Florida’s Beer Franchise Law: a Litigation Case Study
Florida’s Beer Franchise Law
Florida Beverage Law requires beer manufacturers and importers to work with beer distributors. At the heart of the relationship between suppliers and distributors is Florida’s Beer Franchise Law, Florida Statutes Section 563.022. The Franchise Law is a long, complicated statute that requires each beer supplier to grant a Florida distributor the exclusive right (called a “franchise”) to distribute the supplier’s beer in the all or part of the state. In disputes between a supplier and its distributor, the Franchise Law describes the rights of both parties. For instance, the Franchise Law controls whether a supplier can terminate the distributor’s exclusive franchise.
There are very few written case opinions addressing a supplier’s attempt to terminate a Florida distributor’s franchise. The U.S. District Court’s 2014 opinion in the case of Micro Man Distributors, Inc. vs. Louis Glunz Beer, Inc. is a valuable look at what contributed to a beer supplier’s decision to terminate a distributor’s franchise, how the beer supplier handled the termination, and whether termination was permitted under the Franchise Law.
What Led to Termination
In April 2012, Glunz Beer acquired the exclusive contract to import beer manufactured by Stiegl Brewer in Austria. The prior importer had given Micro Man the exclusive franchise to distribute Stiegl beer in all of Florida, and Glunz Beer continued to use Micro Man as its distributor in Florida. Glunz Beer and Micro Man did not have a written contract.
Soon after acquiring the Stiegl contract, Glunz Beer learned that Micro Man did not have the ability to distribute beer in the Florida Panhandle or the Florida Keys. Micro Man refused Glunz Beer’s request to prioritize distribution in the Florida Keys. Glunz Beer also asked Micro Man to distribute Stiegl beer to Publix, Florida’s largest grocery store chain, which Micro Man refused. Glunz Beer offered to buy back Micro Man’s franchise for part or all of Florida, which Micro Man also refused.
Glunz Beer Provides Notice of Termination
In December 2012, Glunz Beer initiated the termination of Micro Man’s franchise following the procedure laid out in Florida’s Beer Franchise Law. Glunz Beer sent to Micro Man, via certified mail, a Notice of Deficiencies which specifically three failures: (1) Micro Man’s failure to provide sales coverage through Florida, (2) Micro Man’s failure to sell Stiegl beer to Publix, and (3) Micro Man’s failure to pay Glunz Beer’s invoices timely. The Notice of Deficiencies gave Micro Man 30 days to provide a written plan of actions it proposed to correct the failures. Finally, the Notice of Deficiencies informed Micro Man that it would have 90 days to cure the three identified deficiencies or else its exclusive distribution franchise for Florida would be terminated.
Micro Man did not submit a corrective plan of action. Micro Man did begin serving the World of Beer chain in the Florida Keys in February 2013, but it did not take other steps to service the Florida Panhandle or distribute to Publix.
Glunz Beer sent Micro Man a termination letter in February 2013. Glunz Beer’s termination letter stated that termination was because Micro Man had failed to establish a sales presence throughout Florida and had failed to provide a corrective plan of action. The letter provided a termination date at the end of May 2013.
What the Court Concluded
Micro Man filed a lawsuit against Glunz Beer and asked the court to declare that Glunz Beer did not have “good cause” for terminating the franchise, which is required under the Franchise Law. Glunz Beer countered that it’s termination did comply with the Franchise Law and asked the court to declare that Glunz Beer was entitled to appoint a new distributor.
Both sides filed motions for summary judgment. A court may grant summary judgment in a party’s favor only if there is no genuine dispute as to any material facts. A fact is material if it may affect the outcome of the case. This means that summary judgment is only appropriate where the law is so clearly on one side or the other that the specific facts do not matter. Unsurprisingly, the court refused to grant summary judgment for either party because the particular facts matter quite a lot.
As the court noted, Florida’s Beer Franchise Law requires that “good cause” for purposes of terminating an exclusive distribution franchise, requires five elements:
- The distributor failed to comply with a term of its agreement with the supplier that is reasonable and materially significant;
- The supplier first acquired knowledge of the failure not more than 18 months before it officially notified the distributor;
- The distributor was given written notice by the supplier in the manner required by the Franchise Law;
- The distributor was given a reasonable opportunity to provide good faith efforts to comply with the contract provision; and
- The distributor was given 30 days to submit a plan of corrective action and an additional 90 days to correct the failure or sell the franchise.
According to the court, the crucial issue was whether Micro Man had devoted “reasonable efforts and resources” to its distribution of Stiegl beer. Even though a written contract between Glunz Beer and Micro Man did not exist, the court concluded that the “reasonable efforts and resources” standard, which is a specific requirement under the Franchise Law, must be a term of the unwritten agreement between supplier and distributor.
Whether or not Micro Man devoted reasonable efforts and resources depended on the particular facts in the case, which meant that the court could not grant Micro Man’s motion for summary judgment. The reasonableness of Micro Man’s efforts was also central to the first element to show that Glunz Beer had “good cause” to terminate the franchise. Therefore, the court also could not grant Glunz Beer’s motion for summary judgment.
There are four primary takeaways from the court’s reported opinion in the case of Micro Man Distributors, Inc. vs. Louis Glunz Beer, Inc.:
First, a distributor has an obligation to devote commercially reasonable efforts and resources to the distribution of beer, even if there is no written distribution agreement or the distribution agreement is silent.
Second, a beer supplier does not have good cause to terminate a distributor’s exclusive distribution franchise unless it shows that the distributor failed to devote commercially reasonable efforts and resources.
Third, whether or not the distributor has devoted commercially reasonable efforts and resources depends on the particular facts.
Fourth, following the procedure of providing written notice of deficiency, opportunity to provide a plan of correction, and opportunity to cure the deficiency is an important requirement on the part of the supplier.
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