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Beer Law: The Final Word on Initiative 1100 & 1105

October 20, 2010 3 comments

Two weeks away from the vote. Here's our last whisper on I-1100. Good luck.

UPDATE: At the suggestion of some organizations, we have added some links to the resources section below.

This is the last of it – we promise.

Over a month ago, I decided to walk away from the topic described above in the title. The subject has become a sour discussion topic amongst beer aficionados, brewers and others who peddle the precious grog we love so dearly. So, we took a step back.

I received my ballot in my mailbox yesterday and revisited the debate for a moment. I realized that I still have yet to decide what is best for Washington state and its incredibly important brewing industry. I am back on the academic trail.

Rather than raise a flag for either side, I simply wanted to take a moment and remind you all of the following 5 things:

 

 

  1. Vote.       Nothing is worse than avoiding the polls. You have a voice; let it be heard.
  2.  

  3. Know.     There are people in the broad spectrum of the brewing industry that support both sides of the Initiatives. There is some moderate solidarity amongst brewers that both Initiatives should go down, and there is some fairly strong solidarity amongst consumers that the Initiative(s) should pass.
  4.  

  5. Read.      There are a bounty of resources on the web that can help you see the potential impact of a passed Initiative v. the continued state of what we have today. Take the time to check them out. (See below for some links)
  6.  

  7. Ask.         Ask your brewer, ask your beer bar owner, and ask your bottle shop seller. These people are directly impacted by the Initiatives. While consumers have an interest in this potential legislation, business owners are the ones who are most invested. See how they feel. Don’t worry it won’t take many attempts to find people on both sides.
  8.  

  9. Review.   If you get through all these steps and you still cannot make up your mind – read the proposed law. Many of the commentators are focusing their attention on particular portions of the Initiatives. You can get a better look at the forest versus the trees, by giving them a read.
  10.  

If you want a brief recap of the information we have provided over the past few months, you can follow this link to find a collection of articles on the topic. Furthermore, check out these resources:

 

With only two weeks left until the vote, we are signing off from the subject. Good luck to all sides. As always, please leave any comments below.

 

Alaskan Brewing Loses Costly Legal Bout with Washington Distributor

September 21, 2010 Leave a comment

Alaskan Brewing owes $5.5 Million to a Washington distributor

***This post was originally posted on BreweryLaw.com, perhaps the nation’s only blog devoted to beer law! The blog is published by Reiser Legal, LLC, a Seattle, Washington law office. Reiser Legal’s Douglas Reiser is our regular legal blogger.***

 

Alaskan Brewing Co. is the subject of an interesting Washington Court of Appeals opinion, which was handed down today. The opinion is unpublished and provides little to nothing in the way of new legal precedent, but it provides an intriguing look at the Washington distributorship law.

Alaska Distributors Company (ADCO) was the exclusive distributor of Alaskan Brewing Company (Alaskan) products in seven Washington counties. In August 2008, after ADCO notified Alaskan of its intent to sell its distribution rights to another distributor, Alaskan terminated ADCO’s distribution services. The termination of the contract was for convenience, rather than for cause.

After termination, ADCO filed for arbitration, in accordance with their distribution contract. The arbitrator awarded damages of $5,537,520 to ADCO for the fair market value of the terminated distribution rights, along with attorneys fees and legal costs. Alaskan filed a motion to vacate in King County Superior Court that was denied, while the Court confirmed the arbitration award as a judgment. Alaskan then appealed the dismissal of its motion to vacate.

Alaskan argued that the arbitrator made mistakes of law that warranted a look by the courts. The brewer believes that the arbitrator (1) failed to apply a contractual liquidated damages clause, (2) failed to apply an agreed upon contractual definition of “fair market value” (for purposes of damages for termination) and (3) erred in applying a statute that awarded the winner with its attorneys fees.

The major argument is over the application of former RCW 19.126.040(2) and (3) (this statute has been amended), which provided:

“[a] supplier shall give the wholesale distributor at least sixty days prior written notice of the supplier’s intent to cancel or otherwise terminate the agreement [unless termination is for cause]” and must provide the reasons for the termination. The “wholesale distributor shall have sixty days in which to rectify any claimed deficiency.”

Former RCW 19.126.040(2).

“The wholesale distributor is entitled to compensation for the laid-in cost of inventory and liquidated damages measured on the fair market price of the business as provided for in the agreement for any termination of the agreement by the supplier other than termination for cause . . .”

Former RCW 19.126.040(3)

The arbitrator decided that this statute applied to the immediate circumstances of the Alaskan dispute. Furthermore, it believed that a contractual limitation on the definition of “fair market price” should only be conditionally applied. The arbitrator elected to hear argument on the “fair market price,” determining that an award of more than $5 Million was appropriate.

Unfortunately for Alaskan, Washington courts accord substantial finality to the decision of an arbitrator rendered in accordance with the parties’ contract. Davidson v. Hensen, 135 Wn.2d 112, 118, 954 P.2d 1327 (1998). This leaves very little room for judicial review of an arbitrator’s opinion.

However, the courts can review errors of law. See RCW 7.04A.230. The courts will only review the face of the arbitration award for clearly erroneous rule of law and misapplication of law. Here, they found none.

The court further agreed that the arbitrator had not erroneously found that the dispute arose out of statute. Therefore, ADCO was entitled to recoup its legal fees under RCW 19.126.060.

Its a big loss for Alaskan and a huge win for a distributor. Alaskan had alleged that the contract limited recovery to $1.8 Million value, but because the contract’s limitation was not enforced, damages tripled.

The case illustrates the vast importance of properly crafted arbitration clauses in contracts. RCW 19.126 will be applied to most disputes between distributors and brewers. A careful brewer should review these regulations with their attorney and find ways to avoid the sometimes severe consequences through smart contracting.

 

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