Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—M.D. Fla.: No basis for summary judgment in beer distributorship termination dispute, (Aug 11, 2014)

By Edward L. Puzzo, J.D.

In a dispute between a beer importer and a beer distributor in Florida over franchise termination, neither party was entitled to summary judgment on the issue of whether “good cause” existed for termination, the federal district court in Tampa has ruled (Micro Man Distributors, Inc. v. Louis Glunz Beer, Inc., August 7, 2014, Whittemore, J.).

In 2002, beer importer Glunz Beer granted Micro Man Distributors an exclusive franchise to distribute Stiegl, an imported Austrian beer, within Florida. Glunz gave the exclusive Florida distributorship to another distributor in 2009, but Micro Man regained its distributorship with Glunz on April 15, 2012. After issuing a notice of deficiency, Glunz terminated Micro Man’s franchise effective July 19, 2013. Micro Man initiated termination litigation, Glunz made counterclaims, and both sides moved for summary judgment.

Termination without written agreement. Micro Man alleged that Glunz did not have “good cause” for the termination, because the deficiencies cited as the reasons for termination were not provisions of the franchise, there being no written franchise agreement. Glunz countered that, even in the absence of a written distributorship agreement, Micro Man was required under the Florida beer distribution law to use due diligence and “reasonable efforts and resources” to promote the product and expand the market within its exclusive territory. Micro Man’s failure fulfill that obligation constituted good cause for termination of the distributorship, Glunz alleged.

The deficiencies that were cited by Glunz as reasons for termination included Micro Man’s lack of an adequate sales presence in the Florida Panhandle region and the Florida Keys, and its refusal to sell through the Publix supermarket chain. Micro Man argued that selling to Publix and covering the entire state were not provisions of the agreement and therefore could not be used as “good cause” for termination.

Good cause and reasonable efforts. The court stated that the issue was how to read the “good cause” provision of §563.022(7)(a) of the Florida beer distribution law harmoniously with the “reasonable efforts and resources” provision of §563.022(12), when there is no written agreement.

The court reasoned that, where there is no written agreement, the “reasonable efforts and resources” provision of §563.022(12) must be read as a “provision of the agreement” under the “good cause” provision of §563.022(7)(a). To do otherwise, the court continued, would allow distributors to define all aspects of a franchise without a written agreement by invoking the UCC’s course of performance and course of dealing provisions, making the “reasonable efforts and resources” provision of §563.022(12) superfluous. To only consider whether the issues raised by Glunz were material provisions of the agreement, as Micro Man advocated, would also be inconsistent with the legislative intent, as reflected in §563.022(1)(b)(2): that a distributor devote reasonable efforts and resources to the sales and distribution of manufacturers’ products.

Conversely, applying only the “reasonable efforts and resources” provision of §563.022(12) while ignoring the termination provisions of §563.022, as Glunz advocated, would mean that importers could terminate a franchise for any reason at any time by simply arguing that the distributor had not devoted reasonable efforts and resources to selling the product, the court stated. This would be inconsistent with the legislative intent to ensure that a beer distributor was free to manage its business enterprise.

For these reasons, the court ruled that neither side was entitled to summary judgment on the “good cause” for termination issue.

Notice requirement. The second aspect of “good cause,” the court continued, was the notice requirement of §563.022(7)(b) that the importer notify the distributor of alleged deficiencies within 18 months of learning of them. Micro Man argued that, based on their first distributorship agreement during the period of 2002 to 2009, Glunz had known for well over 18 months that Micro Man did not sell to Publix and did not sell to all portions of the state, the ostensible reasons for termination. However, the court noted, Micro Man could point to no authority or statutory language allowing consideration of previous franchises in determining whether “good cause” exists for termination or non-renewal of the current one. The current franchise did not begin until April 15, 2012, the court noted, and Glunz’ deficiency notice occurred within 18 months of that date and was therefore timely.

The case is Civil Action No. 8:13-cv-00639-T-27MAP.

Attorneys: H. William Larson, Jr. (Larson & Larson, PA) for Micro Man Distributors, Inc. Blake J. Fredrickson (The Solomon Law Group, PA), and Earl E. Farkas (Gordon & Cornell) for Louis Glunz Beer, Inc.

Companies: Micro Man Distributors, Inc.; Louis Glunz Beer, Inc.

Cases: FranchisingDistribution FloridaNews