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AB-1541 Alcoholic beverages: beer manufacturers and wholesalers: distribution. (2019-2020)



Current Version: 07/11/19 - Amended Senate         Compare Versions information image


AB1541:v98#DOCUMENT

Amended  IN  Senate  July 11, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 1541


Introduced by Assembly Member Gray

February 22, 2019


An act to amend add Section 23086 of 25000.3 to the Business and Professions Code, relating to alcoholic beverages.


LEGISLATIVE COUNSEL'S DIGEST


AB 1541, as amended, Gray. Beverage Control Appeals Board. Alcoholic beverages: beer manufacturers and wholesalers: distribution.
Existing law, the Alcoholic Beverage Control Act, licenses and regulates beer manufacturers and wholesalers, including the regulation of distribution rights between beer manufacturers and wholesalers. A violation of the Alcoholic Beverage Control Act is a misdemeanor, unless another penalty or punishment is specified.
This bill would provide that a beer manufacturer shall not cancel, terminate, reduce, not renew, or cause any of the same, an agreement with a beer wholesaler for the distribution of beer and malt beverage products, unless the beer manufacturer has complied with specified provisions. The provisions would require the beer manufacturer to satisfy unspecified notice and opportunity to cure requirements and notice of termination requirements, with specified exceptions, as provided. The bill would place the burden of proof on the beer manufacturer to demonstrate that it has acted in good faith, that it has or had good cause to cancel, terminate, reduce, or not renew an agreement, or to cause any of the same, and that it complied with notice requirements. The bill would apply its provisions to any agreement that is entered into, amended, extended, modified, ratified, or renewed on or after an unspecified date. The bill, by including provisions that would be subject to those existing criminal sanctions, would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.

Under existing law a person may appeal a decision of the Department of Alcoholic Beverage Control, affecting a penalty assessment or a license issued by the department, to the Alcoholic Beverage Control Appeals Board. Existing law requires the Alcoholic Beverage Control Appeals Board to enter its order on that appeal within 60 days after the filing of an appeal.

This bill would require the board to enter its order within 90 days after the filing of an appeal.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NOYES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 25000.3 is added to the Business and Professions Code, to read:

25000.3.
 (a) For purposes of this section:
(1) “Agreement” means any agreement, contract, or arrangement, whether express or implied, whether oral or written, for a definite or indefinite period, between a beer manufacturer and a beer wholesaler under which a beer wholesaler has the right to purchase, sell, resell, and distribute any beer and malt beverage products offered by a beer manufacturer.
(2) “Beer manufacturer” means any holder of a beer manufacturer’s license, any holder of an out-of-state beer manufacturer’s certificate, or any holder of a beer and wine importer’s general license.
(3) “Beer wholesaler” means a distributor or wholesaler of beer and malt beverage products that is licensed in California to purchase, sell, resell, and distribute beer and malt beverage products to licensees.
(b) Except as otherwise provided for in this section, a beer manufacturer shall not cancel, terminate, reduce, not renew, or cause any of the same, an agreement with a beer wholesaler for the distribution of beer and malt beverage products, unless the beer manufacturer has complied with all of the following:
(1) Has acted in good faith, as provided in subdivision (c).
(2) Has good cause to cancel, terminate, reduce, not renew, or cause any of the same, as provided in subdivision (d).
(3) Has satisfied the notice and opportunity to cure requirements in paragraph (4) of subdivision (d) and notice of termination requirements in subdivision (e). The time periods in paragraph (4) of subdivision (d) and subdivision (e) shall run consecutively.
(c) “Good faith” under paragraph (1) of subdivision (b) means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
(d) Good cause shall exist under paragraph (2) of subdivision (b) only when all of the following occur:
(1) There is a failure by the beer wholesaler, without reasonable excuse or justification, to comply substantially with essential and commercially reasonable requirements of the agreement. A beer manufacturer shall not discriminate between similarly situated beer wholesalers with respect to the enforcement of the requirements of an agreement. The requirements shall not be inconsistent with this section or in violation of any applicable statute or regulation.
(2) The beer wholesaler was given written notice by the beer manufacturer of failure to comply with the agreement, including reasonable supporting documentation.
(3) The beer manufacturer first acquired knowledge of the failure described in paragraph (1) not more than ____ months before the date notification was given to the beer wholesaler.
(4) The beer wholesaler has been afforded ____ days in which to submit a plan of corrective action to substantially comply with the agreement, and an additional ____ days to cure such alleged noncompliance in accordance with the plan of corrective action or, at the beer wholesaler’s election, to sell its distribution business or the affected part of its distribution business.
(e) After the time periods for the plan of corrective action and opportunity to cure alleged noncompliance set forth in paragraph (4) of subdivision (d), if the beer wholesaler has not cured noncompliance, and if the beer manufacturer still intends to cancel, terminate, reduce, or not renew an agreement, or to cause any of the same, the beer manufacturer shall provide the beer wholesaler not less than an additional ____ days’ notice before the effective date of the intended action. The notice shall be given by certified mail and shall contain a statement that includes all of the following:
(1) The beer manufacturer’s intent to cancel, terminate, reduce, or not renew an agreement, or to cause any of the same.
(2) Any alleged reasons, stated with particularity, for the decision to cancel, terminate, reduce, not renew an agreement, or to cause any of the same.
(3) The effective date of the intended action.
(f) Notwithstanding subdivisions (c), (d), and (e), if any of the following events occur, a beer manufacturer may for good cause cancel, terminate, reduce, or not renew an agreement, or cause any of the same, after not less than ____ days’ written notice given by certified mail containing the information required by paragraphs (1), (2), and (3) of subdivision (e):
(1) Insolvency of the beer wholesaler, the filing of any petition by or against the beer wholesaler under any bankruptcy or receivership law, or the dissolution or liquidation of the beer wholesaler that materially affects the beer wholesaler’s ability to remain in business.
(2) The beer wholesaler, or a partner or an individual that owns in excess of 10 percent of the ownership interest of a beer wholesaler, has been convicted of a felony under the United States Code or the laws of any state, which conviction reasonably may adversely and materially affect the goodwill of the beer wholesaler or beer manufacturer. However, if another partner or individual with an existing ownership interest purchases the ownership interest of the convicted owner, and if the sale is completed within 60 days of the conviction, the right to cancel, terminate, reduce, or not renew an agreement, or to cause any of the same, shall not apply.
(3) There was fraudulent conduct by, or at the direction of, an owner, director, officer, or general manager of the beer wholesaler, relating to a material matter in dealings with the beer manufacturer or the beer manufacturer’s products. For purposes of this subdivision, “fraudulent conduct” means an intentional misrepresentation of, or intentional failure to disclose, a material fact, done with the specific intent to deceive the beer manufacturer.
(4) Without the consent of the beer manufacturer, the beer wholesaler, at the direction of an owner, director, officer, or general manager, willfully and repeatedly sells the beer manufacturer’s products to a retailer or retailers located outside a beer wholesaler’s territory.
(5) The beer wholesaler fails to pay for the beer manufacturer’s products ordered and delivered in accordance with terms established with the beer manufacturer and has continued to fail to make payment within ____ business days after receipt of notice of the delinquency and demand for immediate payment.
(6) The beer wholesaler sells, transfers, or assigns the agreement without the written consent of the beer manufacturer, which consent cannot be unreasonably withheld.
(7) Revocation of the beer wholesaler’s license by the department or of the beer wholesaler’s basic permit by the Alcohol and Tobacco Tax and Trade Bureau of the United States Department of the Treasury.
(g) For purposes of this section, the beer manufacturer shall have the burden of demonstrating that it has acted in good faith, that it has or had good cause to cancel, terminate, reduce, or not renew an agreement, or to cause any of the same, and that it complied with the notice requirements under this section.
(h) A court may grant a temporary restraining order, and preliminary and permanent injunctions, for a violation or threatened violation of this section. In reviewing any request for a temporary restraining order, or preliminary or permanent injunction, the court shall consider the disruption to the wholesaler’s business operations and its employees that may result, or threaten to result, from the action sought to be enjoined. Any beer manufacturer that violates the provisions of this section shall compensate the injured beer wholesaler for all reasonable damages sustained as a result of the beer manufacturer’s actions in violation of this section. The remedies provided in this subdivision are independent of, supplemental to, and shall not be construed to limit or prohibit any other statutory, legal, or equitable remedy available to the beer wholesaler.
(i) Nothing contained in this section shall limit the right of a beer manufacturer or beer wholesaler to agree, before or after a dispute has arisen, to binding arbitration of claims under this section, provided that the substantive law and legal standards applied in such arbitration are not contrary to the requirements specified in this section.
(j) This section shall not apply to ____.
(k) If any provision of this section or its application to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of this section that can be given effect without the invalid provision or application, and to this end, the provisions of this section are severable.
(l) Any waiver of any of the provisions of this section, within an agreement or otherwise, is contrary to public policy and void.
(m) This section shall apply to any agreement that is amended, extended, modified, ratified, or renewed on or after ____ or to any new agreement entered into on or after ____. For these agreements:
(1) The provisions of this section shall be incorporated into and shall be deemed a part of every agreement between any beer manufacturer and beer wholesaler and shall govern and apply to all relationships between beer manufacturers and beer wholesalers.
(2) Any requirement of any agreement that is contrary to the provisions of this section is unenforceable.
(n) This section shall be supplemental to the existing statutory provisions of this division and is enacted pursuant to the authority granted this state under its police powers and under Section 22 of Article XX of the California Constitution and under the provisions of the Twenty-First Amendment to the United States Constitution, and in furtherance of the state’s regulatory interest in establishing and maintaining an orderly system of distribution of beer and malt beverage products in the state.

SEC. 2.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
SECTION 1.Section 23086 of the Business and Professions Code is amended to read:
23086.

In all cases, the board shall enter its order within 90 days after the filing of an appeal.