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Court ruling issued in Major Brands termination suit with Diageo

  

ST. LOUIS — A St. Louis Circuit Court ruling handed down this week by Judge Robert H. Dierker found that Diageo wrongly terminated Major Brands, a St. Louis-based wine and spirits distributor.

While this is only one of the eight court cases, plus a countersuit, that Major Brands is involved in surrounding the so-called “liquor wars,” or fight surrounding the Missouri Franchise Law, the ruling comes as a win for the company, according to CEO Sue McCollum.

Sue McCollum
Sue McCollum

“We won a significant victory today with the Court’s determination that Major Brands had a franchise relationship with Diageo and was wrongfully terminated,” McCollum said in a statement.

The judge found that “the current agreement between Major Brands and Diageo functionally is a continuation of agreements executed in 1990 and 1991” between Major Brands and Heublein and Seagram, one of two suppliers that Diageo is the successor of.

The ruling states that the relationship between a liquor manufacturer or supplier and distributors “can be highly independent,” adding that in the case between Major Brands and Diageo, a community of interest exists — a community of interest is a commonly criticized portion of the Missouri Franchise Law during the litigation and legislation that has occurred the last few months.

Diageo brands, which account for 23 percent of Major Brands’ revenues, will still no longer be sold through Major Brands starting July 1, a detriment to the company.

“On the whole, the facts and figures in the record indicate that Major Brands often failed to meet goals set by Diageo, but that Diageo never seriously entertained termination of Major Brands’ distributorship until after two significant events: the decision of the United States Court of Appeals for the Eighth Circuit in Missouri Beverage Co. v. Shelton Bros., Inc., 669 F.3d 873 (8th Cir. 2012), and an offer from Glazer’s of what may be called a very sweet deal to take over Diageo’s Missouri distribution,” the judge writes.

diageoWhile there was no rule on the countersuit from Major Brands regarding the interference of Glazer’s in the situation, the judge wrote in a footnote that “Glazer’s alleged misconduct in this case, in light of the Court’s refusal to entertain the request for injunctive relief against Glazer’s, so the evidence of the Diageo-Glazer’s negotiations is attenuated.”

Ultimately, the ruling states that to date, Diageo’s problem with Major Brands wasn’t a factor in the termination of the business relationship, stating that the testimony of Diageo’s executive during the May hearing “lack[ed] credibility” in that regard.
The next step in the litigation is a case management conference scheduled for August 9.

Update (2:45 p.m.) – Diageo issued the following statement: “Diageo is pleased that with this decision of the Court, we can now move all of our spirit and wine brands to Glazer’s in Missouri.”

Be sure to read our past stories about the “liquor wars” for more information about ongoing litigation and legislative efforts.