Southern Wine & Spirits of Nevada and Maisons Marques & Domaines USA Win Unprecedented $5.4 Million Judgment Against Gray Marketeers

LAS VEGAS--()--Southern Wine & Spirits of Nevada (SWS-NV) — a division of Southern Wine & Spirits of America, Inc. (Southern), the nation’s leading wine and spirits distributor — and Maisons Marques & Domaines USA Inc. (MM&D) — the U.S. sales and marketing arm for Champagne Louis Roederer and its California winery, Roederer Estate — recently achieved a substantial additional legal victory related to their fight against luxury product gray marketing in Nevada. In addition to MM&D’s $2.1 million Nevada jury award from last June punishing the illegal distribution of wine and champagne, a new court order requires the defendants to pay MM&D and Southern approximately $3 million in attorney’s fees and court costs. On June 2, 2014, the trial court entered final judgment in the case in the amount of $5,463,071.21 for favor of both plaintiffs.

MM&D and Southern sued gray marketeers Chateau Vegas Wines Inc., a Nevada distributor, and Transat Trade, Inc., a California-based U.S. importer and supplier of wine and spirits. The lawsuit sought damages for sales of luxury-level gray market French champagnes and Bordeaux wines, as well as a permanent injunction to prohibit Chateau Vegas and Transat Trade from continuing future illegal sales in the State of Nevada.

Following a bench trial in 2008, a Las Vegas court issued MM&D and Southern a permanent injunction, which the Nevada Supreme Court unanimously upheld in 2011. In June 2013, a trial by jury was held to determine the amount of damages to be awarded to MM&D and Southern. The jury awarded MM&D and Southern both economic-loss and punitive damages. In all, the total jury award was $2,160,321.26.

On March 24, 2014, the Nevada trial court — for the first time ever — ordered the defendants to pay a multi-million dollar attorneys’ fees award for infringement of distribution rights. MM&D and Southern were also awarded more than $600,000 in court costs incurred throughout the case. In accordance with the Court’s March order, MM&D and Southern have now obtained Judgments against the defendants in excess of $5.4 million in economic-loss damages, punitive damages, attorneys’ fees, costs and interest.

Nevada employs the Three-Tier System for liquor distribution and enforces a strict primary source law to prevent counterfeit and gray market products from entering the marketplace. Commenting on the outcome of the lawsuit, MM&D President/Chief Executive Officer Gregory Balogh said, “We see this case as a huge victory in the fight against gray market wine and spirits sales. We take tremendous measures to ensure the quality of our products and to build equity for each of our individual brands. Companies like Chateau Vegas and Transat Trade threaten this by choosing to sell potentially flawed signature products with no regard for the other brands in the line or the quality and integrity of the products that end up in consumer hands. It is important to MM&D that our product is fresh, not damaged and sold to our customers the way the product was created on the estate. The decision in this case sends a clear message that this activity will not be tolerated.”

Larry Ruvo, Senior Managing Director, SWS-NV, added, “We’re pleased with the decision in this case and the damages awarded to Southern and MM&D. The defendants’ approach was detrimental to the integrity of the brands, industry and the end consumer.”

On the importance of the MM&D relationship with Southern, Balogh commented, “We have carefully selected and built long-lasting alliances with our distributors. Our relationship with Southern in Nevada, and numerous other states throughout the U.S., is no exception. We picked the right distributor — and Southern protected our brand image across the Nevada marketplace. This lawsuit is but one example of Southern protecting the integrity of all of our brands in the line as it also protects the interests of all tiers of the wine and spirits industry.”

This relationship, and its impact on the quality and integrity of product sold in the state of Nevada, was discussed by the Nevada Supreme Court in its 2011 decision affirming the issuance of the permanent injunction against Chateau Vegas and Transat Trade:

The record shows that Southern Wine invested heavily in the continued value of the Bordeaux wines [and French champagnes]. It built an expensive modernized facility in Las Vegas to properly store its products. Over the course of several years, Southern Wine partnered with the [suppliers] to build and strengthen the value of the brands. It protected the reputation of the brands by making certain that counterfeited products were not sold in Nevada. It also equipped its shipping trucks with specialized equipment to ensure that the wines would be transported at proper temperatures, thus preserving the flavor and quality of the wines.

On the other hand, the record reveals that Transat Trade shipped the wines without adequate quality control measures. In fact, Transat Trade had shipped the wines in question into Nevada on vegetable trucks.

This case exemplifies the importance of the relationship between supplier and distributor and serves as an important warning to wine and spirits suppliers and distributors who choose to threaten the integrity and quality of beverage alcohol products sold in this country by operating in violation of state liquor laws.

Following the jury verdict, the defendants filed bankruptcy in order to avoid paying the judgment against them, but collection efforts are proceeding in bankruptcy court.

About Maisons Marques & Domaines USA Inc.

Maisons Marques & Domaines USA Inc. was founded in 1987 as the U.S. sales and marketing arm for Champagne Louis Roederer and its California winery, Roederer Estate. The key objectives were to manage the complex U.S. distribution system to ensure quality product as well as to build each individual brand’s equity. Today, the company has grown into a well-respected marketer and importer of family-owned, prestigious producers. From France to Portugal, Italy to Spain, and California to South Africa; Maisons Marques & Domaines represents some of the most highly esteemed properties in the world. For more information about Maisons Marques & Domaines, see: http://mmdusa.net/.

About Southern Wine & Spirits of America, Inc.

Southern Wine & Spirits of America, Inc. (Southern) is the nation’s largest wine and spirits distributor and broker with operations in 35 markets. Southern currently operates in: Alabama, Alaska, Arizona, California, Colorado, Delaware, the District of Columbia, Florida, Kentucky, Hawaii, Idaho, Illinois, Indiana, Iowa, Maryland, Maine, Michigan, Minnesota, Mississippi, Montana, Nevada, New Hampshire, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Utah, Vermont, Virginia, Washington, West Virginia and Wyoming. Southern also holds operating licenses and permits in Nebraska and Texas. On a national basis, Southern Wine & Spirits of America, Inc. employs nearly 14,500 team members. Southern urges all retail customers and adult consumers to market, sell, serve and enjoy its products responsibly. For more information about Southern and its responsible consumption program, see: http://www.southernwine.com.

Contacts

Southern Wine & Spirits of America, Inc.
Lee Brian Schrager, 625-625-4171 Ext. 1040
Vice President, Corporate Communications

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Contacts

Southern Wine & Spirits of America, Inc.
Lee Brian Schrager, 625-625-4171 Ext. 1040
Vice President, Corporate Communications