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STATE OF OKLAHOMA
1st Session of the 59th L egislature (2023)
HOUSE BILL 1715 By: Marti
AS INTRODUCED
An Act relating to alcoholic beverages, ame nding 37A
O.S. 2021, Section 3 -111, which relates to
termination of beer distribution agreement ; exempting
brewers who manufacture less than a certain amount of
beer; removing the ability to terminate an agreement
with a beer distributor at any time by giving written
notice; providing certain instance when small brewer
shall pay arbitration costs; and providing an
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 follows:
Section 3-111. A. Except as provided in subsectio n F E of this
section, a small brewer who manufactures less than twenty -five
thousand barrels of beer annually is not subject to the termi nation
provisions of this section.
B. 1. Except as provided in subsections C, D and E of this
section, no brewer sha ll terminate a distributor agreement with any
beer distributor without establishing good cause for such
termination and unless all of the following occur:
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a. the brewer establishes good cause for such
termination,
b. the beer distributor receives written n otification by
certified mail, return rece ipt requested, from the
brewer of the alleged noncompliance and is afforded no
less than sixty (60) days in which to cure such
noncompliance. If not capable of being cured within
the sixty-day period, the beer dis tributor shall begin
the cure within the s ixty-day period and diligently
pursue the cure as promptly as feasible,
c. b. the beer distributor fails to cure such noncompliance
within the allotted cure period, and
d. c. the brewer provides written notice by c ertified mail,
return receipt requested, t o 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 fo r
the termination and the dat e the termination shall
take effect.
2. If a beer distributor cures an alle ged noncompliance within
the cure period provided in subparagr aph b a of paragraph 1 of this
subsection, any notice of termination from a brewer to a bee r
distributor shall be null and void.
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C. A brewer may immediately te rminate a distributor agreement,
effective upon furnishing written notification to the beer
distributor by certified mail, return receipt requested, for any of
the following reasons:
1. The beer distributor's fail ure to pay any account when due
and upon written demand by the brewer for su ch payment, in
accordance with agreed payment terms;
2. The assignment or attempted assignment by the beer
distributor for the benefit of creditors, the institution of
proceedings in bankruptcy by or against the beer dist ributor, the
dissolution or liquid ation 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) days, a beer distributor's
state, local or feder al 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 the goodwill of the
beer distributor or brewer;
5. A beer distributor has been convicted of, fo und 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 t he beer distributor or brew er
to continue to sell its beer in this st ate;
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6. Any attempted transfer of ownership of the beer distributor,
stock of the beer distribu tor or stock of any parent corporation of
the beer distributor, or any change in the benefi cial ownership or
control of any entity having control of the beer di stributor,
without obtaining the p rior written approval of the brewer, which
may not be unreasonably withheld, except as may otherwise be
permitted pursuant to a written agreement between the parties;
7. Fraudulent conduct in the beer distributor's dealin gs with
the brewer of beer, includ ing the intentional sale of beer outside
the brewer's establis hed quality standards;
8. Cessation of the beer distributor to conduct business for
five (5) consecutive business day s, unless conducting the business
is prevented or rendered impractical due t o events beyond the
distributor's reasonable control as a resu lt of an act of God, an
insured casualty, war or a condition of national, state or local
emergency; or
9. Any sale of beer, directly or indirectly, to customer s
located outside the territory as signed to the beer distributor by
the brewer unless expressly authorized by the brewer.
Provided, the beer distributor shall have the opportunity to
sell the brewer's brands for on e hundred twenty (120) days after
termination in accordance with the distrib utor agreement.
D. The brewer shall have the right to termina te an agreement
with a beer distributor at any time by giving the beer distributor
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at least ninety-days' written notice by certified mail, return
receipt requested; provided, the brewer shall gi ve a similar notice
to all other beer distributors in all othe r states who have entered
into the same distributor agreement with the brewer.
E. If a particular brand of beer is tr ansferred by purchase or
otherwise from a brewer to a successor brewer, the following shall
occur:
1. The successor brewer shall become o bligated to all of the
terms and conditions of the existing distributor agreement in effect
on the date of succe ssion. This subsection applies regardless of
the character or form of the success ion. A successor brewer has the
right to contractually requir e its beer distributor to comply with
commercially reasona ble operational standards of performance, if the
standards are uniformly established for all of the su ccessor
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 the purpose of
transferring the dis tribution rights in the beer distributor's
territory to a new beer distribut or, provided that the successor
beer distributor first pays to the existing beer distributor the
fair market value of the existing distributor's business with
respect to the termin ated brand or brands;
2. If the successor brewer decides to terminate its a greement
with the existing beer distributor for purposes of tr ansfer, the
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successor brewer shall notify the existing beer distributor in
writing of the successor brewer's intent no t to appoint the existing
beer distributor for all or part of the existing b eer distributor's
territory. The successor brewer shall mail the notice of
termination by certified mail, return receipt requested, to the
existing beer distributor. The successo r brewer shall include in
the notice the names, addresses and telephone numb ers of the
successor beer distributor or distributors;
3. a. the successor beer distributor shall negotiate with
the existing beer distributor to determine the fair
market value of the existing beer distributor's right
to distribute in the existing beer di stributor's
territory. The successor beer distributor and the
existing beer distributor shall negotiate the fair
market value in good faith, and
b. the existing beer distributor s hall continue to
distribute in good faith until payment of the
compensation agreed to under subparagraph a of this
paragraph, or awarded u nder paragraph 4 of this
subsection, is received; and
4. a. if the successor beer distributor and the existing
beer distributor fail to reach a written agreemen t on
the fair market value within thirty (30) days after
the existing beer distributor receives the notice
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required pursuant to paragraph 2 of this subsection,
the successor beer distributor or the existing beer
distributor shall send a written notice to t he other
party requesting arbitrat ion 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 market 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 beer
distributor receives the notice required pursuant to
paragraph 2 of this subsection. The arbitr ation
proceeding shall conclude not later than sixty (60)
days after the date the notice of intent to arbitrate
is mailed to a party, unless this time is extended by
mutual agreement of the parties and the arbitrator,
c. any arbitration held pursuant to th is subsection shall
be conducted in a city within this state t hat:
(1) is closest to the existing beer distributor, and
(2) has a population of more than twenty thousand
(20,000) people,
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d. any arbitration held pursuant to this paragraph shall
be conducted before one impartial arbitrator to be
selected by the America n Arbitration Association or
its successor. The arbitration shall be conducted in
accordance with the rules and proce dures 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 arbitration 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 held pursuant to this paragraph
shall be equally divided by the parties engaged in the
arbitration. All other cos ts shall be paid by the
party incurring them,
g. the arbitrator in any arbit ration held pursuant to
this paragraph shall render a written decision 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 arbitr ator.
The decision of the arbitra tor is final and binding on
the parties. The arbitrator's awa rd may be enforced
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by commencing a civil action in any court of competent
jurisdiction. Under no circumstances may th e parties
appeal the decision of the arbit rator,
h. an existing beer distrib utor or successor beer
distributor who fails to participate in the
arbitration hearings in any arbitration held pursuant
to this paragraph waives all rights the existing beer
distributor or successor beer distributor would have
had in the arbitration and i s considered to have
consented to the determination of the arb itrator, and
i. if the existing beer distributor does not receive
payment from the successor beer distributor of the
settlement or arbitration award required un der
paragraph 2 or 3 of this subse ction within thirty (30)
days after the date of the settlement or arbitration
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 distrib utor
distributed the beer immediately before the
successor brewer acquired rights to the brand,
and
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(2) the existing beer distributor is not entitled to
the settlement or arbitrati on award.
F. E. 1. In addition to termin ation rights that may be set
forth in a distributor agreement, a small brewer who manufactures
less than twenty-five thousand barrels of beer annually may
terminate a distributor agreement with any beer distributor provided
that, prior to the effective dat e of the termination, the small
brewer pays the beer distributor the fair market value of the
distribution rights which will be lost or diminished by reason of
the termination.
2. If such small brewer and beer dis tributor cannot mutua lly
agree to the fair market value of the applicable di stribution rights
lost or diminished by reason of the terminat ion, then the brewer
shall pay the beer distributor a good faith estimate of the fair
market value of the applicable d istribution rights.
3. If the beer distri butor being terminated under paragraph 2
of this subsection disputes that the payment made by th e small
brewer was less than the fair market value of the distribution
rights, then the beer distributor may within fo rty-five (45) days of
termination submit t he question of fair market value o f the
applicable distribution rights lost or diminished by rea son of the
termination to binding arbitration before a panel of three neutral
arbitrators appointed in accordance with the commercial arbit ration
rules of the American Arbitration Association, w hich panel shall
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determine by majority decision whether the sm all brewer'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 terminati on was less than
the fair market value of distribution rights lost or diminished by
reason of the termination, then the small brewer must pay the beer
distributor the difference be tween the payment mad e to the beer
distributor and the determined fair marke t value plus interest.
5. If the arbitration panel rules that the payment made by the
small brewer to the beer distributor upon termination was more than
the fair market value of distribution rights l ost or diminished by
reason of the termination, then th e beer distributor must pay the
small brewer the difference be tween the payment made to the beer
distributor and the determined fair market value, plus interest.
6. All arbitration fees and expenses s hall be equally divid ed
among the parties to the arbitr ation, except if the arbitration
panel determines that the sma ll 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. F. 1. Any beer distributor or brewer who 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 viol ation.
Except for a dispute arisi ng under subsection E of this section,
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damages Damages shall be sought in a civil action in any court of
competent jurisdiction.
2. Any dispute arising under subsections B and D C of this
section may also be settled by su ch dispute resolution procedures as
may be provided by a written agreement between the parties.
H. G. Nothing in this section shall be construed to limit or
prohibit good-faith settlements voluntarily entered into by the
parties.
I. H. Nothing in this section shall be construed to give a beer
distributor any right to compensation if an agreement wi th the beer
distributor is terminated by a brewer pursuant to subsections B , and
C and D of this section.
J. I. No brewer shall require any beer distributor to waive
compliance with any provisi on of the Oklahoma Alcoholic Beverage
Control Act.
K. J. No brewer shall charge or accept, and no beer distributor
shall pay or provide, in any material way, any money, property,
gratuity, rebate, free goods, shipping cha rges 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 in to a
distributor agreement with the beer dis tributor. However, a brewer
who also holds a beer distributor license and desires to sell all o r
a portion of its beer distribution 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 u se of a distributor agreement ma y accept a
payment for the fair market value of its existing and established
distribution business in the subject territory .
L. K. This section shall apply to any agreement entere d into
and any renewals, extensions, amendme nts or conduct constituting a
modification of a distributor agreement by a brewer or cider
manufacturer existing on or after the effective date of this act.
M. L. Where a cider manufacturer distributes cider thr ough a
beer distributor, the rights and obli gations of the cider
manufacturer, the distributor, a successor cider manufacturer and a
successor distributor shall be the same as the rights and
obligations provided in this section for a brewer, beer distribut or,
successor brewer and successor beer dist ributor.
SECTION 2. This act shall become effective November 1, 2023.
59-1-6522 JL 01/12/23