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Small AlcBev Markets Sue Southern Glazer’s, Alleging Illegal Secret Pricing. Case May Be Linked To Federal Agent Raid

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NOTE: A draft of this article was emailed to the law firms representing each side of this case for comment. No reply has been received yet.

By Lewis Perdue, Wine Industry Insight Executive Editor

A trial date of Dec. 5, 2023 has been set for a class-action case brought in Federal District Court for the Central District of California by a group of small, independent Southern California alcoholic beverage retailers who have sued Southern Glazer’s (SG) alleging that the distribution giant offers special “secret” pricing and retailer support to large national chains in violation of federal and California state laws. The complaint was originally filed June 19 of this year.

 

The lawsuit may also be connected to the federal raid on SG’s San Francisco-area facility, according to veteran alcoholic beverage attorneys familiar with, but not involved directly, with the court case.

 

Southern Glazer’s has not responded to the pricing allegations, but has been trying to prevent a trial by arguing that the case should be heard in arbitration, and moved out of California.

 

The plaintiffs are “class representatives” of the class of independent liquor stores and include:

  • Newport Wine & Spirits, Newport Beach;
  • Sunset Market & Liquor, Chula Vista;
  • Times Market & Liquor, Lakeside;
  • Mike’s Liquor & Market, Oceanside and;
  • Santee Market & Liquor, Santee.

 

While none of the markets are a “lead” plaintiff, the case is named after Roma Mika, Inc. (the dba of Newport Wine & Spirits). In a case like this, law allows additional plaintiffs to join the litigation as long as they comply with the class

Violations of Federal Robinson-Patman Act & California Unfair Practices Act Alleged By Plaintiffs

The Federal Robinson-Patman Act and a corresponding California Unfair Practices Act prohibit sellers from offering covert rebates, pricing, commissions or other financial practices that give “favored customers” an unfair advantage not available to all retailers.

 

In addition, the Roma Mika lawsuit argues that consumers are also harmed because they pay a higher price for the same exact product at a small retailer because the cost of goods sold is higher than at a chain which receives covert price discounts, and other advantages.

 

The Roma Mika lawsuit gave several specific examples as explained in the screenshot below, from their Second Amended Complaint.

 

Screenshot 2022-11-07 at 11.13.16 AM

 

Southern Glazer’s has not replied to those specific allegations in court nor to plaintiff statements that the big distributor does not incur any additional costs for servicing small retailers.

 

Screenshot 2022-11-07 at 11.20.44 AM

Southern Glazer’s Does Not Address “Secret” Payments & Services

None of the filings by SG address the alleged secret payments and services inequities charged in the small retailer’s complaints.

 

Indeed, recent filings (premium document links 5-9, below) have consistently demanded arbitration and venue changes while describing the distributor’s “Proof” ordering system.

 

Those documents have ignored the alleged inequities, and, instead, focused copious text and screenshots on how the Proof system. This exhibit (free pdf) from Catherine Chao-Thomsen, Senior Director of Internal Operations for California is a detailed, instructional, step-by-step of the system’s operation.

Aggressively “Eyes Only” — Is Southern Glazer’s Pushing Arbitration To Keep Information Private?

According to the Roma Mikha complaint:

“Southern has kept its precise prices to National Chains secret from Plaintiffs and all members of the class they seek to represent.

 

“Indeed, even as this litigation progresses, Plaintiffs anticipate that Southern will take aggressive steps (such as demanding an “Attorneys’ Eyes Only” protective order), to keep Plaintiffs in the dark about the secret terms and deals that they gave, and continue to give, to the National Chains.”

The Union City Executive Connection

Even if the Southern Glazer demand for arbitration and/or change of venue to another state succeeds, the lawsuit by Roma Mikha et. al. clearly telegraphed the plaintiff’s allegations beyond the judiciary branch.

 

The IRS and TTB raised eyebrows on October 26 this year when they descended on the Southern Glazer’s Union City facility on the eastern shore of of San Francisco Bay, south of The City.

 

Legal sources contacted by Wine Industry Insight said they do not believe it is a coincidence that the largest court filing in the Southern Glazer’s court filings was an SG executive at that Union City location: Catherine Chao-Thomsen, Senior Director of Internal Operations for California

Getting Uncle Sam On Your Side

Multiple experienced alcoholic beverage practice attorneys expressed their opinion that the Roma Mikha attorneys at Gaw/Pow cleverly structured their case to attract regulators’ attention.

 

“If you’re the small guy going up against the thousand-pound gorilla, you’d be crazy not to get an even bigger gorilla on your team,” one experience attorney told Wine Industry Insight. “I don’t think that was an accident or that the Union City raid was a coincidence.”

Arbitration, Venue Change Scheduled For December 1

The court has set a December 1 hearing on SG’s motion for mandatory arbitration and venue change.

Full court filings

FREE (large PDF): ECF30-3-SouthernGlazers EXHIBITS-1-20 Catherine Chao Thomsen-Support Southern Glazers Motion To Compel Arbitration – Move Venue To Florida Court – 120122.pdf

For Premium Subscriber Links

  1. ECF1-SouthernGlazers-RomaMikha-Complaint
  2. ECF11-SouthernGlazers-RomaMikha-AmendedComplaint
  3. ECF26-SouthernGlazers-RomaMikha-SecondAmendedComplaint-091922.pdf
  4. ECF28-SouthernGlazers-RomaMikha-SchedulingOrder-091922
  5. ECF30-1 Southern Glazers-Roma Mikha-DECLARATION-ManuelMarcial-SUPPORT-Southern Glazers Motion To Compel Arbitration & Move Venue-091922
  6. ECF30-2-Southern Glazers-Roma Mikha DECLARATION Catherine Chao Thomsen – Support Southern Glazers Motion To Compel Arbitration & Move Venue-120122.pdf
  7. ECF31-1 Southern Glazers – Roma Mikha DECLARATION Cody S. Harris In Support Of Southern Glazers Motion To Stay Discovery 120122
  8. ECF31-2 Southern Glazers Roma Mikha EXHIBITS Cody S.Harris In Support Of Southern Glazers Motion To Stay Discovery 120122.pdf
  9. ECF31-3 Southern Glazers-Roma Mikha PROPOSED ORDER Cody S. Harris In Support Of Southern Glazers Motion To Stay Discovery 120122.pdf