The Sixth Circuit held the oral argument yesterday in the dispute between Southern Glazer’s and two craft brewers (Great Lakes Brewing and Boston Beer Company) looking to terminate their distribution relationship.
You can listen to the argument here:
We’ve written about this case a few times here and here noting that it is an important challenge to the franchise restrictions on beer distribution termination in Ohio and could possibly end up setting some favorable precedent for distributor termination disputes in other states as many agreements and state franchise laws have similar restrictions and terms.
The questions from the judges initially involved the enforceability and application of the agreements’ termination provisions and quickly turned to the application and propriety of the debate over terminations based on a lack of brewer consent to a change in control of the distributor. Interestingly, well into the question and answer, the judges get to the heart of the matter and start questioning the brewers regarding “why” they want the termination, basically, why do the brewers not want Southern Glazer’s as their distributor. The judges also questioned counsel for the distributor regarding the matter and appear to give credence to the argument that a craft brewer may not want a wine and spirits focused distributor or a larger distributor for legitimate business reasons.
Another salient point in the Q & A came when the judges seemed to interpret the franchise act as a inclusive and not exclusive stating that if the act doesn’t specifically prohibit something, then you can look to the parties’ contract as the governing document without reading provisions out of a contract.
Tellingly, during the argument one of the judges said they believed the district court judge had misinterpreted Ohio law.
In the end, the answer may come down to a simple principle that one of the judges summed up brilliantly regarding forcing these brewers to stay with the distributor:
“Requiring parties to do something they don’t want to do is pretty extraordinary.”