Senate Bill No. 727
(By Senators Wooton, Snyder and Mitchell)
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[Originating in the Committee on the Judiciary;
reported April 4, 2001.]
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A BILL to amend and reenact section twenty-one, article sixteen,
chapter eleven of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, relating to requirements of
franchise agreements between brewers and distributors of
nonintoxicating beer; providing for marketing rights of new
products; and prohibiting brewers from requiring certain
financial information of distributors.
Be it enacted by the Legislature of West Virginia:
That section twenty-one, article sixteen, chapter eleven of
the code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted to read as follows:
ARTICLE 16. NONINTOXICATING BEER.
§11-16-21. Requirements as to franchise agreements between brewers
and distributors; transfer of franchise by distributor; notice thereof to brewer; arbitration of disputes as to such
transfer; violations and penalties; limitation of section.
(a) On and after July one, one thousand nine hundred seventy-
one, it shall be unlawful for any brewer to transfer or deliver to
a distributor any nonintoxicating beer, ale or other malt beverage
or malt cooler without first having entered into an equitable
franchise agreement with such distributor, which franchise
agreement shall be in writing, shall be identical as to terms and
conditions with all other franchise agreements between such brewer
and its other distributors in this state and which shall contain a
provision in substance or effect as follows:
(1) The brewer recognizes that the distributor is free to
manage his business in the manner the distributor deems best and
that this prerogative vests in the distributor, subject to the
provisions of this article, the exclusive right to establish his or
her selling prices, to select the brands of beer he or she wishes
to handle and to determine the efforts and resources which the
distributor will exert to develop and promote the sale of the
brewer's products handled by the distributor. However, since the
brewer does not expect that its products handled by the distributor
will be sold by others in the territory assigned to the
distributor, the brewer is dependent upon the distributor alone for the sale of such products in said territory. Consequently, the
brewer expects that the distributor will price competitively the
products handled by the distributor, devote reasonable effort and
resources to the sale of such products and maintain a satisfactory
sales level.
(2) Whenever the manufacturing, bottling or other production
rights for the sale of nonintoxicating beer at wholesale of any
brewer is acquired by another brewer, the franchised distributor of
the selling brewer shall be entitled to continue distributing the
selling brewer's beer products as authorized in the distributor's
existing franchise agreement and the acquiring brewer shall market
all the selling brewer's beer products through said franchised
distributor as though the acquiring brewer had made the franchise
agreement and the acquiring brewer may terminate said franchise
agreement only in accordance with subdivision (2), subsection (b)
of this section: Provided, That the acquiring brewer may
distribute any of its other beer products through its duly
authorized franchises in accordance with all other provisions of
this section: Provided, however, That in the event a brewer has
more than one distributor for some of its products in a particular
territory as a result of that brewer acquiring the manufacturing,
bottling, production or importing rights of another brewer and a new product is developed or acquired, the distributor which had
marketed the original products shall be entitled to market the new
products associated with the acquired brewer as though the
franchise agreement with the acquired brewer was still in effect.
Should the new product not be associated with any prior brewer,
then the distribution right of the new product shall be offered to
the distributor in the order of the longevity of agreements with
the developing or acquiring brewer in the particular territory.
(b) It shall also be unlawful:
(1) For any brewer or brewpub or distributor, or any officer,
agent or representative of any brewer or brewpub or distributor, to
coerce or persuade or attempt to coerce or persuade any person
licensed to sell, distribute or job nonintoxicating beer, ale or
other malt beverage or malt cooler at wholesale or retail, to enter
into any contracts or agreements, whether written or oral, or to
take any other action, which will violate or tend to violate any
provision of this article or any of the rules, regulations,
standards, requirements or orders of the commissioner promulgated
as provided in section twenty-one of this article, or
(2) For any brewer or brewpub or distributor, or any officer,
agent or representative of any brewer or brewpub or distributor, to
cancel, terminate or rescind without due regard for the equities of such brewer or brewpub or distributor and without just cause, any
franchise agreement, whether oral or written, and in the case of an
oral franchise agreement, whether the same was entered into on or
before the eleventh day of June, one thousand nine hundred
seventy-one, and in the case of a franchise agreement in writing,
whether the same was entered into on, before or subsequent to the
first day of July, one thousand nine hundred seventy-one. The
cancellation, termination or rescission of any such franchise
agreement shall not become effective for at least ninety days after
written notice of such cancellation, termination or rescission has
been served on the affected party and the commissioner by certified
mail, return receipt requested: Provided, That said ninety-day
period and said notice of cancellation, termination or rescission
shall not apply if such cancellation, termination or rescission is
agreed to in writing by both the brewer and the distributor
involved.
(3) For any brewer to require a distributor to submit profit
and loss statements, balance sheets or financial records as a
requirement to retain its franchise.
(c) In the event a distributor desires to sell or transfer his
or her franchise, such distributor shall give to the brewer or
brewpub at least sixty days' notice in writing of such impending sale or transfer and the identity of the person, firm or
corporation to whom such sale or transfer is to be made and such
other information as the brewer may reasonably request. Such
notice shall be made upon forms and contain such additional
information as the commissioner by rule or regulation shall
prescribe. A copy of such notice shall be forwarded to the
commissioner. The brewer or brewpub shall be given sixty days to
approve or disapprove of such sale or transfer. If the brewer or
brewpub neither approves nor disapproves thereof within sixty days
of the date of receipt of such notice, the sale or transfer of such
franchise shall be deemed to be approved by such brewer. In the
event the brewer or brewpub shall disapprove of the sale or
transfer to the prospective franchisee, transferee or purchaser,
such brewer or brewpub shall give notice to the distributor of that
fact in writing, setting forth the reason or reasons for such
disapproval. The approval shall not be unreasonably withheld by
the brewer or brewpub. The fact that the prospective franchisee,
transferee or purchaser has not had prior experience in the
nonintoxicating beer business or beer business shall not be deemed
sufficient reason in and of itself for a valid disapproval of the
proposed sale or transfer, but may be considered in conjunction
with other adverse factors in supporting the position of the brewer or brewpub. Nor may the brewer or brewpub impose requirements upon
the prospective franchisee, transferee or purchaser which are more
stringent or restrictive than those currently demanded of or
imposed upon the brewer's or brewpub's or other distributors in the
state of West Virginia. A copy of such notice of disapproval shall
likewise be forwarded to the commissioner and to the prospective
franchisee, transferee or purchaser. In the event the issue be not
resolved within twenty days from the date of such disapproval,
either the brewer, brewpub, distributor or prospective franchisee,
transferee or purchaser shall notify the other parties of his or
her demand for arbitration and shall likewise notify the
commissioner thereof. A dispute or disagreement shall thereupon be
submitted to arbitration in the county in which the distributor's
principal place of business is located by a board of three
arbitrators, which request for arbitration shall name one
arbitrator. The party receiving such notice shall within ten days
thereafter by notice to the party demanding arbitration name the
second arbitrator or, failing to do so, the second arbitrator shall
be appointed by the chief judge of the circuit court of the county
in which the distributor's principal place of business is located
on request of the party requesting arbitration in the first
instance. The two arbitrators so appointed shall name the third, or, failing to do so within ten days after appointment of the
second arbitrator, the third arbitrator may be appointed by said
chief judge upon request of either party. The arbitrators so
appointed shall promptly hear and determine and the questions
submitted pursuant to the procedures established by the American
arbitration association and shall render their decision with all
reasonable speed and dispatch but in no event later than twenty
days after the conclusion of evidence. Said decision shall include
findings of fact and conclusions of law and shall be based upon the
justice and equity of the matter. Each party shall be given notice
of such decision. If the decision of the arbitrators be in favor
of or in approval of the proposed sale or transfer, the brewer or
brewpub shall forthwith agree to the same and shall immediately
transfer the franchise to the proposed franchisee, transferee or
purchaser, unless notice of intent to appeal such decision is given
the arbitrators and all other parties within ten days of
notification of such decision. If any such party deems himself
aggrieved thereby, such party shall have a right to bring an
appropriate action in circuit court. Any and all notices given
pursuant to this subsection shall be given to all parties by
certified or registered mail, return receipt requested.
(d) The violation of any provision of this section by any brewer or brewpub shall constitute grounds for the forfeiture of
the bond furnished by such brewer or brewpub in accordance with the
provisions of section twelve of this article. Moreover, any
circuit court of the county in which a distributor's principal
place of business is located shall have the jurisdiction and power
to enjoin the cancellation, termination or rescission of any
franchise agreement between a brewer or brewpub and such
distributor and, in granting an injunction to a distributor, the
court shall provide that the brewer or brewpub so enjoined shall
not supply the customers or territory of the distributor while the
injunction is in effect.
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(NOTE: The purpose of this bill is to provide that a
distributor who markets beer products for a brewer is entitled to
market new products associated with the brewer. The bill also
prohibits brewers from obtaining certain financial information in
reviewing franchise agreements with distributors.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.)