United States District Court, D. Nevada
ORDER (DEF'S MOTION TO DISMISS - ECF NO. 25;
DEF'S OBJECTIONS - ECF NO. 71.)
MIRANDA M. DU UNITED STATES DISTRICT JUDGE
case centers on a contract dispute between an out of state
brewer and a Nevada distributer. Before the Court are a
Motion to Dismiss (“Motion”) filed by Defendant
Sierra Nevada Brewing Co. (“Sierra Nevada”) (ECF
No. 25) and Objections to the Magistrate Judge's March 1,
2016, order on several discovery issues
(“Objections”) (ECF No. 71) filed by Plaintiff
Crown Beverages, Inc (“Crown”). The Court has
reviewed Crown's response (ECF No. 38) and Sierra
Nevada's reply (ECF No. 40) to the Motion to Dismiss, as
well as Sierra Nevada's response to the Objections (ECF
reasons discussed below, Sierra Nevada's Motion is
granted in part and denied in part, and Crown's
Objections are overruled.
Nevada's Alcohol Distribution Regulatory Scheme
§ 597.120 et seq governs the relationship
between alcohol producers (in this case an out of state
brewery) and wholesalers in Nevada. Relevant to this case,
Nevada requires a brewer to give a wholesaler 90 days'
notice before terminating a franchise agreement and also
requires the brewer to inform the wholesaler of the reason
for the termination. NRS § 597.150(1). The wholesaler is
then allowed 60 days to attempt to correct the reason for the
termination. NRS § 597.160(3). Furthermore, a supplier
must establish good cause for termination. NRS §
597.160(2). Good cause is defined as:
1. Failure by a wholesaler to comply substantially with
essential and reasonable requirements imposed on him or her
by a supplier, or sought to be imposed by a supplier, if the
requirements are not discriminatory as compared with
requirements imposed on other similarly suited wholesalers
either by their terms or in the manner of their enforcement.
2. Bad faith by the wholesaler in carrying out the terms of
the franchise agreement.
NRS § 597.144.
The Relationship Between Sierra Nevada and Crown
following facts are based on the allegations in the Amended
Complaint (ECF No. 16) and on exhibits attached to
Crown's Motion for Preliminary Injunction (ECF No. 14).
Crown is a licensed Nevada alcohol wholesaler and importer,
and is a registered supplier of alcoholic beverages. (ECF No.
16 ¶¶ 5, 6, 8.) On December 1, 1986, Crown entered
into an agreement (“Distribution Agreement”) with
Sierra Nevada making Crown the exclusive importer and
wholesaler of Sierra Nevada's products in northern
Nevada. (Id. ¶ 10.)
October 26, 2016, Sierra Nevada sent Crown a letter
(“October Letter”) indicating that Sierra Nevada
wished to end the business relationship due to Crown's
“harassment and bullying tactics directed toward our
employees” and asking Crown to “initiate
discussions to sell [Crown's] distribution rights.”
(Id. ¶ 17; ECF No. 14-4.) On November 3, 2016,
Crown filed suit in state court, alleging that Sierra Nevada
has violated NRS § 597.120 et seq and committed
several torts. (ECF No. 1-1.)
November 9, 2016, Sierra Nevada sent Crown a second letter
(“November Letter”) in which it stated:
“Sierra Nevada did not purport to terminate its
[“Distribution Agreement”] with Crown, ” in
the October Letter, but now was asserting several bases for
termination and providing Crown with the 90 day statutorily
required notice. (ECF No. 16 ¶¶ 22, 23; ECF No.
14-5.) Sierra Nevada enumerated several grounds for
terminating the Distribution Agreement, including:
(1) submitting false and misleading accounting reports,
including overbilling […]; (2) failure to provide a
competitive level of service which has drawn complaints from
retail accounts raising issues with Crown's performance;
(3) ongoing retail execution that fails to meet Sierra
Nevada's brand standards […]; (4) below average
2016 execution performance on key brand building executables
[…]; (5) improper care and oversight of Sierra
Nevada's product, including failure to properly
refrigerate product and to ensure product was maintained
within expiration parameters; and, most importantly, (6)
abusive and unprofessional conduct at meetings held with
Sierra Nevada people, including one which during [Crown
President Paul Bond was] evidently intoxicated and brandished
a firearm to threaten them.
(ECF No. 14-5 at 3.)
parties met on November 15, 2016, in an attempt to resolve
the issues raised in the November Letter. (Id.
¶ 24.) After the meeting, Crown sent a letter proposing
steps it would take to cure the problems identified by Sierra
Nevada. (Id. ¶ 28.) On November, 28, 2016,
Sierra Nevada responded and stated that Crown's proposal
was inadequate. (Id. ¶ 30.) In its response,
Sierra Nevada also introduced, for the first time, a scoring
metric which it claimed also justified its decision.
Nevada removed the suit to this Court on November 30, 2016.
(ECF No. 1.) Crown filed an Amended Complaint on December 14,
2016 (ECF No. 16), and Sierra Nevada filed its Motion to
Dismiss on December 27, 2016 (ECF No. 25). Sierra Nevada
argues that Crown is attempting to shoehorn several tort
claims into their contract claims, and thereby impermissibly
“turn [their] contract disputes into tort disputes with
the specter of punitive damages.” (ECF No. 25 at 6.)
MOTION TO DISMISS
may dismiss a plaintiff's complaint for “failure to
state a claim upon which relief can be granted.”
Fed.R.Civ.P. 12(b)(6). A properly pled complaint must provide
“a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed.R.Civ.P.
8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555 (2007). While Rule 8 does not require detailed
factual allegations, it demands more than “labels and
conclusions” or a “formulaic recitation of the
elements of a cause of action.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citing Papasan v.
Allain, 478 U.S. 265, 286 (1986)). “Factual
allegations must be enough to rise above the speculative
level.” Twombly, 550 U.S. at 555. Thus, ...