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S.B. 157
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5 AN ACT RELATING TO ALCOHOLIC BEVERAGES; ENACTING THE BEER INDUSTRY
6 FAIR DEALING ACT; PROVIDING LEGISLATIVE INTENT; ENACTING DEFINITIONS;
7 PROVIDING LIMITS ON AND PROCEDURES FOR TERMINATION OF A
8 DISTRIBUTORSHIP AGREEMENT; PROHIBITING CERTAIN CONDUCT; REQUIRING
9 COMPENSATION BE PAID FOR CERTAIN ACTS; PROVIDING REQUIREMENTS FOR
10 WHOLESALERS; PROVIDING REMEDIES; ADDRESSING APPLICABILITY;
11 PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE.
12 This act affects sections of Utah Code Annotated 1953 as follows:
13 ENACTS:
14 32A-11a-101, Utah Code Annotated 1953
15 32A-11a-102, Utah Code Annotated 1953
16 32A-11a-103, Utah Code Annotated 1953
17 32A-11a-104, Utah Code Annotated 1953
18 32A-11a-105, Utah Code Annotated 1953
19 32A-11a-106, Utah Code Annotated 1953
20 32A-11a-107, Utah Code Annotated 1953
21 32A-11a-108, Utah Code Annotated 1953
22 32A-11a-109, Utah Code Annotated 1953
23 32A-11a-110, Utah Code Annotated 1953
24 32A-11a-111, Utah Code Annotated 1953
25 Be it enacted by the Legislature of the state of Utah:
26 Section 1. Section 32A-11a-101 is enacted to read:
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1 32A-11a-101. Title -- Legislative intent.
2 (1) This chapter shall be known as the "Utah Beer Industry Fair Dealing Act."
3 (2) The Legislature finds that:
4 (a) under the Twenty-first Amendment to the Constitution of the United States the state
5 has the authority to control and stabilize the distribution of beer within the state;
6 (b) the fair, efficient, orderly, and competitive distribution of beer within the state in
7 accordance with this chapter affects the public interest and public welfare;
8 (c) a substantial inequality of bargaining power between brewers and wholesalers enables
9 a brewer:
10 (i) to compel a wholesaler to execute agreements that contain terms and conditions to
11 which the wholesaler generally would not agree absent the inequality in bargaining power,
12 including:
13 (A) establishment of prices;
14 (B) requiring the purchase of products; or
15 (C) requiring a wholesaler to engage in marketing programs that are not in the public
16 interest; and
17 (ii) to terminate a wholesaler's distributorship agreement without good cause or by unfair
18 means;
19 (d) it is in the public interest to require brewers and wholesalers to conduct their business
20 relations so as to assure:
21 (i) that the wholesaler is free to manage its business enterprise, including the right to
22 independently establish its selling prices; and
23 (ii) that the public, retailers, and brewers are served by wholesalers who will comply in
24 good faith with the requirements of a distributorship agreement with a brewer.
25 Section 2. Section 32A-11a-102 is enacted to read:
26 32A-11a-102. Definitions.
27 As used in this chapter:
28 (1) "Affected party" means a brewer or wholesaler who is a party to a distribution
29 agreement that a terminating party seeks to terminate or not renew.
30 (2) (a) "Distributorship agreement" means any contract, agreement, or arrangement
31 between a brewer and a wholesaler pursuant to which the wholesaler has the right to purchase,
1 resell, and distribute in a designated geographical area any brand of beer manufactured by the
2 brewer.
3 (b) A distributorship agreement may be:
4 (i) express or implied;
5 (ii) oral or written; or
6 (iii) for a definite or indefinite period.
7 (3) "Good cause" means the failure by either party to a distributorship agreement to
8 comply with a provision of the agreement or applicable law that is both reasonable and of material
9 significance to the business relationship between the brewer and the wholesaler.
10 (4) "Sales territory" means the geographic area of distribution and sale responsibility
11 designated by a distributorship agreement.
12 (5) "Terminating party" means a brewer or wholesaler who is a party to a distribution
13 agreement who seeks to terminate or not renew the distribution agreement.
14 Section 3. Section 32A-11a-103 is enacted to read:
15 32A-11a-103. Termination of distributorship agreements.
16 (1) Except as provided in Subsection (2) or (3), a brewer or wholesaler may not:
17 (a) terminate a distributorship agreement; or
18 (b) fail to renew a distributorship agreement.
19 (2) A brewer or wholesaler may take an action prohibited by Section (1) if:
20 (a) the brewer or wholesaler has good cause for the action; and
21 (b) if notification is required by Section 32A-11a-104:
22 (i) the terminating party provides the affected party prior notification in accordance with
23 Section 32A-11a-104; and
24 (ii) the affected party has not eliminated within 90 days after the receipt of the notification
25 the reasons specified in the notification as the reasons for the action.
26 (3) A brewer may terminate or not renew a distributorship agreement if:
27 (a) the brewer gives the wholesaler 30 days written notice before termination or
28 nonrenewal;
29 (b) the brewer discontinues production or discontinues distribution throughout the state
30 of all brands of beer sold by the brewer to the wholesaler; and
31 (c) the termination or nonrenewal does not violate the distributorship agreement.
1 Section 4. Section 32A-11a-104 is enacted to read:
2 32A-11a-104. Notice of termination.
3 (1) Except as provided in Subsection (3), a terminating party may not take an action
4 described in Subsection 32A-11a-103(1) unless the terminating party provides prior notification
5 in accordance with Subsection (2) to the affected party.
6 (2) The notification required under Subsection (1) shall:
7 (a) be in writing;
8 (b) be received by the affected party not less than 90 days before the date on which the
9 distributorship agreement will be terminated or not renewed;
10 (c) state the intention to terminate or not renew;
11 (d) state the reasons for the termination or nonrenewal; and
12 (e) contain the date on which the termination or nonrenewal shall take effect if the reasons
13 for the action are not eliminated by that date.
14 (3) A brewer or wholesaler may take an action described in Subsection 32A-11a-103(1)
15 without furnishing any prior notification if:
16 (a) the affected party is insolvent, bankrupt, in dissolution, or in liquidation;
17 (b) the affected party makes an assignment for the benefit of creditors or similar
18 disposition of substantially all of the assets of the affected party's business; or
19 (c) the affected party or a person owning more than 10% of the stock or other ownership
20 interest in the affected party:
21 (i) is convicted of, pleas guilty to, or pleas no contest to a charge of violating a law or rule;
22 or
23 (ii) has its license or permit revoked or suspended if the revocation or suspension:
24 (A) is for a period of 20 days or more;
25 (B) relates to the affected party's business as a brewer or wholesaler; and
26 (C) materially and adversely affects the affected party's ability to continue in the business.
27 Section 5. Section 32A-11a-105 is enacted to read:
28 32A-11a-105. Prohibited conduct of brewer.
29 (1) A brewer may not:
30 (a) induce, coerce, or attempt to induce or coerce, any wholesaler to engage in any illegal
31 act or course of conduct;
1 (b) require a wholesaler to agree to an unreasonable requirement under a distributorship
2 agreement;
3 (c) prohibit a wholesaler from selling the product of any other brewer;
4 (d) fix or maintain the price at which a wholesaler may resell beer;
5 (e) fail to execute with each wholesaler of its brands a written distributorship agreement;
6 (f) require any wholesaler to accept delivery of any beer or any other item, that is not
7 voluntarily ordered by the wholesaler;
8 (g) restrict or inhibit, directly or indirectly, the right of a wholesaler to participate in an
9 organization representing interests of wholesalers for any lawful purpose;
10 (h) require a wholesaler to participate in or contribute to any local or national advertising
11 fund or other promotional activity;
12 (i) retaliate against a wholesaler that files a complaint with the department or the
13 applicable federal agency regarding an alleged violation by the brewer of a state or federal law or
14 administrative rule;
15 (j) require without good cause any change in the manager or successor manager of any
16 wholesaler who has previously been approved by the brewer;
17 (k) if a wholesaler changes its approved manager or successor manager, prohibit the
18 change unless the new manager fails to meet the reasonable standards for similarly situated
19 wholesalers of the brewer; or
20 (l) refuse to deliver beer products covered by a distribution agreement to the wholesaler:
21 (i) in reasonable quantities; and
22 (ii) within a reasonable time after receipt of the wholesaler's order.
23 (2) Notwithstanding Subsection (1)(l), the brewer may refuse to deliver products if the
24 refusal is due to:
25 (a) the wholesaler's failure to pay the brewer pursuant to the distributorship agreement;
26 (b) an unforeseeable event beyond either party's control;
27 (c) a work stoppage or delay due to a strike or labor problem;
28 (d) a bona fide shortage of materials; or
29 (e) a freight embargo.
30 Section 6. Section 32A-11a-106 is enacted to read:
31 32A-11a-106. Transfer of business assets or stock.
1 (1) (a) Except as provided in Subsection (1)(b), a brewer may not prohibit or withhold
2 approval of any assignment, sale, or transfer of all or any portion of:
3 (i) the voting or nonvoting stock of a wholesaler;
4 (ii) the wholesaler's assets;
5 (iii) the voting stock of any parent corporation; or
6 (iv) the beneficial ownership or control of any other entity owning or controlling the
7 wholesaler, including the wholesaler's rights and obligations under the terms of a distributorship
8 agreement.
9 (b) If an assignment, sale, or transfer described in Subsections (1)(a)(i) through (iv) results
10 in a person being substituted for the wholesaler, the brewer may not unreasonably withhold or
11 delay its approval of the assignment, sale, or transfer:
12 (i) if that person meets reasonable standards that are imposed on the wholesaler; and
13 (ii) the standards imposed on the wholesaler are imposed on all other wholesalers of that
14 brewer of the same general class, taking into account the size and location of the sales territory and
15 market to be served.
16 (2) Upon the death of one of the partners of a partnership operating the business of a
17 wholesaler, a brewer may not deny the surviving partner or partners of the partnership the right to
18 become a successor-in-interest to the distributorship agreement between the brewer and the
19 partnership, if:
20 (a) the survivor has been active in the management of the partnership; or
21 (b) is capable of carrying on the business of the partnership.
22 (3) (a) Notwithstanding Subsection (1) or (2), if a wholesaler dies, a brewer may not
23 disapprove any transfer of ownership to a surviving spouse or adult child of an owner of the
24 wholesaler.
25 (b) A transfer of ownership by the surviving spouse or adult child subsequent to the
26 transfer under Subsection (3)(a) is subject to Subsection (1).
27 Section 7. Section 32A-11a-107 is enacted to read:
28 32A-11a-107. Reasonable compensation.
29 (1) If a brewer violates Section 32A-11a-103 or 32A-11a-106, the brewer shall pay the
30 wholesaler the fair market value of the wholesaler's business with relation to the affected brands.
31 In determining fair market value, consideration shall be given to all elements of value, including
1 good will and going concern value.
2 (2) (a) Either the brewer or the wholesaler may request arbitration if a brewer and a
3 wholesaler are unable to mutually agree on:
4 (i) whether or not good cause exists for termination, nonrenewal, or refusal to consent to
5 an assignment; or
6 (ii) the reasonable compensation to be paid for the value of the wholesaler's business.
7 (b) If a brewer or wholesaler requests arbitration under Subsection (2)(a), an arbitration
8 panel shall be created with the following members:
9 (i) one member selected by the brewer in a writing delivered to the wholesaler within ten
10 business days of the date arbitration was requested under Subsection (2)(a);
11 (ii) one member selected by the wholesaler in a writing delivered to the brewer within ten
12 business days of the date arbitration was requested under Subsection (2)(a); and
13 (iii) one member selected by the two arbitrators appointed under Subsections (2)(b)(i) and
14 (ii).
15 (c) If the arbitrators selected under Subsection (2)(b)(iii) fail to choose a third arbitrator
16 within ten business days of their selection, a judge of a district court in the county in which the
17 wholesaler's principal place of business is located shall select the third arbitrator.
18 (d) Arbitration costs shall be divided equally between the wholesaler and the brewer.
19 (e) The award of the arbitration panel is binding on the parties unless appealed within ten
20 days from the date of the award.
21 (f) Subject to the requirements of this chapter, arbitration and all proceedings on appeal
22 shall be governed by Title 78, Chapter 31a, Utah Arbitration Act.
23 Section 8. Section 32A-11a-108 is enacted to read:
24 32A-11a-108. Sale or transfer of brewer's business.
25 If a brewer sales or transfers its business or assets, the transferee shall become a party to
26 and be bound by the terms of each distribution agreement with a wholesaler to which the brewer
27 was a party immediately prior to the transfer.
28 Section 9. Section 32A-11a-109 is enacted to read:
29 32A-11a-109. Judicial remedies.
30 (1) A brewer or wholesaler who is a party to a distributorship agreement may maintain a
31 civil action against the brewer or wholesaler in a court of competent jurisdiction in the county in
1 which the wholesaler's principal place of business is located if:
2 (a) the brewer or wholesaler violates this chapter; or
3 (b) (i) a brewer and wholesaler are not able to mutually agree on reasonable compensation
4 under Section 32A-15-107; and
5 (ii) neither party elects arbitration in accordance with Section 32A-11a-107 prior to or
6 within 20 days following service of process on the electing party in the civil action.
7 (2) (a) The prevailing party in any action under Subsection (1) shall recover:
8 (i) actual damages, including the value of the wholesaler's business as specified in Section
9 32A-15-107 if applicable; and
10 (ii) reasonable attorneys' fees and court costs.
11 (b) In addition to the amount awarded under Subsection (2)(a), the court may grant such
12 relief in law or equity as the court determines to be necessary or appropriate considering the
13 purposes of this chapter.
14 (3) If either party elects arbitration under Subsection (1)(b)(ii) following service of
15 process, the civil action is stayed pending a decision by the arbitration panel.
16 Section 10. Section 32A-11a-110 is enacted to read:
17 32A-11a-110. Modifying statutory requirements not permitted.
18 (1) The requirements of this chapter may not be modified by agreement.
19 (2) Any agreement that by its terms modifies the requirements of this statute is void and
20 unenforceable to the extent it attempts to modify the requirements of this chapter.
21 Section 11. Section 32A-11a-111 is enacted to read:
22 32A-11a-111. Applicability.
23 This chapter shall apply to distributorship agreements in existence on July 1, 1997, as well
24 as to distributorship agreements entered into and any cancellation, termination, failure to renew,
25 amendment, or material modification of any distributorship agreement occurring after July 1, 1997.
26 Section 12. Severability clause.
27 If any part, section, or subsection of this chapter, or the application of a part, section, or
28 subsection, is held to be invalid, the remainder of this chapter shall not be affected by the
29 invalidation.
30 Section 13. Effective date.
31 This act takes effect on July 1, 1997.
Legislative Review Note
as of 1-29-97 8:30 AM
A limited legal review of this bill raises no obvious constitutional or statutory concerns.
Office of Legislative Research and General Counsel
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