Category archives for “Franchises”

Gallo Case Sheds Light on Interpretation of Distribution Rights in North Carolina

January 18, 2012

The Fourth Circuit of the United States Court of Appeals recently decided that North Carolina’s former Wine Distribution Act did not require that a wholesaler used by an importer of foreign wine must be used by a new importer of that wine. Country Vintner of N.C., LLC v. E & J Gallo Winery, Inc., No. 10-2289 (4th Cir., January 6, 2012). Wine from Bodegas Esmeralda, an Argentinean winery, was being imported into the United States by Billington Imports, which in turn used Country Vintner of North Carolina as its exclusive North Carolina wholesaler for the wine. Bodegas Esmeralda then switched its importer to E & J Gallo. After the switch Gallo began using its own wholesaler network, as opposed to Country Vintner. The Fourth Circuit upheld the district court’s conclusion that there had never been a commercial relationship between Gallo and Country Vintner and therefore, Country Vintner had no protections from North Carolina’s Wine Distribution Act. The protections Country Vintner had under the act with Billington Imports were no longer relevant due to the fact that Billington ceased to import the wine.

In 2010, North Carolina amended its Wine Distribution Act to provide a continuation of wholesaler rights upon a succession to importer rights; however, that amendment only applies prospectively. N.C. Gen. Stat. § 18B-1213. Thus, in importer-wholesaler relationships entered into after the 2010 amendment in North Carolina, the holding of this case will not apply. For relationships entered into prior to the change, however, the case provides instructive insight into wholesaler continuation rights in a change of importer situation.

If you’d like to discuss specific distribution issues, please feel free to contact any of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·

Not All Franchise Acts Govern French Fry Franchises

July 22, 2011

To someone new in the alcoholic beverage industry, the word “franchise” likely conjures up images of fast-food restaurants. Indeed the relationship between an entity that adopts another entity’s trademarks and sells only its goods and/or services in a manner such that both entities profit is described as a franchise relationship. These relationships are governed by federal and state franchise laws. Those familiar to the alcoholic beverage industry, especially the beer segment, are also aware of “Franchise Acts,” which are state level acts governing the relationship between various alcohol suppliers and wholesalers. Not all states have such acts, although most do for beer. Some states also have them for wine or distilled spirits. These laws frequently govern, among other things, the termination of the relationship between the supplier and wholesaler. They sometimes govern regardless of the contents of any written agreement between a supplier and wholesaler, and almost always govern if there is no written agreement between a supplier and wholesaler.

Nevada, for example, defines a “franchise” as “a contract or agreement either expressed or implied, whether written or oral, between a supplier and wholesaler, wherein: (1) A commercial relationship of definite duration or continuing indefinite duration is involved; and (2) The wholesaler is granted the right to offer, sell and distribute within this state or any designated areas thereof such of the supplier’s brands of packaged malt beverages, distilled spirits and wines, or all of them, as may be specified (emphasis added)” Nev. Admin. Code § 597.130. Thus, regardless of whether or not there is a written agreement in place, a franchise relationship may be formed in Nevada when a supplier allows a wholesaler to distribute the supplier’s product in any portion of the state (Nevada does require that a certain amount of cases be sold in a calendar year before the legal restrictions go into effect.) The real difficulty is that each state is different in both their provisions and approach to applying such provisions. In a rush to get products to market, some suppliers skip looking into these laws and then find themselves locked into relationships they thought could be easily ended. Becoming familiar with these laws and taking the time to think through how they might affect ones relationship with a wholesaler is often invaluable to a product’s long-term success. For more information on the effect of state franchise acts on supplier and wholesaler relationships, please feel free to contact any of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·


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