July 14, 2011 Jacksonville, FL – Public records show that Liquor Group Wholesale, Inc. (Publicly Traded: LIQR) and Liquor Group Florida, LLC., their State Level Distribution Customer have completed another Alcohol Brand litigation in their favor, this is the most recent in a series of litigation victories for the company.
Court records show that the initial claim was filed in against a brand supplier of LIQR, Liquor Group Holding, LLC. (LGH), but was revised to include many other Liquor Group companies in an attempted litigation “drag net”.
The Judge in Duval County Civil Court determined that a brand that contracted with LGH for distribution cannot simply add any/all Liquor Group companies as Defendants in the case just because they provided services on behalf of LGH, regardless of the binding Arbitration status or any outstanding claims of the contract. This process would either force a default or require each of the various Liquor Group named entities to defend the litigation, which was found to be procedurally improper and unfair by the courts. The opposing brand in this instance not only lost against LGH, but may now have to defend against Counterclaims and Sanctions levied against them by Liquor Group Florida, LLC. and Liquor Group Wholesale, Inc. for attorneys fees and costs.
So what’s the problem?
The basic principle is simple: Brands contracted for distribution must abide by the term length and conditions of their contracts, and they must pay for the marketing and expenses that they contract for; or they face treble damages or liquidation of inventory to cover the uncollected fees and costs. The records show that Liquor Group only uses this process as a last resort, giving brands six full months to bring their contract into compliance, and then implements under strict State and Federal guidelines. Other distributors are not so patient, many have a 30 or 60 day clause to quicken the process.
LIQR not the only ones…
Though the premise seems straightforward, during the 2009-2010 economic down-turn, many alcohol beverage brands within the US found themselves unable or unwilling to support the sale of their products by providing their distributor/brokerage partners with the contracted adequate marketing monetary support; and many others simply failed to repay their bill-backs for services such as brokerage fees and delivery fees due in Control States. Court records in Florida, Texas, California and New York show that most every major alcohol distributor in the US litigated heavily with brand suppliers during this timeline, mostly to enforce contracts or collect on bill-backs.
The Results are in:
This lack of follow through by brands had a massive cumulative negative effect on all major alcohol industry distributors/brokers throughout the US, leaving many distributors and brokerages out of business by 2011, (public records show that more than 35% of state level distribution/brokerage licenses terminated during this time period). Many of the remaining distribution/brokerage companies have been unable to recover or recoup these losses from their brand suppliers due to inadequate or unenforceable contracts.
Although according to their 2009-2010 public disclosures, LIQR suffered many hundreds of thousands in “uncollectable” invoices from various brand suppliers due to this unsettling situation, the contracts they utilized specifically address these very issues, which resulted in a much smaller number of brands defaulting on agreements without recourse than average distributors or brokerages; and the vast majority of brands who did default in their agreements yielded profits to the companies through public auction style liquidations of inventory held to defray or cover costs incurred by these brand suppliers.
Is it getting any better?
At the height of the economic downturn, LIQR was involved in 15 cases related to brand defaults, brand issues or brands attempting termination without cause, which considering the 3,000+ brands represented in 33 US States, that number does not seem so dramatic. Currently the number of outstanding cases has decreased dramatically, a spokesperson for LIQR states that they are now only involved in two brand related litigations, both tied to contracts with LGH, and the company contemplates that both will be resolved favorably.
