Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Mich.: Wine supplier’s attempt to dismiss or transfer suit was fruitless, (Feb 9, 2015)

By Greg Hammond, J.D.

A wine supplier’s attempt to dismiss or transfer a distributor’s breach of contract claim was found fruitless by the federal district court in Detroit. In denying the supplier’s motion to dismiss or to transfer, the court determined that the arbitration and choice-of-law clause at issue was unenforceable under the Michigan Liquor Control Code of 1998 (Arbor Beverage Company, Inc. v. Phillips Farms, LLC, February 4, 2015, Drain, G.).

Phillips Farms, LLC, doing business as Michael David Winery (MDW), is a family-owned wine supplier in California. Arbor Beverage Company, Inc. is a wine wholesaler, located in Michigan. In 2004, MDW granted Arbor exclusive distribution rights for the sale of its wine under a distribution agreement. In 2007, Arbor submitted 48 purchase orders, and MDW’s accompanying invoices contained arbitration and California choice-of-law provisions. In 2009, MDW granted another wine wholesaler distribution rights in portions of Arbor’s exclusive territory. Arbor filed suit against MDW for breach of contract, seeking compensation for the loss of alleged exclusive distribution rights. MDW moved to dismiss or alternatively to transfer based on the 2007 arbitration and choice-of-law provisions on Arbor’s invoices.

The court first noted that if transfer is not appropriate, then dismissal would also not be warranted. Consequently, the court examined the validity of the forum selection provision in the 2007 Terms and Conditions on Arbor’s invoices. It found that the Michigan Liquor Control Code of 1998 applied because Arbor is a wine wholesaler, MDW is a wine supplier, and the parties decided to engage in a business relationship within the State of Michigan. This type of relationship, according to the court, is expressly contemplated by the Liquor Control Code, which contains prohibitive choice of law and forum rules. Specifically, the Liquor Control Code limits resolution to the state of Michigan. Consequently, because the 2007 Terms and Conditions only provided for arbitration in San Francisco, the forum selection provision was deemed statutorily barred and invalid. The motion to dismiss or to transfer was therefore denied.

The case number is 14-cv-12907.

Attorneys: Gary W. Faria (Ufer & Spaniola) for Arbor Beverage Company, Inc. Gary S. Fealk (Vercruysse Murray, PC) for Phillips Farms, LLC.

Companies: Arbor Beverage Company, Inc.; Phillips Farms, LLC

Cases: FranchisingDistribution MichiganNews