2006 New York Code - Agreements Between Brewers And Beer Wholesalers.

 
    §  55-c. Agreements between brewers and beer wholesalers. 1.  Purpose.
  It is hereby declared to be the policy of this state, that the sale  and
  delivery  of  beer by brewers to beer wholesalers shall be pursuant to a
  written agreement. That further, the regulation  of  business  relations
  between brewers and beer wholesalers is necessary and appropriate to the
  general economy and tax base of this state and in the public interest.
    2.  Definitions.  As  used  in this section, the following words shall
  have the following meanings:
    (a) "Agreement" means any contract, agreement, arrangement, course  of
  dealing   or  commercial  relationship  between  a  brewer  and  a  beer
  wholesaler pursuant to which a beer wholesaler is granted the  right  to
  purchase,  offer  for sale, resell, warehouse or physically deliver beer
  sold by a brewer.
    (b) "Brewer" means any person or entity engaged primarily in  business
  as  a  brewer,  manufacturer of alcoholic beverages, importer, marketer,
  broker or agent of any of the foregoing who sells or offers to sell beer
  to a beer wholesaler in this state or any successor to a brewer.
    (c) "Successor to a brewer" means any person or entity which  acquires
  the  business  or beer brands of a brewer, without limitation, by way of
  the purchase, assignment, transfer, lease, or license or disposition  of
  all  or  a  portion of the assets, business or equity of a brewer in any
  transaction, including merger, corporate reorganization or consolidation
  or the  formation  of  a  partnership,  joint  venture  or  other  joint
  marketing alliance.
    (d)   "Beer  wholesaler"  and  "wholesaler"  means  the  holder  of  a
  wholesaler's license pursuant to section fifty-three of this article who
  purchases, offers to sell, resells,  markets,  promotes,  warehouses  or
  physically distributes beer sold by a brewer.
    (e) "Good cause" means and shall be limited to:
    (i)  (A)  The  implementation  by  a  brewer of a national or regional
  policy of  consolidation  which  is  reasonable,  nondiscriminatory  and
  essential.    Such  policy  shall  have  been  previously  disclosed, in
  writing, in reasonable detail to the  brewer's  wholesalers,  and  shall
  result  in  a  contemporaneous  reduction  in  the  number of a brewer's
  wholesalers not only for a brand in this state, but also for a brand  in
  contiguous  states  or  in  a majority of the states in which the brewer
  sells the brand. All affected wholesalers and affected brewers shall  be
  afforded  ninety days prior notice of the implementation of such policy,
  and such notice shall  be  provided  by  the  brewer  implementing  said
  policy.  Further, an affected wholesaler who has actual knowledge of the
  intended  implementation  of such policy shall also notify each affected
  brewer.  The term "affected brewers" means all  other  brewers  with  an
  agreement   with  an  affected  wholesaler  who  is  a  multiple  brands
  wholesaler. The term "affected wholesalers" means  wholesalers  who  may
  reasonably  be  expected to experience a loss or diminishment of a right
  to distribute a brand, in whole or  in  part,  as  a  consequence  of  a
  proposed consolidation policy.
    (B)  An  affected  brewer  receiving notice pursuant to this paragraph
  may, within  one  hundred  twenty  days  after  receiving  such  notice,
  terminate  an  agreement with a multiple brands wholesaler in the event:
  (1) the total  case  purchases  computed  in  twenty-four  twelve  ounce
  equivalence  units  by  the  wholesaler  of the products of the affected
  brewer  amounted  to  two  percent  or  less  of  the  multiple   brands
  wholesaler's total sales volume during the twelve month period preceding
  the notice; and (2) the affected brewer, prior to such termination, pays
  compensation to the multiple brands wholesaler.
    (ii)  There  is  a  failure  by  the  beer wholesaler to comply with a
  material term of an agreement required  by  subdivision  three  of  this
  section  between  the brewer and beer wholesaler, provided that: (A) the
  wholesaler was given written notice by the  brewer  of  the  failure  to
  comply  with  the  agreement as provided for in subdivision five of this
  section  and in which the brewer states with particularity the basis for
  the brewer's determination of non-compliance, and upon the  wholesaler's
  written request within ten days of receipt of the notice, the brewer has
  supplemented  such notice by submitting to the wholesaler in writing the
  brewer's recommended plan of  corrective  action  to  cure  the  claimed
  defaults  or  deficiencies  in  a  manner  satisfactory  to  it; (B) the
  wholesaler was afforded a reasonable opportunity to  assert  good  faith
  efforts  to  comply with the agreement by curing the claimed defaults or
  deficiencies specified in said notice within the time  provided  for  in
  clause  (C)  of  this  subparagraph; and (C) the wholesaler was afforded
  fifteen days after receipt of such notice to submit a  written  plan  of
  corrective  action  to  comply  with the agreement by curing the claimed
  non-compliance and seventy-five days  to  cure  such  non-compliance  in
  accordance  with the plan.  Provided, however, that such period for cure
  may be increased or reduced to a commercially reasonable  period  by  an
  order  of  a  court  in  this state entered after a hearing at which the
  brewer has the burden  to  demonstrate  that  the  claimed  defaults  or
  deficiencies  can  be  substantially  rectified  in  the  period of time
  afforded the wholesaler or that, after receipt of notice of  default  or
  deficiency  as  provided  for  in  subdivision five of this section, the
  wholesaler has intentionally engaged in an affirmative course of conduct
  in which the brewer's current marketing plans and  other  trade  secrets
  are  disclosed  to a third party without the prior consent of the brewer
  or in which the wholesaler acts or threatens  to  act  to  significantly
  impair,  harm  or  dilute  the reputation or competitive position of the
  brewer or  otherwise  irreparably  injure  the  brewer,  its  brands  or
  trademarks.  Provided,  further however:   (1) that such period for cure
  need not exceed forty-five days if within the twelve months  immediately
  following  a cure, the wholesaler intentionally engages in conduct which
  repeats the same specified default and deficiency which the  brewer  had
  deemed  cured;  and  (2) that such period for cure need not exceed sixty
  days in the event that during the  twelve  month  period  preceding  the
  notice,  the  total  case  purchases  by  the wholesaler of the affected
  products of the brewer account for less than one-half of one percent  of
  the  wholesaler's  aggregate  case  purchases  from  all  sources or one
  thousand cases. For purposes of  this  subdivision,  case  purchases  of
  affected  products  whether  package  or  draught  shall  be computed in
  twenty-four twelve ounce equivalence units.
    (f)  "Good  faith"  means  honesty  in  fact  and  the  observance  of
  reasonable commercial standards in the trade.
    (g)  "Material modification" of an agreement or to "materially modify"
  means  and  includes  a  substantial  and  significant  change  in   the
  competitive circumstances under which the agreement was entered into and
  is  performed  which  is caused by a brewer without fault on the part of
  the wholesaler.
    (h) "Multiple brands wholesaler" means a wholesaler which pursuant  to
  agreements  with different brewers holds the rights to purchase, resell,
  warehouse or physically  deliver  two  or  more  competing  products  in
  substantially the same geographic area or to the same customer class.
    (i)  "Fair  market  value  of  distribution rights" means the amount a
  willing seller, under no compulsion to sell, would be willing to  accept
  and  a  willing buyer, under no compulsion to purchase, would be willing
  to pay for the distribution rights.
    3. Written agreement required. Except as provided for  in  subdivision
  ten  of this section, beer offered for sale in this state by a brewer to
  a beer wholesaler shall be sold and  delivered  pursuant  to  a  written
  agreement  which  conforms  to  the provisions of this section and which
  sets forth all essential and material terms, requirements, standards  of
  performance and conditions of the business relationship between a brewer
  and  a  beer  wholesaler.  Such  agreement may be cancelled, terminated,
  materially modified or not renewed for good cause  as  defined  in  this
  section, provided the brewer has acted in good faith.
    4.  Termination  for  cause and opportunity to cure. (a) No brewer may
  cancel, fail to renew,  or  terminate  an  agreement  unless  the  party
  intending  such  action has good cause for such cancellation, failure to
  renew, or termination and in any case in  which  prior  notification  is
  required  under  this  section, the party intending to act has furnished
  said prior notification as provided for  in  subdivision  five  of  this
  section  and  the  wholesaler  has  failed  to  cure  such  defaults  or
  deficiencies after a period for cure, as provided for in clause  (C)  of
  subparagraph (ii) of paragraph (e) of subdivision two of this section.
    (b)  No brewer shall amend or materially modify or otherwise terminate
  any essential and material term or requirement of  an  agreement  unless
  the  brewer has good cause therefor and has furnished the affected party
  with at least fifteen days prior notification as required by subdivision
  five of this section.
    5. Notice  of  default  or  deficiency.  (a)  Except  as  provided  in
  paragraph  (d)  of this subdivision, no brewer may cancel, fail to renew
  or terminate an agreement unless the brewer or beer wholesaler furnished
  prior notification in accordance with paragraph (c) of this subdivision.
    (b) Notwithstanding any agreement, no brewer or  beer  wholesaler  may
  materially amend or modify an essential and material term or requirement
  unless  the  brewer  or  beer wholesaler furnished prior notification in
  accordance with paragraph (c) of this subdivision.
    (c) The notification required under paragraphs (a)  and  (b)  of  this
  subdivision  shall  be  in  writing  and  sent  to the affected party by
  certified mail. Such notification shall contain:
    (i) a statement of intent to cancel, not renew,  otherwise  terminate,
  materially amend or modify an agreement;
    (ii)  a  statement of all reasons therefor, stated with particularity;
  and
    (iii) the date on which such action shall take effect.
    (d) A brewer or beer wholesaler may cancel, fail to renew or otherwise
  terminate  an  agreement  without  furnishing  the  prior   notification
  required under this section only:
    (i)  in  the  event  the affected party has made an assignment for the
  benefit of creditors or similar disposition of all or substantially  all
  of the assets of such party's business;
    (ii) in the event of a conviction or plea of guilty or no contest to a
  felony  which  in  the  reasonable  judgment of the brewer may adversely
  affect the goodwill or interests of the wholesaler or brewer;
    (iii) in the event of the revocation or suspension for thirty-one days
  or more of any license or permit required  of  the  wholesaler  for  the
  normal operation of its business;
    (iv)  in  the  event  there  was fraudulent conduct on the part of the
  brewer or beer wholesaler in its dealings with the other party;
    (v) in the event of the failure by either party to pay sums  of  money
  to  the other party when due or if either the wholesaler or brewer takes
  any  action  which  would  provide  grounds  for  immediate  termination
  pursuant  to  the  reasonable  terms  of a written enforceable agreement
  between  them,  which  was  freely  entered  into  without   threat   of
  termination  or  other  coercion or compulsion and was in full force and
  effect sixty days from the effective date of the chapter of the laws  of
  nineteen hundred ninety-seven which amended this subparagraph;
    (vi)  in the event the brewer and beer wholesaler voluntarily agree in
  writing to terminate the agreement.
    6. Right of action. If a brewer fails to comply with the provisions of
  this section, a beer wholesaler may maintain a civil action in  a  court
  of  competent  jurisdiction  within  this state for damages sustained in
  accordance with the laws of this state which shall govern  all  disputes
  arising  under  an agreement or by reason of its making and performance.
  In any such action the court may  grant  such  equitable  relief  as  is
  necessary  or  appropriate, considering the purposes of this section, to
  remedy the effects of any failure to comply with the provisions of  this
  section  or  the  effects  of  conduct  prohibited  hereunder, including
  declaratory judgment, mandatory or  prohibitive  injunctive  relief,  or
  preliminary  or  other interim equitable relief; provided, however, that
  permanent injunctive  relief  shall  not  be  granted  to  prohibit  the
  effectiveness  of  a  termination  or  non-renewal  of  an  agreement in
  furtherance of a policy of consolidation  that  is  in  compliance  with
  subparagraph (i) of paragraph (e) of subdivision two of this section. In
  any legal action challenging any cancellation, termination or failure to
  renew,  or where an issue is the brewer's compliance with the provisions
  of subparagraph (i) of paragraph (e) of subdivision two of this section,
  the brewer shall have the burden of proof that its action was based upon
  good cause, provided however, the wholesaler shall retain the burden  of
  proof  in  all  other respects. The rights and remedies provided in this
  section to a beer wholesaler with respect to an agreement with a  brewer
  and to an affected wholesaler or an affected brewer shall be intended to
  supplement  and  not  be  exclusive of any rights and remedies otherwise
  available pursuant to any other statute, or at law or equity.
    7. Reasonable compensation. (a)  Any  brewer  who  shall  implement  a
  national  or  regional  consolidation  policy, pursuant to this section,
  shall not terminate its relationship with an affected  wholesaler  until
  compensation  as  provided  for  in this subdivision has been paid. Such
  brewer shall pay the affected beer wholesaler the fair market  value  of
  the  distribution  rights  which will be lost or diminished by reason of
  the implementation of such policy, together  with  fair  and  reasonable
  compensation for other damages sustained.
    (b)  Every  brewer who without good cause amends, cancels, terminates,
  materially modifies or fails to renew any agreement, or who in violation
  of this section causes a beer wholesaler to resign from an agreement  or
  denies  or  withholds  consent  to any assignment, transfer or sale of a
  beer wholesaler's business assets or capital stock or  other  equity  or
  debt  securities, shall pay the affected beer wholesaler the fair market
  value of the beer wholesaler's business, including distribution  rights,
  which  have  been  lost  or  diminished  as  the  result of the brewer's
  actions.
    (c) In the event that the brewer and the beer wholesaler are unable to
  agree on the  compensation  to  be  paid  for  the  value  of  the  beer
  wholesaler's  business  and  assets,  the matter may with the consent of
  both the brewer and the beer  wholesaler,  be  submitted  to  a  neutral
  arbitrator  to  be selected by the parties; if they cannot agree on such
  an arbitrator, the same shall be selected by  a  judge  of  a  court  of
  competent  jurisdiction. No brewer or beer wholesaler may impose binding
  arbitration of any issue  as  a  term  or  condition  of  an  agreement.
  Arbitration  costs  shall  be equally divided by the beer wholesaler and
  the brewer. The award of the arbitrator shall be confirmed by a court of
  competent jurisdiction in this state, the judgment  of  which  shall  be
  binding.
    8.  Sale  and  transfer of beer wholesaler's business. No brewer shall
  unreasonably withhold or delay its approval of any assignment,  sale  or
  transfer  of all or any portion of beer wholesaler's corporate equity or
  debt or assets, including the beer wholesaler's rights  and  obligations
  under  the  terms  of an agreement, whenever the person or persons to be
  substituted meet objectively reasonable standards imposed by the brewer.
  A wholesaler who sells, assigns or transfers an agreement made  pursuant
  to this section shall provide written notice of such sale, assignment or
  transfer to all other brewers with whom it has entered agreements.
    9.  (a) A brewer qualified to do business in the state of New York may
  hold an interest in a limited partnership licensed by the authority as a
  wholesaler, when the brewer or its affiliate is a  limited  partner  and
  the  beer  wholesaler  is the general partner. Notwithstanding any other
  provision of law, such brewer may loan money to a general partner of  an
  aforementioned  limited  partnership.   Provided, however, any brewer or
  its affiliate who holds an interest in a limited partnership licensed by
  the authority as a wholesaler or who loans money to a general partner of
  such limited partnership may only exercise such control of the  business
  as permitted by section 121-303 of the partnership law.
    (b)  Notwithstanding subdivision (a) of this subdivision, no brewer or
  its affiliate may acquire or hold an interest in  or  loan  money  to  a
  general  partner  of  a  multiple brands wholesaler unless and until all
  other brewers having agreements with  said  multiple  brands  wholesaler
  have  been  afforded  sixty  days prior written notice of the particular
  terms and conditions of the limited partnership or loan agreement or  of
  any  change therein. A "loan" for purposes of this subdivision shall not
  include  bona  fide  credit  terms  for  product  purchases  customarily
  extended by a brewer to wholesalers in the normal course of business.
    (c)  For  one  hundred  twenty days after the formation, licensing and
  commencement of operations as a beer wholesaler of a limited partnership
  or the  making  of  a  loan,  and  upon  at  least  fifteen  days  prior
  notification  as  required by subdivision five of this section, a brewer
  may terminate an agreement with a  multiple  brands  wholesaler  in  the
  event: (i) a competing brewer or its affiliate becomes a limited partner
  with  or  loans  money  to  a  general  partner  of  a  multiple  brands
  wholesaler, (ii) by reason of said  loan,  the  performance  of  a  loan
  agreement,  or the terms or conduct of the limited partnership, there is
  a reasonable likelihood that competition between brands of the competing
  brewers  has  been  or  may  be  significantly  reduced  in  a  relevant
  geographic  area  or  market,  and  (iii)  in  lieu  of other rights and
  remedies it might have under this chapter to terminate for  good  cause,
  the   terminating  brewer  pays  compensation  to  the  multiple  brands
  wholesaler.
    10. Coverage. (a) This section shall not apply to  written  agreements
  that  were  in  effect prior to the effective date of this section which
  set forth all terms and conditions of  material  significance  governing
  the  relationship  between the brewer and beer wholesaler, including but
  not limited to the grounds and procedures which govern: (i)  termination
  of  the  relationship;  (ii) approval and disapproval of managers; (iii)
  change in ownership; and (iv) whether or not the wholesaler is  entitled
  to  compensation in the event the wholesaler is terminated for deficient
  performance under  such  agreement  or  without  good  cause.  Provided,
  however,  that  this  section shall apply to any agreement entered into,
  and renewals, extensions, amendments or conduct constituting a  material
  modification  of  an  agreement  on  or after the effective date of this
  section.
    (b) Where an agreement between a brewer and beer wholesaler in  effect
  prior  to  the effective date of this section is continuous in nature or
  has no specific duration or has no renewal provision and  fails  to  set
  forth  all  terms  and conditions of material significance governing the
  relationship between the brewer and beer wholesaler, including  but  not
  limited  to  the grounds and procedures which govern: (i) termination of
  the relationship; (ii)  approval  and  disapproval  of  managers;  (iii)
  change  in ownership; and (iv) whether or not the wholesaler is entitled
  to compensation in the event the wholesaler is terminated for  deficient
  performance  under  such agreement or without good cause; such agreement
  shall be considered for purposes of this section to  have  been  renewed
  sixty days after the effective date of this section.
    11.  The  requirements  of  this section may not be altered, waived or
  modified by written or oral agreement in advance of a bona fide case and
  controversy arising  under  a  written  agreement  complying  with  this
  section.