vs. ) CASE NO. 84-2401
Respondent. )
A final hearing was held in this case in Miami on August 1, 1984. The issue is whether Respondent Department of Business Regulation, Division of Alcoholic Beverages and Tobacco (Division) should authorize Respondent Southeast Liquor Importers (Southeast) to withdraw the brand Aguardiente Antioqueno from distributor, Petitioner Florida Beverage Corporation, under Section 565.095(5), Florida Statutes (1983). Southeast takes the position that the statute does not apply but that, if it does, Southeast has demonstrated the "good cause" required by the statute for withdrawal of a registered brand such as Aguardiente Antioqueno from a distributor. Florida Beverage takes the position that the statute does apply and that Southeast has not demonstrated "good cause."
For Petitioner: J. Riley Davis, Esquire
For Respondent: Lane Abraham, Esquire Southeast Liquor 2700 Southwest 37th Avenue Importers Miami, Florida 33133
For Respondent: Sandra P. Stockwell, Esquire
DABT Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
Florida Beverage is a distributor of wine and liquor in the State of Florida and is licensed as a distributor of wine and liquor by the Division. Florida Beverage has been licensed as a distributor for many years in Florida, and in its capacity as a distributor, has carried and sold various brands or labels of wine and liquor in the State. (Southeast's Response To Notice To Show Cause).
Southeast is an importer of fine liqueurs and is the representative and agent of a foreign manufacturer and is the primary American source of Aguardiente Antioqueno. Southeast is in the business of selling and/or importing various brands and labels of liquors and/or liqueurs in the State of Florida. (Id.)
Southeast has its principal place of business in Coral Gables, Florida.
In May of 1979, Florida Beverage was appointed the exclusive distributor of Aguardiente Antioqueno, a spirituous liquor and fine liqueur, by UMZ, Inc., the importer of the brand at that time. (T. 52-53) Aguardiente Antioqueno is owned and produced by the Colombian government and is exported from Colombia by a company named Cabarria, the exclusive exporter of the brand from Colombia.
In 1980 or 1981, UMZ, Inc. announced the appointment of Imported Beverage Specialties Company as the exclusive national distributor for Aguardiente Antioqueno, and Florida Beverage purchased some of the brand from Imported Beverage Specialties. (T. 53)
Later, UMZ, Inc. again became the importer and primary American source of Aguardiente Antioqueno, and Florida Beverage resumed purchasing the brand from UMZ, Inc.
In September, 1983, Southeast entered into a contract with Cabarria under which it became the exclusive importer of Aguardiente Antioqueno to the United States. (T. 11, 26)
Southeast's general manager is Jose (Pepe) Dans. Dans previously had worked for Southern Wines and Spirits, Inc. for eight years as a salesman. (T.
Dans' first cousin is the vice-president of sales at Southern Wines and Spirits, and Dans felt he would get better treatment from and would prefer dealing with his cousin as distributor of Aguardiente Antioqueno in Florida. (T.
Southeast, through Dans, learned that Florida Beverage was the previous distributor of the product in Florida but did not contact Florida Beverage. (T. 13, 27)
Florida Beverage later contacted a representative of Cabarria and learned that Southeast was the new exclusive importer of the brand. Cabarria advised Florida Beverage to contact Southeast and indicated its appreciation of Florida Beverage's interest in the product. (T. 13, 55) And Cabarria also advised Florida Beverage that its price would be $36 a case, FOB Columbia, less a $6 purchase allowance. (T. 56)
Although Florida Beverage had been paying more than $30 per case to the previous importer of Aguardiente Antioqueno (T. 68), Florida Beverage placed a purchase order for 600 cases at $30 a case. (T. 56) The quantity was based upon Florida Beverage's historical purchasing pattern of buying approximately 600 cases 3 or 4 times a year. (T. 60)
When Dans received the purchase order, Southeast had not yet actually signed its contract with Cabarria. (T. 27-28) Yet Dans had already contacted Southern Wines and Spirits and was negotiating with it for the sale of 2,000 cases at $44 a case. (T. 15-17)
When Dans received Florida Beverage's purchase order, he took offense at the $30 a case quote and became committed to deal with Southern Wines and Spirits. (T. 14-15, 28)
In response to Florida Beverage's purchase order, Dans telephoned Florida Beverage and spoke with an order entry clerk. (T. 59) Dans told the clerk that his price was $44 a case, that he wanted a 2,000 case order and that he needed a letter of credit. (T. 16-18) He added, either in this telephone conversation or in a later one on October 30, 1983, that he would not be doing business with Florida Beverage. (T. 57-58; Petitioner's exhibit 1)
Either by October 20, 1983 or shortly thereafter, Southeast entered into an agreement with Southern Wine and Spirits under which Southern Wine and Spirits would be the exclusive distributor of Aguardiente Antioqueno in Florida and under which Southern Wines and Spirits would buy 2,000 cases of the product at $44 a case, 1,000 cases by airline and 1,000 cases by ocean freight. (T. 16-
17) There was no agreement as to the quantity of future shipments, but Southeast concedes that future shipments of 1,000 cases would be reasonable. (T. 41-48)
After October 20, 1983, Florida Beverage again contacted Southeast and agreed to increase its offer to the $44 a case price quoted by Southeast. (T.
60-61) There was no discussion about the 2,000 case quantity requirement or the letter of credit requirement. (T. 61)
Later, Florida Beverage's chief executive officer spoke directly with Dans by telephone and was at that time advised by Dans that Southeast was insisting upon a letter of credit. There was, however, no mention of a 2,000 case quantity requirement during this conversation. (T. 62) Florida Beverage's chief executive officer advised Dans that it was not Florida Beverage's normal course of business to issue letters of credit but that it would speak with its attorneys on the subject.
After discussions between the attorneys for the parties, Florida Beverage was informed that Southeast would honor Florida Beverage's amended purchase order (at $44 a case) if Florida Beverage would furnish a letter of credit. (T. 62)
In February 1984, Florida Beverage submitted the required letter of credit. The letter of credit was to expire on April 15, 1984. (T. 63-64; Petitioner's exhibit 2)
Instead of honoring the amended purchase order, with letter of credit, Southeast's attorney notified Florida Beverage and the Division by letter dated April 6, 1984 that, pursuant to Section 565.095(5), Florida Statutes (1983), Aguardiente Antioqueno would not he shipped to Florida Beverage. The letter stated that Southeast would be appointing a new distributor which was a business decision reserved to Southeast which constitutes "good cause" under the Division's recent decision in the case In Re: Petition of Standard Distributing Company. (Petitioner's exhibit 3) Southeast has never shipped Florida Beverage any Aguardiente Antioqueno.
CONCLUSIONS OF LAW
Section 565.095(5), Florida Statutes (1983), provides:
(5) WITHDRAWAL OF REGISTERED BRAND OR LABEL - No brand or label registered hereunder or any brand or label of wine may be withdrawn from any distributor after it has been sold by a manufacturer to any distributor unless good cause for its withdrawal is shown by the manufacturer.
This provision was created by enactment of Section 3, Chapter 78-135, Laws of Florida (1978).
Section 565.095(1), Florida Statutes (1983), provides:
DEFINITION - "Primary American source of supply" means the manufacturer, rectifier, or owner of spirituous liquors at the time
same become a marketable product, or bottler, or the exclusive agent of any such person, who, if the product cannot be secured directly from the manufacturer
by an American distributor, is the source closest to the manufacturer in the channel of commerce from whom the product can he
secured by an American distributor, or who, if the product can be secured directly from the manufacturer by an American distributor, is the manufacturer.
This provision, along with others, was created by enactment of Section 2, Chapter 78-135, Laws of Florida (1978).
Section 2, Chapter 78-135, Laws of Florida (1978), evidences a specific legislative intent to modify the law enacted by it as part of Section 565.095, Florida Statutes. On the other hand, Section 3 of Chapter 78-135, Laws of Florida (1978), does not specifically reflect any legislative intent that the law it enacts should be codified as part of Section 565.095, Florida Statutes. However, undoubtedly because of the proximity of the two provisions within Chapter 78-135, Laws of Florida (1978), the Statutory Revision Division of the Joint Legislative Management Committee has codified both provisions as parts of Section 565.095, Florida Statutes. The Legislature has not recodified the provisions in subsequent sessions through 1983.
Section 565.095(5), Florida Statutes (1983), refers to the withdrawal of a brand or label "registered hereunder." Section 565.095(2), provides for registration of the "primary American source of supply" of "any spirituous liquors to any distributor within the state." Section 565.095(1), defines "[P]rimary American source of supply" as set forth above. Therefore, Subsection
(5) should be read together with Subsection (1) of Section 565.095.
Section 565.095(5) speaks to the withdrawal of a registered brand "from any distributor after it has been sold by a manufacturer to any distributor." It provides that good cause for withdrawal must be shown "by the manufacturer." It also affords certain rights to "any distributor carrying the
manufacturer's brand or label." Subsection (5) therefore applies to withdrawal of a registered brand or label by a manufacturer and, it would appear on first reading, only by a manufacturer.
However, as mentioned, Subsection (5) must be read together with Subsection (1). In defining "[p]rimary American source of supply," Subsection
(1) equates "manufacturer" with "the exclusive agent of [the manufacturer], who, if the product cannot be secured directly from the manufacturer by an American distributor, is the source closest to the manufacturer in the channel of commerce from whom the product can be secured by an American distributor . . .
."
In this case, Florida Beverage Corporation showed that Southeast Liquor Importers is the exclusive importer of Aguardiente Antioqueno to the United States and therefore the "source closest to the manufacturer in the chain of commerce from whom the product can be secured by an American distributor" and the "manufacturer" for purposes of 565.095(5).
The decision in Somerset Importers, Ltd. v. Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, 428 So.2d 679, 680 (Fla. 1st DCA 1983), holds that Section 565.095 (5) "controls the withdrawal of a registered brand or label from any distributor, and is not limited to withdrawal by a manufacturer which has previously sold that brand." The facts of this case are substantially the same as the facts in the Somerset case. Therefore, Section 565.095(5) is applicable in this case because Florida Beverage Corporation purchased Aguardiente Antioqueno from the entity that preceded Southeast Liquor Importers as exclusive importer.
Neither Section 565.095(5), Florida Statutes (1983), nor its legislative history provide any insight into the nature of the "good cause" necessary for withdrawal of a registered brand or label. It would seem that the requirement of "good cause" was imposed, at the very least, to prevent arbitrary or discriminatory withdrawal of a registered brand by a manufacturer. Cf. International Harvester Co. v. Calvin, 353 So.2d 144 (Fla. 1st DCA 1977). It has been held that if a manufacturer sets unrealistic sales goals and then selectively terminates one dealer for failing to meet those goals, the termination may be considered in violation of the good faith standard provided in the Federal Automobile Act. Autohause Brugger, Inc. v. Saab Motors, Inc.,
567 F.2d 901 (9th Cir. 1978), cert. den., 436 U.S. 946. Similarly, some of the more general franchise acts seek to prevent manufacturers from playing on a distributor's fear of termination in order to compel the distributor to abide by unreasonable requirements. Under such statutes, a refusal by a manufacturer to supply automobiles unless the dealer orders unwanted models constitutes a failure to act in good faith. American Motors Sales Corp. v. Semke, 384 F.2d 192 (10th Cir. 1967; Barry Brothers Buick v. General Motors Corp., 257 F.2d 542 (DCPa. 1966, aff'd, 377 F.2d 552; David R. McGeorge Car Co., Inc. v. Leyland Motor Sales, Inc., 504 F.2d 52 (4th Cir. 1974), cert. den., 420 U.S. 92.
On the other hand, failure of a distributor to perform according to an agreement would constitute good cause for a manufacturer to terminate its distributorship. See, J. C. Millett Co. v. Pack & Tilford Distillers Corp., 123
F. Supp. 484 (D.C. Calif. 1954); C. C. Hauff Hardware, Inc. v. Long Manufacturing Co., 140 N.W. 2nd 425 (Iowa 1967)(desire to establish own sales organization and no dissatisfaction with existing distributor expressed is not good cause); Allied Equipment Co. v. Weber Engineered Products, Inc., 237 F.2d 879 (4th Cir. 1956) (where distributor did not faithfully and efficiently carry out its business, termination of distributorship was with good cause).
In the Final Order, In Re: Petition of standard Distributing Company, DBR, DABT Case No. 83-BW1, entered March 6, 1984, the Division issued a declaratory statement that "good cause for withdrawal of certain brands of wine and liquors from a distributor existed, under the undisputed facts of that case, where a manufacturer's assets, including the brands of wines and liquors in question, were acquired by a successor manufacturer. The Division explained that the acquisition made the successor manufacturer the "new owner of these products" and that the "negotiated acquisition did not include any contractual obligations existing with current Florida distributors of the [seller's] products . . . . The Division concluded: "Unless it can be shown that the sale of such products and the appointment of new distributor(s) by owner was merely a vehicle to circumvent the requirements of the Division's withdrawal requirements, the arms length purchase of a product line by a successor will be viewed as good cause by the Division for the appointment of a new distributor and the withdrawal of the brand from the preceding [sic] distributor."
This case does not involve the acquisition of a product line by a successor manufacturer. It therefore is distinguishable factually from the Standard Distributing Company case. Nor should the Standard Distributing Company precedent be extended to govern the facts of this case. First, Section
565.095 is aimed primarily at manufacturers and applies to importers such as Southeast Liquor Importers only to the extent that a registered brand or label cannot be purchased by a distributor directly from the manufacturer. Second, extending the Standard Distributing Company precedent to the facts of this case would open the door to potential abuses and subterfuges under which a manufacturer could evade the clear purpose of 565.095(5) by dealing with a new legal entity as its exclusive agent. And third, even disregarding the potential for abuse and subterfuge, the Standard Distributing Company precedent is designed to afford some rights to a successor manufacturer to counterbalance the rights of distributors under 565.095(5). New exclusive agents of the manufacturers are not entitled to the same counterbalancing rights.
As reflected in the Findings Of Fact, several of the allegedly valid business reasons for withdrawing Aguardiente Antioqueno from Florida Beverage Corporation were in fact after- the fact rationalizations. The real reason Southeast Liquor Importers withdrew the brand from Florida Beverage Corporation is that its manager, Pepe Dans, intended from the outset to sell to Southern Wines and Spirits, Inc. where he had worked for eight years as a salesman and where his first cousin is vice-president of sales. Such a business decision does not constitute "good cause" for withdrawal of a brand, and it violated Florida Beverage Corporation's rights under Section 565.095(5), Florida Statutes (1983).
Nor is Southeast Liquor Importers' desire to consolidate Aguardiente Antioqueno with all of its other brands for distribution by Southern Wines and Spirits "good cause" under 565.095(5). That business purpose is unrelated to the distributor's performance as a distributor of the brand; it is exclusively related to the new exclusive agent's business structure and practices. That business purpose, or one like it, could be raised in most, if not all, situations' where a manufacturer changes its exclusive agent. To call such a business purpose "good cause" could render 565.095(5) almost meaningless in a case where the manufacturer changes its exclusive agent. See also Joseph Schlitz Brewing Co. v. Central Beverage Co., Inc., 359 N.E. 2nd 566 (Ind. 1st DCA 1977) (desire to consolidate houses did not constitute just cause under the terms of an Indiana statute prohibiting termination "unfairly without due regard to equities and without justification of provocation").
Finally, Southeast Liquor Importers argues that Southern Wines and Spirits has a separate Latin division which could more effectively distribute Aguardiente Antioqueno, which is purchased primarily by Colombians. This may or may not be true. But, in any event, it was not shown that Florida Beverage Corporation had a Latin division at the time it became a distributor of Aguardiente Antioqueno. Absent such proof, neither the manufacturer nor its exclusive agents have shown a change of circumstances which might be "good cause" for withdrawing the brand from Florida Beverage Corporation.
Section 565.095(5), Florida Statutes (1983), provides:
If the Division determines that good cause to justify the withdrawal is absent, the division may prohibit the brand or label from being withdrawn, and failure on the part of the manufacturer so prohibited to ship the distributor a reasonable amount of the brand sought to be withdrawn will Result in the withdrawal from sale in this state of all its brands.
Where a brand has been withdrawn by an exclusive agent of a manufacturer, the withdrawal from sale in this state applies to all brands imported by the exclusive agent. In this case, 600 to 1,000 cases of Aguardiente Antioqueno is, on the facts proved at this time, a reasonable amount of Aguardiente Antioqueno to ship to Florida Beverage Corporation at reasonable intervals.
Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, enter a final order: (1) declaring that Southeast Liquor Importers has not shown "good cause" under Section 565.095(5), Florida Statutes (1983), for withdrawal of the registered brand Aguardiente Antioqueno from Florida Beverage Corporation; and (2) prohibiting Southeast Liquor Importers from withdrawing Aguardiente Antioqueno from Florida Beverage Corporation.
RECOMMENDED this 20th day of September, 1984 in Tallahassee, Florida.
J. LAWRENCE JOHNSTON Hearing Officer
Filed with the Clerk of the Division of Administrative Hearings this 20th day of September, 1984.
1/ The proposed findings of fact submitted by Southeast and Florida Beverage have been considered. To the extent reflected in these Findings Of Fact, the proposed findings of fact are accepted. To the extent the proposed findings of fact are not reflected in these Findings Of Fact, the proposed findings of fact have been rejected as being either not proven by competent substantial evidence, being contrary to facts proven by the party with the burden of proof being cumulative, being subordinate or being irrelevant. The Division submitted no proposed findings of fact, but its motion for an extension of time to file a memorandum of law was granted, and its memorandum of law was considered.
J. Riley Davis, Esquire
Howard M. Rasmussen, Director Division of Alcoholic Beverages
