Ohio Appeals Court: MillerCoors not a Successor Manufacturer


Dear Client:

Remember the Ohio MillerCoors termination lawsuit that's been winding around circuit courts for four years? The Ohio distributors in the case: Beverage Distributors, Heidelberg, Esber, Tramonte, and Muxie sued MillerCoors and its parent companies to stop their termination under the argument that MillerCoors is not a "successor manufacturer" to Miller Brewing Co. or Coors Brewing Co.

Under Ohio law, successor manufacturers (which occur after a supplier merger or acquisition) can switch distributors after paying fair market value without cause. Distributors won the first round in lower courts in a summary judgment, as the district court found that MillerCoors is not a "successor manufacturer" under Ohio law because it is controlled by Miller and Coors (now SABMiller and Molson Coors).

This morning, the appellate court upheld the lower court in favor of the distributors. The court affirmed that MillerCoors "board members owe their fiduciary duty to the company that appointed them, not to MillerCoors or the other directors."

On appeal, MillerCoors argued that contrary to the findings of the district court, MillerCoors is a "successor manufacturer" under the Act because MillerCoors has "acquire[d] all or substantially all of the stock or assets of [Miller and Coors] through merger or acquisition."

However, the court responds that "if the exception to the just cause requirement for successor manufacturers were read narrowly, and the proceedings about compliance with that provision were confined to a review of documents alone, it would be too easy for a manufacturer to set up a new entity which, on paper, looks like a business that is not under the control of its predecessor, while at the same time exercising control over the new entity by disregarding the language of the written instruments that purported to transfer control."

Concludes the court: "Upon review, we agree with the reasoning of the district court and conclude that Miller and Coors 'exercise control' over MillerCoors under the meaning of" Ohio law. "...Therefore, MillerCoors may not terminate the distributorships under the procedure outlined in subsection (D). Moreover, MillerCoors has not presented just cause for termination of the distributorships, and the Distributors did not consent to the termination. Thus, MillerCoors is also prohibited from terminating the distributorships under the general provisions of the Act."

Until tomorrow, Harry

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