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Judge rules Major Brands and Diageo relationship is ‘franchise’

June 28, 2013

Major Brands Inc. is declaring a legal victory in its lawsuit against Diageo Americas Inc., which had sought to terminate its distribution agreement with Major Brands.
In a June 20 ruling, released late Tuesday afternoon, St. Louis Circuit Judge Robert Dierker said the relationship between Major Brands and Diageo was that of a “franchise.” The ruling was related to Major Brands’ counter suit against the Norwalk, Conn.-based spirits company, whose portfolio includes Smirnoff Vodka, Captain Morgan Rum and Seagram’s 7 Whiskey, after Diageo sued Major Brands in a Connecticut court in March.
The case, and Major Brands itself, is at the epicenter of Missouri’s liquor wars, a bitter struggle over the state’s franchise law, a 1975 regulation that prevents alcohol suppliers from terminating wholesalers without “good cause.”
“In short, Major Brands’ agreement with Diageo constitutes a franchise,” Dierker wrote. “Diageo has provided proper notice of termination to Major Brands. Its ‘cause’ for termination has been found wanting by the Court. Major Brands, therefore, has established a probability of success on the merits of its claims against Diageo.”
The liquor wars erupted in January when French wine and spirits distiller Pernod Ricard announced it was terminating its contract with Major Brands and Glazer’s Midwest, Missouri’s largest wholesalers. Within weeks, other suppliers, including Diageo North Americas Inc. and Bacardi USA, followed suit, putting nearly half of Major Brands’ $550 million-a-year business at risk.
In the June 20 ruling, Dierker denied Major Brands a preliminary injunction to prevent Diageo from terminating its franchise agreement with Major Brands as of July 1.
“Diageo is pleased that with this decision of the court, we can now move all of our spirit and wine brands to Glazer’s in Missouri,” Diageo said in a statement in response to the ruling.
The ruling also denied Diageo’s motion to dismiss. The suit will now go to a final hearing and jury trial for damages.
“We won a significant victory today with the Court’s determination that Major Brands had a franchise relationship with Diageo and was wrongfully terminated,” Major Brands CEO Sue McCollum said in a statement.

Source: St. Louis Business Journal