Termination of Wholesaler’s Rights Did Not Violate North Carolina Wine Distribution Law

This posting was written by Pete Reap, Editor of CCH Business Franchise Guide.

A wine importer’s termination of a wholesaler’s right to distribute an imported brand did not violate the North Carolina Wine Distribution Agreements Act absent an “agreement” between the parties, according to the U.S. Court of Appeals in Richmond, Virginia. The parties had neither a “commercial relationship” nor an agreement under the statute.

The wine distribution law protected a wine wholesaler in the absence of an “agreement” only in two limited circumstances: (1) in the context of the transfer of a win wholesaler’s business, and (2) when a winery had been acquired.

Because neither of those two circumstances was present in this case, the importer’s actions did not violate the statute.

The dispute began when an Argentine winery chose a new importer in the United States. The new importer subsequently began supplying the brand to its own network of wholesalers, which did not include the plaintiff wholesaler, which had been distributing the brand in North Carolina.

Noting the liberal construction that should accorded the wine distribution law in order to effectuate the law’s intent to protect wholesalers, the plaintiff wholesaler argued that the law’s protections should extend to this situation. However, accepting the wholesaler’s argument would require the court to read into the statute an exception to the default requirement of an “agreement” that was nowhere to be found, in the court’s view.

When statutory language is clear and unambiguous, North Carolina law requires courts to construe a statute using its plain meaning. In 2010, subsequent to this dispute, the North Carolina General Assembly amended the wine distribution law to grant prospectively the very type of protection that the wholesale sought in this case.

The amendment demonstrated that the General Assembly knew how to protect a wholesaler’s right to the continued distribution of a brand, yet previously chose not to do so.

The unpublished decision is Country Vintner v. E.J. Gallo Winery, CCH Business Franchise Guide ¶14,753.