Rudolph Rosa, Inc. v. Latrobe Brewing Co.

• Decision Date: 15 November 1985
• Citation: Rudolph Rosa, Inc. v. Latrobe Brewing Co., 500 A.2d 1194, 347 Pa.Super. 551 (Pa. Super. Ct. 1985)
• Parties: RUDOLPH ROSA, INC., Eastwood Beer Distributors, Inc., and Mosso Beverage, Inc., Appellees, v. LATROBE BREWING COMPANY, Appellant. 1442 Pittsburgh 1984
• Court: Pennsylvania Superior Court

Page 1194

500 A.2d 1194

347 Pa.Super. 551

RUDOLPH ROSA, INC., Eastwood Beer Distributors, Inc., and Mosso Beverage, Inc., Appellees, v.LATROBE BREWING COMPANY, Appellant.

1442 Pittsburgh 1984

Superior Court of Pennsylvania.

Argued April 11, 1985.

Filed Nov. 15, 1985.

Daniel I. Booker, Pittsburgh, for appellant.

Thomas R. Betz, Pittsburgh, for appellees.

Before WIEAND, CIRILLO and JOHNSON, JJ.

WIEAND, Judge.

This appeal requires that we interpret 1980amendments to the Pennsylvania Liquor Code and determine their effect on distributing rights agreements in existence prior to the effective date of such amendments.

The appellant, Latrobe Brewing Company, brewers of Rolling Rock beer, and the appellees, Rudolph Rosa, Inc.(Rosa), Eastwood Beer Distributors, Inc.(Eastwood), and Mosso Beverage, Inc.(Mosso) had been parties to agreements entered circa 1966 by which appellant had designated appellees as distributors of its beer in Latrobe and surrounding areas in Westmoreland County.The appointments were for indefinite periods, but each agreement contained a provision that it could be cancelled and the distributorship terminated upon notice by either party.

On June 22, 1980, the Governor approved ActNumber 1980-73.By this statute, the legislature amended the Liquor Code, ¹ effective in sixty days, by adding the following:

(d)(1) All distributing rights as hereinabove required shall be in writing, shall be equitable in their provisions and shall be substantially similar as to terms and conditions with all other distributing rights agreements between the manufacturer giving such agreement and its other importing distributors and distributors shall not be modified, cancelled, terminated or rescinded by the manufacturer without good cause, and shall contain a provision in substance or effect as follows: "The manufacturer recognizes that the importing distributor and distributor are free to manage their business in the manner the importing distributor and distributor deem best and that this prerogative vests in the importing distributor and distributor the exclusive right to establish a selling price, to select the brands of malt or brewed beverages they wish to handle and to determine the efforts and resources which the importing distributor and distributor will exert to develop and promote the same of the manufacturer's products handled by the importing distributor and distributor.However, the manufacturer expects that the importing distributor and distributor will price competitively the products handled by them, devote reasonable effort and resources to the sale of such products and maintain a reasonable sales level.""Good Cause" shall mean the failure by any party to an agreement, without reasonable excuse or justification, to comply substantially with an essential, reasonable and commercially acceptable requirement imposed by the other party under the terms of an agreement.

(2) After January 1, 1980, no manufacturer shall enter into any agreement with more than one distributor or importing distributor for the purpose of establishing more than one agreement for designated brand or brands of malt or brewed beverages in any one territory.Each franchise territory which is granted by a manufacturer shall be geographically contiguous.

(3) Except for discontinuance of a brand or a valid termination for good cause, the purchaser of the assets of the manufacturer as defined in this act shall become obligated to all the territorial and brand designations of the agreement in effect on the date of purchase.Purchase of assets as defined for the purposes of this act shall include, but not be limited to, the sale of stock, sale of assets, merger, lease, transfer or consolidation.

(4)The court of common pleas of the county wherein the licensed premises of the importing distributor or distributor are located is hereby vested with jurisdiction and power to enjoin the modification, rescission, cancellation or termination of a franchise or agreement between a manufacturer and an importing distributor or distributor at the instance of such importing distributor or distributor who is or might be adversely affected by such modification, rescission, cancellation or termination, and in granting an injunction the court shall provide that no manufacturer shall supply the customers or territory of the importing distributor or distributor by servicing the territory or customers through other importing distributors or distributors or any other means while the injunction is in effect: Provided, however, That any injunction issued under this subsection shall require the posting of sufficient bond against damages arising from an injunction improvidently granted and a showing that the danger of irrevocable loss or damage is immediate and that during the pendency of such injunction the importing distributor or distributor shall continue to service the accounts of the manufacturer in good faith.

(5) The provisions of this subsection shall not apply to Pennsylvania manufacturers whose principal place of business is located in Pennsylvania unless they name or constitute a distributor or importing distributor as a primary or original supplier of their products subsequent to the effective date of this act, or unless such Pennsylvania manufacturers have named or constituted a distributor or importing distributor as a primary or original supplier of their products prior to the effective date of this act, and which status is continuing when this act becomes effective.

Act of June 22, 1980, P.L. 253, § 1,47 P.S. § 4-431(d)(emphasis added)(amendingAct of April 12, 1951, supra, § 431,47 P.S. § 4-431).Section 2 of the same Act of 1980, also effective in sixty days, added subsection (19) to Section 4-492 of the Liquor Code, making it unlawful

(19) For any manufacturer or any officer, agent or representative of any manufacturer to modify, cancel, terminate, rescind or not renew, without good cause, any distributing rights agreement, and in no event shall any modification, cancellation, termination, rescission or nonrenewal of any distributing rights agreement become effective for at least ninety (90) days after written notice of such modification, cancellation, termination, rescission or intention not to renew has been served on the affected party and board by certified mail, return receipt requested, except by written consent of the parties to the agreement.The notice shall state all the reasons for the intended modification, termination, cancellation, rescission or nonrenewal.The distributor or importing distributor holding such agreement shall have ninety (90) days in which to rectify any claimed deficiency, or challenge the alleged cause.

If the deficiency shall be rectified within ninety (90) days of notice, then the proposed modification, termination, cancellation, rescission or nonrenewal shall be null and void and without legal effect.

If the notice states as one of the reasons for the intended modification, cancellation, termination, rescission or renewal that the importing distributor or distributor's equipment or warehouse requires major changes or additions, then if the distributor or importing distributor shall have taken some positive action to comply with the required changes or additions, the distributor or importing distributor shall have deemed to have complied with the deficiency as set forth in the notice.The notice provisions of this section shall not apply if the reason for termination, cancellation or nonrenewal is insolvency, assignment for the benefit of creditors, bankruptcy, liquidation, fraudulent conduct in its dealings with the manufacturer, revocation or suspension for more than a thirty (30) day period of the importing distributor or distributor license.

Act of June 23, 1980, supra, § 2,47 P.S. § 4-492(19).

On August 16, 1980, prior to the effective date of these amendments, Latrobe Brewing Co. entered new agreements with Rosa and Mosso; and on August 19, 1980, also prior to the effective date of the amendments, a new agreement was entered with Eastwood.Each agreement named the distributor as "secondary importing distributor or distributor for [appellant's] Rolling Rock Premium Beer" in Westmoreland County.The intent was that appellant, a Pennsylvania manufacturer, should continue to act as primary or original distributor of its product as contemplated by Section 4-431(b) of the Liquor Code, Act of April 12, 1951, supra, § 431, as amended, 47 P.S. § 4-431(b).Each agreement also contained an express provision that "[the] agreement may be cancelled immediately upon written notice by either party."

During the summer of 1983, appellant's employees in Latrobe went on strike.Appellant, therefore, obtained and distributed beer that had been brewed out of state and bottled under the Rolling Rock label.Appellees refused to handle it.After the strike had been settled, appellant terminated its distributing agreements with appellees, effective immediately, and named another distributor for its product in the Latrobe area.

An amicable action was commenced in the Court of Common Pleas of Westmoreland County to determine whether appellant's immediate termination of appellees' distributing rights agreements had been in violation of Section 492(19) of the Liquor Code.Acting on stipulated facts, the trial court held that Section 492(19) was binding upon appellant and that its attempt to terminate appellees' distributing agreements had been "in contravention of that section by failing to give [appellees] ninety (90) days notice of the termination and by failing to afford the [appellees] the opportunity to rectify the claimed deficiency."Judgment was entered, and this appeal followed.

Appellant's attempted termination of appellees' distributing rights agreements without complying with the terms of Section 492(19) is conceded.It is equally clear that Section 431(d)'s proscriptions against...