Navigating the legal labyrinth of alcohol franchise laws requires precision, as highlighted in DET Beverages v. Willett Distillery, where procedural missteps led to a court dismissal. This case provides a critical lens into Tennessee’s franchise laws, particularly regarding the transfer of distributor rights.

The Crux of the DisputeDET Distributing had exclusive rights to distribute Willett’s sought-after bourbon brands in Middle Tennessee. When DET sold its assets to DET Beverages (DBLLC), it sought Willett’s consent for the transfer of distribution rights. Willett, however, declined, expressing a preference for a distributor with specialized experience. DET claimed Willett’s refusal violated Tennessee’s franchise laws,…
Continue Reading Crafting Clarity in Alcohol Franchise Transfers: Lessons from DET Beverages v. Willett Distillery

In a classic Granholm v. Heald situation involving a lack of parity between in-state and out-of-state distilleries, Washington state allows in-state distilleries the privileges of direct sale and shipment of their liquors to Washington residents and restricts out-of-state distilleries from doing the same.

Under the Washington laws for alcohol production and sale, Washington distilleries can act as a retailer of their products (and those of other distilleries) if they abide by retailer rules – primarily – maintaining a physical presence in the state. Distilleries that have a physical retail location can ship internet orders directly to customers. The in-state physical…
Continue Reading Case involving alcohol law allowing in-state distilleries shipping direct to citizens and prohibiting out-of-state distilleries from doing the same allowed to proceed after direct comparison to Granholm.

“However, the Court in Lebamoff did not hold that direct ship restrictions are always constitutional. The concurring opinion, which had the support of a majority of the panel, emphasized that the Court upheld Michigan’s statute because “the plaintiffs ha[d] not sufficiently refuted” the defendant’s evidence indicating that the challenged statute “serves the public health.” 

In an opinion limiting its prior Lebamoff decision to the facts, the 6th Circuit has denied an en banc rehearing in its Block v. Canepa case leading the State of Ohio to request a stay of the mandate to remand for further fact finding so that…
Continue Reading The Tennessee Wine Test? 6th Circuit falls in line with requiring evidence of out-of-state alcohol shipping restriction’s health and safety benefits in order to surmount a Dormant Commerce Clause challenge. The State says it wants to take the matter to the Supreme Court.

The Circuits are by and large falling into line regarding the implications and procedures of Tennessee Wine when Dormant Commerce Clause challenges are brought against State alcohol-related laws and regulations. They are rejecting the notion that a summary dismissal of challenges is acceptable and requiring a fact-finding assessment involving evidence greater than conclusory assertions made by “experts” regarding the health and safety effects of laws and regulations. Governments need to present evidence showing that their statutes create the stated effects, and those challenging statutes are able to present evidence to rebut those assertions. Once a plausible complaint alleges a lack…
Continue Reading 1st Circuit closes ranks with those Circuits reading Tennessee Wine as requiring States prove alcohol laws discriminating against out-of-state interests affect health or safety goals or other legitimate interests

The old adage of taking a multiple of the gross profits earned by a beer distributor is the typical response you’ll receive in asking about the fair market value of the distribution rights for a given brand. We hear it a lot as a casual methodology employed between parties in negotiating value and potentially setting a price for the sale of a brand or as damages in lawsuits for improper termination of alcoholic beverage distribution rights. 

But this multiplier method has many faults. Chief among them, it is not an economically rigorous approach to setting price or value, it is…
Continue Reading Another court relies on the discounted cash flow analysis and not the simple multiple of gross profits for valuing distribution rights. Don’t worry, the DCA can result in acceptable numbers as well.

The appeal results from a challenge in Ohio. An out-of-state wine retailer and an in-state wine enthusiast brought suit against the state of Ohio looking for a judgment that the inability of the out-of-state wine shipper to obtain a retail license to ship wine direct to consumers in Ohio without establishing a physical presence in Ohio violated Dormant Commerce Clause principles. You know the argument – in state retailers can ship direct but out-of-state retailers cannot and plaintiffs believe that is a Constitutional violation. The wine enthusiast also brought suit challenging a law that Ohio really doesn’t enforce regarding the…
Continue Reading 6th Circuit hears oral argument in Ohio wine shipping case. Questions regarding implementing an out-of-state license and the evidentiary basis for factual assertions regarding public health and safety justifications for shipping prohibitions predominate.

A Michigan Federal Court has ruled that the motion to dismiss stage is no place to test the merits of claims that a wine supplier’s termination of a distribution agreement with a wine distributor. 

Cana Distributors, a Michigan based wholesaler of wine, sued PortoVino, a supplier of wine (link to complaint), alleging that PortoVino’s termination of their distribution agreement violated MCL §436.1305, Michigan’s statute detailing rights and remedies for the termination of wine distribution agreements. Cana asserted that PortoVino should have paid reasonable compensation for the diminished value of Cana’s business and instead proceeded in “bad faith” alleging it…
Continue Reading Court rejects wine supplier’s attempt to dismiss wine distributor’s lawsuit for improper termination and reasonable compensation finding termination for lack of prompt payment and assertions of improper credit require factual determination.

A Court’s grant of an injunction to a beer distributor prohibiting Constellation from moving its brands to a new wholesaler in Washington State has set the stage for a fully briefed and soon to be argued 9th Circuit case that is certain to set an important precedent for interpreting state beer franchise laws.

That’s because the titular question, does the Washington state beer franchise law (RCW Chapter 19.126) allow a brewer or other supplier to terminate a distribution agreement without good cause provided they pay fair (or “just”) compensation, is being argued mainly from the point of statutory…
Continue Reading The 9th Circuit will be deciding whether Washington’s beer franchise law allows a supplier to terminate without cause and the case may provide some important precedent.

Every once in a while competing alcohol brands will get involved in a dispute over advertising. You’ll all remember the Bud/Miller dust-up over corn syrup from the 2019 Super Bowl advertising that took three years to shake out. There’s also the ongoing fight over Havana Club and don’t get us started on the sheer number of nascent brand trademark fights over brand names.

The merits of a fact-based claim about which company is the first African-American owned bourbon distillery in the Commonwealth of Kentucky has resulted in an ongoing lawsuit by two African-American owned companies each making claims about their…
Continue Reading Court finds TTB label approval does not preclude Lanham Act false advertising claims in dispute between two brands looking to claim status as the “First African-American Owned Distillery in Kentucky.”

In a recent opinion showing the 21st Amendment and state franchise laws must work within the confines of the Commerce Clause a New York federal court has granted a second motion to dismiss the complaint of a New York beer importer and wholesaler finding that because sale of the beer (transfer of title and payment) took place outside New York, the state franchise law did not apply and could not help the wholesaler keep the rights to distribute the beer when a new importer started importing and selling the beer to other wholesalers in the state.

We previously wrote about…
Continue Reading Court provides stark reminder to liquor and beer distributors about why FOB terms matter: the location of title transfer or sale can determine whether you have franchise protection thanks to the Dormant Commerce Clause.