2014 Kentucky Revised Statutes CHAPTER 244 - ALCOHOLIC BEVERAGES -- PROHIBITIONS, RESTRICTIONS, AND REGULATIONS 244.606 Contents of agreement among brewer, importer, and distributor -- Conditions for transfer of brands from brewer or importer -- Conditions for termination -- Duties -- Damages.
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244.606 Contents of agreement among brewer, importer, and distributor -Conditions for transfer of brands from brewer or importer -- Conditions
for termination -- Duties -- Damages.
(1)
(2)
Every brewer and importer of malt beverages shall contract and agree in
writing with each of its distributors to provide and specify the rights and duties
of the brewer, the importer, and the distributor with and in regard to the sale of
the products of the brewer or the importer within the Commonwealth of
Kentucky. The terms and provisions of the contracts shall comply with and
conform to KRS 244.602 to 244.606 and to all other applicable statutes.
If a particular brand or brands of malt beverage are transferred by purchase or
otherwise from a brewer or importer, the successor brewer or importer, and the
successor brewer's or importer's designee, shall comply with the following:
(a) The successor brewer or importer shall notify the existing distributor of
the successor's intent not to appoint the existing distributor for all or a part
of the existing distributor's territory for the product. The successor shall
mail the notice of termination by certified mail, return receipt requested, to
the existing distributor. The successor shall include in the notice the
names, addresses, and telephone numbers of the successor's designees;
(b) A successor's designee shall negotiate with the existing distributor to
determine the fair market value of the existing distributor's right to
distribute the product in the existing distributor's territory immediately
before the successor acquired rights to the particular brand or brands of
malt beverage. For the purposes of this paragraph, fair market value shall
be the value that would be determined in an arm's length transaction
entered into without duress or threat of termination of the existing
distributor's right and shall include all elements of value, including
goodwill and going-concern value;
(c) The existing distributor shall continue to distribute the product until
payment of the compensation agreed to under paragraph (b) of this
subsection or awarded under paragraph (d) of this subsection is received;
(d) The successor's designee and the existing distributor shall negotiate in
good faith. If the parties fail to reach an agreement not later than thirty
(30) days after the existing distributor receives the notice under paragraph
(a) of this subsection, the successor's designee or the existing distributor
may send a written notice to the other party and the American Arbitration
Association, or its successor in interest, declaring the party's intention to
proceed with final and binding arbitration administered by the American
Arbitration Association under the American Arbitration Association's
Commercial Arbitration Rules. Thereafter, an arbitration shall be held for
the purpose of determining the fair market value of the existing
distributor's right to distribute the product in the existing distributor's
territory immediately before the successor acquired rights to the particular
brand or brands of malt beverage. For the purpose of this paragraph, fair
market value shall be the value that would be determined in an arm's
length transaction entered into without duress or threat of termination of
the existing distributor's right and shall include all elements of value,
including goodwill and going-concern value;
(e)
Notice of intent to arbitrate shall be sent, as provided in paragraph (d) of
this subsection, not later than thirty-five (35) days after the existing
distributor receives notice under paragraph (a) of this subsection. The
arbitration proceeding shall conclude not later than forty-five (45) days
after the date the notice of intent to arbitrate is mailed to a party;
(f) Any arbitration held pursuant to this subsection shall be conducted in the
city within Kentucky that:
1.
Is closest to the existing distributor; and
2.
Has a population of more than twenty thousand (20,000);
(g) Any arbitration held pursuant to this subsection shall be conducted before
one (1) impartial arbitrator to be selected by the American Arbitration
Association. The arbitration shall be conducted in accordance with the
rules and procedures of the American Arbitration Association;
(h) An arbitrator's award in any arbitration held pursuant to this subsection
shall be monetary only and shall not enjoin or compel conduct. Any
arbitration held pursuant to this subsection shall be instead of all other
remedies and procedures;
(i) The cost of the arbitrator and any other direct costs of any arbitration held
pursuant to this subsection shall be equally divided by the parties
engaged in the arbitration. All other costs shall be paid by the party
incurring them;
(j) The arbitrator in any arbitration held pursuant to this subsection shall
render a decision not later than thirty (30) days after the conclusion of the
arbitration, unless this time period is extended by mutual agreement of
the parties or by the arbitrator. The decision of the arbitration is final and
binding on the parties. Under no circumstances may the parties appeal
the decision of the arbitrator;
(k) A party who fails to participate in the arbitration hearings in any arbitration
held pursuant to this subsection waives all rights the party would have
had in the arbitration and is considered to have consented to the
determination of the arbitrator;
(l) If the existing distributor does not receive payment from the successor's
designee of the compensation under paragraph (b) or (d) of this
subsection not later than thirty (30) days after the date of the settlement
or arbitration award:
1.
The existing distributor shall remain the distributor of the product in
the existing distributor's territory to at least the same extent that the
existing distributor distributed the product immediately before the
successor's designee acquired rights to the product; and
2.
The existing distributor is not entitled to the settlement or arbitration
award;
(m) Nothing in this section shall be construed to limit or prohibit good-faith
settlements voluntarily entered into by the parties; and
(n) Nothing in this section shall be construed to give the existing distributor or
a successor's designee any right to compensation if the existing
distributor or successor's designee is terminated by a brewer or importer
(3)
pursuant to subsection (4) of this section.
The terms or provisions of any contract or agreement among any brewers,
importers, or distributors, including contracts or agreements entered into after
July 13, 2004, and any renewals or extensions of contracts existing prior to
July 13, 2004, shall not permit a brewer or importer of malt beverages to, nor
may any brewer or importer:
(a) Terminate, refuse to renew, or refuse to enter into an agreement, in part
or in whole, with a distributor, except for good cause and in good faith;
(b) Terminate, refuse to renew, or refuse to enter into an agreement, in part
or in whole, with a distributor without first giving the distributor written
notice of any alleged deficiency on the part of the distributor and giving
the distributor a reasonable opportunity of sixty (60) to one hundred
twenty (120) days to cure the alleged deficiency;
(c) Unreasonably withhold timely consent to a proposed sale or transfer, in
part or whole, of the stock or assets of the distributor, and in no event
shall the brewer take more than thirty (30) days to approve or disapprove
the proposed sale or transfer after the brewer has received written notice
of the proposal from the distributor and received all requested information
from the distributor to enable the brewer to pass upon the proposed sale
or transfer;
(d) Assign an agreement, in part or in whole, with a distributor, except with
consent from the distributor which shall not be unreasonably withheld. No
consent is required where the distributor has proposed to transfer an
ownership interest in its business and the brewer exercises its right to
purchase this ownership interest in accordance with a written agreement
between the brewer and distributor, subject to the brewer or its designee
purchasing the ownership interest at the price and on the conditions
applicable to the proposed change.
(e) Enter into a contract with more than one (1) distributor to sell any of its
products or brand within the same territory or area at the same time. This
paragraph shall not apply to contracts entered into prior to January 1,
2004, or future renewals of such contracts, to the extent the existing
contract and the future renewal allow different distributors to sell certain
but not all of the brewer's or importer's brands or brand extensions within
the same territory or area at the same time;
(f) Unilaterally amend its agreement, or any document referred to or
incorporated by reference in its agreement, with any distributor, except
modifications contemplated by the brewer-distributor agreement which
modifications occur after written notice to the distributor or amendments
that occur by a brewer after having consulted with an advisory panel of
distributors;
(g) Terminate an agreement with a distributor because the distributor refuses
or fails to accept an unreasonable amendment to the agreement
proposed by the brewer or importer;
(h) Require a distributor to arbitrate disputes which may arise between it and
the brewer or the importer;
(i)
(4)
(5)
(6)
Preclude a distributor from litigating in state or federal courts located in
Kentucky or from litigating under the laws of the Commonwealth;
(j) Unreasonably discriminate or retaliate against its distributor in the
application of the terms of a written agreement;
(k) Unreasonably fail to consent to the distributor's designation of an
individual as the distributor's manager or successor-manager in
accordance with nondiscriminatory and reasonable qualifications and
standards; or
(l) Withdraw approval of an individual as the distributor's manager or
successor-manager without just cause.
Notwithstanding the provisions in subsection (3) of this section, a brewer or
importer of malt beverages may terminate an agreement with a distributor if
any of the following occur:
(a) The assignment or attempted assignment by the distributor for the benefit
of creditors, the institution of proceedings in bankruptcy by or against the
distributor, the dissolution or liquidation of the distributor, the insolvency of
the distributor or the distributor's failure to pay for malt beverages in
accordance with the agreed terms;
(b) Failure of any owner of the distributor to sell his or her ownership interest
within one hundred twenty (120) days after the later of the owner having
been convicted of a felony which, in the sole judgment of the brewer, may
adversely affect the goodwill or interests of the distributor or the brewer,
or the brewer learns of the conviction;
(c) Fraudulent conduct of the distributor in any of its dealings with the brewer
or the brewer's products;
(d) Revocation or suspension for more than thirty-one (31) days of the
distributor's federal basic permit or any state or local license required of
the distributor for the normal operation of its business;
(e) Sale of malt beverages by a distributor outside its sales territory
prescribed by the brewer in accordance with KRS 244.585; or
(f) Without brewer consent, the distributor engaging in changes in ownership
or possession of ownership interests, the establishment of trusts or other
ownership interest, entering into buy-sell agreements, or granting an
option to purchase an ownership interest.
During the term of a contract or agreement between the brewer or importer and
a distributor, including contracts or agreements in existence prior to July 13,
2004, the distributor shall, in accordance with the provisions of such contract or
agreement, maintain physical facilities and personnel so that the product and
brand of the brewer or importer are properly represented in the territory of the
distributor, the reputation and trade name of the brewer or importer are
reasonably protected, and the public is serviced. The brewer, importer, and
distributor shall act in good faith at all times during the term of the contract or
agreement.
Any brewer, importer, or distributor who violates any provision of this section
shall pay the injured brewer, importer, or distributor all reasonable damages
sustained by it as a result of the brewer's, importer's, or distributor's violations,
together with the costs and attorney's fees incurred by the brewer, importer, or
distributor in protecting its right. If a brewer or importer violates subsection
(3)(a), (b), or (g) of this section, the injured distributor's reasonable damages
shall be the fair market value of the distributor's business. In determining the
fair market value of the distributor's business, proper and full consideration
shall be given to all elements of value, including goodwill and going-concern
value.
Effective:June 20, 2005
History: Amended 2005 Ky. Acts ch. 142, sec. 4, effective June 20, 2005. -Created 2004 Ky. Acts ch. 120, sec. 3, effective July 13, 2004.
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