CALIFORNIA COURT REJECTS FRANCHISE LAW FOR WINE WHOLESALERS
Victory for wineries but not wholesalers in California after a court rejected attempts to pass a state franchise law for wine wholesalers. In other words, the jury decided that California vintners have the right to terminate open-ended agreements with wine distributors at any time upon reasonable notice and for any reason - without the requirement of paying a termination fee or any other form of compensation. Since 1995, California courts have recognized that an oral distribution agreement for wine is terminable at will upon reasonable notice.
Ironically, beer distributors were given franchise protection last week after Gov. Schwarzenegger signed Senate Bill 574 that requires a successor brewer to compensate a beer wholesaler if the distribution relationship is terminated. The successor manufacturer is to pay fair market value for the distribution right or face mandatory arbitration.
BACKGROUND. A Stockton jury rejected distributor Frank-Lin Distiller's claim that its relationship with Michael-David brands cannot be terminated without the winery paying a significant termination fee.
Michael-David Winery, producer of “7 Deadly Zins,” terminated Frank-Lin’s distribution agreement in 2006. As a result, the winery says Frank-Lin withheld payments in excess of $350,000 for wine purchased and later sued Michael-David Winery for $8.9 million in damages. Frank-Lin argued that an oral distribution agreement with goals could be terminated only for cause, and then only after written warnings and an opportunity to cure were given.
In the case, there was no written distribution agreement. As there was no agreement on the length of the distribution relationship, the court held that the contract was of indefinite duration, terminable at the will by either party. The court also cited evidence of industry custom that wine distribution arrangements were terminable for any reason and not just for good cause.
Ironically, beer distributors were given franchise protection last week after Gov. Schwarzenegger signed Senate Bill 574 that requires a successor brewer to compensate a beer wholesaler if the distribution relationship is terminated. The successor manufacturer is to pay fair market value for the distribution right or face mandatory arbitration.
BACKGROUND. A Stockton jury rejected distributor Frank-Lin Distiller's claim that its relationship with Michael-David brands cannot be terminated without the winery paying a significant termination fee.
Michael-David Winery, producer of “7 Deadly Zins,” terminated Frank-Lin’s distribution agreement in 2006. As a result, the winery says Frank-Lin withheld payments in excess of $350,000 for wine purchased and later sued Michael-David Winery for $8.9 million in damages. Frank-Lin argued that an oral distribution agreement with goals could be terminated only for cause, and then only after written warnings and an opportunity to cure were given.
In the case, there was no written distribution agreement. As there was no agreement on the length of the distribution relationship, the court held that the contract was of indefinite duration, terminable at the will by either party. The court also cited evidence of industry custom that wine distribution arrangements were terminable for any reason and not just for good cause.
posted at 12:06 PM
<< Home