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HOUSE OF REPRESENTATIVES - FLOOR VERSION
STATE OF OKLAHOMA
1st Session of the 59th Legislature (2023)
ENGROSSED SENATE
BILL NO. 422 By: Coleman of the Senate
and
Marti of the House
[ alcoholic beverages - agreement - provisions -
remedy of noncompliance - interest - conditions -
renegotiation - damages - compensation - effective
date ]
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 37A O.S. 2021, Section 3 -111, is
amended to read as fo llows:
Section 3-111. A. Except as provided in subsection F of this
section, a small brewer, who manufactures less than twenty -five
thousand (25,000) barrels of beer annually, is not subject to the
termination provisions of this section.
B. 1. Except as provided in subsections C, D and E subsection
C of this section, no brewer shall termi nate a distributor agreement
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with any beer distributor without establishing good cause for such
termination and unless all of the following occur:
a. the brewer establishes good cause for such
termination,
b. the beer distributor receives written notificat ion by
certified mail, return receipt requested, from the
brewer of the alleged noncompliance and is afforded no
less than sixty (60) ninety (90) days in which to cure
such noncompliance. If not capable of being cured
within the sixty-day ninety-day period, the beer
distributor shall begin the cure within the sixty-day
ninety-day period and diligently pursue the cure as
promptly as feasible,
c. b. the beer distributor f ails to cure such noncompliance
within the allotted cure period, and
d. c. the brewer provides written notice by certified mail,
return receipt requested, to the beer distributor of
such continued noncompliance. The notification shall
contain a statement of the intention of the brewer to
terminate the distributor agreement, the reasons f or
the termination and the date the termination shall
take effect.
2. If a beer distributor cures an alleged noncompliance within
the cure period provided in subparagraph b a of paragraph 1 of this
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subsection, any notice of termination from a brewer to a beer
distributor shall be null and void.
C. A brewer may immediately terminate a distributor agreement,
effective upon furnishing written notification to the beer
distributor by certified mail, return receip t requested, for any of
the following reasons:
1. The beer distributor’s failure to pay any undisputed account
when due and upon written demand by the brewer for such payment, in
accordance with agreed payment terms;
2. The assignment or attempted assign ment by the beer
distributor for the benefit of cred itors, the institution of
proceedings in bankruptcy by or against the beer distributor, the
dissolution or liquidation of the beer distributor or the insolvency
of the beer distributor;
3. The revocation or suspension of, or the failure to renew for
a period of more than fourteen (14) thirty-one (31) days, a beer
distributor’s state, local or federal license or permit to sell beer
in this state;
4. The beer distributor has been convicted of a felony that , in
the brewer’s sole judgment, adversely affects t he goodwill of the
beer distributor or brewer ; provided, however, an existing
stockholder or stockholders, partner or partners, or member or
members shall have the right to purchase the stock, partnershi p
interest, or membership interest of the offending s tockholder,
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partner, or member prior to the conviction of the offending
stockholder, partner, or member, and if the sale is completed prior
to conviction, the provision s of this paragraph shall not apply ;
5. A beer distributor has been convicted of, found guilty of or
pled guilty or nolo contendere to, a charge of violating a law or
regulation of the United States or of this state if it materially
and adversely affects the ability of the beer distributor or brewer
to continue to sell its beer in this state ;
6. Any attempted transfer of at least fifty percent (50%)
ownership of the beer distributor, stock of the beer distributor or
stock of any parent corporation of the beer distributor, or any
change in more than fifty percent (50%) of the beneficial ownership
or control of any entity having control of the beer distributor,
without obtaining the prior written approval of the brewer, which
may not be unreasonably withheld , except as may otherwise be
permitted pursuant to a written agreement betw een the parties;
7. Fraudulent conduct made with the express , prior knowledge of
the ownership and management of the beer distributor in the beer
distributor’s dealings with the br ewer of beer, including the
intentional sale of beer outside the brewer ’s established quality
standards;
8. Cessation of the beer distributor to conduct business for
five (5) consecutive business days, unless conducting the business
is prevented or render ed impractical due to events beyond the
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distributor’s reasonable control as a result of an act of God, an
insured casualty, war or a condition of national, state or local
emergency; or
9. Any material and repeated sale of beer, directly or
indirectly, to customers located outside the terri tory assigned to
the beer distributor by the brewer made with the express, prior
knowledge of the ownership and management of the beer distributor
unless expressly authorized by the brewer.
Provided, the D. Any beer distributor terminated by a brewer
under subsection B or C of this section shall have the opportunity
to sell the brewer’s brands for one hundred twenty (120) days after
termination in accordance with the distributor agreement .
Additionally, the brewer shall pay the beer distributor the fair
market value of the distribution rights , which may be lost or
diminished by reason of the termination. If the beer distributor
disputes that the payment made by the brewer was the fair market
value of the distribution rights, the beer distributor may submit
the question of fair market value to binding arbitr ation in
accordance with the procedures set for th in paragraphs 3 through 6
of subsection F of this subsection.
D. The brewer shall have the right to terminate an agre ement
with a beer distributor at an y time by giving the beer distributor
at least ninety-days’ written notice by certified mail, return
receipt requested; provided, the brewer shall give a similar notice
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to all other beer distributors in all other states w ho have entered
into the same distributor agreement with the brewer.
E. If a particular brand of beer is transferred by purchase or
otherwise from a brewer to a successor brewer , the following shall
occur:
1. The the successor brewer shall become obligat ed to all of
the terms and conditio ns of the existing distributor agreement in
effect on the date of succession. This subsection applies
regardless of the character or form of the succession. A successor
brewer has the right to contractually require its beer distributor
to comply with commercially reasonable operational standards of
performance, if the standards are uniformly established for all of
the successor brewer ’s distributors. A successor brewer may, upon
written notice, terminate its agreement, in whole or in part, with a
beer distributor of the brewer it succeeded, for t he purpose of
transferring the distribution rights in the beer distributor ’s
territory to a new beer distributor, provided that the successor
beer distributor first pays to the e xisting beer distributor the
fair market value of the existing distributor ’s business with
respect to the terminated brand or brands;
2. If the successor brewer decides to terminate its agreement
with the existing beer distributor for purposes of transfer , the
successor brewer shall notify the existing beer distributor in
writing of the successor brewer’s intent not to appoint the existing
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beer distributor for all or part of the existing beer distributor ’s
territory. The successor brewer shall mail the no tice of
termination by certified ma il, return receipt requested, to the
existing beer distributor. The successor brewer shall include in
the notice the names, addresses and telephone numbers of the
successor beer distributor or distributors;
3. a. the successor beer distributor shall negot iate with
the existing beer distributor to determine the fair
market value of the existing beer distributor ’s right
to distribute in the existing beer distributor ’s
territory. The successor beer distributor and the
existing beer distributor shall negotiat e the fair
market value in good faith, and
b. the existing beer distributor shall continue to
distribute in good faith until payment of the
compensation agreed to under subparagraph a of this
paragraph, or awarded under p aragraph 4 of this
subsection, is received; and
4. a. if the successor beer distributor and the existing
beer distributor fail to reach a written agreement on
the fair market value within thirty (30) days after
the existing beer distributor receives the no tice
required pursuant to paragraph 2 of this subsection,
the successor beer distributor or the existing beer
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distributor shall send a written notice to the other
party requesting arbitration pursuant to the Uniform
Arbitration Act, Part 2 of Article 22 of Title 13,
C.R.S. Arbitration shall be held for the purpose of
determining the fair mark et value of the existing beer
distributor’s right to distribute in the existing beer
distributor territory,
b. notice of intent to arbitrate shall be sent, as
provided in subparagraph a of this paragraph , not
later than forty (40) days after the existing b eer
distributor receives the notice required pursuant to
paragraph 2 of this subsection. The arbitration
proceeding shall conclude not later than sixty (60)
days after the date the notice of intent to a rbitrate
is mailed to a party, unless this time is ex tended by
mutual agreement of the parties and the arbitrator,
c. any arbitration held pursuant to this subsection shall
be conducted in a city within this state that:
(1) is closest to the existing beer distributor, and
(2) has a population of more than tw enty thousand
(20,000) people,
d. any arbitration held pursuant to this paragraph shall
be conducted before one impartial arbitrator to be
selected by the American Arbi tration Association or
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its successor. The arbitration shall be conducted in
accordance with the rules and procedures of the
Uniform Arbitration Act, Part 2 of Article 22 of Title
13, C.R.S.,
e. an arbitrator’s award in any arbitration held pursuant
to this paragraph shall be monetary only and shall not
enjoin or compel conduct. Any arbitrat ion held
pursuant to this paragraph shall be in lieu of all
other remedies and procedures,
f. the cost of the arbitrator and any other direct costs
of an arbitration he ld pursuant to this paragraph
shall be equally divided by the parties engaged in the
arbitration. All other costs shall be paid by the
party incurring them,
g. the arbitrator in any arbitration held pursuant to
this paragraph shall render a written decisi on not
later than thirty (30) days after the conclusion of
the arbitration, unless this time is extended by
mutual agreement of the parties and the arbitrator.
The decision of the arbitrator is final and binding on
the parties. The arbitrator ’s award may be enforced
by commencing a civil action in any court of competent
jurisdiction. Under no circumstances may the parties
appeal the decision of the arbitrator,
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h. an existing beer distributor or successor beer
distributor who fails to participate in the
arbitration hearings in any arbitrat ion held pursuant
to this paragraph waives all rights the existing beer
distributor or successor beer distributor would have
had in the arbitration and is considered to ha ve
consented to the determination of the arbitrato r, and
i. if the existing beer dist ributor does not receive
payment from the successor b eer distributor of the
settlement or arbitration award required under
paragraph 2 or 3 of this subsection within thirt y (30)
days after the date of the settlement or ar bitration
award:
(1) the existing beer distributor shall remain the
beer distributor in the existing beer
distributor’s territory to at least the same
extent that the existing beer distributor
distributed the beer immediately before the
successor brewer acquired rights to the brand,
and
(2) the existing beer distributor is not entitled to
the settlement or arbitration award.
F. 1. In addition to termination rights that may be set forth
in a distributor agreement, a small brewer who manufactures less
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than twenty-five thousand barrels of bee r annually may terminate a
distributor agreement with any beer distributor provided that, prior
to the effective date of the termination, the small brewer pays the
beer distributor the fair market value of the distributio n rights
which will be lost or dimi nished by reason of the termination.
2. If such small brewer and beer distributor cannot mutually
agree to the fair market value of the applicable distribution rights
lost or diminished by reason of the termination, then the brewer
shall pay the beer dist ributor a good faith estimate of the fair
market value of the applicable distribution rights.
3. If the beer distributor being terminated under paragraph 2
of this subsection disputes that the payment made by the small
brewer was less than the fair market value of the distribution
rights, then the beer dist ributor may within forty-five (45) days of
termination submit the question of fair market value of the
applicable distribution rights lost or diminished by reason of th e
termination to binding arbitratio n before a panel of three neutral
arbitrators appointed in accordance with the commercial arbitration
rules of the American Arbitration Association, which panel shall
determine by majority decision whether the small brewe r’s payment
meets the requirements of paragraph 2 of this subsection.
4. If the arbitration panel rules that the payment made by the
small brewer to the beer distributor upon termination was less than
the fair market value of distribution rights lost or d iminished by
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reason of the terminat ion, then the small brewer must pay the beer
distributor the difference between the payment made to the beer
distributor and the determined fair market value plus inter est.
5. If the arbitration panel rules that the paym ent made by the
small brewer to the beer distributor upon termination was more than
the fair market value of distribution rights lost or diminished by
reason of the termination, then the beer distributor must pay the
small brewer the difference between the payment made to the beer
distributor and the determined fair market value, plus interes t.
6. All arbitration fees and expenses shall be equally divided
among the parties to the arbitration, except if t he arbitration
panel determines that the small brewer ’s payment upon termination
was not a good-faith estimate of the fair market value, then the
panel may award up to shall order that one hundred percent (100%) of
the arbitration costs to be paid by the small brewer.
G. 1. Any beer distributor or brewer w ho is aggrieved by a
violation of any provision of subsections B and D C of this section
shall be entitled to recovery of damages caused by the violation ,
including an improper termination by a br ewer, which damages shall
include the fair market value of t he distribution rights if the beer
distributor is improperly terminated by the br ewer. Except for a
dispute arising under subsectio n E of this section, damages Damages
shall be sought in a civil action in any court of competent
jurisdiction.
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2. Any dispute arising under subsections B and D C of this
section may also be settled by such dispu te resolution procedures as
may be provided by a written agreement between the parties.
H. Nothing in this section shall be construed to limit or
prohibit good-faith settlements voluntarily entered into by the
parties.
I. Nothing in this section shall be construed to give a beer
distributor any right to compensation if an agreement with the beer
distributor is terminated by a brewer pursuant to subsections B , C
and D of this section.
J. No brewer shall require any beer distributor to waive
compliance with any provision of the Oklahoma Alcoholic Beverage
Control Act and any provisions of a distributor agreement in
conflict with the provisions of the Oklahoma A lcoholic Beverage
Control Act shall be null a nd void.
K. J. No brewer shall charge or accept, and no beer distributor
shall pay or provide, in a material way, any money, property,
gratuity, rebate, free goods, shipping charges different than those
charged for all beer distributors, allowances, thing of value or
other inducement, as defined in Section 3-123 of this title, from a
beer distributor in exchange for the brewer entering into a
distributor agreement with the beer distributor. However, a brewer
who also holds a beer distributor license and d esires to sell all or
a portion of its beer distribut ion rights and business, or a holder
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of small brewer license who desires to change its election from
self-distribution to the use of a distributor agreement may accept a
payment for the fair market value of its existing and established
distribution busines s in the subject territory.
L. K. This section shall apply to any agreement entered i nto
and any renewals, extensions, amendments or conduct constituting a
modification of a distributor agreement by a b rewer or cider
manufacturer existing on or after the effective date of this act
October 1, 2018.
M. L. Where a cider manufacturer distributes cider throug h a
beer distributor, the rights and obligations of the cider
manufacturer, the distributor, a successor cider manufacturer and a
successor distributor sh all be the same as the rights and
obligations provided in this section for a brewer, beer distributor,
successor brewer and successor beer distributor.
SECTION 2. This act shall become effective N ovember 1, 2023.
COMMITTEE REPORT BY: COMMITTEE ON ALCOHOL, TOBACCO AND CONTROLLED
SUBSTANCES, dated 04/12/2023 - DO PASS.