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Ohio Supreme Court Allows Successor Manufacturer to Terminate Distributorship Under the Ohio Alcoholic Beverages Franchise Act

The Ohio Supreme Court recently affirmed an appellate court’s decision finding that the Ohio Alcoholic Beverages Franchise Act clearly permits a successor manufacturer to appoint its own distributors, provided that the successor manufacturer gives the existing distributor notice and compensation. Esber Beverage Co. v. Labatt USA Operating, Slip Op. 2013-Ohio-4544 (Ohio Oct. 17, 2013). Esber Beverage Company had been a distributor of Labatt brands for many years. The Labatt brands were acquired by Labatt USA Operating in March 2009 and Labatt notified Esber that it intended to terminate Esber’s distributorship and compensate Esber under the Act. Esber reacted by filing a complaint seeking to stop the termination. The trial court entered a preliminary injunction preventing the termination after finding that the termination rule of the Act applies to a successor manufacturer only when there is no written distribution agreement in place. Esber’s written distribution agreement had been assigned to Labatt. The appellate court reversed the decision and the Ohio Supreme Court agreed, finding that under the Act, when a manufacturer assigns its rights respecting a certain alcoholic beverage to a successor manufacturer, the successor may “terminate any distributor’s franchise without just cause by giving the distributor notice of termination within 90 days of the acquisition” and compensation, even if there is a written distribution agreement in place.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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