Jӓgermeister uses the old “Shelton Brothers gambit” to beat Major Brands in Missouri liquor franchise law termination dispute

In this case, Jӓgermeister sent its Missouri distributor, Major Brands, a termination letter saying it wanted to consolidate its distribution and would be going with Southern Glazer’s Wine & Spirits in Missouri. Major Brands sued in a count with multiple claims alleging, amongst other assertions, that Jӓgermeister’s actions violated Missouri’s liquor distribution franchise laws because under those laws, Jӓgermeister required “good cause” to terminate the oral contract relationship (there was no written agreement between Jӓgermeister and Major Brands).

You can read the complaint filed by Major Brands here which is part of the motion removing the case to federal court that Jӓgermeister filed.

Jӓgermeister moved to dismiss these claims (as well as others) stating that under 8th Circuit precedent – call it the Shelton Brothers gambit – the requirements for establishing a “franchise” hadn’t been met because beer/wine/spirits franchises require a license of a trademarks or a trade name or a service mark from the manufacturer to the wholesaler and without such a license, franchise protections don’t adhere.

That’s right, we named it.

Back in 2012 we wrote about Shelton Brothers’ win in Missouri against Missouri Beverage Company (now owned by Major Brands,(awkward!)) in a beer franchise law case where Shelton Brothers argued that a franchise wasn’t created with its wholesaler under the Missouri beer franchise law because a particular provision of the law Missouri Revised Statute §407.400(1) – holds that a trademark license is a necessary element to consider the relationship between a manufacturer and a wholesaler a liquor franchise:

“‘Franchise’ means a written or oral arrangement … in which a person grants to another person a license to use a trade name, trademark, service mark, or related characteristic…”

And Shelton brothers hadn’t licensed a trademark or trade name. In its case, Shelton Brothers argued and successfully won the 8th Circuit’s blessing on the fact that without a grant of a trademark license, the rights granted by say, a brewer, to a wholesaler, are just a distribution contract and don’t qualify as a franchise entitled to the anticompetitive and onerous protections granted alcohol wholesalers under such a statute.

And Jӓgermeister used the same argument to the same effect here.

In ruling the court in this case fell in line with the 8th Circuit Shelton Brothers precedent and held:

The Petition in this case fails to sufficiently set forth the necessary facts to state a franchise agreement between Plaintiff and Jägermeister. Plaintiff merely states that it meets the general franchise test, however, the only alleged facts are that Plaintiff has had a longstanding agreement with Jägermeister whereby it was granted “the rights” to offer, sell, and distribute within Missouri certain brands of spirits, and that it has made substantial investments in the marketing and distribution of those brands. There are no facts setting out any trademark licenses from Jägermeister or any allegations regarding a “community of interest” with Jägermeister. The allegations are insufficient to state a claim under the Franchise Act. Counts I and II [the franchise counts] will be dismissed.

You can read the full opinion here and see how the Court also made short shrift of nearly all of the other claims brought by Major Brands.The takeaway: Depending on your intention, a trademark, trade name or service mark license grant is a key element to include or eliminate in your Missouri beer, wine, or spirits distribution agreement.