Garal Wholesalers, Ltd. v. Miller Brewing Co.

193 Misc. 2d 630, 751 N.Y.S.2d 679, 2002 N.Y. Misc. LEXIS 1321
CourtNew York Supreme Court
DecidedAugust 16, 2002
StatusPublished
Cited by6 cases

This text of 193 Misc. 2d 630 (Garal Wholesalers, Ltd. v. Miller Brewing Co.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Garal Wholesalers, Ltd. v. Miller Brewing Co., 193 Misc. 2d 630, 751 N.Y.S.2d 679, 2002 N.Y. Misc. LEXIS 1321 (N.Y. Super. Ct. 2002).

Opinion

OPINION OF THE COURT

Thomas F. Whelan, J.

This case examines the law governing the rights of the parties concerning the termination of Garal’s beer distributorship. The court is called upon to determine whether certain recent amendments to the controlling statute, Alcoholic Beverage Control Law § 55-c, are unconstitutional as violative of the constitutional prohibition against impairing the obligations of contracts (see US Const, art I, § 10 [1]). Garal believes that the amendments advance the beneficial purpose of the statutory scheme for the regulation of the sale and marketing of beer within the state and that Miller is seeking to accomplish the very thing that the legislation was specifically designed to prevent. Miller believes that by applying the amendments retroactively, the State Legislature had “changted] the rules in the middle of the game” and substantially impaired “the rights that Miller reserved for itself in its distributor agreement with Garal and the rights that Miller had under New York law at the time that it sent its [termination] notice.” Since the court finds that the distributor agreement anticipated future changes in state law requirements concerning “differing termination notice periods, procedures, or justifications,” the Contract Clause claim must be dismissed.

This is an action by Garal, a licensed beer wholesaler, against Miller, a brewer, seeking to stop Miller from terminating Garal’s beer distributorship rights. Garal seeks declaratory and injunctive relief under Alcoholic Beverage Control Law § 55-c. In its answer, Miller has raised, as its first affirmative defense, that “Garal’s claims under ABCL § 55-c should be dismissed because they are based upon amendments that cannot, under the Contract Clause, be retroactively applied to the relationship between Miller and Garal.” The parties have stipulated to an early determination of this issue by the court.

Garal is licensed by the New York State Liquor Authority to sell beer at wholesale pursuant to Alcoholic Beverage Control Law § 53. Garal purchases beer from different brewers which it resells to license beer retailers. In 1998, Garal purchased the distributorship rights for various brands of beer manufactured by the Pabst Brewing Company (Pabst). At that time, Garal [632]*632entered into an exclusive distributorship agreement with Pabst. Garal’s exclusive territory for the acquired Pabst brands is Nassau and Suffolk Counties. In 1999, Miller acquired from Pabst some of the brands previously sold by Pabst, including some of the brands sold by Garal under the Pabst distributorship agreement. By virtue of an April 21, 1999 letter, Miller acknowledged to Garal that their relationship “will be governed by the terms of the current agreement for these acquired brands and New York law.”

By letter dated August 31, 2001, Miller notified Garal that it intended to transfer Garal’s distributorship rights in the acquired Pabst brands to another distributor. The letter stated that Miller had “instituted a national consolidation policy” and that pursuant to that policy, it had determined to have the acquired Pabst brands distributed by the existing distributor that currently sells the Miller brand. The letter also terminated the distributor agreement as of November 30, 2001.1 It is Garal’s position that any attempt to terminate the distributorship agreement must comply with the provisions of Alcoholic Beverage Control Law § 55-c. Alcoholic Beverage Control Law § 55-c, enacted in 1996, and amended in 1997 and 2001, governs the rights of brewers and wholesalers in regard to distribution agreements within the State of New York.2 Both the distributor agreement and Alcoholic Beverage Control Law § 55-c specify that Alcoholic Beverage Control Law § 55-c supercedes any conflicting provisions of the written agreement, particularly with regard to terminations. The distributor agreement states in pertinent part, at paragraph 15 (B): “To the extent applicable, if state or local laws require longer or otherwise differing termination notice periods, procedures, or justifications, then this Agreement is amended to incorporate such requirements.”

Alcoholic Beverage Control Law § 55-c (3) states, in pertinent part: “Written agreement required. * * * [B]eer 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 * * * .”

[633]*633Alcoholic Beverage Control Law § 55-c (4) (a), which precludes terminations except in accordance with the statute, states, in pertinent part:

“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 * * * .”

Alcoholic Beverage Control Law § 55-c (11), which precludes superceding the law by written agreement, states: “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.”

As originally enacted, in 1996, Alcoholic Beverage Control Law § 55-c did not specify any objective standards as to what constitutes the “national or regional policy of consolidation” and did not require the brewer to pay damages to the terminated wholesaler prior to termination. It has been claimed that such resulted in questionable consolidation plans supporting distributor termination contrary to the intention of the law (see Governor’s Bill Jacket, L 2001, ch 346, at 8, 11, 14, 32).3 Moreover, on January 12, 2001, the law, as originally drafted, led to a dismissal of a distributor’s preliminary injunction action seeking to enjoin a brewer from terminating a distributor before the validity of an alleged consolidation policy was shown, since such was not authorized under the law (see Oak Beverages, Inc. v Heineken USA, Inc., Sup Ct, Orange County, Index No. 7757/00, Owen, J.).

On June 15, 2001, the New York State Legislature passed amendments to Alcoholic Beverage Control Law § 55-c, that is chapter 346 of the Laws of 2001. The legislation was not signed into law by Governor George E. Pataki until September 19, [634]*6342001; however, the amendments to the law were expressly made effective and retroactive to June 15, 2001. In fact, the actual language states: “[t]his act shall take effect immediately and shall be deemed to have been in full force and effect on and after June 15, 2001, and shall apply to agreements amended, cancelled, terminated, modified or not renewed on or after such date” (L 2001, ch 346, § 7).

The Senate sponsor, Owen H. Johnson, in his State Senate Introducer’s Memorandum, offered the following rational for the amendments:

“Unfortunately, a recent court decision has brought about a result unintended by the legislature in its adoption of section 55-c by rejecting a wholesaler’s request for preliminary injunctive relief without first requiring the supplier to meet the statutory burden of proof as to whether its putative consolidation policy qualified under the criteria established by the legislature, (see Oak Beverages. Inc. et. at [sic] v Heineken USA Inc.

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Cite This Page — Counsel Stack

Bluebook (online)
193 Misc. 2d 630, 751 N.Y.S.2d 679, 2002 N.Y. Misc. LEXIS 1321, Counsel Stack Legal Research, https://law.counselstack.com/opinion/garal-wholesalers-ltd-v-miller-brewing-co-nysupct-2002.