Case Title: Esber Beverage Co. v. Labatt USA Operating Co., LLC

Citation: 2013-Ohio-4544

Docket Number: 2012-0941

State: ohio

Court: Ohio Supreme Court

Date: 2013-10-17T00:00:00Z

Document:
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Esber Beverage Co. v. Labatt USA Operating Co., L.L.C., Slip Opinion No. 2013-Ohio-4544.] 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in 
an advance sheet of the Ohio Official Reports.  Readers are requested 
to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 
65 South Front Street, Columbus, Ohio 43215, of any typographical or 
other formal errors in the opinion, in order that corrections may be 
made before the opinion is published. 
 
SLIP OPINION NO. 2013-OHIO-4544 
ESBER BEVERAGE COMPANY, APPELLANT, v. LABATT USA OPERATING 
COMPANY, L.L.C., ET AL., APPELLEES. 
[Until this opinion appears in the Ohio Official Reports advance sheets,  
it may be cited as Esber Beverage Co. v. Labatt USA Operating Co., L.L.C., 
Slip Opinion No. 2013-Ohio-4544.] 
Ohio 
Alcoholic 
Beverages 
Franchise 
Act—R.C. 
1333.85(D)—Successor 
manufacturer may terminate distributor’s franchise by giving the 
distributor notice of termination within 90 days of successor’s acquisition 
of product or brand. 
(No. 2012-0941—Submitted May 8, 2013—Decided October 17, 2013.) 
APPEAL from the Court of Appeals for Stark County, Nos. 2011CA00113 and 
2011CA00116, 2012-Ohio-1183. 
____________________ 
O’NEILL, J. 
Overview 
{¶ 1} This case deals with the rights of manufacturers and distributors of 
alcoholic beverages under the Ohio Alcoholic Beverages Franchise Act, R.C. 
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1333.82 et seq., when a manufacturer sells all of its rights relating to a particular 
brand of alcoholic beverage to a successor manufacturer.  Under R.C. 1333.85(D), 
when there is a transfer of ownership, the successor manufacturer may terminate 
any distributor’s franchise without just cause by giving the distributor notice of 
termination within 90 days of the acquisition of the particular product or brand.  
Such notice of termination triggers an evaluation of the franchise value, for which 
the successor manufacturer must compensate the terminated franchisee.  Id.  We 
hold that R.C. 1333.85(D) is clear and unambiguous and permits successor 
manufacturers to assemble their own team of distributors so long as the successor 
manufacturers provide timely notice and compensate those distributors who are 
not being retained. 
Facts and Procedural History 
{¶ 2} Appellant, Esber Beverage Company (“Esber”), is one of the 
oldest, family-owned, continuously operated beverage wholesalers in Ohio and 
the United States.  It was founded in 1937 by Dave and Helen Esber and is 
currently operated by second and third generation Esber family members.  
Appellee InBev entered into a written franchise agreement with Esber on 
November 30, 2007.  The franchise agreement provided that Esber was to be the 
exclusive distributor of Labatt brand products in a ten-county area of Ohio for an 
indefinite period. 
{¶ 3} On July 13, 2008, InBev N.V./S.A., InBev’s parent corporation, 
entered into an agreement to acquire Anheuser-Busch Companies, a merger that 
would create the largest brewing company in the world.  United States v. InBev 
N.V./S.A., D.D.C. No. 08-cv-1965 (Aug. 11, 2009) (memorandum order) available 
at http://www.justice.gov/atr/cases/f248900/248957.pdf (accessed July 23, 2013).  
This purchase agreement caused the United States Department of Justice to file an 
antitrust complaint against InBev N.V./S.A.  On the same day that it filed that 
complaint, November 14, 2008, the Department of Justice also filed a proposed 
January Term, 2013 
3 
 
final judgment under which InBev N.V./S.A. would divest itself of all assets 
relating to the sale of Labatt brand products in the United States, including the 
right to sell Labatt brand products.  See Proposed Final Judgment filed November 
14, 2008, in InBev N.V./S.A., D.D.C. No. 08-cv-1965, available at 
http://www.justice.gov/atr/cases/f239400/239448.pdf (accessed July 23, 2013). 
{¶ 4} In accordance with the proposed final judgment, InBev N.V./S.A. 
sold the Labatt brands to appellee KPS Capital Partners, L.P., a private equity 
firm, which formed appellee Labatt USA Operating Company, L.L.C. (“Labatt 
Operating”) to acquire the assets.  On March 13, 2009, Labatt Operating acquired 
the exclusive right to sell Labatt brand products in the United States. 
{¶ 5} As the successor manufacturer to InBev, Labatt Operating invited 
the Labatt distributors in Ohio to make a presentation as to why they should be 
chosen to distribute the Labatt brand products for various regions in Ohio.  Esber 
made such a presentation and requested both to continue distributing products in 
its existing territory and to expand its distribution territory to additional counties.  
But in a letter dated May 15, 2009, Labatt Operating notified Esber that it 
intended to terminate Esber’s franchise to distribute Labatt brand products.  The 
letter stated that the notification was made “within the 90 day period of the 
acquisition, pursuant to [R.C.] 1333.85(D)” and that Labatt Operating intended to 
compensate Esber fully as required by R.C. 1333.85(D) and 1333.851. 
{¶ 6} Following receipt of the termination letter, Esber filed a complaint 
in the Stark County Court of Common Pleas.  The trial court granted a 
preliminary injunction ordering Labatt Operating to continue to distribute its 
Labatt products through Esber, and it later granted partial summary judgment in 
Esber’s favor.  The trial court held that the franchise-termination rules of R.C. 
1333.85(D) apply to a successor manufacturer only when no written franchise 
agreement existed between the distributor and the former manufacturer.  The trial 
court found that Labatt Operating had assumed InBev’s written franchise 
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agreement with Esber when Labatt Operating acquired the Labatt brands, and it 
held that the statutory franchise-termination provision therefore did not apply. 
{¶ 7} The Fifth District Court of Appeals reversed the summary 
judgment decision, holding that R.C. 1333.85(D) does give a successor 
manufacturer the right to terminate a franchise agreement within 90 days of 
acquiring the brand and that the statute does not differentiate between successors 
to manufacturers that had written franchise agreements and successors to 
manufacturers that had franchise agreements that had arisen by operation of law.  
Therefore, following a de novo review, the court of appeals ruled that Labatt 
Operating was permitted by R.C. 1333.85(D) to terminate the franchise agreement 
as a matter of law and that the trial court should have granted summary judgment 
in favor of Labatt Operating. 
{¶ 8} In a single proposition of law before this court, Esber asserts: “The 
Ohio Alcoholic Beverages Franchise Act does not permit a successor 
manufacturer to terminate a distributor without cause when the successor 
manufacturer has itself entered into or assumed a written contract with the 
distributor.” 
{¶ 9} We review cases involving a grant of summary judgment using a 
de novo standard of review.  Bonacorsi v. Wheeling & Lake Erie Ry. Co., 95 Ohio 
St.3d 314, 2002-Ohio-2220, 767 N.E.2d 707, at ¶ 24.  Summary judgment is 
appropriately granted when “ ‘(1) [n]o genuine issue as to any material fact 
remains to be litigated; (2) the moving party is entitled to judgment as a matter of 
law; and (3) it appears from the evidence that reasonable minds can come to but 
one conclusion, and viewing such evidence most strongly in favor of the party 
against whom the motion for summary judgment is made, that conclusion is 
adverse to that party.’ ”  M.H. v. Cuyahoga Falls, 134 Ohio St.3d 65, 2012-Ohio-
5336, 979 NE.2d 1261, at ¶ 12, quoting Temple v. Wean United, Inc., 50 Ohio 
St.2d 317, 327, 364 N.E.2d 267 (1977), citing Civ.R. 56(C). 
January Term, 2013 
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Analysis 
{¶ 10} In Ohio, an alcoholic-beverage-distribution franchise is a creature 
of statute.  The Ohio Alcoholic Beverages Franchise Act was enacted by the 
General Assembly in 1974.  Am.Sub.H.B. No. 857, 135 Ohio Laws, Part II, 913.  
The purpose of the act was “to eliminate unfair practices by beer and wine 
manufacturers in their dealings with distributors.”  Legislative Service 
Commission Bill Analysis, Am.Sub.H.B. No. 857 (1974).  The General Assembly 
included language in the act specifying that all contractual provisions that waive 
or fail to comply with the act are void.  R.C. 1333.83. 
{¶ 11} Pursuant to the act, every manufacturer of alcoholic beverages 
must offer its distributors a written franchise agreement specifying the rights and 
duties of each party.  Id.  If the parties do not enter a written franchise agreement, 
a franchise relationship will arise as a matter of law when a distributor distributes 
products for 90 days or more.  Id. 
{¶ 12} The act also specifies the prerequisites for canceling or terminating 
a franchise.  R.C. 1333.85.  The general rule is that prior consent of the other 
party and 60 days’ notice is required in order to cancel a franchise.  Id.  The act 
also specifies situations that constitute just cause for cancellation and situations 
that do not.  Id.  When just cause exists, consent and notice are not required.  Id.  
Regardless of whether the franchise is canceled with the prior consent of the 
distributor or whether the manufacturer can show just cause for canceling the 
franchise relationship, the manufacturer is always required to repurchase all of the 
terminated distributor’s unsold inventory and sales aids.  Id.  Most relevant to this 
dispute, however, is the fact that the act also establishes a specific procedure for 
terminating a franchise when the manufacturer sells a particular brand or product 
of alcoholic beverage to a successor manufacturer. 
{¶ 13} Specifically, R.C. 1333.85(D) provides that if a successor 
manufacturer acquires all or substantially all of the stock or assets of another 
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manufacturer, the successor manufacturer may give written notice of termination, 
nonrenewal, or renewal of the franchise to a distributor of the acquired product or 
brand.  Any notice of termination or nonrenewal of the franchise to a distributor 
of the acquired product or brand shall be received at the distributor’s principal 
place of business within 90 days of the date of the acquisition.  If notice is not 
received within this 90-day period, a franchise relationship is established between 
the parties.  And if the successor manufacturer complies with the provisions of the 
statute, neither just cause nor consent of the distributor is required for termination 
or nonrenewal.  On termination of a franchise, the successor manufacturer must 
repurchase the distributor’s inventory and must compensate the distributor for the 
diminished value of the distributor’s business that is directly related to the sale of 
the product terminated by the successor manufacturer, including the appraised 
market value of the distributor’s assets devoted to the sale of the terminated 
product and the goodwill associated with that product. 
{¶ 14} Despite these protections, Esber asserts that the Ohio Alcoholic 
Beverage Franchise Act does not permit a successor manufacturer to terminate a 
distributor’s franchise without just cause within the 90-day period when the 
successor manufacturer has itself entered into or assumed a written contract with 
the distributor.  We disagree.  “When a statute’s language is clear and 
unambiguous, a court must apply it as written.”  Estate of Johnson v. Randall 
Smith, Inc., 135 Ohio St.3d 440, 2013-Ohio-1507, 989 N.E.2d 35, at ¶ 16, citing 
Zumwalde v. Madeira & Indian Hill Joint Fire Dist., 128 Ohio St.3d 492, 2011-
Ohio-1603, 946 N.E.2d 748, ¶ 23-24.  The plain language of the statute allows the 
successor manufacturer to terminate a franchise.  The definition of “franchise” 
includes both written franchise agreements and franchise agreements that have 
arisen by operation of law.  R.C. 1333.82(D).  Allowing a successor manufacturer 
to terminate a written franchise agreement without cause is clearly permitted 
under R.C. 1333.85(D), as long as the successor manufacturer provides written 
January Term, 2013 
7 
 
notice of the termination to the distributor within 90 days of the sale, merger, or 
acquisition, and as long as compensation for the lost value of the franchise is 
provided.  Moreover, pursuant to statute, the parties are unable to restrict this right 
of termination by contract—under R.C. 1333.83, “[a]ny provision of a franchise 
agreement that waives any of the prohibitions of, or fails to comply with, sections 
1333.82 to 1333.87 of the Revised Code is void and unenforceable.” 
{¶ 15} In this case, in order to resolve an antitrust case against it, InBev 
sold the right to sell Labatt brand products in the United States to Labatt 
Operating.  The closing date of the sale was March 13, 2009, and the purchase 
agreement expressly included all wholesale distributor contracts.  It is not 
disputed that Labatt Operating is a successor manufacturer of InBev.  Thus, 
Labatt Operating was in compliance with the statute when it gave notice to Esber 
that it would be terminating Esber’s franchise as a distributor of the Labatt brand 
products.  Labatt Operating also informed Esber of its intent to compensate Esber 
in accordance with its statutory duty under R.C. 1333.85(D). 
{¶ 16} Labatt Operating is a successor manufacturer who gave notice of 
its intention to terminate to Esber within 90 days of its purchase of the Labatt 
brands from InBev.  Labatt Operating is required to compensate Esber in 
accordance with R.C. 1333.85(D), and it is not disputed that it accepted that 
responsibility in its notice of termination.  Nothing more is required under the 
statute. 
{¶ 17} Therefore, we conclude that Labatt’s termination of Esber’s 
franchise met the statutory requirements of the Ohio Alcoholic Beverages 
Franchise Act.  Esber is entitled to compensation as specified under R.C. 
1333.85(D).  Accordingly, we affirm the Fifth District Court of Appeals’ 
judgment holding that it was error for the trial court to grant summary judgment 
to Esber.  The Fifth District found that summary judgment should have been 
granted to Labatt Operating as a matter of law.  We agree.  R.C. 1333.85(D) is 
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clear and unambiguous on its face, and Labatt Operating followed its 
requirements for the termination of a franchise.  This matter is remanded to the 
trial court for further proceedings consistent with this opinion. 
Judgment affirmed. 
O’CONNOR, C.J., and LANZINGER, KENNEDY, and FRENCH,  JJ., concur. 
O’DONNELL, J., concurs in judgment only. 
PFEIFER, J., dissents without opinion. 
____________________ 
Taft, Stettinius & Hollister, L.L.P., Charles R. Saxbe, and Stephen C. 
Fitch; Roetzel & Andress, L.P.A., and Stephen W. Funk; Tzangas, Plakas, 
Mannos & Raies, Ltd., Lee Plakas, and Gary Corroto; and Stanley R. Rubin, for 
appellant. 
Frantz Ward, L.L.P., James B. Niehaus, and Olivia L. Southam; and 
Milligan Pusateri Co., L.P.A., and Paul J. Pusateri, for appellees Labatt USA 
Operating Company, L.L.C., KPS Capital Partners, L.P., North American 
Breweries, Inc., and Doug Tomlin. 
James L. Messenger, Richard J. Thomas, and Jerry R. Krzys, for appellee 
Superior Beverage Group, Ltd. 
Krugliak, Wilkins, Griffiths & Dougherty Co. and John P. Maxwell, 
urging reversal for amicus curiae Tramonte Distributing Company. 
Squire Sanders, L.L.P., David W. Alexander, and Emily E. Root, urging 
reversal for amicus curiae Beverage Distributors, Inc. 
 
Lancione, Lloyd & Hoffman and Tracey Lancione Lloyd, urging reversal 
for amicus curiae Muxie Distributing Co., Inc. 
________________________