, Missouri Revised Statutes Sec.
407.413, an alcohol beverage supplier is prohibited from “unilaterally
terminat[ing] or refus[ing] to continue or change substantially the condition of
any franchise with the wholesaler unless the supplier has first established good
cause for such termination, non continuance or change.” Good cause is limited
to failure by the wholesaler to comply with the provisions of the
supplier-wholesaler agreement, bad faith or failure to observe reasonable
commercial standards of fair dealing, or revocation or suspension of the
wholesaler’s federal permit or state/local
We usually see this alleged “breach of franchise agreement” used as the basis for a counter-claim by the purchaser of our client’s wine. Typically, XYZ Winery sells its wine to a retail establishment in a franchise state, which then doesn’t pay for the wine. When our client sues the purchaser in California state court, the purchaser counter sues for breach of the alleged franchise agreement, and will sometimes remove the case to federal court. The purchaser will then use the cost of litigation of its counter-claim to negotiate a discount on the amount owed, or a complete “walk-away” settlement.
In a recent
Diageo sued its distributor in the state to terminate its distribution agreement. Diageo argues that Missouri state law should not apply to the two
distribution contracts in question. Diageo relies on language in its
distribution contract with Major Brands that states that the contract's terms are
to be governed by Connecticut law for certain products, and New York law for
certain other products. In the alternative, Diageo argues that it has good
cause to terminate the agreement should Missouri law apply, claiming that Major
Brands failed to devote sufficient resources to the promotion of Diageo’s
products, among other things. Missouri
We will be watching this case and will report on its outcome.
For more information or assistance on distributor termination issues contact David Balter (firstname.lastname@example.org) or John Trinidad (email@example.com).