The opinion
Filed 9/25/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
MISSION BEVERAGE COMPANY, B271781
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC578821)
v.
PABST BREWING COMPANY, LLC,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County. Maureen Duffy-Lewis, Judge. Affirmed.
McDermott Will & Emery, Richard K. Welsh, Gregory
R. Jones, and Jeffrey A. Zuidema for Defendant and Appellant.
Morgan Lewis & Bockius, Thomas M. Peterson, Brian
C. Rocca, Phillip J. Wiese, and Seth M. Gerber for Plaintiff and
Respondent.
******
A brewer of beer decided to replace one of its distributors,
and sent that distributor a letter terminating their distribution
contract and invoking the statutory procedure requiring an
existing distributor to negotiate and, if necessary, arbitrate with
its successor to settle the “fair market value” of its
distributorship rights (Bus. & Prof. Code, § 25000.2). 1 The
ousted distributor sued the brewer for breaching the contract’s
termination-for-cause requirement and for declaratory relief.
The brewer responded with a motion to strike the entire
complaint under the anti-SLAPP 2 statute (Code Civ. Proc.,
§ 425.16). This appeal presents two questions: (1) Does a
brewer’s cancellation of a contract, when that cancellation will be
followed by negotiation and possibly arbitration under section
25000.2, qualify as “protected activity” within the meaning of the
anti-SLAPP statute?; and (2) Does the ousted distributor’s
lawsuit for breach of contract and declaratory relief lack minimal
merit on the ground that section 25000.2 immunizes successor
brewers from liability for breach of contract because it
affirmatively grants those brewers a right to terminate
distribution contracts and provides full compensation for the
ousted distributor? We conclude that the answer to both
questions is “no,” and accordingly affirm the trial court’s denial of
the brewer’s anti-SLAPP motion in this case.
1 All further statutory citations are to the Business and
Professions Code unless otherwise indicated.
2 “SLAPP” is short for “strategic lawsuit against public
participation.”
2
FACTS AN PROCEDURAL BACKGROUND
I. Facts
Defendant and appellant Pabst Brewing Company, LLC
(Pabst) is a brewer of beers; among others, Pabst brews such
American classics as Pabst Blue Ribbon, Colt 45 Malt Liquor, Old
Milwaukee, Schlitz, and Stroh’s.
In January 2009, Pabst entered into a written Distributor
Agreement (Agreement) with plaintiff and respondent Mission
Beverage Company (Mission). Pabst granted Mission the
exclusive right to distribute many of its beers within specifically
delineated boundaries within Los Angeles County. In turn,
Mission promised to “aggressively promote, encourage, and
increase” the sales of, and “customer satisfaction” with, those
beers. The parties’ powers to terminate the contract were not the
same: Mission could terminate the contract with 60 days’ notice
and irrespective of cause, while Pabst could terminate the
contract only for one of ten enumerated reasons and then only if
it gave Mission an opportunity to cure. One of those ten reasons,
memorialized in section 8.2.10 of the Agreement, permits Pabst
to terminate the Agreement if Pabst has a “right to terminate”
under “applicable state or federal law, statute or regulation.”
The Agreement also provides that any and all litigation should
occur in court, and contemplates that Mission recover attorney’s
fees if it prevails in litigation against Pabst.
In November 2014, Pabst came under new ownership.
Three months later, in February 2015, Pabst sent Mission a
letter “commencing termination” of the Agreement “pursuant
to . . . [section] 25000.2 and Section 8.2.10 of
[the] . . . Agreement.” Pabst stated that Classic Distributing &
Beverage Group, Inc. (Classic) and Beauchamp Distributing
3
Company (Beauchamp) would be replacing Mission as Pabst’s
distributor. 3 Pabst did not cite any other basis for terminating
the Agreement.
As discussed more fully below, section 25000.2 provides
that when a brewer who acquires the right to manufacture beer
“cancels any of [an] existing beer wholesaler’s rights to distribute
[a] product,” that successor brewer’s designated replacement
distributors must negotiate in good faith—and, failing that,
arbitrate—with the existing distributor “to determine the fair
market value of the affected distribution rights.” (§ 25000.2,
subds. (b), (d), (e) & (f).) Adhering to these procedures, Pabst’s
designated distributors tried to negotiate with Mission and, when
that failed, in March 2015, sent Mission a letter initiating
arbitration.
II. Procedural Background
In April 2015, Mission sued Pabst for (1) breach of contract,
and (2) declaratory relief. Specifically, Mission alleged that Pabst
breached the Agreement by “attempting to terminate” the
Agreement on the basis of section 25000.2, which did not “provide
an independent right to terminate . . . .” Mission also sought a
declaration that there was no valid “termination” of the
Agreement.
Mission made several attempts to halt the ongoing
arbitration between itself and Pabst’s newly designated
distributors, all to no avail. Mission made an ex parte motion to
stay the arbitration, but that motion was denied “without
prejudice” to filing a noticed motion. Mission thereafter filed a
3 Pabst named a third distributor, Harbor Distributing, LLC,
in its letter, but that distributor at some point dropped out of the
running to replace Mission.
4
noticed motion, but that motion was also denied. Not deterred,
Mission also asked the arbitrator to dismiss the arbitration, but
the arbitrator refused.
The arbitrator issued a final award in October 2015. In the
award, the arbitrator made clear that his order “contain[ed] no
findings, declarations or damages determinations regarding
Mission’s [pending civil] cause of action . . . that Pabst breached
the . . . Agreement.” However, the arbitrator fixed the fair
market value of the distributorship rights conferred by the
Agreement. 4 Mission did not appeal the award, and Classic and
Beauchamp thereafter paid Mission the amount fixed by the
arbitrator.
Pabst then filed a motion to strike Mission’s lawsuit under
the anti-SLAPP statute. 5 Pabst argued that the “linchpin” of
Mission’s lawsuit was Pabst’s “invo[cation of] the statutorily-
mandated arbitration process under [s]ection 25000.2,” which
Pabst asserted was “protected activity” under the anti-SLAPP
statute. Pabst further contended that Mission’s lawsuit lacked
minimal merit because no “legally viable or non-duplicative
remedy” remained once Mission had accepted the payment
reflecting the fair market value of its distributorship rights from
Classic and Beauchamp.
4 Pabst has moved to augment the record with an unredacted
version of the arbitrator’s award revealing proprietary financial
data and the actual amount awarded. Because the proprietary
data and the award amount are not relevant to our resolution of
the issues in this appeal, we deny the motion to augment.
5 Pabst also filed a demurrer, which was subsequently
overruled and is not challenged on appeal.
5
The trial court denied the motion. The court acknowledged
that “protected activity” under the anti-SLAPP statute included
activities related to “official proceeding[s]” such as “statutorily
required . . . arbitration[s],” but concluded that Mission’s lawsuit
was separate and distinct from the arbitration: The lawsuit was
“for breach of the contract between [Mission and Pabst],” while
the arbitration was “between the distributors,” and the primary
issue in the lawsuit—“whether the [Agreement] was validly
terminated”—is “an issue separate [from] (and prerequisite to)
the arbitration, . . . not part of [it].”
After the trial court entered its order, Pabst filed this
timely appeal.
DISCUSSION
Pabst argues that the trial court erred in denying its anti-
SLAPP motion. We independently review the trial court’s ruling.
(Park v. Board of Trustees of California State University (2017)
2 Cal.5th 1057, 1067 (Park).) Because this case lies at the
intersection of the anti-SLAPP statute and the Alcoholic
Beverage Control Act (§ 23000 et seq.), we will discuss the
pertinent portions of each before turning to the merits of this
appeal.
I. The Anti-SLAPP Statute
The anti-SLAPP statute “provides a procedure for weeding
out, at an early stage, meritless claims arising from protected
activity.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 384 (Baral).)
Specifically, the anti-SLAPP statute protects—and thus
“subject[s] to a special motion to strike”—any “cause of
action . . . arising from any act of [a] person in furtherance of the
person’s right to petition or free speech under the United States
6
Constitution or the California Constitution in connection with a
public issue.” (Code Civ. Proc., § 425.16, subd. (b)(1).)
When a party moves to strike a cause of action (or portion
thereof) under the anti-SLAPP statute, a trial court has two
tasks. (Barry v. State Bar of California (2017) 2 Cal.5th 318, 321
(Barry).)
First, the court must evaluate whether the moving party
has “made a threshold showing that the challenged cause of
action arises from protected activity.” (Rusheen v. Cohen (2006)
37 Cal.4th 1048, 1056.) This evaluation turns on two subsidiary
questions: (1) What conduct does the challenged cause of action
“arise[] from”; and (2) is that conduct “protected activity” under
the anti-SLAPP statute?
A cause of action “arises from” protected activity when the
“cause of action itself” is “based on” protected activity. (City of
Cotati v. Cashman (2002) 29 Cal.4th 69, 78 (City of Cotati);
Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th
1106, 1114 (Briggs) [“arises from” means “based upon”].)
Whether a cause of action is itself based on protected activity
turns on whether its “‘“principal thrust or gravamen”’” is
protected activity—that is, whether the “‘core injury-producing
conduct’” warranting relief under that cause of action is protected
activity. (Colyear v. Rolling Hills Community Assn. of Rancho
Palos Verdes (2017) 9 Cal.App.5th 119, 134.)
“[W]hether [activity] is protected under the anti-SLAPP
statute” turns “not [on] First Amendment law, but [rather on] the
statutory definitions in [Code of Civil Procedure] section 425.16,
subdivision (e).” (City of Montebello v. Vasquez (2016) 1 Cal.5th
409, 422 (City of Montebello).) Code of Civil Procedure section
425.16, subdivision (e) defines four categories of protected
7
activity. Two are pertinent here—namely, (1) “any written or
oral statement or writing made before a legislative, executive, or
judicial proceeding, or any other official proceeding authorized by
law,” and (2) “any written or oral statement or writing made in
connection with an issue under consideration or review by a
legislative, executive, or judicial body, or any other official
proceeding authorized by law.” (Code Civ. Proc., § 425.16, subd.
(e)(1) & (2).)
Second, and only if the court concludes that the litigant has
made this “threshold showing,” the court must examine whether
the nonmoving party has “established . . . a probability that [it]
will prevail” on the challenged cause(s) of action. (Code Civ.
Proc., § 425.16, subd. (b)(1); Oasis West Realty, LLC v. Goldman
(2011) 51 Cal.4th 811, 819-820 (Oasis West).) This burden is met
if the nonmoving party demonstrates that any challenged cause
of action has “minimal merit” (Navellier v. Sletten (2002)
29 Cal.4th 82, 94), and it does so by making a “prima facie factual
showing sufficient to sustain a favorable judgment” on that cause
of action (Baral, supra, 1 Cal.5th at pp. 384-385). In assessing
the sufficiency of this showing, a court is to “consider the
pleadings, and supporting and opposing affidavits” (Code Civ.
Proc., § 425.16, subd. (b)(2)), but must “‘“accept as true the
evidence favorable to the [nonmoving party] and evaluate the
[moving party’s] evidence only to determine if it has defeated that
submitted by the [nonmoving party] as a matter of law.”’” (Oasis
West, at p. 820.) If the nonmoving party satisfies its burden, the
anti-SLAPP motion must denied; if it fails to do so, the pertinent
cause of action must be dismissed. (Barry, supra, 2 Cal.5th
at p. 321.)
8
II. The Alcoholic Beverage Control Act
The Alcoholic Beverage Control Act (Act) is designed,
among other things, “to eliminate the evils of unlicensed and
unlawful manufacture, selling, and disposing of alcoholic
beverages.” (§ 23001.) To accomplish this end, the Act divides up
the distribution chain for alcohol into three tiers—namely,
(1) “manufacturers,” (2) “wholesalers” or distributors, and
(3) “retailers” (§§ 23012, 23021, & 23023); requires each to be
licensed (§§ 23300, 23356, 23378, 23393, 23394, 23396, & 23402);
and generally prohibits each from having an ownership interest
in the others (§§ 23772, 23776, & 23784).
“The sale of beer is . . . highly regulated.” (Crown Imports,
LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1406-1407
(Crown Imports).) That is because, in addition to the Act’s
general provisions, several provisions specifically regulate the
contractual relationships between “beer manufacturers” (or
brewers) and “beer wholesalers” (or distributors). (§ 25000 et
seq.) The Act requires their agreements to be in writing and to
specifically “designate [the] territorial limits” of any grant of
distribution rights. (§ 25000.5, subds. (a) & (b).) The Act
prohibits a brewer from retaining the power to terminate a
distribution agreement “solely” due to the “beer [distributor’s]
failure to meet a sales goal or quota” unless that goal or quota is
“commercially reasonable under the prevailing market
conditions.” (§ 25000.7, subd. (a).) And the Act permits a brewer
to contractually reserve the right to prohibit a distributor from
changing its ownership, but renders the brewer “liable in
damages to the” distributor if the brewer “unreasonably
withholds consent or unreasonably denies approval of a sale,
transfer, or assignment of any ownership interest.” (§ 25000.9.)
9
Section 25000.2 dictates the procedures to be followed when
a “successor beer manufacturer . . . acquires the rights to
manufacture” held by a brewer, and then “cancels any of the
[brewer’s] existing beer [distributor’s] rights to distribute the
product.” (§ 25000.2, subd. (b).) The successor brewer “cancels” a
distribution contract if it “terminate[s], reduce[s], [does] not
renew, [does] not appoint or reappoint, or cause[s] any of the
same.” (§ 25000.2, subd. (a)(4).) The pertinent procedure is as
follows. First, the successor brewer must “notify” the existing
distributor of its “intent to cancel any of the existing
[distributor’s] rights to distribute the product.” (§ 25000.2, subd.
(c)(1).) Second, the entity the new brewer wants to be its new
distributor—whom the Act calls the “successor beer
manufacturer’s designee”—is required to “negotiate in good faith”
with the existing distributor to “determine the fair market value
of the affected distribution rights.” (§ 25000.2, subd. (d); see also
§ 25000.2, subd. (a)(9) [defining “[s]uccessor beer manufacturer’s
designee”].) “Fair market value” is defined as “all elements of
value, including, but not limited to, goodwill.” (§ 25000.2, subd.
(a)(6).) If the existing distributor and the successor brewer’s
preferred distributor can “agree to the fair market value,” then
the successor brewer’s preferred distributor “shall compensate
the existing” distributor “in the agreed amount.” (§ 25000.2,
subd. (d).) If they “are unable to mutually agree,” then the
successor brewer’s preferred distributor “shall initiate
arbitration . . . to determine the issue of compensation for the fair
market value of the affected distribution rights” following the
timelines set forth in the statute, and if the existing distributor
does not appeal the arbitration award, the successor brewer’s
preferred distributor must pay the existing distributor that
10
amount. (§ 25000.2, subd. (f).) The existing distributor continues
to distribute the beer until and unless the above-described
procedures have run their course and the existing distributor
receives the amount fixed by negotiation or arbitration.
(§ 25000.2, subds. (e) & (g).)
III. Analysis
A. Do Mission’s Claims Arise From Protected
Activity?
Pabst argues that the trial court erred in concluding that
Mission’s breach of contract and declaratory relief claims did not
arise from protected activity because (1) those claims are based
upon Pabst’s letter purporting to cancel the Agreement, and
(2) that letter invokes section 25000.2’s procedures and is
accordingly preparatory to statutorily mandated arbitration,
which constitutes an official proceeding within the meaning of
Code of Civil Procedure section 425.16, subdivision (e)(1) and (2).
The two parts of Pabst’s argument dovetail exactly with the two
subsidiary questions underlying the first step of anti-SLAPP
statute analysis: What conduct is the basis for the challenged
claim(s), and does that conduct constitute protected activity? We
turn to each question.
1. What conduct by Pabst is Mission challenging?
A claim is subject to the anti-SLAPP statute only if conduct
constituting protected activity “itself is the wrong complained of.”
(Park, supra, 2 Cal.5th at p. 1060, italics in original; City of
Cotati, supra, 29 Cal.4th at p. 78.) Thus, where a plaintiff’s claim
is based upon “an action or decision” of the defendant, it is not
enough that some protected activity by the defendant precedes
that action or decision, that some protected activity is the means
of communicating that action or decision, or that some protected
activity constitutes evidence of that action or decision. To fall
11
under the anti-SLAPP statute, the challenged action or decision
itself must be protected activity. (Park, at pp. 1060-1061.)
Accordingly, where a plaintiff’s claim attacks only the
defendant’s decision to undertake a particular act, and if that
decision is not itself protected activity, that claim falls outside
the ambit of the anti-SLAPP statute. Thus, in Park, our
Supreme Court held that the anti-SLAPP statute did not apply to
a claim challenging a university’s decision to deny tenure to a
professor, even though the decision was communicated in writing
and even though the university dean’s comments supplied
evidence of discriminatory animus. (Park, supra, 2 Cal.5th
at pp. 1068-1069.) In Ulkarim v. Westfield LLC (2014)
227 Cal.App.4th 1266, 1275-1276, 1279, the court held that the
anti-SLAPP statute did not apply to a claim challenging a
landlord’s decision to terminate a tenancy, even though the
landlord subsequently served a notice to quit and filed an
unlawful detainer lawsuit. And in McConnell v. Innovative
Artists Talent & Literary Agency, Inc. (2009) 175 Cal.App.4th
169, 176-177, the court held that the anti-SLAPP statute did not
apply to a claim challenging an employer’s decision to wrongfully
terminate employees, even though the employer later sent a
letter terminating those employees. Only when the decision that
the plaintiff attacks is itself protected activity will the anti-
SLAPP statute apply. (See City of Montebello, supra, 1 Cal.5th
at p. 423 [decision to cast a particular vote as part of a city
council meeting constitutes “protected activity”].)
In this case, Mission’s breach of contract and declaratory
relief claims challenge Pabst’s decision to terminate the
Agreement. That is because both claims challenge Pabst’s right
to terminate the Agreement and, in particular, Pabst’s assertion
12
that section 25000.2 provides such a right. Pabst’s subsequent
letter merely communicated Pabst’s decision to terminate, but
“that communication does not convert [Mission’s] suit into one
arising from such speech.” (Park, supra, 2 Cal.5th at p. 1068.)
Pabst raises two challenges to this reasoning. First, Pabst
argues that Kibler v. Northern Inyo County Local Hospital Dist.
(2006) 39 Cal.4th 192 (Kibler) supports its position that every
aspect of a statutorily mandated proceeding, including the
decision itself, is protected activity. Kibler held that a hospital’s
decision to revoke a doctor’s staff privileges as part of a
statutorily mandated peer review process constituted protected
activity under the anti-SLAPP statute. (Id. at pp. 199-200.) A
handful of cases read Kibler to stand for the proposition that
every aspect of a statutorily mandated procedure constitutes
protected activity. (See DeCambre v. Rady Children’s Hospital-
San Diego (2015) 235 Cal.App.4th 1, 22; Nesson v. Northern Inyo
County Local Hospital Dist. (2012) 204 Cal.App.4th 65, 78-79, 82-
84.) However, our Supreme Court’s recent decision in Park
expressly disapproves of that reading. Kibler, noted Park, “did
not address whether every aspect of a hospital peer review
proceeding involves protected activity” and thus “does not stand
for the proposition that disciplinary decisions reached in a peer
review process, as opposed to statements in connection with that
process, are protected.” (Park, supra, 2 Cal.5th at pp. 1069-1070,
italics added.) In short, Kibler does not disturb the otherwise
clear distinction between claims based on a defendant’s decision
and claims based on the means by which that decision is
communicated.
Second, Pabst contends that Mission’s claims are
necessarily based on Pabst’s letter because Mission’s claims
13
cannot be based on Pabst’s decision to terminate the Agreement.
Mission’s claims cannot be based on the decision to terminate,
Pabst continues, because Pabst’s decision did not take effect—
and any claims attacking the decision itself were not ripe—until
such time as Mission lost its distribution rights, which did not
occur under section 25000.2 until Classic and Beauchamp paid
Mission the amount of those rights as fixed in the arbitration.
This contention ignores that a breach need not be effected to be
actionable. A plaintiff may sue for anticipatory breach when the
other party “‘positively repudiates the contract by acts or
statements indicating that [it] will not or cannot substantially
perform essential terms thereof . . . .’” (Guerrieri v. Severini
(1958) 51 Cal.2d 12, 18 (Guerrieri).) In such an instance, the
party “‘“can treat the repudiation as an anticipatory breach and
immediately seek damages for breach of contract.”’” (Ferguson
v. City of Cathedral City (2011) 197 Cal.App.4th 1161, 1168
(Ferguson); see generally Civ. Code, § 1440.) In this case,
Mission’s claims attack Pabst’s decision to repudiate the
Agreement; as noted above, the fact that the repudiation was
communicated through a letter does not alter the basis of those
claims.
2. Is that conduct protected activity?
The anti-SLAPP statute expressly delineates the four
categories of activity that constitute “act[s] . . . in furtherance of
[a] person’s right of petition or free speech under the United
States Constitution or the California Constitution.” (Code Civ.
Proc., § 425.16, subds. (b)(1) & (e).) As noted above, two of those
categories are relevant to this case—namely, (1) “any written or
oral statement or writing made before a legislative, executive, or
judicial proceeding, or any other official proceeding authorized by
14
law,” and (2) “any written or oral statement or writing made in
connection with an issue under consideration or review by a
legislative, executive, or judicial body, or any other official
proceeding authorized by law.” (Code Civ. Proc., § 425.16, subd.
(e)(1) & (2).)
As a general rule, “private contractual arbitration” is
“not . . . an ‘official proceeding authorized by law’” under Code of
Civil Procedure section 425.16, subdivision (e)(1) and (2), even
though arbitration awards are subject to judicial confirmation or
vacation. (Century 21 Chamberlain & Associates v. Haberman
(2009) 173 Cal.App.4th 1, 7-9.) That is because “[a]rbitration is
not a judicial proceeding,” but rather “an alternative thereto.”
(Id. at p. 8.) However, where arbitration is statutorily mandated
as part of a regulatory scheme, it does constitute an “official
proceeding authorized by law” within the meaning of the anti-
SLAPP statute. (Id. at p. 9; Mallard v. Progressive Choice Ins.
Co. (2010) 188 Cal.App.4th 531, 538-539 (Mallard).) Thus,
arbitration mandated by Insurance Code section 11580.2
qualifies as an official proceeding because that statute requires
every automobile liability insurance policy that covers bodily
injury to provide coverage for bodily injury damages caused by
uninsured motorists and mandates the contractual arbitration of
disputes regarding that coverage. (Mallard, at pp. 539-541; see
Ins. Code, § 11580.2, subds. (a) & (f).) Arbitration conducted
pursuant to the Mandatory Fee Arbitration Act (§ 6200 et seq.)
qualifies as an official proceeding because such arbitration is
“established by statute to address a particular type of dispute”
and is mandatory for the attorney if the client agrees in writing
to arbitration. (Philipson & Simon v. Gulsvig (2007)
154 Cal.App.4th 347, 358 (Philipson); § 6200, subd. (c); accord,
15
Kibler, supra, 39 Cal.4th at pp. 198-200 [peer review proceeding
to evaluate the staff privileges of physicians qualifies as an
“official proceeding” because it is mandated by statute and
subject to judicial review by administrative mandate].)
If a statutorily mandated arbitration proceeding qualifies
as an official proceeding, the acts of a party to that proceeding
may constitute protected activity. A party’s initiation of such an
official proceeding is certainly protected activity. (Briggs, supra,
19 Cal.4th at p. 1115 [“‘“[t]he constitutional right to
petition . . . includes the basic act of filing litigation”’”]; Chavez
v. Mendoza (2001) 94 Cal.App.4th 1083, 1087 [“filing a lawsuit is
an exercise of a party’s constitutional right of petition”];
see Philipson, supra, 154 Cal.App.4th at p. 358 [filing cross-
complaint].) A party’s subsequent acts during the proceeding
also qualify. (Mallard, supra, 188 Cal.App.4th at pp. 539-541
[issuing subpoena in midst of arbitration].) A party’s preceding
acts may also qualify as protected activity if they are
“‘communications preparatory to or in anticipation of the
bringing of an action or other official proceeding.’” (Briggs,
at p. 1115.) But such preparatory communications do not qualify
as a protected activity if future litigation is not anticipated, and
is therefore only a “possibility”—and this is true even if the
communication is a necessary prerequisite to any future
litigation. (People ex rel. Fire Ins. Exchange v. Anapol (2012)
211 Cal.App.4th 809, 827-828 (Anapol).) Thus, an insured’s
submission of a claim to an insurance company is usually not
protected activity because, absent prior failed negotiations or the
like, “the insured will have no reason to believe the claim will be
denied and litigation will follow.” (Ibid.; see also Beach v. Harco
National Ins. Co. (2003) 110 Cal.App.4th 82, 94 [conduct of
16
insurer in delaying response to claim is not protected activity
because it “occurred long before any arbitration or other
proceeding commenced”].)
Mission’s claims do not involve protected activity for two
reasons. First, as we have concluded above, Mission’s claims are
based upon Pabst’s decision to terminate the Agreement—not
Pabst’s subsequent letter communicating that decision. That
decision precedes and is unconnected with any official proceeding.
Second, even if we were to assume that Mission’s claims are
premised on Pabst’s subsequent letter, that letter does not
qualify as protected activity. Although section 25000.2’s
mandatory arbitration undoubtedly qualifies as an official
proceeding under the governing precedent, Pabst’s letter is not
preparatory to such an arbitration. That is because section
25000.2 first contemplates that the existing distributor and
successor brewer’s designated distributors negotiate in good faith
and resort to arbitration only if negotiations fail. (§ 25000.2,
subd. (f).) Like the insured who files a claim not knowing
whether the insurer will pay the claim or fight the claim in
litigation, Pabst had “no reason to believe” that arbitration “will
follow” from its letter because Mission, Classic, and Beauchamp
could well have negotiated a settlement and obviated any need
for arbitration. (Anapol, supra, 211 Cal.App.4th at pp. 827-828.)
For these reasons, the anti-SLAPP statute does not apply.
B. Do Mission’s Claims Have Minimal Merit?
Pabst further contends that Mission’s two claims lack the
minimal merit necessary to withstand its anti-SLAPP motion.
Specifically, Pabst asserts that Mission cannot prove (1) any
breach of contract because section 25000.2 independently confers
upon brewers a right to terminate a distribution contract, or
17
(2) any damages arising from any breach because Mission was
made whole by Classic’s and Beauchamp’s payment reflecting the
fair market value of Mission’s distribution rights. Because any
breach of contract claim requires proof of a contractual duty,
breach of that duty, causation, and damages (Oasis West, supra,
51 Cal.4th at p. 821), and because Mission’s declaratory relief
claim that there was no valid termination in effect seeks a
declaration that Pabst breached the contract (Code Civ. Proc.,
§ 1060 [authorizing suit for a “declaration of . . . rights . . . with
respect to another”]), Mission is required to make out a prima
facie case that Pabst breached the Agreement and that Mission
was damaged by that breach. Although the trial court did not
evaluate whether Mission’s claims had minimal merit, we have
the discretion to do so (Schwarzburd v. Kensington Police
Protection & Community Services Dist. Bd. (2014)
225 Cal.App.4th 1345, 1355; Roberts v. Los Angeles County Bar
Assn. (2003) 105 Cal.App.4th 604, 615-616), and will exercise that
discretion in this case because the issue is squarely presented
and because no California court has construed section 25000.2.
We will consider each contested element.
1. Has Mission made a prima facie showing that
Pabst breached the Agreement?
Because Pabst’s termination of the Agreement rested solely
on its position that section 25000.2 confers upon brewers an
independent right to terminate a distribution contract, whether
Mission has made out a prima facie case for the element of
breach turns on whether section 25000.2 confers such a right.
This is a question of statutory interpretation, which we review de
novo. (Weatherford v. City of San Rafael (2017) 2 Cal.5th 1241,
1247.)
18
Our “‘“fundamental task”’” in interpreting a statute is to
“‘“effectuate the law’s purpose.”’” (City of San Jose v. Superior
Court (2017) 2 Cal.5th 608, 616-617, quoting Sierra Club
v. Superior Court (2013) 57 Cal.4th 157, 165-166.) Because the
best indicator of our Legislature’s intent is found in the words of
the statute itself, we start with the statute’s plain text. (Ibid.)
We construe the text “‘“in the context of the statutory framework
as a whole”’” and give that text “a plain and commonsense
meaning.”’” (Id. at p. 616) Unless a literal reading of the text
“‘“would result in absurd consequences”’” or unless the text
“‘“permits more than one reasonable interpretation,”’” our inquiry
both starts and stops with the text. (Ibid.) In those limited
situations where we look beyond the text, we may also consider
“‘“the statute’s purpose, legislative history, and public policy.”’”
(Id. at pp. 616-617.)
The text of section 25000.2 sets forth the procedures that
must be followed when a “successor beer manufacturer . . .
acquires the rights to manufacture . . . a product” and “cancels
any of the existing [distributor’s] rights to distribute the product.”
(§ 25000.2, subd. (b)(1) & (2).) The statute prescribes what
happens after the successor brewer cancels, but nothing in the
statute’s text expressly grants the successor brewer the precursor
right to cancel distribution rights. (Accord, Maita Distributors,
Inc. v. DBI Beverage (N.D.Cal. 2009) 667 F.Supp.2d 1140, 1147
(Maita) [“Nothing in the statutory text [of section 25000.2]
expressly grants a right of cancellation”]; Mussetter Distributing,
Inc. v. DBI Beverage Inc. (N.D.Cal. 2010) 685 F.Supp.2d 1028,
1030 (Mussetter) [same].) More to the point, nothing in the
statute’s text expressly grants the successor beer manufacturer
19
the further right to cancel distribution rights regardless of its
contractual obligations with the existing distributor.
Nor can we infer an implied right to cancel distribution
contracts—with or without impunity—from section 25000.2’s
legislative history. To begin, section 25000.2 was sponsored by
the California Beer and Beverage Distributors. (Assem. Com. on
Governmental Organization, Analysis of Sen. Bill No. 574 (2007-
2008 Reg. Sess.) June 27, 2007, pp. 3-4
<http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0551-
0600/sb_574_cfa_20070626_130036_asm_comm.html>). It seems
highly unlikely that an organization representing distributors
would sponsor legislation that would deprive their members of
their negotiated contractual rights. Moreover, section 25000.2
was enacted to address a specific problem: Brewers were buying
up and consolidating more and more brands of beer and then
seeking to use their own network of distributors, so there was a
need for “an authorized and structured process to insure the
timely payment of fair and market-based compensation for the
transfer of brands between” distributors. (Ibid.; see also Sen.
Rules Com., Off. of Sen. Floor Analyses, Analysis of Sen. Bill No.
574 (2007-2008 Reg. Sess.) as amended Aug. 27, 2007, p. 6
<http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0551-
0600/sb_574_cfa_20070905_133644_sen_floor.html>.) Solving
this problem does not require brewers to be granted an
unvarnished right to terminate their distributorship contracts.
Not surprisingly, the only two decisions to have interpreted
section 25000.2—the federal district court decisions in Maita and
Mussetter—have also concluded that section 25000.2 does not
expressly or implicitly grant a successor brewer a right to cancel
20
distribution contracts. (Maita, supra, 667 F.Supp.2d at pp. 1147-
1148; Mussetter, supra, 685 F.Supp.2d at p. 1030.)
Pabst concedes that section 25000.2 does not expressly
confer upon successor brewers an independent right to cancel
distributorship without incurring any contractual liability, but
offers seven reasons why section 25000.2 implicitly confers such a
right and why Maita and Mussetter are both wrongly decided.
First, Pabst asserts that section 25000.2 was designed to
facilitate “efficient breaches of contract”—that is, the successor
brewers may breach the distributorship contracts as long as their
newly designated distributor pays the existing distributor the
statutorily mandated fair market value of the transferred
distribution rights. Pabst argues that our Legislature’s intent to
allow for efficient breaches of contract under section 25000.2 is
analogous to its intent to allow for such breaches under section
25000.9, the provision requiring brewers to pay an existing
manufacturer damages if the brewer “unreasonably” refuses to
allow that distributor to transfer its distribution rights to another
distributor. (See Crown Imports, supra, 223 Cal.App.4th at p.
1407, fn. 14 [“section 25000.9 is simply a manifestation of the
doctrine of efficient breach of contract”].) Pabst’s argument
misapprehends the concept of efficient breach of contract. That
concept supports a rule that allows one party to a contract to
breach and pay damages rather than perform, at least where it is
“worth more [to that party] to breach rather than to perform.”
(Huynh v. Vu (2003) 111 Cal.App.4th 1183, 1198-1199.) That
concept does not, as Pabst seems to suggest, support a rule that
allows the breaching party to avoid paying damages for
breaching the contract by having someone else pay a subset of
those damages. Indeed, the Crown Imports case looked to the
21
damages amount in section 25000.9 only because the
distributorship contract specifically incorporated state statutory
law; Crown Imports did not purport to effect a wholesale
substitution of the statutory measure of damages for the usual
damages arising from a breach of contract. (Crown Imports,
at p. 1407, fn. 14.) Nothing in section 25000.2 prevents a
successor brewer, like Pabst, from engaging in an efficient breach
of contract by canceling its distributorship contracts; critically,
however, nothing in section 25000.2 immunizes a brewer from
the full amount of damages it must pay for such an efficient but
nevertheless wrongful breach.
Second, Pabst contends that section 25000.2’s legislative
history requires us to imply that section 25000.2 grants brewers
the right to cancel their distributorship contracts and immunity
from breach of contract liability when they do so. Pabst points to
a number of letters, including a letter from the California Beer
and Beverage Distributors, that were submitted to legislators
and that stated the authors’ view that section 25000.2 “takes the
brewer out of the process and effectively out of litigation” and
thus “will end brand transfer litigation to the economic benefit of
both brewers and California beer distributors.” 6 These letters do
not support—let alone compel—the conclusion that section
25000.2 gives brewers a “get out of litigation free” card. To begin,
these letters reflect the opinions of entities lobbying our
Legislature, not the Legislature itself. Moreover, the letters on
their face simply recognize that section 25000.2 “takes the brewer
out of the process” of negotiating, arbitrating, and if there is an
6 We grant Pabst’s request to judicially notice these letters,
which are part of section 25000.2’s legislative history. (Evid.
Code, §§ 452, subd. (c) & 459.)
22
appeal, litigating, the fair market value of the distribution rights;
the letters in no way reflect the view that section 25000.2 takes
brewers out of all litigation, even litigation for violating their
contractual obligations. Indeed, the brewer in Maita offered the
same letters in support of its argument that section 25000.2
conferred a right to cancel contracts and concomitant immunity
for doing so; Maita concluded that “this snippet of legislative
history . . . [was] not sufficient” to support that argument.
(Maita, supra, 667 F.Supp.2d at pp. 1147-1148.)
Third, Pabst notes that section 25000.2 provides that
“arbitration” conducted under its auspices “shall be the means of
determining compensation . . . for the fair market value of the
affected distribution rights” (§ 25000.2, subd. (f), italics added),
and asserts that the word “the” implies that section 25000.2’s
remedy is exclusive. But the exclusivity of section 25000.2
regarding the means of fixing damages for the fair market value
of distribution rights does not speak to the preceding right to
terminate those rights or the right to initiate litigation seeking
damages over and above “the fair market value of the affected
distribution rights.”
Fourth, Pabst argues that the “primary right” theory
mandates that section 25000.2 be read to grant a brewer the
right to terminate an existing distributorship agreement and to
foreclose any lawsuit for breach of the agreement. Otherwise,
Pabst explains, the existing distributor will be allowed to
impermissibly “split its claim” for damages—getting some
damages from the newly designated distributors under section
25000.2’s negotiation and arbitration process and some damages
from the successor brewer in breach of contract litigation.
23
Pabst overreads the primary right theory. “The primary
right theory . . . provides that a ‘cause of action’ is comprised of a
‘primary right’ of the plaintiff”; a “primary right” is the “right to
be free from the particular injury suffered.” (Crowley
v. Katleman (1994) 8 Cal.4th 666, 681-682.) Because a “primary
right” is “‘indivisible’” and “‘gives rise to but a single cause of
action’” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888,
904), the doctrine prevents a plaintiff from “split[ting] a single
cause of action and try[ing] it piecemeal” (Ford Motor Co.
v. Superior Court (1973) 35 Cal.App.3d 676, 679; Mycogen Corp.,
at p. 904 [“‘The primary right theory . . . is invoked . . . when a
plaintiff attempts to divide a primary right and enforce it in two
suits’”]). However, the “‘primary right theory has a fairly narrow
field of application’” (Grisham v. Philip Morris U.S.A., Inc. (2007)
40 Cal.4th 623, 642), and as our Supreme Court has observed, is
“ill-suited to the anti-SLAPP context” (Baral, supra, 1 Cal.5th
at p. 395).
Although a distributor may have a single primary right—
and hence a single claim—not to be injured by a breach of its
distribution contract, a distributor does not impermissibly split
that claim when it is shunted into a statutorily mandated
procedure for evaluating the fair market value of its distribution
rights and thereafter files suit for the wrongful breach of that
contract to collect damages over and above the fair market value
of its rights. Our Legislature’s decision to create the potential for
litigation to occur in two fora is not the distributor’s decision to
split a claim, and thus does not run afoul of the primary right
doctrine or require us to construe section 25000.2 to foreclose all
attempts by the distributor to seek relief outside the statutorily
mandated procedure.
24
Fifth, Pabst argues that section 25000.2 must be read to
foreclose any lawsuit by an existing distributor against the
brewer because such a lawsuit will always be either unripe or
moot. It will be unripe, Pabst claims, until the existing
distributor is paid by the newly designated distributors because,
until that time, the existing distributor will continue to exercise
its distribution rights. (§ 25000.2, subds. (e) & (g).) But once the
distributor is paid, Pabst continues, the distributor’s lawsuit
instantly becomes moot because the payment makes the
distributor whole and makes any declaratory relief redress for a
“past wrong.” (See Babb v. Superior Court (1971) 3 Cal.3d 841,
848 [declaratory relief “‘operates prospectively, and not merely
for the redress of past wrongs”].) This argument is flawed. Pabst
is incorrect that a distributor’s claim for breach of contract is not
ripe as long as it continues to distribute the brewer’s beer
because, as noted above, the distributor may sue for anticipatory
breach. (Guerrieri, supra, 51 Cal.2d at p. 18; Ferguson, supra,
197 Cal.App.4th at p. 1168.) Pabst is also incorrect that a
distributor’s claim is moot once the newly designated distributors
remit the fair market value of the distribution rights because, as
discussed below, additional damages may be available if there is
a wrongful breach and there remains a live “actual controversy”
warranting declaratory relief regarding those additional damages
and the wrongful breach that caused them.
Sixth, Pabst contends that section 25000.2 must be read to
foreclose a distributor’s subsequent lawsuit for breach of contract
because that lawsuit will always be barred by California’s
litigation privilege. The litigation privilege “applies to any
communication (1) made in judicial or quasi-judicial proceedings;
(2) by litigants or other participants authorized by law; (3) to
25
achieve the objects of the litigation; and (4) that have some
connection or logical relation to the action.” (Silberg v. Anderson
(1990) 50 Cal.3d 205, 212.) The privilege applies to
communications made in “private arbitration proceedings.”
(Moore v. Conliffe (1994) 7 Cal.4th 634, 645.) The privilege
immunizes a defendant from liability for all claims (other than
malicious prosecution) based on privileged communications
(Flatley v. Mauro (2006) 39 Cal.4th 299, 322), including breach of
contract claims (Feldman v. 1100 Park Lane Associates (2008)
160 Cal.App.4th 1467, 1485-1486). However, because, as
discussed above, Mission’s lawsuit is based upon Pabst’s decision
to terminate the Agreement (and not Pabst’s subsequent
communication of that decision), Mission’s lawsuit is not barred
by the litigation privilege. The same would be true for all
lawsuits by distributors premised on the successor brewer’s
decision to breach the distributorship contract, so the litigation
privilege does not dictate that we interpret section 25000.2 to bar
all distributor lawsuits for breach of contract.
Lastly, Pabst points to the earlier rulings of the trial court
and the arbitrator in this case rejecting Mission’s entreaties to
halt the arbitration. Pabst urges that these rulings stand for the
proposition that section 25000.2 forecloses Mission’s—and hence,
any distributor’s—subsequent breach of contract lawsuit. Pabst
overreads the prior rulings. Those rulings simply refused to halt
the ongoing section 25000.2 proceedings; they said nothing about
the viability of Mission’s civil lawsuit for damages. Indeed, the
arbitrator in his final award went out of his way not to foreclose
Mission’s lawsuit.
For these reasons, we hold that section 25000.2 does not
independently confer upon brewers the right to cancel their
26
existing distributorship contracts and does not immunize them
from liability for any wrongful cancellation of those contracts. 7
Because Pabst offers no other basis for its decision to terminate
the Agreement, Mission has made out a prima facie case that
Pabst breached the Agreement.
2. Has Mission made a prima facie showing that
Pabst’s cancellation of the Agreement caused it damage?
A plaintiff is entitled only to a “single recovery” for “a
distinct harm suffered.” (Tavaglione v. Billings (1993) 4 Cal.4th
1150, 1158-1159; Renda v. Nevarez (2014) 223 Cal.App.4th 1231,
1237.) A plaintiff suing for breach of contract is entitled to
recover as damages “the amount which will compensate . . . for all
the detriment proximately caused thereby, or which, in the
ordinary course of things, would be likely to result therefrom.”
(Civ. Code, § 3300.) These damages include: (1) “general
damages,” which are damages that “flow directly and necessarily
from a breach of contract” (Lewis Jorge Construction
Management, Inc. v. Pomona Unified School Dist. (2004)
34 Cal.4th 960, 968 (Lewis Jorge), and which include lost profits
(Sargon Enterprises, Inc. v. University of Southern California
(2012) 55 Cal.4th 747, 773-774); (2) “special” or consequential
damages, which are damages that “do not arise directly and
inevitably” but which are recoverable to the extent they “were
either actually foreseen . . . or were ‘reasonably foreseeable’ when
the contract was formed” (Lewis Jorge, at p. 970); (3) nominal
7 We accordingly have no occasion to reach Mission’s further
contention that construing section 25000.2 to immunize successor
brewers from breach of contract liability for wrongful termination
of distribution contracts would unconstitutionally impair the
contract rights of distributors. (U.S. Const., art. I, § 10;
Cal. Const., art. I, § 9.)
27
damages (Civ. Code, § 3360; Sweet v. Johnson (1959)
169 Cal.App.2d 630, 632-633); and, if the contract so provides,
(4) attorney’s fees to the prevailing party (Civ. Code, § 1717; Code
Civ. Proc., § 1021).
Given the breadth of damages available when a contract is
breached, an existing distributor’s receipt of the “fair market
value of the affected distribution rights” under section 25000.2
does not necessarily make that distributor whole. Even if the fair
market value provided for by section 25000.2 encompasses the
distributor’s lost profits (e.g., Tri County Wholesale v. Labatt
USA Operating Co. (6th Cir. 2016) 828 F.3d 421, 423, 430-431),
the distributor may also be entitled to consequential damages
arising from a wrongful breach as well as attorney’s fees (and, of
course, nominal damages). Nor is there any danger that an
existing distributor would be unjustly enriched by receiving
duplicative damages because courts can and will offset against
any civil jury award amounts that are duplicative of payments
made under section 25000.2’s procedures. (E.g., Clayworth
v. Pfizer, Inc. (2010) 49 Cal.4th 758, 777 [noting how “the problem
of duplicative recoveries could be addressed by allowing damages
already paid to be offset”].)
Pabst resists this conclusion with two further arguments.
First, it argues that a distributor would not be entitled to
injunctive relief that would unwind the transfer of distribution
rights. However, whether or not section 25000.2 forecloses
injunctive relief that would unwind a transfer (a question not
before us now), Mission has still made out a cognizable claim for
damages and declaratory relief that survives Pabst’s anti-SLAPP
motion.
28
Second, Pabst asserts that Mission has adduced insufficient
proof of damage because its assertion that it has suffered
“approximately $2,500,000 per year” in lost “expected annual
gross profits” to its company as a whole—over and above the lost
value of its distribution rights—is too “conclusory”; Pabst
complains that Mission did not explain how its estimate was
calculated. Pabst forfeited this argument by not objecting to this
evidence on this basis before the trial court. (Evid. Code, § 353;
Gonzalez v. Santa Clara County Dept. of Social Services (2017)
9 Cal.App.5th 162, 173.) Even if the objection were not forfeited,
the trial court would not have abused its discretion in considering
the evidence. (People v. Waidla (2000) 22 Cal.4th 690, 725.)
Although a court “determining whether the plaintiff has made a
prima facie evidentiary showing on the second prong of the anti-
SLAPP inquiry” should “disregard declarations lacking in
foundation or personal knowledge, or that are argumentative,
speculative, impermissible opinion, hearsay, or conclusory”
(Dwight R. v. Christy B. (2013) 212 Cal.App.4th 697, 714), the
estimate in this case was provided by Mission’s president and
was based on his personal knowledge; the president’s failure to
“show his math” does not render the estimate conclusory.
29
DISPOSITION
The order is affirmed. Mission is entitled to its costs on
appeal.
CERTIFIED FOR PUBLICATION.
______________________, J.
HOFFSTADT
We concur:
_________________________, Acting P. J.
ASHMANN-GERST
_________________________, J. *
GOODMAN
* Retired judge of the Los Angeles Superior Court, assigned
by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
30