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Thursday, April 18, 2013

Diageo Americas v. Major Brands: Franchise Law Litigation and Forum Selection


Wineries big and small face difficulties in trying to terminate distribution ageements in franchise law states.  We posted an article a few weeks ago about a lawsuit filed by Diageo Americas, Inc. against its Missouri distributor, Major Brands, Inc.  Diageo has asked the federal district court in Connecticut to issue a declaratory judgment allowing the company to terminate its Missouri  distribution agreement.  The court will first have to determine which state (Connecticut or Missouri) is the proper forum to hear the parties' dispute. 

Diageo filed its complaint in federal district court in Connecticut pursuant to a "forum selection" clause in the agreements stating that jurisdiction and venue for any litigation between the parties would be in the State of Connecticut.  

Major Brands wants this dispute heard in Missouri state court, and has taken numerous steps to take the case out of Connecticut.  First, Major Brands filed its own lawsuit in Missouri (Cause No. 1322-CC00534) shortly after Diageo filed its complaint, claiming that Diageo's attempted termination of the parties' agreement violated Missouri franchise law.  The Missouri lawsuit also names Mid-Continent Distributors, Inc. d/b/a Glazer's Midwest as a co-defendant. 

In addition, Major Brands filed a motion to dismiss Diageo's federal court case in Connecticut earlier this month, arguing in part that the court should deem the forum selection clause unenforceable because of Missouri's strong public policy interest in liquor control and protection of a Missouri franchisee.  "Because of Missouri's complex and specific regulations regarding both liquor control and termination of Missouri franchisees, a ruling by this Court would disrupt the State's attempt to establish a coherent policy regarding these important concerns…."  It is not surprising that Major Brands is attempting to keep the dispute in state court.  Distributors in franchise states may believe that a state court provides a friendlier forum for their claims than federal court. 

The Federal District Court's ruling on Major Brand's motion will be closely watched by suppliers and distributors in franchise law states.  If the court denies the motion and concludes that the forum selection clause is enforceable, then alcohol beverage suppliers may be well served by including similar forum selection clause provisions in any agreement governing distribution in franchise states. 

For more information on distributor termination or franchise law issues, please contact John Trinidad at jtrinidad@dpf-law.com.

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