Opinion
No. 89-3593.
May 22, 1991.
Richard M. Blau, Stacy D. Blank, Holland Knight, Tampa, Fla., for defendant-appellant, cross-appellee.
David H. Simmons, Thomas F. Neal, Drage, deBeaubien, Knight Simmons, Orlando, Fla., for plaintiff-appellee, cross-appellant.
Appeals from the United States District Court for the Middle District of Florida.
Before KRAVITCH and COX, Circuit Judges, and RONEY, Senior Circuit Judge.
This appeal involves the retroactive application of Florida's beer distribution statute, Fla.Stat. § 563.022, to an existing alcoholic beverage distribution contract between All Brand Importers, Inc. (All Brand) and Geary Distributing Company, Inc. (Geary). The district court held that the beer distribution statute could be retroactively applied to the contract between All Brand and Geary and that All Brand had violated the statute by unreasonably withholding its consent to a proposed assignment by Geary of its rights under the contract. The court awarded Geary compensatory damages, interest and attorneys' fees totalling $114,351.22. Both All Brand and Geary appeal.
I. FACTS AND PROCEDURAL HISTORY
All Brand is a New York corporation in the business of supplying alcoholic beverages at wholesale to distributors in several states including Florida. Geary is a Florida corporation that did business as a distributor of alcoholic beverages in Orange, Volusia and Brevard Counties in Florida. In 1978, Geary and All Brand entered into an oral agreement that authorized Geary to distribute All Brand products, including Foster's Lager and Moosehead beer. The distribution agreement was in effect until 1987, when the present dispute arose. There was no written agreement evidencing the terms of the oral agreement. In 1984, All Brand signed a proposed written agreement, but Geary refused to sign. Both parties maintain that this written document reflects the content of their oral agreement, except for a provision concerning exclusivity of the distributorship. A copy of the 1984 document is attached as Appendix A to this opinion.
In 1985, Geary ceased its operations in Orange County and sought to assign its distributorship rights for Orange County to Jim Taylor Corporation. Geary, pursuant to its oral agreement with All Brand, asked All Brand to consent to the assignment of distributorship rights. All Brand, after reviewing Taylor's qualifications, eventually consented to the assignment.
Later, Geary sought to assign its distributorship rights for Volusia County to Central Florida Distributors. Geary asked that All Brand consent to the assignment. All Brand, after reviewing Central Florida Distributors' qualifications, consented to this assignment also.
Then in September 1987, Geary requested All Brand's consent to Geary's assignment of the distribution rights for Brevard County to Grantham Distribution Company. According to the terms of an agreement between Geary and Grantham, Geary would receive an additional $75,000 if Geary could ensure Grantham that it would be designated All Brand's distributor for Brevard County. All Brand refused to consent to the assignment to Grantham. All Brand maintains that it had a number of valid business reasons for refusing to consent to this assignment.
After All Brand refused to consent to the assignment to Grantham, Geary filed this action in the Circuit Court of Orange County, Florida. Geary alleges that All Brand unreasonably withheld consent to the assignment. Geary relies upon a recently enacted Florida statute, Fla.Stat.Ann. § 563.022 (West Supp. 1990) (the beer distribution statute), as the principal basis for its cause of action. The beer distribution statute provides that a manufacturer may not unreasonably withhold consent to the assignment of distribution rights. See Fla. Stat.Ann. § 563.022(5)(b)(7) (West Supp. 1990).
Geary also had other theories to support its cause of action. Because the district court did not address them, we do not address them.
All Brand removed the case to federal court and answered Geary's complaint by asserting that Florida's statute of frauds, Fla.Stat.Ann. § 725.01 (West 1988), precludes this cause of action and that retroactive application of the beer distribution statute would violate the Florida Constitution's contract clause, and the United States Constitution's contract clause. Geary maintains that the beer distribution statute supersedes the statute of frauds and controls this cause of action.
The Florida Constitution's contract clause provides, in pertinent part:
No . . . law impairing the obligation of contracts shall be passed.
Fla. Const. art. I, § 10.
The United States Constitution's contract clause provides, in pertinent part:
No State shall . . . pass any . . . Law impairing the Obligation of Contracts. . . .
U.S. Const. art. I, § 10, cl. 1.
The district court agreed with Geary and held that the beer distribution statute supersedes the Florida statute of frauds and is the controlling statute in the case. In making that determination the district court concluded that the beer distribution statute could be applied retroactively without violating the United States Constitution's contract clause. The court, however, failed to explicitly address All Brand's contention that the retroactive application of the beer distribution statute would violate the Florida Constitution's contract clause.
After a bench trial, the district court found that All Brand had unreasonably withheld consent to the assignment. The court awarded Geary $75,000 in compensatory damages, $14,351.22 in interest, and $25,000 in attorneys' fees. No evidentiary hearing was held on Geary's request for attorneys' fees. Both parties appeal.
II. CONTENTIONS OF THE PARTIES ON APPEAL
All Brand contends that the district court erred by retroactively applying the beer distribution statute, Fla.Stat.Ann. § 563.022, to the contract at issue in this case. Geary contends that the district court erred by failing to conduct an evidentiary hearing to determine the amount of attorneys' fees to be awarded in this case.
III. DISCUSSION
The district court ruled that retroactive application of the beer distribution statute does not violate the United States Constitution's contract clause. We need not address this question because we hold that retroactive application of the beer distribution statute violates the Florida Constitution's contract clause.
Although the wording of both contract clauses is almost identical, the interpretation of the clauses has not been identical. The Supreme Court of Florida stated that "this Court, when construing a provision of the Florida Constitution, is not bound to accept as controlling the United States Supreme Court's interpretation of a parallel provision of the federal Constitution." Pomponio v. Claridge of Pompano Condominium, Inc., 378 So.2d 774, 779 (Fla. 1979). In Pomponio, the Supreme Court of Florida adopted an approach to the Florida contract clause that the court termed "similar" to that of the United States Supreme Court's approach to the federal contract clause. Id. at 780. Although the approach is similar, Florida courts interpreting the Florida contract clause appear to tolerate less impairment than the federal courts interpreting the federal contract clause. See id.
The Florida Constitution provides that "[n]o ... law impairing the obligation of contracts shall be passed." Fla. Const. art. I, § 10. The correct interpretation of this provision of the Florida Constitution is a question of Florida law. "Therefore, federal courts are required to construe the [Florida Constitution] ... as would the Supreme Court of Florida." Royal Health Care Servs., Inc. v. Jefferson-Pilot Life Ins. Co., 924 F.2d 215, 216 (11th Cir. 1991). Where the Supreme Court of Florida has not addressed a particular issue, federal courts are then bound by the decisions of the Florida district courts of appeal that address the disputed issue, unless there is an indication that the supreme court would not adhere to the district court's decision. Maseda v. Honda Motor Co., 861 F.2d 1248, 1257 n. 14 (11th Cir. 1988); Rabon v. Automatic Fasteners, Inc., 672 F.2d 1231, 1235 n. 7 (5th Cir. Unit B 1982).
In Stein v. Reynolds Securities, Inc., 667 F.2d 33, 34 (11th Cir. 1982), this court adopted as binding precedent all decisions of Unit B of the former Fifth Circuit.
We now turn to the substantive question at hand: whether the beer distribution statute can be applied retroactively to a contract entered into before the statute's enactment. The Supreme Court of Florida has not addressed the retroactivity of this particular statute, but an intermediate appellate court in Florida has. In Gans v. Miller Brewing Co., 560 So.2d 281 (Fla. 4th Dist.Ct.App. 1990), the Florida Fourth District Court of Appeal held that retroactive application of the beer distribution statute violates the Florida Constitution's contract clause.
In Gans, the Miller Brewing Company and Douglas Kerr had entered into a contract that authorized Kerr's company, the Huber Distributing Company, to distribute Miller's products. The contract provided that Kerr could not assign the distributorship rights without the written consent of Miller. Thereafter Kerr agreed to assign his distribution rights under the contract to Robert Gans. Miller refused to consent to the assignment and Kerr's distribution rights were not assigned to Gans. Gans, relying upon the beer distribution statute, Fla.Stat. § 563.022, sued Miller for unreasonably withholding consent to the assignment. The court held that the "suit would violate the Florida Constitution, Article I, § 10. The written contract in question predated the enactment of section 563.022 and said contract gave Miller the right to approve any sale of the Huber distributorship." Gans, 560 So.2d at 283. Because Gans is a decision of a Florida district court of appeal, we are bound by that decision unless there is an indication that the Supreme Court of Florida would decide the issue otherwise. Maseda, 861 F.2d at 1257 n. 14; Rabon, 672 F.2d at 1235 n. 7.
Any review of the Supreme Court of Florida's interpretation of the Florida Constitution's contract clause must begin with Yamaha Parts Distribs., Inc. v. Ehrman, 316 So.2d 557 (Fla. 1975). In rejecting the contention that the legislature may retroactively lengthen the notice required to terminate a franchise agreement, the court noted that "[v]irtually no degree of contract impairment has been tolerated in this state." Id. at 559. The court stated that "the state's interest in policing franchise agreements and other manifestations of the motor vehicle distribution system is not so great as to override the sanctity of contracts." Id.
The supreme court expanded upon Yamaha in Pomponio v. Claridge of Pompano Condominium, Inc., 378 So.2d 774 (Fla. 1979). The Pomponio court stated that "our conclusion in Yamaha that `virtually' no impairment is tolerable necessarily implies that some impairment is tolerable, although perhaps not so much as would be acceptable under traditional federal contract clause analysis." Id. at 780. The court went on to develop a balancing test similar to the one used in federal contract clause analysis. The court stated that "we must weigh the degree to which a party's contract rights are statutorily impaired against both the source of authority under which the state purports to alter the contractual relationship and the evil which it seeks to remedy." Id.
The beer distribution statute impairs this contract in several ways. The most significant contract impairment is that the statute imposes the restriction that All Brand cannot unreasonably withhold consent to an assignment of distributorship rights. The district court found that this restriction does not impair the contract because the common law of Florida prohibits All Brand from unreasonably withholding consent to the assignment.
This court, like the district court, is unable to locate any reported cases establishing this as the common law of Florida. The only Florida case mentioning the issue explicitly stated that it was not deciding the question. See Troup v. Meyer, 116 So.2d 467 (Fla. 3rd Dist.Ct.App. 1959).
In concluding that the common law of Florida requires that consent to assignments not be unreasonably withheld the district court relied on several landlord/tenant cases. Such cases are unpersuasive when dealing with franchise or distributorship contracts. There is a distinct difference in the relationship between a landlord and tenant and a franchisor and franchisee. A franchisor is markedly more concerned with a franchisee's qualifications, business conduct, and marketing techniques than is a landlord with a tenant's business.
Florida law does not permit assignment of distributorship contracts unless the contract specifically provides for assignments. See Parker v. Evening News Pub. Co., 54 Fla. 544, 45 So. 309 (1907); see also Clinton Foods, Inc. v. Frozen Foods, Inc., 130 F. Supp. 422 (S.D.Fla. 1955). Thus, because assignments in this area are not favored, we would be reluctant to conclude that consent to an assignment could not be unreasonably withheld by a party to the contract.
The beer distribution statute also impairs the contract by requiring the reasonableness of the consent to be based on the qualifications of Florida distributors only rather than on national standards. See Fla.Stat.Ann. § 563.022(2)(j) (West Supp. 1990). The statute further impairs the contract by providing that the franchisor, not the franchisee, bears the burden of proving that consent was withheld reasonably. See id. at § 563.022(8). Finally, the statute impairs the contract by allowing the prevailing party in a cause of action under the statute to be awarded reasonable attorneys' fees. See id. at § 563.022(18)(c).
Having concluded that the statute impairs the contract, we must now determine the state's authority for the statute and the evil the statute seeks to remedy. The state's authority for the statute comes not from the Twenty-First Amendment to the United States Constitution, as Geary contends, but rather from its inherent police power. The Twenty-First Amendment allows a state to circumvent only federal constitutional provisions, not state constitutional limitations. See California v. La Rue, 409 U.S. 109, 93 S.Ct. 390, 34 L.Ed.2d 342 (1972); Park Benziger Co. v. Southern Wine Spirits, Inc., 391 So.2d 681, 683 (Fla. 1980); see also Bellanca v. New York State Liquor Auth., 54 N.Y.2d 228, 429 N.E.2d 765, 445 N.Y.S.2d 87 (1981), cert. denied, 456 U.S. 1006, 102 S.Ct. 2296, 73 L.Ed.2d 1300 (1982); Heublein, Inc. v. Department of Alcoholic Beverage Control, 237 Va. 192, 376 S.E.2d 77 (1989). Thus, the state's authority for the statute is its inherent police power to regulate commercial activity within its borders. The evil the statute seeks to eliminate is unfair business practices by franchisors that restrict the distribution of malt beverage products to the public.
The Twenty-First Amendment to the United States Constitution provides, in pertinent part:
The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.
U.S. Const. amend. XXI, § 2.
In balancing the impairment of the contract against the authority for the statute and the evil it seeks to eradicate, we conclude that the Supreme Court of Florida would find the impairment is significantly greater than necessary. As stated by the supreme court in Yamaha, "the state's interest in policing franchise agreements and other manifestations of the ... [malt beverage] distribution system is not so great as to override the sanctity of contracts." Yamaha, 316 So.2d at 559. Although the preservation of Florida's supply of malt beverages is an important goal, it is not enough to outweigh the impairment wrought by the statute. We conclude that there is no indication that the Supreme Court of Florida would decide the question differently. The Gans decision, therefore, controls this case.
IV. CONCLUSION
We conclude that the district court erred by ruling that the beer distribution statute could be retroactively applied to the contract at issue. We VACATE the district court's final judgment, including the award of attorneys' fees, and REMAND for proceedings consistent with this opinion.
In light of our holding that the beer distribution statute cannot be retroactively applied to the contract at issue, it necessarily follows that the award of attorneys' fees to Geary under the beer distribution statute must be vacated.
Geary's motion for attorneys' fees on appeal is denied.
VACATED and REMANDED.