2002 Legislation
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HOUSE BILL NO. 591 – Wine, distributors/suppliers

HOUSE BILL NO. 591

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H0591...........................................................by BUSINESS
WINE - Adds to existing law to set forth provisions for agreements between
wine distributors and wine suppliers and for transfers of wine
distributors' businesses; to prohibit certain acts; and to provide judicial
remedies.
                                                                        
02/08    House intro - 1st rdg - to printing
02/11    Rpt prt - to Bus

Bill Text


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-sixth Legislature                  Second Regular Session - 2002
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 591
                                                                        
                                   BY BUSINESS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO DISTRIBUTORS AND SUPPLIERS OF WINE; AMENDING TITLE 23, IDAHO CODE,
  3        BY THE ADDITION OF A NEW CHAPTER 15, TITLE 23, IDAHO CODE, TO DECLARE LEG-
  4        ISLATIVE POLICY, TO DEFINE TERMS, TO EXEMPT  CERTAIN  AGREEMENTS,  TO  SET
  5        FORTH   PROHIBITED   ACTS,  TO  PROVIDE  FOR  NOTICE  OF  TRANSFERS  OF  A
  6        DISTRIBUTOR'S BUSINESS, TO PROVIDE FOR WRITTEN  CONSENT  OF  TRANSFERS  BY
  7        SUPPLIERS, TO PROVIDE FOR A SUPPLIER'S RIGHT TO AMEND, CANCEL OR REFUSE TO
  8        RENEW  AGREEMENTS  UPON WRITTEN NOTICE IN SPECIFIED SITUATIONS, TO PROVIDE
  9        FOR A SUPPLIER'S RIGHT TO DISCONTINUE DISTRIBUTION OF BRANDS OF  WINE,  TO
 10        PROVIDE  FOR SUPPLIER REQUIREMENTS UPON AMENDMENT, CANCELLATION OR REFUSAL
 11        TO RENEW AN AGREEMENT, TO PROVIDE NOTICE  REQUIREMENTS,  TO  PROVIDE  THAT
 12        CERTAIN  PERSONS  SHALL  BE  BOUND BY TERMS AND CONDITIONS OF AGREEMENT IN
 13        EFFECT AT THE TIME OF TRANSFER OR SUCCESSION, TO PROVIDE FOR  COMPENSATION
 14        TO  DISTRIBUTORS  UPON  TERMINATION,  CANCELLATION OR NONRENEWAL OF AGREE-
 15        MENTS, TO PROVIDE FOR ARBITRATION, TO PROVIDE JUDICIAL REMEDIES,  TO  PRO-
 16        VIDE  FOR  WAIVERS AND TO PROVIDE SEVERABILITY; AND DECLARING AN EMERGENCY
 17        AND PROVIDING  APPLICATION.
                                                                        
 18    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 19        SECTION 1.  That Title 23, Idaho Code, be, and the same is hereby  amended
 20    by  the addition thereto of a NEW CHAPTER, to be known and designated as Chap-
 21    ter 15, Title 23, Idaho Code, and to read as follows:
                                                                        
 22                                      CHAPTER 15
 23                          DISTRIBUTORS AND SUPPLIERS OF WINE
                                                                        
 24        23-1501.  DECLARATION OF POLICY. It is hereby declared to be the policy of
 25    the legislature of the state of Idaho to regulate and control the importation,
 26    sale and distribution of wine within the state of Idaho, in  the  exercise  of
 27    its  powers under the twenty-first amendment to the constitution of the United
 28    States of America, and pursuant to section 26, article III, of  the  constitu-
 29    tion  of  the  state of Idaho. In furtherance of that policy, the restrictions
 30    contained in this chapter are enacted to promote equality and fair dealing  in
 31    the business relationship between Idaho distributors of wine and the suppliers
 32    of  wine  and to assure the establishment and maintenance of an orderly system
 33    for the distribution of such products in accordance  with  the  laws  of  this
 34    state regulating the sale and distribution of wine to the public.
                                                                        
 35        23-1502.  DEFINITIONS. As used in this chapter:
 36        (1)  "Agreement" means any agreement between a distributor and a supplier,
 37    whether  oral  or  written, whereby a distributor is granted the right to pur-
 38    chase a brand or brands of wine sold by a supplier and  to  resell  such  wine
 39    within the state of Idaho.
 40        (2)  "Amendment"  or  "modification" means any alteration or change in the
 41    agreement that causes a material change in the distributor's business or rela-
                                                                        
                                           2
                                                                        
  1    tionship with the supplier, and which alteration or change does not  apply  to
  2    all distributors in the state of Idaho who distribute supplier's products.
  3        (3)  "Ancillary  business"  means  a business owned by a distributor, by a
  4    substantial stockholder of a distributor, or by a  substantial  partner  of  a
  5    distributor,  the  primary business of which is directly related to the trans-
  6    porting, storing or marketing of the supplier's products.
  7        (4)  "Designated member" means:
  8        (a)  The parent, spouse, sibling, child or grandchild of a deceased  indi-
  9        vidual who owned an interest in a distributor;
 10        (b)  Any person who inherits an ownership interest in a distributor;
 11        (c)  The  appointed and qualified personal representative or the testamen-
 12        tary trustee of a deceased individual owning an interest in a distributor;
 13        (d)  The person appointed by a court as the guardian or conservator of the
 14        property of an incapacitated individual owning an interest in a  distribu-
 15        tor; or
 16        (e)  A  person  who  has  succeeded to the deceased individual's ownership
 17        interest in the distributor pursuant to a written contract  or  instrument
 18        which has been previously approved, in writing, by a supplier.
 19        (5)  "Distributor"  means  a business entity, whether sole proprietorship,
 20    partnership, corporation, association, syndicate, or any other combination  of
 21    persons,  licensed  by  the state of Idaho to sell wine to retailers. The term
 22    "distributor" does not include a winery that is licensed by the state of Idaho
 23    and which license authorizes sales of wine to be made directly to a  retailer,
 24    whether or not licensed as a distributor by the state of Idaho.
 25        (6)  "Good faith" is as defined in section 28-4-605, Idaho Code.
 26        (7)  "Person" means any individual, partnership, corporation, association,
 27    syndicate, or any other combination of individuals or corporations.
 28        (8)  "Reasonable  standards  and/or  qualifications"  means those criteria
 29    established and consistently applied by a supplier to distributors within  the
 30    state of Idaho and similarly situated distributors in adjoining states who:
 31        (a)  Have  entered  into,  continued or renewed an agreement with the sup-
 32        plier during a period of twenty-four (24) months immediately preceding the
 33        proposed transfer of the distributor's business; or
 34        (b)  Have changed managers  or  successor  managers  during  a  period  of
 35        twenty-four  (24) months immediately preceding the proposed change in man-
 36        ager or successor manager of the distributor.
 37        (9)  "Retaliatory action" includes the refusal to continue  an  agreement,
 38    or  a material part of an agreement, or a material reduction in the quality of
 39    service or quantity of products available to a distributor under an agreement,
 40    which refusal or reduction is not made in good faith.
 41        (10) "Similarly situated distributors in adjoining states" means distribu-
 42    tors in adjoining states having an agreement with the supplier who  have  rea-
 43    sonably  comparable business, area and market characteristics to an Idaho dis-
 44    tributor of the supplier's products, which business, area and  market  charac-
 45    teristics  may  include, but are not limited to: gross sales volume concerning
 46    supplier's products, facilities, number of employees, business capitalization,
 47    market areas, considering the population and the demographics thereof, and the
 48    square miles of area served.
 49        (11) "Substantial stockholder" or "substantial partner" means a person who
 50    owns an interest of ten percent (10%) or more in a distributorship.
 51        (12) "Supplier" means any person, within or outside the  state  of  Idaho,
 52    who  enters  into an agreement with a distributor for the sale of wine to such
 53    distributor with the intent that such products will be resold by the distribu-
 54    tor to retailers within the state of Idaho. The term "supplier"  includes  the
 55    successor in interest to a supplier's business generally, or with reference to
                                                                        
                                           3
                                                                        
  1    a specific brand or brands of wine.
  2        (13) "Transfer  of  distributor's  business"  or similar phrase, means the
  3    voluntary sale, assignment or other transfer of all or control  of  the  busi-
  4    ness,  or all or substantially all of the assets of the distributor, or all or
  5    control of the capital stock of the distributor including, but not limited to,
  6    the sale or other transfer of:
  7        (a)  Capital stock or assets by merger, consolidation or dissolution;
  8        (b)  Capital stock of the parent corporation; or
  9        (c)  Capital stock or beneficial ownership of any other entity  owning  or
 10        controlling the distributor.
 11        (14) "Wine"  means  all alcoholic beverages permitted to be sold by a dis-
 12    tributor pursuant to chapter 13, title 23, Idaho Code.
                                                                        
 13        23-1503.  EXEMPTION. The provisions of this chapter  shall  not  apply  to
 14    agreements  between  a  supplier and distributor if the supplier manufactures,
 15    bottles or sells less than fifty thousand gallons (50,000) of wine within  the
 16    United States within a period of twelve (12) consecutive months.
                                                                        
 17        23-1504.  PROHIBITED  ACTS.  The  following  acts are prohibited under the
 18    provisions of this chapter:
 19        (1)  A distributor shall not:
 20        (a)  Transfer the distributor's business without giving the supplier writ-
 21        ten notice of the proposed transfer of the business as required under  the
 22        provisions of this chapter.
 23        (b)  Transfer  the distributor's business without receiving the supplier's
 24        written approval  for  the  proposed  transfer,  where  such  approval  is
 25        required  by an agreement and consistent with the provisions of this chap-
 26        ter.
 27        (c)  Distribute, sell or deliver wine to a  retailer  whose  premises  are
 28        situated  outside  the geographic territory agreed upon by the distributor
 29        and the supplier, as the area in which the distributor will sell wine pur-
 30        chased from the supplier, without the consent of the supplier and the dis-
 31        tributor who has been assigned such territory by the supplier.
 32        (2)  A supplier shall not, directly or indirectly, or through an affiliate
 33    or subsidiary:
 34        (a)  Require any distributor to do any illegal act or to violate any  law,
 35        rule  or  regulation by threatening to amend, modify, cancel, terminate or
 36        refuse to renew any agreement existing between the supplier and  the  dis-
 37        tributor, or by any other means.
 38        (b)  Require  any distributor to accept delivery of any wine or other com-
 39        modity which has not been ordered by the distributor or, if  ordered,  has
 40        been  canceled  by the distributor in accordance with reasonable cancella-
 41        tion procedures of the supplier. Provided however, a supplier  may  impose
 42        reasonable  inventory  requirements upon a distributor if the requirements
 43        are made in good faith and are generally applied to other distributors  in
 44        Idaho  and  similarly  situated distributors in adjoining states having an
 45        agreement with the supplier.
 46        (c)  Withhold delivery of wine  ordered  by  a  distributor  or  change  a
 47        distributor's allocation of a brand or brands by the supplier if the with-
 48        holding or change is not made in good faith.
 49        (d)  Engage  in any conduct that requires a distributor to fix or maintain
 50        the resale prices at which the distributor sells  products  received  from
 51        the supplier.
 52        (e)  Require  a  distributor to purchase one (1) or more brands of wine or
 53        other products in order for the distributor to purchase another  brand  or
                                                                        
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  1        brands of wine. Provided however, that if a distributor has agreed to dis-
  2        tribute  a brand or brands of wine before  the effective date of this act,
  3        the distributor shall continue to distribute the brand or brands  of  wine
  4        in conformance with the provisions of this chapter.
  5        (f)  Require a distributor to assent to any unreasonable requirement, con-
  6        dition,   understanding   or   term  of  an  agreement  which  limits  the
  7        distributor's right to sell a brand or brands of wine or other products of
  8        any other supplier.
  9        (g)  As a condition of renewal or continuation of an agreement, require  a
 10        distributor  to  submit  financial  reports or other specific financial or
 11        sales information regarding products, other than those  of  the  supplier,
 12        sold by the distributor.
 13        (h)  Require  a  distributor to terminate the designation of an individual
 14        as a manager or successor manager of a distributor, or refuse  to  approve
 15        the designation of an individual as a manager or successor manager, unless
 16        the  manager  or  successor  manager fails to meet reasonable standards or
 17        qualifications that are nondiscriminatory and  applied  uniformly  to  all
 18        distributors similarly situated. In any legal action or other dispute res-
 19        olution  proceedings challenging such termination or designation, the dis-
 20        tributor shall have the burden of proving that the termination of the man-
 21        ager or successor manager was required by the supplier or  that  the  sup-
 22        plier  refused to approve the designation of an individual as a manager or
 23        successor manager. Upon the distributor making such prima  facie  showing,
 24        the  supplier  shall  have the burden of proving that such person fails to
 25        meet nondiscriminatory and reasonable standards and qualifications.
 26        (i)  Take any retaliatory action against  a  distributor  who,  with  just
 27        cause,  files  a complaint with any regulatory body or in any court of law
 28        regarding an alleged violation by the supplier of federal, state or  local
 29        law or of any administrative rule.
                                                                        
 30        23-1505.  NOTICE  OF TRANSFER BY DISTRIBUTOR -- CONSENT BY SUPPLIER. (1) A
 31    distributor who proposes to transfer the distributor's business shall give the
 32    supplier written notice of such proposed transfer not less  than  thirty  (30)
 33    days prior to the date specified in the notice for completion of the transfer;
 34    provided  however,  that in the case of a transfer to a designated member, the
 35    transferee shall give the supplier written notice of  the  transfer  within  a
 36    reasonable time after the transfer is completed.
 37        (2)  A  supplier's written consent shall be required for a transfer of the
 38    distributor's business to a person other than a  designated  member;  provided
 39    however,  written  consent from a supplier shall be required for a transfer of
 40    the distributor's business to a designated member if any of the following con-
 41    ditions apply:
 42        (a)  The transferee or any owner of the transferee has been convicted of a
 43        felony under the laws of any state or of the United  States  which  felony
 44        would adversely affect the good will or interests of the supplier.
 45        (b)  The  transferee  or any owner of the transferee has had a license for
 46        the sale of beer, wine or any alcoholic beverage suspended or revoked by a
 47        regulatory agency of any state or of the United States and such suspension
 48        or revocation interrupted service by the transferee or by the owner of the
 49        transferee for a period of more than thirty (30) days.
 50        (c)  The transferee or any  owner  of  the  transferee  is  insolvent,  as
 51        defined  in 11 U.S.C. section 101, or there has been a liquidation, disso-
 52        lution or assignment for the benefit of creditors of substantially all  of
 53        the  transferee's  business  or  assets,  or  an order for relief under 11
 54        U.S.C. sections 701 through 784, has been  entered  with  respect  to  the
                                                                        
                                           5
                                                                        
  1        transferee.
  2        (d)  The  transferee  or  any owner of the transferee has had any previous
  3        agreement with the supplier involuntarily terminated, canceled, discontin-
  4        ued or not renewed by the supplier for good cause.
  5        (3)  If the transferee is a designated member, a supplier shall not inter-
  6    fere with, prevent or unreasonably delay the  transfer  of  the  distributor's
  7    business.  "Unreasonable  delay"  means  a delay that exceeds thirty (30) days
  8    after the service of the notice required by subsection (1) of this section and
  9    the receipt of all material information reasonably requested  from  which  the
 10    supplier  can  determine  whether  the  transfer  to the designated member may
 11    require the supplier's consent. If consent is required,  a  supplier  may  not
 12    withhold   consent   or  unreasonably  interfere  with  the  transfer  of  the
 13    distributor's business if the transferee meets reasonable standards and quali-
 14    fications which are material and nondiscriminatory.
 15        (4)  If the transferee is not a designated  member,  a  supplier  may  not
 16    withhold  consent  or unreasonably interfere with or delay the transfer of the
 17    distributor's business if the transferee meets reasonable standards and quali-
 18    fications which are material and nondiscriminatory. "Unreasonable delay" means
 19    a delay that exceeds thirty (30) days after the receipt of all material infor-
 20    mation reasonably requested to enable the supplier to  determine  whether  the
 21    transferee meets reasonable standards and qualifications.
 22        (5)  In  any legal action or other dispute resolution proceeding between a
 23    distributor and supplier relating to the supplier's refusal to consent to  the
 24    transfer  of the distributor's business to a transferee, the distributor shall
 25    have the burden of proving that the supplier withheld consent, interfered with
 26    or delayed the proposed transfer of the distributor's business. Upon the  dis-
 27    tributor making such a prima facie showing, the supplier shall have the burden
 28    of proving that the proposed transferee does not meet reasonable standards and
 29    qualifications.
                                                                        
 30        23-1506.  SUPPLIER'S RIGHT TO AMEND, CANCEL OR REFUSE TO RENEW IMMEDIATELY
 31    UPON  WRITTEN NOTICE -- GROUNDS. A supplier may amend, modify, terminate, can-
 32    cel, discontinue or refuse to renew an agreement with  a  distributor  immedi-
 33    ately  upon  written  notice  given  by  the  supplier  as provided in section
 34    23-1509, Idaho Code, only if any of the following occur:
 35        (1)  Revocation or suspension of a governmental permit or license held  by
 36    the distributor whereby the distributor cannot service the distributor's sales
 37    territory for a period of more than thirty (30) days;
 38        (2)  The distributor is insolvent, as defined in 11 U.S.C. section 101, or
 39    there  has  been  a  liquidation, dissolution or assignment for the benefit of
 40    creditors of substantially all of the distributor's business or assets, or  an
 41    order  for  relief  under  11 U.S.C. sections 701 through 784 has been entered
 42    with respect to the distributor;
 43        (3)  A stockholder or a partner of the distributor who holds or  owns  ten
 44    percent  (10%)  or more of the stock or value of the distributor has been con-
 45    victed of a felony under the laws of any state or of the United States,  which
 46    conviction  would adversely affect the good will or interests of the distribu-
 47    tor or supplier; provided however, that if another stockholder or other stock-
 48    holders, or a partner or partners, or a designated member or members, or other
 49    person notifies the supplier in writing prior to the conviction of  an  intent
 50    to purchase the partnership interest or the stock of the convicted stockholder
 51    or  partner  and  then purchases the interest or stock within thirty (30) days
 52    after a final conviction or within thirty (30) days  after  the  supplier  has
 53    consented  to  the transfer, whichever is later, the supplier shall not amend,
 54    modify, terminate, cancel, discontinue or fail to renew  such  agreement.  Any
                                                                        
                                           6
                                                                        
  1    purchase of an interest or stock pursuant to the provisions of this subsection
  2    shall  comply  with  the requirements and conditions of supplier  consent con-
  3    tained in the provisions of section 23-1505, Idaho Code;
  4        (4)  An assignment of the distributor's agreement with the supplier, or  a
  5    transfer of the distributor's business, other than to a designated member, has
  6    been  made  without  written  notice  as provided under the provisions of this
  7    chapter;
  8        (5)  Fraud has been committed by the distributor in his dealings with  the
  9    supplier or with reference to supplier's products;
 10        (6)  The  distributor has failed to pay for products ordered and delivered
 11    in accordance with established terms of an agreement with a supplier and fails
 12    to make full payment within five (5) business days after receipt of a  written
 13    notice of the delinquency and demand for immediate payment from the supplier;
 14        (7)  A  transfer  of the distributor's business is made despite timely and
 15    proper notice of disapproval by the supplier; or
 16        (8)  The distributor has sold or delivered wine to a retailer whose  prem-
 17    ises  are outside of the territory assigned to the distributor by the supplier
 18    as set forth in the agreement.
                                                                        
 19        23-1507.  SUPPLIER'S RIGHT TO DISCONTINUE DISTRIBUTION OF BRAND. (1)  With
 20    reference  to a brand sold by a supplier, a supplier may amend, modify, termi-
 21    nate, cancel, discontinue or refuse to renew an agreement not less than thirty
 22    (30) days after written notice is given by the supplier as provided in section
 23    23-1509, Idaho Code, if the supplier discontinues production  or  discontinues
 24    distribution in this state of a brand of wine sold by the supplier to the dis-
 25    tributor.
 26        (2)  Nothing  in  this  section  shall prohibit a supplier from conducting
 27    test marketing of a product that is not currently being sold  in  this  state,
 28    provided that the supplier has notified the director of the Idaho state police
 29    in  writing  of  its  plans  to  conduct such test marketing. The notice shall
 30    describe the market area in which the test shall be  conducted,  the  name  or
 31    names  of the distributor or distributors who will be selling the product, the
 32    name or names of the product being tested, and the  period  of  time,  not  to
 33    exceed eighteen (18) months, during which the testing will take place.
 34        (3)  If a supplier causes the discontinuance of distribution in this state
 35    of  a  brand  of  wine, except a brand that is being test marketed pursuant to
 36    subsection (2) of this section, then that brand shall not be  reintroduced  or
 37    sold to distributors within this state by any supplier for a period of six (6)
 38    months  after  providing the written notice required in the provisions of this
 39    section. A supplier who is test marketing a brand or brands in this  state  in
 40    compliance with subsection (2) of this section shall not be subject to the six
 41    (6) month reintroduction limitation as set forth in this subsection.
 42        (4)  If  a  supplier discontinues distribution in this state of a brand of
 43    wine, the supplier shall, at the distributor's request, purchase from the dis-
 44    tributor any unsold inventory of that brand.
                                                                        
 45        23-1508.  SUPPLIER REQUIREMENTS UPON AMENDMENT, CANCELLATION OR REFUSAL TO
 46    RENEW AGREEMENT. Except as provided in sections  23-1506  and  23-1507,  Idaho
 47    Code,  a  supplier  shall not amend, modify, terminate, cancel, discontinue or
 48    refuse to renew an agreement with a distributor, or  cause  a  distributor  to
 49    resign  from an agreement, unless the supplier has complied with the following
 50    requirements:
 51        (1)  The supplier gives written notice to the distributor, as provided  in
 52    section 23-1509, Idaho Code;
 53        (2)  The supplier acts in good faith. In any legal action or dispute reso-
                                                                        
                                           7
                                                                        
  1    lution proceeding, the supplier shall have the burden of proving that it acted
  2    in good faith; and
  3        (3)  The  supplier  has good cause. In any legal action or dispute resolu-
  4    tion proceeding, the supplier shall have the burden of  proving  that  it  has
  5    good cause. Good cause exists when all of the following have occurred:
  6        (a)  The distributor has failed to comply substantially with essential and
  7        reasonable  requirements  imposed  upon  him  by  the  agreement,  if such
  8        requirements are not discriminatory, either  by  their  terms  or  in  the
  9        method  of  their  enforcement,  as  compared with requirements imposed on
 10        other distributors in Idaho or similarly situated distributors in  adjoin-
 11        ing  states and if such requirements are not in violation of any law, rule
 12        or regulation;
 13        (b)  The supplier first acquired knowledge of  the  failure  described  in
 14        subsection  (3)(a)  of  this section not more than twenty-four (24) months
 15        before the date notification was given pursuant to the provisions of  sec-
 16        tion 23-1509, Idaho Code;
 17        (c)  The supplier has given written notice to the distributor stating spe-
 18        cifically  the  manner  in which the distributor has failed to comply with
 19        the agreement; and
 20        (d)  The distributor was given adequate  opportunity  to  use  good  faith
 21        efforts  to  correct  the  failure  to comply with the agreement. Adequate
 22        opportunity shall be thirty (30) days  after  receipt  of  the  supplier's
 23        notice  to submit a plan of corrective action to comply with the agreement
 24        and an additional ninety (90) days after the submission of a plan of  cor-
 25        rective action to correct the failure in accordance with the plan.
                                                                        
 26        23-1509.  NOTICE  REQUIREMENTS.  Written  notice by a supplier of any pro-
 27    posed amendment, modification, termination,  cancellation,  discontinuance  or
 28    refusal  to  renew  an agreement with the distributor shall be provided to the
 29    distributor in the manner provided in the agreement, if  written,  or  if  the
 30    agreement  is oral, by certified mail, and the notice shall contain all of the
 31    following:
 32        (1)  A statement of intention to amend, modify, terminate, cancel, discon-
 33    tinue or refuse to renew the agreement;
 34        (2)  A statement of the reason or reasons for the amendment, modification,
 35    termination, cancellation, discontinuance or nonrenewal; and
 36        (3)  The date on which the amendment, modification, termination, cancella-
 37    tion, discontinuance or nonrenewal will take effect.
                                                                        
 38        23-1510.  AGREEMENTS IN EFFECT AT TIME OF TRANSFER AND SUCCESSION.  (1)  A
 39    transferee  of a distributor's business that continues to operate the business
 40    shall have the benefit of and shall be bound by all terms  and  conditions  of
 41    the agreement with the supplier in effect on the date of the transfer.
 42        (2)  A  successor to a supplier's interest in a particular brand or brands
 43    of wine, whether acquired by purchasing of the brand name or of  all  or  sub-
 44    stantially all of the stock or assets of the supplier of that brand or brands,
 45    or  who  has been granted the marketing rights to a particular brand or brands
 46    of wine shall be bound by all terms and conditions of each agreement with dis-
 47    tributors with respect to that brand or brands in effect on the  date  of  the
 48    succession  to such interest as a condition of such successor in interest con-
 49    tinuing to sell that brand or brands to distributors for  resale  within  this
 50    state.
                                                                        
 51        23-1511.  COMPENSATION  TO  DISTRIBUTOR  UPON TERMINATION, CANCELLATION OR
 52    NONRENEWAL OF AGREEMENT. (1) In the event that  an  agreement  is  terminated,
                                                                        
                                           8
                                                                        
  1    canceled  or  not  renewed by a supplier, the distributor shall be entitled to
  2    reasonable compensation for the laid-in cost to the distributor of the  inven-
  3    tory  of the supplier's products, including any taxes paid on the inventory by
  4    the distributor together with a reasonable charge for handling  of  the  prod-
  5    ucts.
  6        (2)  In the event that an agreement is terminated, canceled or not renewed
  7    by a supplier in bad faith or for other than good cause, the distributor shall
  8    be entitled to additional compensation from the supplier for:
  9        (a)  The  fair  market  value  of  any and all assets, including ancillary
 10        businesses,  related  to  the  transporting,  storing  or   marketing   of
 11        supplier's products; and
 12        (b)  The good will of the business.
 13        (3)  The total compensation to be paid by the supplier shall be reduced by
 14    any  sum  received  by the distributor from the sale of assets of the business
 15    used in the distribution of the supplier's products as  well  as  by  whatever
 16    value  such  assets  may  have  to  the  distributor that are unrelated to the
 17    supplier's products.
 18        (4)  As used in this section, "fair market value" means the highest dollar
 19    amount at which a seller would be willing to sell assets and a buyer would  be
 20    willing  to  buy  such  assets  when both the seller and the buyer possess all
 21    information relevant to the transaction.
                                                                        
 22        23-1512.  ARBITRATION. Any dispute arising under the  provisions  of  this
 23    chapter  may be settled by such dispute resolution procedures, including arbi-
 24    tration, as may be provided by a written agreement between the parties. In the
 25    absence of a written agreement providing for  dispute  resolution  procedures,
 26    any  dispute  arising  under  the provisions of this chapter may be settled by
 27    arbitration, if every party involved in the dispute agrees to arbitrate. Arbi-
 28    tration shall be conducted in accordance with  the  uniform  arbitration  act,
 29    chapter 9, title 7, Idaho Code.
                                                                        
 30        23-1513.  JUDICIAL  REMEDIES OF PARTIES. (1) If a supplier engages in con-
 31    duct prohibited under the provisions of this chapter, a distributor with which
 32    the supplier has an agreement may maintain a civil action against the supplier
 33    to recover actual  damages,  court  costs  and,  in  the  court's  discretion,
 34    attorney's fees, reasonably incurred as the result of the prohibited conduct.
 35        (2)  If  a  distributor engages in conduct prohibited under the provisions
 36    of this chapter, a supplier with which the distributor has  an  agreement  may
 37    maintain  a  civil  action  against the distributor to recover actual damages,
 38    court costs and, in the court's discretion, attorney's fees reasonably  incur-
 39    red as a result of the prohibited conduct.
 40        (3)  A  supplier  or distributor may bring an action for declaratory judg-
 41    ment for determination of any controversy arising pursuant to  the  provisions
 42    of this chapter.
 43        (4)  Upon  proper  application to the court, a supplier or distributor may
 44    obtain injunctive relief against any violation of the provisions of this chap-
 45    ter.
 46        (5)  The remedies provided in this section shall  not  abolish  any  other
 47    cause of action or remedy available to the supplier or the distributor.
 48        (6)  Nothing  contained in this chapter shall give rise to a claim against
 49    the supplier or distributor by any proposed transferee  of  the  distributor's
 50    business.
 51        (7)  As used in this section, "actual damages" includes any damages to any
 52    ancillary business incurred as a result of the prohibited conduct.
                                                                        
                                           9
                                                                        
  1        23-1514.  WAIVER.  No agreement shall require a supplier or distributor to
  2    waive any rights granted pursuant to any provision of this  chapter,  and  the
  3    provisions  of  any agreement that would have such an effect shall be null and
  4    void; provided however, that if a good faith dispute arises between  the  par-
  5    ties  as to the meaning of any rights or obligations created in the provisions
  6    of this chapter, or the performance by a party of its obligations, the parties
  7    may enter into a written voluntary settlement of the dispute.
                                                                        
  8        23-1515.  SEVERABILITY. The provisions of this chapter are hereby declared
  9    to be severable and if any provision of this chapter  or  the  application  of
 10    such  provision to any person or circumstance is declared invalid for any rea-
 11    son, such declaration shall not affect the validity of the remaining  portions
 12    of this chapter.
                                                                        
 13        SECTION  2.  An  emergency  existing  therefor,  which emergency is hereby
 14    declared to exist, this act shall be in full force and effect on and after its
 15    passage and approval; provided however, that the provisions of this act  shall
 16    not  apply  to agreements between distributors and suppliers that are made and
 17    entered into prior to the effective date of this act; provided  further,  that
 18    the  provisions  of this act shall apply to any renewal of such agreements, or
 19    any extension of the provisions of such agreements, occurring on or after  the
 20    effective date of this act.

Statement of Purpose / Fiscal Impact


	               STATEMENT OF PURPOSE
                          RS 11989
The legislation establishes certain rights and duties 
governing the business relationship between large wine suppliers 
and distributors. The legislation mirrors the law governing the 
business relationship between beer suppliers and wholesalers 
enacted by the Idaho legislature in 1993.
	
The legislation does not apply to wine suppliers who sell, bottle 
or manufacture less than 50,000 gallons of wine annually. The bill 
does not affect existing contracts between wine suppliers and the 
distributors.
	
The proposed legislation establishes standards of good faith and 
fair dealing to the relationship between the wine suppliers and 
the distributors. It recognizes the right of a supplier to terminate 
agreements for just cause, requires distributors to meet reasonable 
standards and qualifications that are nondiscriminatory, and 
provides remedies for arbitrary terminations of contracts without 
just cause.
	
This legislation is necessary to assure that Idaho’s wine 
distributors who build the good will for the products they sell 
and who meet reasonable requirements established by the suppliers 
will be treated fairly and not subject to arbitrary decisions and 
the loss of their businesses without just compensation.


                      FISCAL IMPACT


There is no fiscal impact

Contact
Name:	Bill Roden Jeremy Pisca
	Idaho Beer & Wine Distributors
Phone:	208-336-7930



STATEMENT OF PURPOSE/FISCAL NOTE		H 591