Argument about lack of distributor services may help in establishing shorter UCC statute of limitations for breach of your alcohol distribution agreement

The statute of limitations on a breach of a liquor distribution agreement received some interesting attention in a recent state court appellate opinion.

The brewer, Paper City, alleged that the beer distributor, La Resistance, breached an oral agreement to pay for beer purchased from the brewer for distribution. The problem arose when Paper City filed suit almost five years after the alleged breach as the defense argued and the Court agreed, that a four year statute of limitations applied.

The key point from the opinion centers around its discussion and distinction about the proper statute of limitations for bringing a claim for breach of contract in the instance of a beer distribution agreement.

Some states view beer, wine and spirits distribution agreements as sale agreements governed by the UCC and subject to the UCC’s statute of limitations as the sale of items is the predominant factor. Others view them under other standards such as services agreements or franchise agreements and apply differing limitations periods.

In this case, the court rejected the notion that the contract was for more than the sale of goods, because although the brewer argued that it is industry standard for beer distributors to assist with marketing, managing accounts, representing the brewery at festivals, the oral agreement did not allegedly contain those terms and there was no indication that the brewer ever paid the distributor for those services.

The discussion follows common legal principles amongst various state’s interpretations regarding the UCC’s applicable statute of limitations for article 2 sale of goods. It implies that had services or other obligations been involved, the analysis would have required determining whether the sale of goods was the primary goal of the agreement (not certain the outcome would have changed even if the beer distributor did perform marketing and festival tasks).

The majority of courts to address this issue in other jurisdictions, however, have concluded that art.2 governs distribution agreements where the sale of goods is the predominant factor. See Specialty Beverages, L.L.C. v. Pabst Brewing Co., 537 F.3d 1165, 1174-1175 (10th Cir. 2008)(applying “predominant factor” test and determining that art.2 governs distribution agreements); Watkins & Son Pet Supplies v. Iams Co., 254 F.3d 607, 612 (6th Cir. 2001) (written distribution agreement that primarily entailed sale of pet food by defendant to plaintiff governed by art. 2). See also Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129, 134 (5th Cir. 1979) (“Although most distributorship agreements, like franchise agreements, are more than sales contracts, the courts have not hesitated to apply the Uniform Commercial Code to cases involving such agreements”).

Had the services been involved and had this been a general contract, then Massachusetts’s six year statute of limitations for breach of contract would have applied and the result would have been the opposite for the brewer.

You can read the opinion in Paper City v. La Resistance here.