City Beverages LLC v. Crown Imports LLC et al, No. 3:2022cv05756 - Document 105 (W.D. Wash. 2023)
Court Description: ORDER denying Plaintiff's 91 Motion for Temporary Restraining Order. Signed by U.S. District Judge David G Estudillo.(MW)
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City Beverages LLC v. Crown Imports LLC et al Doc. 105 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 8 9 10 11 CITY BEVERAGES LLC, Plaintiff, 12 13 CASE NO. 3:22-cv-05756-DGE ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) v. CROWN IMPORTS LLC et al., 14 Defendant. 15 16 17 I. INTRODUCTION This matter comes before the Court on Plaintiff’s second motion for a temporary 18 restraining order. (Dkt. No. 91.) For the reasons discussed herein, the Court DENIES the 19 Motion. 20 21 22 23 II. BACKGROUND A. Factual History Plaintiff is City Beverages, LLC d/b/a Olympic Eagle Beverages (“Olympic Eagle”). (Dkt. No. 1 at 5.) Defendants are Constellation Brands, Inc. (“Constellation”) and Crown 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 1 Dockets.Justia.com 1 Imports, LLC d/b/a Constellation Brands Beer Division (“Crown Imports”). (Id.) Crown 2 Imports is a Constellation wholly-owned subsidiary. (Id. at 6.) 3 Olympic Eagle and Crown Imports operate under a Distribution Agreement originally 4 entered between Barton Beers, LTD (“Barton”) and Olympic Eagle (Dkt. No. 5-1), subsequently 5 assigned to Crown Imports (Dkt. No. 5-2 at 2), and then subsequently amended by Crown 6 Imports and Olympic Eagle (Id. at 3–8). 7 Constellation has sought to terminate the Distribution Agreement. Olympic Eagle asks 8 the Court to enter a temporary restraining order preventing transfer of the distribution rights until 9 after compensation due to Olympic Eagle for the distribution rights has been determined by 10 agreement or arbitration. 11 1. Constellation’s Acquisitions through 2013 12 In 1993, Constellation acquired Barton as its wholly-owned subsidiary. (Dkt. No. 98 at 13 2.) At that time, Barton was the sole importer of Modelo brand beer in the United States. (Id.) 14 Modelo brand beer includes popular Mexican beer such as Modelo, Pacifica, Corona, and 15 Victoria. (Id.) 16 In 2003, Barton entered into a distribution agreement with Olympic Eagle granting 17 Olympic Eagle the right to distribute Modelo brands in a defined territory in the State of 18 Washington. (Id.) Since 2003, the Distribution Agreement has been amended multiple times, 19 including granting Olympic Eagle additional distribution rights to new brands or brand 20 extensions in its territory. (Id.; Dkt. No. 5-2 at 3–8.) 21 In 2007, Constellation and Grupo Modelo formed Crown Imports in a 50-50 venture. 22 (Dkt. No. 98 at 2.) As part of this formation, Constellation’s subsidiary (Barton) transferred 23 most all of its assets to Crown Imports, making Crown Imports the supplier of Modelo brand 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 2 1 beer within the western United States under various distribution agreements, including the 2003 2 Barton Distribution Agreement with Olympic Eagle. (Id.; Dkt. No. 5-2 at 2.) 3 In 2013, beer giant Anheuser-Busch, Inc. (“ABI”) was primed to acquire Grupo Modelo. 4 (Dkt. No. 98 at 2–3.) ABI manufactures, imports, or supplies beer brands in the United States, 5 including the Budweiser, Busch, Michelob, Bud Light, and Natural Light brands. (Id. at 3.) The 6 Department of Justice, expressing antitrust concerns over this potential acquisition, opposed the 7 deal. The Department of Justice required Constellation to acquire Grupo Modelo’s 50% share of 8 Crown Imports, making Constellation the sole owner of Crown Imports. (Id. at 2–3.) 9 As part of the same action involving the Department of Justice, Constellation additionally 10 “acquired the right to manufacture and distribute the Modelo Brands in the United States in 11 perpetuity.” (Id. at 3.) Where previously Constellation, through its subsidiary, only had the right 12 to import Modelo brand beer from Mexico, as of 2013 Constellation obtained the right to 13 manufacture and distribute Modelo brand beer within the United States. (Id.) Thus, 14 Constellation, through various wholly-owned subsidiaries, including Crown Imports, has been 15 “the sole brewer and importer of the Modelo Brands in the United States” since 2013. (Id.) 16 17 18 19 20 Also as part of the 2013 acquisition of the remaining interest in Crown Imports, Constellation was given the right to terminate ABI-owned distributors: [F]or ABI’s majority-owned distributors (“ABI-Owned Distributors”) that distribute Modelo Brand Beer, Constellation will have a window of opportunity to terminate that distribution relationship and direct the ABI-owned distributor to sell the distribution rights to another distributor. Similarly, should ABI subsequently acquire any distributors that have contractual rights to distribute Modelo Brand Beer, Constellation may require ABI to sell those rights. 21 (Dkt. No. 93 at 26; see also Dkt. No. 98 at 3.) 22 23 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 3 1 2. Constellation’s Post-2013 Distributor Terminations 2 In accordance with its authority, Constellation terminated distribution agreements with 3 ABI-Owned Distributors in 2015 but not distribution agreements with independent distributors 4 that also distributed ABI products, such as Olympic Eagle. (Dkt. No. 98 at 3.) On April 1, 2014 5 and August 22, 2017, Crown Imports amended the Distribution Agreement with Olympic Eagle 6 and otherwise reaffirmed its contractual relationship with Olympic Eagle. (Dkt. No. 5-2 at 3–4.) 7 Between 2018 and 2021, “Constellation terminated eight independent California 8 Distributors (e.g., distributors not owned by ABI)[.]” (Dkt. No. 98 at 4.) Constellation asserts 9 “[t]he decision to terminate these distributors had nothing to do with Constellation’s acquisition 10 of the remaining ownership interest in Crown Imports back in 2013[.]” (Id.) Instead, 11 Constellation states these terminations were made after it “evaluated the territories and markets 12 and determined that its interests would be better served by other distributors.” (Id.) 13 Constellation states that “[a]pproximately 17% of Constellation’s beer volume is sold by 14 distributors that concurrently distribute ABI products and approximately 34% of Constellation’s 15 beer distributors also sell ABI brands.” (Id.) It identifies that “there is at least one distributor in 16 California with concurrent ABI and Constellation distribution rights; Constellation has no plans 17 to terminate this distributor.” (Id.) Notwithstanding that Crown Imports is the only signatory to the Distribution Agreement 18 19 at issue in this litigation, Constellation and Crown Imports admitted that “Constellation is the 20 beverage supplier under the Distribution Agreement.” (Compare Dkt. Nos. 1 at 7 and 52 at 6. 1) 21 1 22 23 24 During oral argument on the present motion, the Court questioned whether Olympic Eagle had alleged facts sufficient to pierce Crown Imports’ corporate veil or to conclude that Crown Imports was Constellation’s alter ego. Because Constellation admitted it was the “supplier” under the Distribution Agreement, the Court assumes Constellation and Crown Imports are one and the same for purposes of this motion. ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 4 1 2 B. Procedural History On September 8, 2022, Constellation informed Olympic Eagle it was terminating the 3 Distribution Agreement. (Dkt. No. 7 at 2.) On October 6, 2022, Olympic Eagle filed a 4 complaint, requesting preliminary and permanent injunctions against Constellation/Crown 5 Imports’ without-cause termination of the Distribution Agreement. (Dkt. No. 1.) Olympic Eagle 6 put forth three bases for relief: Washington’s Wholesale Distributor/Supplier Equity Agreement 7 Act, Washington’s Franchise Investment Protection Act, and the plain terms of the Distribution 8 Agreement itself. 9 On November 4, 2022, Olympic Eagle filed a temporary restraining order (“TRO”) 10 requesting the Court prevent termination of the Distribution Agreement while it adjudicated the 11 then-pending preliminary injunction. (Dkt. No. 28.) On November 8, 2022, the Court granted 12 the TRO. (Dkt. No. 40.) On December 12, 2022, the Court ruled in favor of Olympic Eagle on 13 the preliminary injunction and enjoined Constellation from terminating the Distribution 14 Agreement without cause. (Dkt. No. 51.) In its preliminary injunction order, the Court reasoned 15 that Olympic Eagle was likely to succeed on the merits based on its interpretation that the 16 Wholesaler Act did not allow without-cause terminations. On January 4, 2023, Constellation 17 appealed to the Ninth Circuit. (Dkt. No. 55.) On July 20, 2023, the Ninth Circuit vacated the 18 preliminary injunction. (Dkt. No. 78.) It concluded, “[a]lthough the text of the Act does not 19 expressly state that suppliers always have the right to terminate distribution agreements without 20 cause, it clearly allows a supplier to contract for that right.” (Id. at 2.) It further concluded, 21 22 23 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 5 1 “[t]he [Distribution] Agreement grants [Constellation/Crown Imports] the right to terminate 2 without cause.” (Id. at 4. 2) On July 21, 2023, “Constellation issued notice to Olympic Eagle . . . stating that it ‘is 3 4 terminating the Distribution Agreement dated October 22, 2003.’” (Dkt. No. 86 at 2.) The parties, and the presumed successor distributor CoHo Distributing LLC 5 6 (“Columbia”), agreed the termination of the Distribution Agreement would not become effective 7 until 60 days from the July 21, 2023 termination notice or 30 days after the Ninth Circuit’s 8 mandate issued, whichever was later. (Id. at 4.) The parties also stipulated to modify the 9 deadlines set forth in Washington Revised Code § 19.126.040(7)–(8), 3 and instead agreed that, 10 “[i]n the event that the termination contemplated by the Termination Notice becomes effective, 11 2 12 13 14 15 16 17 18 19 20 21 22 23 As to Olympic Eagle’s Franchise Investment Protection Act claim, the Ninth Circuit determined such claim would unlikely succeed and that, even if Olympic Eagle could establish such claim, it was likely that Olympic Eagle waived any right to injunctive relief as a remedy for a Franchise Investment Protection Act violation. (Id. at 4–5.) 3 The provisions provide: (7) In the event the terminated distributor and the successor distributor do not agree on the fair market value of the affected distribution rights within thirty days after the terminated distributor is given notice of termination, the matter must be submitted to binding arbitration. Unless the parties agree otherwise, such arbitration must be conducted in accordance with the American arbitration association commercial arbitration rules with each party to bear its own costs and attorneys' fees; (8) Unless the parties otherwise agree, or the arbitrator for good cause shown orders otherwise, an arbitration conducted pursuant to subsection (7) of this section must proceed as follows: (a) The notice of intent to arbitrate must be served within forty days after the terminated distributor receives notice of terminated distribution rights; (b) the arbitration must be conducted within ninety days after service of the notice of intent to arbitrate; and (c) the arbitrator or arbitrators must issue an order within thirty days after completion of the arbitration[.] Wash. Rev. Code § 19.126.040(7)–(8). 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 6 1 and Olympic Eagle and Columbia do not agree on the fair market value of the affected 2 distribution rights within thirty-five days following the issue of the Ninth Circuit’s Mandate . . . 3 the matter must be submitted to binding arbitration[.]” (Id.) The stipulation contained a clause 4 noting that “Nothing in this Stipulation shall be construed as a waiver by either party of any 5 claims, defenses, or any other rights related to this dispute.” (Id. at 5.) It also clarified that, 6 “[f]or the avoidance of doubt, Olympic Eagle disputes Constellation’s right to terminate the 7 distribution agreement.” (Id.) 8 On September 19, 2023, the Ninth Circuit denied Olympic Eagle’s request for rehearing 9 en banc. (Dkt. No. 88.) The Ninth Circuit issued its mandate on October 12, 2023, effectuating 10 11 its July 20, 2023 judgment. (Dkt. No. 89.) Constellation asserts that, per the parties’ stipulation, the Distribution Agreement should 12 be terminated on November 10, 2023, 30 days after the mandate issued. On October 31, 2023, 13 Olympic Eagle filed a second temporary restraining order, arguing termination cannot take place 14 until after the fair market value of the distribution rights has been determined. (Dkt. No. 91.) 15 16 C. Claims of Irreparable Harm. Olympic Eagle identifies, it “would need to expand geographically or acquire additional 17 brands to try to make up for the significant loss of revenue and profit from the loss of 18 Constellation brands.” (Dkt. No. 92 at 3.) It states, “[t]his will take time and significant amounts 19 of money.” (Id.) At the same time, it acknowledges that “[e]ven with time and money, success 20 [in expanding or acquiring new brands] is highly speculative as [it] [has] tried to buy significant 21 brands in the past and [has] been unsuccessful.” (Id.; see also Dkt. No. 93 at 6) (“Because we 22 have sought to buy other significant brands in the past and have been unsuccessful, it is 23 speculative in the least to say that we will succeed now.”)). 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 7 1 Olympic Eagle identifies that “[t]he second notice from Defendants of losing 2 Constellation brands put Olympic Eagle in default on its loan from Wells Fargo.” (Dkt. No. 92 3 at 3.) It has $11 million currently outstanding on its bank loan. (Id.) “Wells Fargo has put 4 Olympic Eagle on notice that the bank could refuse to let Olympic Eagle borrow additional funds 5 on [its] current loan[.]” (Id.) Olympic Eagle asserts “it will be difficult if not impossible to 6 obtain new financing in an amount necessary to satisfy [its] working capital needs and reinvest in 7 the business from another bank because of . . . reduced cashflows from losing Constellation’s 8 brands.” (Id. at 4.) It asserts it will face significant financial repercussions if the transfer of 9 rights occurs before it “receive[s] a fair market value payment[.]” (Id.) 10 11 III. DISCUSSION A. The Parties’ Stipulation 12 Constellation asserts the negotiated stipulation entered on August 28, 2023 precludes 13 Olympic Eagle from raising any argument under Washington Revised Code § 19.126.040(4). 14 (Dkt. No. 97 at 7–8.) 15 Notwithstanding the Parties’ stipulation as to the procedure related to Constellation’s 16 termination notice, the timing of its effect and the transfer of distribution rights, it is undeniable 17 that Olympic has not waived its claims asserted in this Motion. (Dkt. No. 86 at 5) (“Nothing in 18 [the] Stipulation shall be construed as a waiver by either party of any claims, defenses, or any 19 other rights related to this dispute. For the avoidance of doubt, Olympic Eagle disputes 20 Constellation’s right to terminate the distribution agreement.”). Based on explicit language in 21 the Stipulation, the Court concludes the stipulation has no effect on Olympic Eagle’s attempt to 22 seek a temporary restraining order under a new theory. 23 B. Temporary Restraining Order – Legal Standard 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 8 1 A TRO is “an extraordinary remedy that may only be awarded upon a clear showing that 2 the plaintiff is entitled to such relief.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 3 (2008). The standard for issuing a TRO is the same as that of a preliminary injunction. It 4 requires a party to demonstrate “(1) ‘that he is likely to succeed on the merits, (2) that he is likely 5 to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips 6 in his favor, and (4) that an injunction is in the public interest.’” Stormans, Inc. v. Selecky, 586 7 F.3d 1109, 1127 (9th Cir. 2009) (citing Winter, 555 U.S. at 20). 8 As an alternative to the Winter test, a preliminary injunction is appropriate if “serious 9 questions going to the merits were raised and the balance of the hardships tips sharply in the 10 plaintiff's favor,” thereby allowing preservation of the status quo when complex legal questions 11 require further inspection or deliberation. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 12 1127, 1134-35 (9th Cir. 2011). However, “‘serious questions going to the merits’ and a balance 13 of hardships that tips sharply towards the plaintiff can support issuance of a preliminary 14 injunction, so long as plaintiff also shows that there is a likelihood of irreparable damage and 15 that the injunction is in the public interest.” Id. at 1135 (emphasis added). The moving party 16 bears the burden of persuasion and must make a clear showing that it is entitled to such relief. 17 Winter, 555 U.S. at 22. 18 C. TRO Analysis 19 Olympic Eagle argues Washington Revised Code § 19.126.040(4) prohibits Constellation 20 from “terminating Olympic Eagle[’s Distribution Agreement] until after the fair market value 21 arbitration initiated by Columbia has concluded.” (Dkt. No. 91 at 12.) It asserts the termination 22 of the Distribution Agreement in this case results from Constellation’s 2013 acquisition of 23 manufacturing and distribution rights and Constellation’s election to transfer the Distribution 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 9 1 Agreement from Olympic Eagle to Columbia. (Id. at 16–18.) As support, Olympic Eagle notes 2 that Constellation’s 2013 acquisition of manufacturing and distribution rights made Constellation 3 ABI’s direct competitor, and asserts that ABI “would not be terminating its own distributors 4 without cause . . . [and] thus the termination is a consequence of Constellation acquiring control 5 of the [Modelo] brands.” (Id. at 18.) At a minimum, Olympic Eagle argues there are serious 6 questions as to whether § 19.126.040(4) prevents the transfer of the Modelo brands to Columbia 7 until after the fair market value arbitration is completed. (Id. at 20.) 8 Constellation argues Olympic Eagle is not likely to prevail on its claims that 9 § 19.126.040(4) bars transfer of distribution rights until after completion of the fair market value 10 arbitration. It asserts there must be a direct connection between the acquisition of new rights and 11 the election of a different distributor; otherwise, “any decision to terminate a distributor would 12 ultimately be a consequence of its past acquisition of brand rights” as “any 13 termination . . . necessarily ‘results from’ its prior acquisition of those rights.” (Dkt. No. 97 at 14 15.) Constellation further asserts Olympic Eagle advances “conspiracy theories and speculation” 15 to argue the termination in this case resulted from acquisition of rights that occurred nine years 16 prior to the notice of termination. (Id. at 17.) Constellation points out that it executed 17 amendments to the Distribution Agreement with Olympic Eagle after the 2013 acquisition 18 reaffirming Olympic Eagle’s distributor status and that currently “34% of its distributors 19 nationwide also distribute ABI products.” (Id. at 15.) If further offers that its subsequent market 20 evaluations performed well after the 2013 acquisition drove the decision to terminate Olympic 21 Eagle’s Distribution Agreement, not the fact that it acquired rights in 2013. (Id.) 22 23 Washington Revised Code § 19.126.040(4) provides in part: . . . In the case of terminated distribution rights resulting from a supplier acquiring the right to manufacture or distribute a particular 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 10 1 2 brand and electing to have that brand handled by a different distributor, the affected distribution rights will not transfer until such time as the compensation to be paid to the terminated distributor has been finally determined by agreement or arbitration[.] 3 At issue is whether the termination of the Distribution Agreement resulted from 4 Constellation’s 2013 acquisition of rights and its election to change distributors. The phrase 5 “resulting from” is not defined in the statute. Nor does there appear to be a decision interpreting 6 this phrase as used in this statute. 7 Olympic Eagle argues “resulting from” requires only that the termination “is a 8 consequence of” Constellation’s 2013 acquisition of manufacturing and distribution rights. (Dkt. 9 No. 91 at 18.) As support, Olympic Eagle relies on the dictionary definition of “result” and a 10 state court decision, State v. Velezmoro, 384 P.3d 613 (Wash. Ct. App. 2016). In the context of a 11 state criminal restitution statute, Velezmoro recognized the application of a “but-for” test in 12 applying the term “resulting from.” It stated and held: 13 14 15 16 Generally, the but-for test is the way to prove that one event was the factual cause of another. But where the application of that test leads to anomalous results, alternative ways of proving causation may apply. In the circumstances here, where an unknown number of people possessed pornographic images of Vicky's abuse, each possessor had a share in causing her harm. The trial court did not err in determining that Velezmoro's offense was a cause of Vicky's loss. We affirm. 17 384 P.3d at 614. Accordingly, Olympic Eagle asserts “but-for” or actual causation is all that 18 § 19.126.040(4) requires. (Dkt. No. 100 at 3–4.) 19 Constellation disputes Velezmoro’s application. It asserts, “the question is whether an 20 event (acquisition of brand rights) resulted in the supplier’s act (termination). In other words, it 21 presents a question of the supplier’s motivation . . . [,] not whether the acquisition of brand rights 22 was in the chain of events leading to the termination.” (Dkt. No. 97 at 17.) Furthermore, 23 Constellation argues, Olympic Eagle’s interpretation “merely requires that a brand acquisition 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 11 1 occur at any point before the termination. But that would include virtually all terminations and 2 the exception would swallow the rule.” (Id.) 3 The Court agrees “resulting from” as used in § 19.126.040(4) indicates a “but-for” or 4 actual causation requirement but disagrees that the acquisition factor should be considered in 5 isolation from the election factor. In other words, because § 19.126.040(4) requires that 6 termination results from the acquisition of rights and the election of a new distributor, both 7 requirements relative to one another must be the actual, or but-for, cause of the termination. To 8 fail to recognize a relationship between the two criteria would mean that every termination 9 would fall within § 19.126.040(4) regardless of when the election of a new distributor occurred 10 relative to the acquisition of rights and regardless of whether the decision to elect a new 11 distributor was for reasons completely independent of the acquisition of the rights. 4 With this understanding in mind, the Court considers whether Olympic Eagle has 12 13 established it is entitled to a temporary restraining order. 14 1. Likelihood of Success 15 Pointing to its current Equity Agreement with ABI, Olympic Eagle asserts its rights under 16 the 2003 Barton Distribution Agreement (and subsequent amendments) “would not have been 17 terminated without cause” because the ABI Equity Agreement “does not allow AB to 18 terminate . . . without cause.” (Dkt. No. 93 at 6.) According to Olympic Eagle, this shows the 19 termination of the Distribution Agreement resulted from Constellation’s 2013 acquisition of 20 rights. 21 4 22 23 24 For example, under Olympic Eagle’s interpretation, if Company A acquired rights in 1901 and subsequently, 100 years later in 2001, decided to elect a new distributor for reasons completely unrelated to the acquisition that occurred in 1901, the terminated distributor could avail itself of § 19.126.040(4). This scenario, in the Court’s view, would be an inappropriate application of § 19.126.040(4) ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 12 1 But this conclusion is speculative. Even if ABI had completed its acquisition of Modelo 2 Grupo in 2013, it is unknown whether ABI would have maintained the 2003 Barton Distribution 3 Agreement as-is, whether it would have modified it, whether it would have terminated it, or 4 whether it would have negotiated a new distribution agreement covering Modelo brands identical 5 or even similar to the Equity Agreement under which Olympic Eagle currently operates. 5 6 Accordingly, reliance on Olympic Eagle’s Equity Agreement to establish the termination of the 7 Distribution Agreement resulted from the 2013 acquisition of rights is misplaced. Alternatively, Olympic Eagle argues the Distribution Agreement’s termination, initially 8 9 attempted in 2022, resulted from Constellation’s 2013 acquisition of rights because it became 10 ABI’s direct competitor and chose to exercise its right to terminate ABI-owned Distributors in 11 2015. (Dkt. No. 100 at 4–7.) As the theory goes, because Constellation terminated the Seattle 12 ABI distributor in 2015 and transferred those rights to Columbia, Olympic Eagle’s termination 13 nine years after the 2013 acquisition and seven years after the termination of the Seattle ABI 14 distributor is the culmination of Constellation’s desire “to consolidate its Puget Sound area 15 distribution.” (Dkt. No. 100 at 6.) Put another way, “Olympic Eagle’s termination is a 16 continuation of Constellation’s efforts to redirect its route to market for the Modelo brands it 17 manufactures away from the distributors aligned with its competitor[.]” (Dkt. No. 91 at 8–9.) The challenge with this theory is that it is just a theory, based solely on Olympic Eagle’s 18 19 belief as to Constellation’s motives and the timing of such motives relative to the 2013 20 acquisition of rights. Olympic Eagle presents no facts establishing that, as of 2013, Constellation 21 22 23 24 5 The Department of Justice clearly was concerned about the anti-trust implications of ABI’s acquisition of Modelo and, arguably, ABI could have directed distribution of Modelo brands to ABI-owned distributors. The point is one simply does not know what ABI would have done with the 2003 Barton Distribution Agreement had it acquired Modelo. ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 13 1 planned to eliminate all ABI-affiliated distributors from distributing Modelo brands. 6 In 2 contrast, the record establishes that after the 2013 acquisition of rights, Olympic Eagle’s 3 distribution rights were twice affirmed through amendments to the Distribution Agreement, and 4 nine years lapsed between acquisition of rights and the first attempt to terminate the Distribution 5 Agreement. It also is undisputed that Constellation continues to maintain distribution 6 agreements with ABI-affiliated distributors, currently making up 34% of its distributors. 7 Furthermore, although Constellation only received manufacturing and distributing rights 8 for Modelo brand beer in 2013, it had been sole importer of the beer, via its subsidiaries Barton 9 and Crown Imports, since 1997. If Constellation had wanted to freeze out ABI-affiliated 10 distributors from selling Modelo brand beer to their retailers, it could have done so any time after 11 1997. Constellation’s acquisition of manufacturing and distribution rights in 2013 did not 12 provide it with any additional power to cut off ABI-affiliated distributors from Modelo brand 13 products; as sole importer, that power was already in its hands. Accordingly, based on the record presented, Olympic Eagle fails to establish it will likely 14 15 succeed on its claim that the termination of the Distribution Agreement resulted from 16 Constellation’s acquisition of rights and its election of a different distributor. 17 This factor weighs against a preliminary injunction. 18 2. Irreparable Harm 19 For purposes of this Motion, the Court focuses on the harm that would result from the 20 immediate transfer of rights versus a transfer occurring after arbitration. This is because harm to 21 22 23 24 6 At oral argument, Olympic Eagle asserted it was prevented from conducting further discovery on this and other issues because of the discovery stay. However, Olympic Eagle never argued discovery was necessary to establish a claim under § 19.126.040(4). In fact, as Constellation notes, the § 19.126.040(4) claim was never previously raised. ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 14 1 Olympic Eagle appears inevitable as the Ninth Circuit has already ruled the Distribution 2 Agreement grants Constellation the ability to terminate its distributions rights without cause— 3 and Constellation in fact has initiated such termination. Thus, the issue is whether irreparable 4 harm will result from immediate transfer of rights versus eventual transfer. This is a harm 5 distinct from the irreparable harm already resulting from the termination of the Distribution 6 Agreement. 7 “Irreparable harm is traditionally defined as harm for which there is no adequate legal 8 remedy, such as an award of damages.” Arizona Dream Act Coal. V. Brewer, 757 F.3d 1053, 9 1068 (9th Cir. 2014) (citation omitted). In other words, “financial injury . . . will not constitute 10 irreparable harm if adequate compensatory relief will be available in the course of litigation.” 11 Mountaineers Foundation v, The Mountaineers, 2023 WL 36333430 (W.D. Wash. May 24, 12 2023) (quoting Goldie's Bookstore, Inc. v. Superior Ct. of State of Cal., 739 F.2d 466, 471 (9th 13 Cir. 1984) (internal quotations omitted). 14 Olympic Eagle asserts the transfer of rights cannot occur immediately because it cannot 15 wait until arbitration to receive compensation. It needs to take steps to expand geographically or 16 acquire additional brands to make up for the loss of revenue and profit that will occur from 17 losing the Modelo brand. However, Olympic Eagle presents no evidence that it has current 18 opportunities to expand or acquire new brands. Rather, it notes that “success is highly 19 speculative” and that past attempts to buy additional brands have been unsuccessful. Moreover, 20 the record lacks information as to Olympic Eagle’s current financial status. There is no 21 information about its current assets relative to the funds it would take to acquire new brands or 22 territory. Thus, even if Olympic Eagle received immediate payment through arbitration, it is 23 speculative as to whether it would succeed in expanding or acquiring new brands. 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 15 1 Olympic Eagle also identifies that it already is in default of its bank loan as a result of 2 Constellation’s termination notice. This means the transfer of rights now or after arbitration does 3 not impact its default status. And, while Olympic Eagle identifies that its bank has given it 4 notice that it “could refuse” additional funds, the record does not establish the bank would refuse 5 additional funds if the transfer of rights were to immediately occur. And while there certainly 6 will be financial repercussions, Olympic Eagle does not identify that its operations would cease 7 if an immediate transfer occurs. Again, financial harm is inevitable because a termination is 8 occurring. 9 Olympic Eagle also asserts harm from the loss of goodwill due to the transfer of rights. 10 This loss of goodwill results from the termination of the Distribution Agreement and not so 11 much as a result of whether the transfer occurs now or after arbitration. 12 Based on the record presented, the Court is unable to find Olympic Eagle has put forth 13 sufficient evidence to show it will face irreparable harm that is distinct from the harm caused by 14 the termination of the Distribution Agreement. 15 This factor weighs against a preliminary injunction. 16 3. Balance of Equities 17 While the Court concludes Olympic Eagle has not identified irreparable harm resulting 18 from immediate transfer that is distinct from the irreparable harm caused by the termination of 19 the Distribution Agreement, the harm Olympic Eagle would suffer if a preliminary injunction 20 were not granted is still greater on balance than the harm Constellation would suffer from the 21 issuance of a permanent injunction. 22 23 This is because any harm Constellation complains of would only be temporary. Constellation holds all rights to manufacture and distribute the Modelo brands. It owns the 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 16 1 Modelo brand market in the region subject of the Distribution Agreement. There is no evidence 2 that Constellation, through its distributors, would be unable to maintain its relationships with the 3 retailers or that sales of its products would forever be injured. In fact, there is no evidence there 4 would be a gap in the delivery of Modelo products to retailers if an injunction were granted. 5 Thus, as compared to the financial harm Olympic Eagle will suffer from a delay in 6 compensation, Constellation likely would not suffer any significant financial harm. 7 This factor weighs in favor of granting the Motion. 8 4. Public Interest 9 “When the reach of an injunction is narrow, limited only to the parties, and has no impact 10 on non-parties, the public interest will be ‘at most a neutral factor in the analysis rather than one 11 that favor[s] [granting or] denying the preliminary injunction.’” Stormans, Inc., 586 F.3d at 12 1138–1139 (citations omitted). “If, however, the impact of an injunction reaches beyond the 13 parties, carrying with it a potential for public consequences, the public interest will be relevant to 14 whether the district grants the preliminary injunction. Id. at 1139. 15 Olympic Eagle argues that “compliance with the law” is in the public interest. (Dkt. No. 16 91 at 26.) Olympic Eagle contends that Constellation violated the law in terminating their 17 Distribution Agreement without cause and so the TRO is in the public interest. (Id.) 18 Notwithstanding Olympic Eagle’s belief that Constellation violated the law in terminating 19 Distribution Agreement without cause, the Ninth Circuit has already determined Constellation’s 20 without cause termination is lawful. (Dkt. No. 78 at 4) (“The [Distribution] Agreement grants 21 [Constellation/Crown Imports] the right to terminate without cause.”). Thus, determination of 22 compensation for the distribution rights is a private affair resting squarely in the interests of the 23 parties and not the public. And, because it does not appear the termination of the Distribution 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 17 1 Agreement would create a lapse in the public’s ability to purchase Modelo products, there is no 2 impact on the public. 3 This factor weighs against a preliminary injunction. 4 5. Wild Rockies/Winter Alternative Test Not Applicable 5 Olympic Eagle argues that in the event it is unable to convince the Court of its likelihood 6 of success on the merits of its § 19.126.040(4) claim, at a minimum it has raised serious 7 questions about the merits of its claim, which means the alternative Wild Rockies/Winter test for 8 obtaining injunctive relief applies. (Dkt. No. 91 at 20.) 9 However, as already noted, the alternate Wild Rockies/Winter is inapplicable if a 10 petitioner fails to establish the likelihood of irreparable damage and that the injunction is in the 11 public interest. Alliance for the Wild Rockies, 632 F.3d at 1135 (“‘serious questions going to the 12 merits’ and a balance of hardships that tips sharply towards the plaintiff can support issuance of a 13 preliminary injunction, so long as plaintiff also shows that there is a likelihood of irreparable 14 damage and that the injunction is in the public interest.”). 15 Having concluded the records fails to establish irreparable damage or public interest in 16 the grant or denial of a preliminary injunction, Olympic Eagle is not entitled to relief under the 17 Wild Rockies/Winter test. 18 19 20 21 22 23 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 18 1 2 IV. CONCLUSION Because Olympic Eagle has failed to establish a likelihood of success, irreparable harm, 3 or that a grant of the Motion is in the public interest, the Court DENIES Plaintiff Olympic 4 Eagle’s second motion for a temporary restraining order. (Dkt. No. 91.) 5 6 7 8 Dated this 9th day of November 2023. A David G. Estudillo United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 ORDER ON SECOND MOTION FOR TEMPORARY RESTRAINING ORDER (DKT. NO. 91) - 19
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