Bacardi USA was within its rights when it terminated a decades-old relationship with Missouri distributor Major Brands, a federal judge in Florida ruled in granting partial summary judgment to Bacardi.
Major Brands, according to a statement released last week, will appeal the March ruling and continue its case alleging wrongful termination of the contract.
Major Brands held the distribution rights for Bacardi products in Missouri for 65 years, according to its statement. According to the order on motions for summary judgment by Judge Kathleen M. Williams, U.S. district judge in the Southern District of Florida, Bacardi terminated its business relationship with Major Brands in March 2013.
The companies had made several agreements, and the court cited five of them. The companies signed four in 1969 and another in 2004. The agreements provide for cancellation with 60 days’ notice under certain conditions, including “sale or transfer by the other party of its physical assets, a majority of its stock, or a change in ownership, control or management of its control or business,” Williams cited.
In 2010, then-CEO of Major Brands Todd Epsten was diagnosed with brain cancer. In early 2012, his wife Sue McCollum was promoted from executive vice president to CEO. Epsten died in May 2012, and Bacardi terminated the relationship on March 5, 2013.
Missouri’s franchise law governs the relationship between liquor suppliers and distributors. The 2004 agreement between the two, though, sets forth a forum selection clause, stating that the agreement is to be construed, interpreted and governed by the laws of the state of Florida. Williams, in her order, called this a “fundamental point of agreement” that neither side disputed.
Major Brands is a Missouri company that only does business in Missouri, McCollum said.
“It’s very important to note that the Florida district court applied Florida law, not Missouri law,” McCollum said.
Major Brands is suing Bacardi in the St. Louis Circuit Court as well. In August 2013, Judge Robert H. Dierker issued a memorandum and order in that case explaining that the agreements were indisputably subject to Missouri law, despite the agreements.
“A forum selection clause is considered to be unreasonable if Missouri has some overriding interest in the subject matter of the contract that outweighs any interest that the selected forum state would have,” Dierker wrote. “It is inconceivable that Florida has any interest in the regulation of liquor distribution franchises in Missouri.”
Missouri’s franchise laws for liquor follow a three-tier system, where suppliers must enter into franchise relationships with wholesalers, who then sell to the retailers. The franchise relationship is governed by section 407.413 of state statutes, which offers protections to the wholesalers, including that the suppliers have to offer the same terms to different wholesalers and that a supplier must have good cause to discontinue the business relationship. A 1947 law mandates Missouri residency for the corporate officers, directors and major shareholders of the wholesalers.
The St. Louis case is set for trial June 9. Attorneys on both sides of the Florida suit declined to comment, and attorneys on both sides of the St. Louis case did not return messages seeking comment Thursday before press time.