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HOUSE OF REPRESENTATIVES - FLOOR VERSION
STATE OF OKLAHOMA
1st Session of the 60th Legislature (2025)
COMMITTEE SUBSTITUTE
FOR
HOUSE BILL NO. 2803 By: Marti of the House
and
Coleman of the Senate
COMMITTEE SUBSTITUTE
An Act relating to alcoholic beverages; amending 37A
O.S. 2021, Section 3 -111, as amended by Section 7,
Chapter 338, O.S.L. 2023 (37A O.S. Supp. 2024,
Section 3-111), which relates to termination of
distribution agreements; requiring certain things to
occur before a brewer terminates a distributor;
modifying timing requirements; updating actions that
may allow a brewer to immediately terminate a
distributor agreement; requiring a new distributor to
purchase any remaining inventory for laid in cost of
an old distributor in certain instances; requiring
arbitrators to have certain qualifications; providing
for when an appeal of a decision of an arbitrator may
be made; requiring small brewers to purchase any
remaining inventory for laid in cost when terminating
a distribution agreement in certain circumstances;
providing that a penalty for wrongful termination and
a distribution agreement may include the purchase of
any remaining inventory for laid in cost; and
providing an effective date.
BE IT ENACTED BY THE PEOP LE OF THE STATE OF OKLAHOMA:
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SECTION 1. AMENDATORY 37A O.S. 2021, Section 3 -111, as
amended by Section 7, Chapter 338, O.S.L. 2023 (37A O.S. Supp. 2024,
Section 3-111), is amended to read as follows:
Section 3-111. A. Except as provided in subsection G of this
section, a small brewer is not subject to the termination provisions
of this section.
B. 1. Except as provided in subsection C of this section, no
brewer shall terminate a distributor agreement with any beer
distributor without establishing good cause for such termination and
unless all of the following occur:
a. the beer distributor receives written notification by
certified mail, return receipt requested, from the
brewer of stating with specificity the alleged
noncompliance with material and reasonable provisions
of the agreement and is afforded no less than sixty
(60) days ninety (90) days in which to cure such
noncompliance. If not capable of being cured within
the sixty-day period ninety-day period, the beer
distributor shall begin the cure within the sixty-day
period ninety-day period and diligently pursue the
cure as promptly as feasible,
b. the beer distributor fails to cure such noncompliance
within the allotted cure period, and
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c. the brewer provides written notic e 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 for
the termination and t he date the termination shall
take effect.
2. If a beer distributor cures an alleged noncompliance within
the cure period provided in subparagraph a of paragraph 1 of this
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 receipt requested, for any of
the following reasons:
1. The beer distributor's failure to pay any account when due
and upon written demand by the brewer for such 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 distributor, the
dissolution or liquidation of the beer distributor or the insolvency
of the beer distributor;
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3. The revocation or suspension of, or the failure to renew for
a period of more than fourteen (14) da ys, 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 the goodwill of the
beer distributor or brewer; pr ovided, however, an existing
stockholder or stockholders, partner or partners, or member or
members shall have the right to purchase the stock, partnership
interest, or membership interest of the offending s tockholder,
partner, or member prior to the convi ction of the offending
stockholder, partner, or member, subject to brewer's approval, which
shall not be unreasonably withheld, and if the sale is completed
prior to conviction, the provisions of this paragraph shall not
apply;
5. A beer distributor has b een 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 t he beer distributor or brewer
to continue to sell its beer in this state;
6. Any attempted transfer or change in beneficial ownership of
ten percent (10%) or more of the beer distributor, stock of the beer
distributor or stock of any parent corporation of the beer
distributor, or any change in the owner ship or control of any entity
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having control of the beer distributor, without obtaining the prior
written approval of the brewer, which may not be unreasonably
withheld and must be based on reasonable and ma terial objective
requirements imposed on all othe r distributors, except as may
otherwise be permitted pursuant to a written agreement between the
parties;
7. Fraudulent conduct, by or on the part of the beer
distributor or any owner of the beer distributor, or by any employee
as to which the beer distri butor or any of its owners or its senior
management knew or reasonably should have known, in the beer
distributor's dealings with the brewer of beer, including the
intentional sale of beer outside the brewer 's established quality
standards, provided howeve r, in the case of fraudulent conduct by a
beer distributor employee other than the owner or senior management
and only in the event the beer distributor was unaware or should not
have been aware of such fraudulent conduct, the beer distributor
shall be allowed sixty-day ninety-day cure period following written
notice of such conduct from the brewer, and shall only be terminated
for failing to cure the same within sixty (60) ninety (90) days
thereof;
8. Cessation of the beer distributor to conduct business for
five (5) consecutive business days, unless conducting the business
is prevented or rendered impractical due to events beyond the
distributor's reasonable control as a result of an act of God, an
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insured casualty, war or a condition of national, state o r local
emergency; or
9. Any intentional sale of beer, directly or indirectly, to
customers located outside the territory assigned to the beer
distributor by the brewer unless expressly authorized by the br ewer.
D. Any beer distributor terminated by a br ewer under subsection
B of this section shall have the opportunity to sell the brewer's
brand rights for one hundred twenty (120) days after termination in
accordance with the distributor agreement. If no such sale occurs,
the brewer's newly appointed dis tributor shall pay the beer
distributor the fair market value of the distribution rights, which
will be lost or diminished by reason of termination , and purchase
any remaining non-expired inventory for laid in cost. If the
parties cannot agree on the fair market value, the parties shall
follow the same procedures as set forth in paragraphs 2 through 6 of
subsection G of this section.
E. The brewer shall have the right to terminate an agreement
with a beer distributor at any time by giving the beer distrib utor
at least ninety-days' written notice by certified mail, return
receipt requested; provided, the brewer shall give a similar notice
to all beer distributors in all other states with which the brewer
has a distributor agreement.
F. 1. If a particular brand of beer is transferred by purchase
or otherwise from a brewer to a successor brewer, the successor
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brewer shall become obligated to all of the terms and conditions of
the 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 operational standards of performance, if
the standards are unifo rmly established for all of the successor
brewer's distributors. Provided, however, where the successor
brewer holds a brewer's license in the state as of January 1, 2023,
and has an existing distribution agreement with a beer distributor,
the successor brewer may terminate the distribution agreement, i n
whole or in part, in order to transfer the brand rights to the
successor brewer's beer distributor with at least sixty (60) ninety
(90) days' written notice to the terminated distributor and with
termination effective upon payment to the terminated beer
distributor the fair market value of the terminated beer
distributor's business with respect to the terminated brand or
brands.
2. 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
distribution rights in the beer distributor's territory to a new
beer distributor, provided that the successor beer distributor first
pays to the existing beer distributor the fair market value of the
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existing distributor's business with respect to the terminated brand
or brands;
3. 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
beer distributor for all or part of the existing beer distributor's
territory. The successor brewer shall mail the notice of
termination by certified mail, 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;
4. 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 distributor'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 shall continue to
distribute in good faith until payment of the
compensation agreed to under subparagraph a of this
paragraph, or awarded under paragraph 4 of this
subsection, is received; and
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5. 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 notic e
required pursuant to paragraph 2 of this subsec tion,
the successor beer distributor or the existing beer
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 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 arbitration
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 this subsection shall
be conducted in a city within this state that:
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(1) is closest to the existing beer distributor, and
(2) has a population of more than twenty thousand
(20,000) people according to the latest Federal
Decennial Census,
d. any arbitration held pursuant to this paragraph shall
be conducted before one impartial arbitrator to be
selected by the American Arbitra tion Association (AAA)
or 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. The AAA arbitrator must have no less than
fifteen (15) years of experience in franchise law and
is required to use the laws of the state where the
distributor is located and cannot use other state laws
in their reviews,
e. an arbitrator's award in any arbitration held pursuant
to this paragraph shall be monetary onl y 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
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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 decision not
later than thirty (30) day s 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, but questions of error of law may be
appealed by either part y to a state or federal court
in the state where the distributor is located . 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,
h. an existing beer distributor 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 b eer
distributor or successor beer distributor wou ld have
had in the arbitration and is considered to have
consented to the determination of the arbitrator, and
i. if the existing beer distributor does not receive
payment from the successor beer distributor of the
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settlement or arbitration award required under
paragraph 2 or 3 of this subsection 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 be er
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 .
G. 1. In addition to termina tion rights that may be set forth
in a distributor agreement, a small brewer may terminate a
distributor agreement with any beer distributor; provided, that
prior to the effective date of the termination, th e 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
and purchase any remaining non -expired inventory for laid in cost .
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
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shall pay the beer distributor a good faith estimate of the fair
market value of the applicable d istribution rights.
3. If the beer distributor b eing 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 distributor may within forty -five (45) days of
termination submit the ques tion of fair market value of the
applicable distribution rights lost or diminished by reason of the
termination to binding arbitration 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 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 termination 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 made to the beer
distributor and the determined fair market 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 lost or diminished by
reason of the termination, then the beer distributor must pay the
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small brewer the difference between the payment made to the beer
distributor and the determined fair market value, plus interest.
6. All arbitration fees and expenses shall be equally divided
among the parties to the arbitration, except if the 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 one hundred percent (100%) of the arbitrati on
costs to the prevailing party.
H. 1. Any beer distributor or brewer who is aggrieved by a
violation of any provision of this section shall be entitled to the
recovery of damages caused by the violation. If a beer distributor
is not terminated in acco rdance with the provisions of this section,
damages may additionally include the fair market value of the
distribution rights and purchase any remaining non -expired inventory
for laid in cost. Damages shall be sought in a civil action in any
court of competent jurisdiction.
2. Any dispute arising under this section may also be settled
by such dispute resolution procedures as may be provided by a
written agreement between the parties.
I. Nothing in this sec tion shall be construed to limit or
prohibit good-faith settlements voluntarily entered into by the
parties.
J. Except as otherwise provided herein, nothing in this section
shall be construed to give a beer distributor any right to
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compensation if an agreement with the beer distributor is terminated
by a brewer pursuant to this section.
K. No brewer shall require any beer distributor to waive
compliance with any provision of the Oklahoma Alcoholic Beverage
Control Act and any provisions of the Oklahoma Al coholic Beverage
Control Act shall supersede any provisions of a distributor
agreement in conflict in this section.
L. 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 tho se
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 desires to sell all or
a portion of its beer distribution rights and business, or a holder
of small brewer license who desires to change its election from
self-distribution to the use of a distributor a greement may accept a
payment for the fair market value of its existing and established
distribution business in the subject territory .
M. This section shall apply to any agreement entered into and
any renewals, extensions, amendments or conduct constitut ing a
modification of a distributor agreement by a brewer or cider
manufacturer.
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N. Where a cider manufacturer distributes cider through a beer
distributor, the rights and obligations of the cider manufacturer,
the distributor, a successor cider manufactu rer and a successor
distributor shall 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 November 1 , 2025.
COMMITTEE REPORT BY: COMMITTEE ON HEALTH AND HUMAN SERVICES
OVERSIGHT, dated 02/17/2025 - DO PASS, As Amended and Coauthored.