Court Upholds Brewer’s Contractual Language Reserving The Right To Choose Which Products A Distributor Receives

A Federal District Court in Pennsylvania recently denied a distributor’s motion to reconsider the Court’s finding upholding the terms of a distribution agreement with Millercoors.  The original decision dismissing the distributor’s suit came at the end of October and found that the distributor didn’t have a right to sue Millercoors claiming that Millercoors’ failure to provide the distributor with new craft beer lines or product was a breach of an implied covenant of good faith and fair dealing in the agreement. 

The decision is important because it offers some clear guidance on the interpretation of contractual terms allowing brewers the ability to contractually specify that the right to new products will be on a case-by-case basis and not to just limit a brewer’s products wholly to one distributor with an initial agreement.

The agreement in this case read:

This Agreement sets forth the respective obligations of Coors and Distributor [Plaintiff] regarding the sale by Coors to Distributor of only those Coors products listed on Exhibit A (the “Products”) and Distributor’s resale of the Products to retailers. Coors may amend Exhibit A from time to time to add new products.

The Court found that this language meant that the craft brands that the distributor complained about not getting were therefore expressly not guaranteed to the distributor in any way:

Moreover, “none of the craft brands at issue in this case are within the scope of the Agreement. . . . [U]nder the express terms of the … Agreement, Plaintiff has no contractual right to receive these particular brands and MillerCoors is free to assign these brands to any distributor.”

…

Here, the Distribution Agreement permits, not requires, MillerCoors to amend the Distribution Agreement to give Plaintiff the distribution rights to its new beer brands. MillerCoors was under no obligation to grant Plaintiff distribution rights or the right of first refusal to MillerCoors’ new craft/specialty beer brands. To read into the Agreement that MillerCoors was under the obligation to offer distribution rights of new beer brands under the good faith and fair dealing provision would override the Distribution Agreement’s express terms: i.e., that MillerCoors “may” grant Plaintiff distribution rights to add new products.

Absent some state statute prohibiting the practice, such language allows a brewer to hold back future products or reserve the right to place them with the distributor under the existing distribution agreement.

The opinion in Fuhrer Wholesale Company v. Millercoors can be found here.  A copy of the distribution agreement that Coors and Fuhrere entered into in 1997 can be found here.  Coors had assigned the agreement to Millercoors when Miller and Coors created Millercoors.