribution Contract.

         Odom asks the Court to determine whether the Act authorizes suppliers to terminate distributorships without cause. It argues the Act does not expressly or implicitly authorize termination without cause, and Washington courts have agreed. Pabst argues it could properly terminate Odom's contract without cause because the Act contemplates such terminations, and their agreement allowed either party to cancel it at will after "a reasonable time."

         The Act "governs the relationship between suppliers of malt beverages and spirits and their wholesale distributors to the full extent consistent with the Constitution and laws of [Washington] and of the United States." RCW 19.126.010(2). It directs a supplier to give a distributor at least sixty days written notice and an opportunity to cure before terminating their agreement, unless (1) the distributor acts fraudulently, (2) there's "insolvency, the occurrence of an assignment for the benefit of creditors, bankruptcy, or suspension in excess of fourteen days or revocation of a license issued by the state liquor board, " or (3) the supplier acquires a new brand and has another distributor handle it. RCW 19.126.040(2) (incorporating RCW 19.126.030(5)):

A supplier must give the wholesale distributor at least sixty days prior written notice of the supplier's intent to cancel or otherwise terminate the agreement, unless such termination is based on a reason set forth in RCW 19.126.030(5) or results from a supplier acquiring the right to manufacture or distribute a particular brand and electing to have that brand handled by a different distributor. The notice must state all the reasons for the intended termination or cancellation. Upon receipt of notice, the wholesale distributor has sixty days in which to rectify any claimed deficiency. If the deficiency is rectified within this sixty-day period, the proposed termination or cancellation is null and void and without legal effect.

RCW 19.126.040(2). RCW 19.126.030(5) says:

The supplier may cancel or otherwise terminate any agreement with a wholesale distributor immediately and without notice if the reason for such termination is fraudulent conduct in any of the wholesale distributor's dealings with the supplier or its products, insolvency, the occurrence of an assignment for the benefit of creditors, bankruptcy, or ...

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