Tri County Wholesale Distrib., Inc. v. Labatt USA Operating Co., No. 15-3769 (6th Cir. 2016)
Annotate this CaseUnder Ohio Rev. Code 1333.85, suppliers manufacture or import alcoholic beverages and must sell their products to state-licensed distributors, who sell to retailers; supplier-distributor franchise agreements are protected from termination without just cause, except when a successor manufacturer acquires another manufacturer, the successor may terminate the franchise by repurchasing the distributor’s inventory and compensating for the diminished value of the distributor’s business that is directly related to the sale of the product terminated. NAB owned Labatt through nested holding companies. NAB's owners sold their interests to CCR. Months later, Ohio distributors of the Labatt brands received letters terminating their franchises, citing the section 1333.85(D) exception. In the distributors' suit, the court granted CCR summary judgment on a Takings Clause claim and a claim regarding the scope of section 1333.85(D), then determined the diminution of the values of the distributors. The Sixth Circuit affirmed rejection of the constitutional claims. At common law, businesses may enter into contracts that allow for termination and contracting parties have a right to breach a contract that is no longer advantageous, in an “efficient breach.” That common-law norm is abrogated by section 1333.85, with an exception. The state created and is free to take away that protection from termination. The court remanded the calculation of damages with instructions to deduct the distributors' projected profits for the time until the date when the franchise agreements are finally terminated
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