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Arbitration Clause in Beer Distribution Agreement Enforced by the Virginia ABC

On May 7, 2019, the Virginia Department of Alcoholic Beverage Control (VABC) published a decision confirming the enforceability of arbitration clauses in distribution agreements between brewers and beer distributors under Virginia’s Beer Franchise Act (BFA). In Loveland Distributing Co., Inc. and Premium of Virginia, LLC v. Bell’s Brewery, Inc., the VABC panel ruled unanimously in favor of compelling the parties to resolve their dispute through arbitration, as provided for in the parties’ distribution agreement (the Agreement).

The decision is good news overall for beer and wine suppliers hoping to avoid the cost of litigation before the VABC. Continue reading for details of the dispute and further considerations. (more…)




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Texas Court Affirms Constitutionality of Statute Prohibiting Brewers from Selling Distribution Rights to Their Products

Texas craft beer distributors received an early Christmas present in 2017. On December 15, 2017, the Texas Court of Appeals for the Third District, at Austin issued an opinion in Texas Alcoholic Beverage Commission v. Live Oak Brewing Co., et al. (NO. 03-16-00786-CV) in which the court overturned a lower court’s determination that a statute prohibiting self-distributing brewers from selling the distribution rights to their products was unconstitutional under the Texas Constitution. (more…)




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Third Circuit Affirms MillerCoors Victory in Wholesaler Contract Dispute

On Wednesday, February 25, 2015, the U.S. Court of Appeals for the Third Circuit issued its opinion in Frank B. Fuhrer Wholesale Co. v. MillerCoors LLC, No. 14-1008 (3d Cir. 2015), finding in favor of MillerCoors LLC (MillerCoors) that the brewer did not violate its contract with Frank B. Fuhrer Wholesale Co. (Fuhrer) or Pennsylvania’s alcohol beverage laws in assigning the distribution rights for several new products to other distributors and attempting to condition the award of future products to Fuhrer on Fuhrer establishing a new entity devoted to MillerCoors products.  The case stemmed from Fuhrer’s 1997 distribution agreement (the Agreement) with Coors Brewing Company (Coors).  In 2008, Coors and Miller Brewing Company created MillerCoors, a joint venture, and Coors transferred the Agreement to MillerCoors.

The Agreement made Fuhrer MillerCoors’ exclusive distributor of certain specified MillerCoors products in an area of Pennsylvania.  The Agreement gave MillerCoors the right, but not the obligation, to grant distribution rights to Fuhrer for additional MillerCoors products.  The Agreement also gave Fuhrer the right to acquire distribution rights for other brewers’ brands without MillerCoors’ consent, which Fuhrer has exercised (e.g., in selling certain Anheuser-Busch products).  The Agreement required both parties to exercise “good faith and fair dealing” in carrying out its terms.

MillerCoors introduced three new beers in 2012 and 2013 and awarded the distribution rights for the products to Fuhrer’s competitors.  Fuhrer sued, alleging that MillerCoors:  (1) failed to give Fuhrer the rights to the new products because Fuhrer also sold for Anheuser-Busch; and (2) told Fuhrer it would need to create a new entity dedicated to MillerCoors products in order to obtain future rights to new MillerCoors products.  Fuhrer sought a declaratory judgment and asserted claims for breach of contract, violation of the Pennsylvania Liquor Code, unreasonable restraint of trade, and tortious interference.  The district court granted MillerCoors’ motion to dismiss and denied Fuhrer’s motion for reconsideration.

On appeal, Fuhrer argued that it objected not to MillerCoors’ assignment of the distribution rights for the new products elsewhere.  Instead Fuhrer argued that the process by which MillerCoors undertook this action violated the Agreement’s covenant of good faith and fair dealing.  The Third Circuit agreed with the district court that under Pennsylvania law, “the duty of good faith cannot override express contractual terms and convert a permissive contract provision into a mandate.”  MillerCoors, the court held, accordingly did not violate its duty of good faith by exercising its contractual right to choose different distributors for the new products.

The Third Circuit also found that because the Agreement placed no obligation on MillerCoors to assign Fuhrer distribution rights to new products, MillerCoors’ proposal to grant Fuhrer such rights in exchange for Fuhrer creating a new entity devoted to MillerCoors did not constitute bad faith performance, but was an “arm’s-length negotiating tactic, offering to barter contractual right for contractual right.”  MillerCoors’ proposal did not interfere with Fuhrer’s rights under the Agreement, and accordingly did not constitute a breach of contract.  The court also noted that there was [...]

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