W. Va. Code R. § 176-1-13

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 176-1-13 - Brewers, Qualification, Shipment Into State, Bond, Contract

13.1. West Virginia distributors shall not purchase, receive or distribute any nonintoxicating beer from any brewer or resident brewer, whether situate in or out of the state of West Virginia, unless the brewer is qualified to manufacture or transport nonintoxicating beer into the state by licensure from the Commissioner. The license as described in W. Va. Code § 11-16-1et seq. which shall provide:

13.1.a. For the filing of such written reports as may be required by the Commissioner.

13.1.b. For the payment on behalf of its distributors, of the beer excise (barrel) tax in monthly advance payments, or as may be otherwise directed by rule or statute; and

13.1.c. For the delivery, upon request, to the office of the Commissioner, the brewer's or resident brewer's records, papers, and accounts, for the purpose of inspecting and auditing the same, or the payment of the expense of an auditor(s) of the Commissioner while inspecting and auditing records in the office of the brewer or resident brewer.

13.2. Brewer or Resident Brewer-Distributor Franchise Agreement, Brand, Line Extensions, Sales, Transfers, Withdrawals, and Termination.

13.2.a. A brewer may not transfer or deliver to a distributor any nonintoxicating beer without first having entered into an equitable franchise agreement with the distributor: Provided, that the franchise agreement must conform to the laws of this state and be approved in writing by the Commissioner. However, any brands sold or transferred pursuant to paragraph 13.2.a.2., shall remain in the selling brewer's franchise distributor network. All of a brewer's nonintoxicating beer products, brands or family of brands, including line extensions that are imported or offered for sale in West Virginia must be listed in the franchise agreement or an amendment to the franchise agreement subject to the Commissioner's approval. A franchise agreement may be amended by mutual written agreement of the parties, as approved by the Commissioner with identical terms and conditions for a brewer and all of its distributors. The Commissioner shall approve: all brewers' franchise agreements, any amendments to franchise agreements and all brewers' franchise distributor networks, which shall be in writing and identical as to terms and conditions with all other franchise agreements between the brewer and its other distributors in this state, a brewer's existing brands, line extensions, and new brands are assigned by the brewer to the correct approved distributors in established and approved territories for the brewer's brands or line extensions; and the registration of the brewer's labels per section 4, and it shall contain a provision in substance or effect as follows:

13.2.a.1. The brewer recognizes that the distributor is free to manage his or her business in the manner the distributor considers best, and that this prerogative vests in the distributor, subject to the provisions of W. Va. Code § 11-16-1et seq., the exclusive right:

(i) to establish the distributor's selling prices;

(ii) to have the distribution rights to the brands and line extensions of nonintoxicating beer products that are bound by franchise agreements specifying a distributor's assigned territory and that are assigned to a franchise distributor network, and, further, that the distributor may determine which brands and line extensions of nonintoxicating beer products he or she wishes to handle; and to determine the efforts and resources which the distributor will exert to develop and promote the sale of the brewer's nonintoxicating beer products handled by the distributor;

13.2.a.1.A. As a brewer's nonintoxicating beer products, brands, and line extensions shall only be handled by the distributor with a franchise agreement for a certain territory in West Virginia as a part of the brewer's overall franchise distributor network in West Virginia and will not be sold by others in the territory assigned to the distributor, the brewer is dependent upon the distributor alone for the sale of such products in the distributor's assigned territory; and,

13.2.a.1.B. The distributor must therefore competitively price the brewer's nonintoxicating beer products handled by the distributor, devote reasonable effort and resources to the sale of such products and maintain a satisfactory sales level.

13.2.a.1.C. Upon licensure, brewers must select distributors to be included in brewers' franchise distributor network via an approved franchise agreement. A brewer shall only have one franchise distributor network and only one brewer's license. However, a brewer may have nonintoxicating beer products, brands or family of brands, including line extensions, which were acquired from another brewer and continue to utilize the selling brewer's franchise distributor network for those acquired nonintoxicating beer products, brands or family of brands, including line extensions, as specified in paragraph 13.2.a.2. Any changes to the brewer's entity shall bind all the successor entities to the brewer's approved franchise distributor network. The brewer's franchise agreement with a distributor binds the parties and all successor brewers, unless the parties mutually agree in writing to any change resulting from a sale or transfer of the distributor's business, or unless the brewer terminates the distributor as provided in the West Virginia Code and this rule.

13.2.a.1.D. Resident brewers may select distributors to be included in its franchise distributor network via an approved franchise agreement. A resident brewer shall only have one franchise distributor network and only one resident brewer's license. However, a resident brewer may have nonintoxicating beer products, brands or family of brands, including line extensions, which were acquired from another resident brewer and continue to utilize the selling resident brewer's franchise distributor network for those acquired nonintoxicating beer products, brands or family of brands including line extensions, as specified in paragraph 13.2.a.2. Any changes to the resident brewer's entity shall bind all the successor entities to the resident brewer's approved franchise distributor network. The resident brewer's franchise agreement with a distributor shall bind the parties and all successor resident brewers or brewers, unless the parties mutually agree in writing to any change resulting from a sale or transfer of the distributor's business, or unless the resident brewer terminates the distributor, all as further provided in subsection 13.5, the West Virginia Code and this rule. Unless otherwise specified, a resident brewer must meet the requirements of a brewer specified in section 13 of this rule.

13.2.a.2. A brewer may sell or transfer to another brewer or a resident brewer may sell or transfer to another resident brewer the manufacturing, bottling, or other production rights for the sale of nonintoxicating beer at wholesale. In subdivision 13.2.a., where the term brewer is used the same requirements or authority apply to resident brewer when reading section 13 as a whole, where applicable and where not contradicted by specific statements in this rule. When a sale occurs, the franchised distributor of the selling brewer is entitled to continue distributing the selling brewer's nonintoxicating beer products, brands or family of brands, including line extensions, as authorized in the distributor's existing franchise agreement. The acquiring brewer, any successor brewers or successor entities are all bound by the selling brewer's existing franchise agreement and franchise distributor network and shall continue to market all the selling brewer's nonintoxicating beer products, brands or family of brands, including line extensions, through the franchised distributor as though the acquiring brewer had made the franchise agreement, unless all the parties mutually agree, in writing, to change or cancel the existing franchise agreement and franchise distributor network or the acquiring brewer may terminate the franchise agreement only in accordance with W. Va. Code § 11-16-21(b)(2) and paragraph 13.2.b.2 of this rule. The acquiring brewer may continue to distribute any of its other nonintoxicating beer products, brands or family of brands, including line extensions, through its duly authorized franchises in accordance with all other provisions of this section.

13.2.a.3. In the event a brewer withdraws products from the state and subsequently reintroduces the products to the state at a later date, that brewer or any successor brewer shall offer the territorial franchise distribution rights for those withdrawn products to the distributors who had a franchise agreement with the brewer in effect at the time of the original withdrawal of the brewer's nonintoxicating beer products.

13.2.a.4. A brewer must list every nonintoxicating beer brand and line extension it has registered, imports and offers for sale in West Virginia in its approved franchise agreements or in an approved amendment to the franchise agreement.

13.2.a.5. At the time of licensure, a brewer must list all its registered brands to be distributed in West Virginia that it imports and will offer for sale in its franchise agreements and such brands must be appointed to its approved franchise distributor network. A brewer shall file amendments, subject to the Commissioner's approval, to its approved franchise agreements in its approved franchise distributor network for any new brands or line extensions to be imported, distributed, and offered for sale in West Virginia.

13.2.a.6. In the process of investigating and reviewing:

(i) any franchise agreement;

(ii) any amendments to a franchise agreement;

(iii) registration of container labels;

(iv) registration of all brands and line extensions;

(v) appointment of all brands or line extensions to a brewer's established franchise distributor network and to a distributor's assigned territory; and

(vi) appointment of all brands or line extensions as an acquiring brewer, successor brewer and also any successor entities to the selling brewer's established franchise distributor network and to a distributor's assigned territory, the Commissioner may include in his investigation and review, but is not limited to: the brewer, its subsidiaries, parent entities, contracted entities, affiliated entities, associated entities, or other related entities, the brewer's corporate structure, the nature of the relatedness of various entities, ownership, trade names or partial trade names, logos, copyrights, trademarks, or trade design; and product codes, marketing and advertising, promotion, or pricing.

13.2.a.7. The Commissioner shall review franchise agreements and any amendments to verify that brands and line extensions are offered to the correct distributors in a brewer's established franchise distributor network and territories. The Commissioner may approve franchise agreements or amendments to franchise agreements for any brands or line extensions a brewer offers to the correct distributors as determined by the Commissioner, as the facts and circumstances dictate. The Commissioner may deny franchise agreements or amendments to franchise agreements for any brands or line extensions a brewer offers to the incorrect distributors as determined by the Commissioner, as the facts and circumstances dictate.

13.2.a.8. Any nonintoxicating beer product denied as a brand or as a line extension may not be sold in the West Virginia, and further any illegal sale, distribution or transportation of such a product would subject the brewer, distributor or retailer to the penalties in Section 14 of this rule.

13.2.a.9. Any brewer adversely affected by a denial per paragraph 13.2.a.6., subparagraphs (iv) or (v) only, may request, in writing a final written determination from the Commissioner.

13.2.a.10. Per paragraph 13.2.a.9., the brewer, upon receipt of a final determination from the Commissioner, may request a hearing per W.Va. Code § 11-16-24 and Section 15 of this rule by filing a written petition and a $1,000 deposit via certified check or money order to cover the costs of the hearing. Such certified check or money order shall be made payable to the Commissioner. Further, in any brewer requested hearing, the brewer has the burden of proof and the standard of review in the administrative hearing is by a preponderance of the evidence._

13.2.a.11. The provisions of this rule and W. Va. Code § 11-16-1 et. seq. shall be part of all franchise agreements subject to the provisions of W. Va. Code § 11-16-21 and may not be altered by the parties.

13.2.b. A Brewer, Resident Brewer, or Distributor Shall Not:

13.2.b.1. Coerce or persuade, or attempt to coerce or persuade, any licensee to enter into any contracts or agreements, whether written or oral, or to take any other action, which will violate or tend to violate any provision of W. Va. Code § 11-6-1et seq. or any of the rules, standards, requirements, or orders of the Commissioner; or

13.2.b.2. Cancel, terminate or rescind without due regard for the equities of the brewer or distributor, and without just cause, any oral franchise agreement entered into on or before June 11, 1971, or any written franchise agreement entered into on, before, or subsequent to July 1, 1971.

13.2.b.2.A. The cancellation, termination or rescission of any franchise agreement shall not become effective until 90 calendar days after written notice of the action has been served contemporaneously on the affected party and the Commissioner by certified mail, return receipt requested or other express mail service with a return receipt requested, by the brewer. The 90 day calendar period shall start on the date received by the affected party and the Commissioner, or whichever date is later. The brewer shall provide the Commissioner with proof of receipt to any affected party.

13.2.b.2.B. The 90 day calendar period and the notice of cancellation, termination or rescission shall not apply if action is agreed to in writing by both the brewer and the distributor involved.

13.2.b.2.C. If a brewer seeks to terminate dealings with a distributor and the distributor does not agree in writing to the termination the brewer must:

13.2.b.2.C.1. Notify the Commissioner and the distributor in writing of the brewer's intent to terminate dealings with the distributor after the 90^th day. A distributor must notify the Commissioner and the brewer, in writing and via certified mail, return receipt requested or other express mail service with a return receipt requested, within the 90 day period referenced in subparagraph 13.2.b.2.A., of any objections to the cancellation, termination, or rescission of its franchise agreement. Failure of a distributor to object on or before the 90^th day, will authorize the Commissioner to issue an approval of the termination. The Commissioner will consider any timely filed written objections by a distributor prior to determining whether to approve or disapprove a termination and may set a hearing per subparagraph 13.2.b.2.G., to decide this matter;

13.2.b.2.C.2. After receipt of approval of the termination from the Commissioner, offer to purchase all marketable nonintoxicating beer manufactured by the brewer in the possession of the distributor as of the date of termination at the then existing brewery platform price, plus transportation costs; and

13.2.b.2.C.3. Refrain from making any statement, or performing or causing to be performed, any act (other than the termination) detrimental to the distributor or to the distributor's business.

13.2.b.2.D. After receipt from a brewer of a written notice of termination and receipt from the Commissioner of approval of the termination, the distributor must:

13.2.b.2.D.1. Sell to the brewer all marketable nonintoxicating beer, ale, malt beverages or malt coolers manufactured by the brewer and in the possession of the distributor as of the date of the termination at the then existing brewery platform price, plus transportation; and

13.2.b.2.D.2. Refrain from making any statement, or performing or causing to be performed, any act detrimental to the brewer or to the brewer's product or business.

13.2.b.2.E. If a distributor seeks to terminate dealings with a brewer, the distributor must:

13.2.b.2.E.1. Notify the Commissioner and the brewer, in writing, of the distributor's termination of dealings with the brewer;

13.2.b.2.E.2. Offer to sell to the brewer all marketable nonintoxicating beer, ale, malt beverages or malt coolers manufactured by the brewer in the possession of the West Virginia distributor as of the date of the termination at the then existing brewery platform price, not including transportation; and

13.2.b.2.E.3. Refrain from making any statement, or performing or causing to be performed, any act (other than the termination) detrimental to the brewer or to the brewer's product or business.

13.2.b.2.F. After receipt from a distributor of a written notice of termination, the brewer must:

13.2.b.2.F.1. Purchase from the distributor all marketable nonintoxicating beer manufactured by the brewer and in the possession of the distributor as of the date of the termination at the then existing brewery platform price, not including transportation; and

13.2.b.2.F.2. Refrain from making any statement, or performing or causing to be performed, any act detrimental to the distributor or to the distributor's business.

13.2.b.2.G. Hearing: If the Commissioner has grounds to believe that there has occurred a violation of section 13.2 of this rule by either a brewer or a distributor, the Commissioner may in his or her discretion order a hearing to determine whether or not a violation has occurred. If a hearing is ordered by the Commissioner, the hearing shall be held in the office of the Commissioner within 30 calendar days after the termination in question. Any hearing shall be conducted in the manner described in the W. Va. Code § 11-16-1et seq., and the burden of proving that a violation has been committed rests upon the brewer or distributor, as the case may be, against whom the termination has been effected. The Commissioner shall, within 10 calendar days after the close of any hearing, make his or her determination and issue an appropriate order of findings as to whether or not a violation of this rule has occurred.

13.2.c. A distributor seeking to sell or transfer the distributor's franchise must give to the brewer at least 60 calendar days notice in writing of the impending sale or transfer, the identity of the person, firm, or corporation to whom such sale or transfer is to be made, and any other information the brewer may reasonably request. The notice shall be made upon forms and contain such additional information as the Commissioner prescribes by rule. A copy of the notice shall be forwarded to the Commissioner.

13.2.c.1. The brewer must be given 60 calendar days to approve or disapprove the sale or transfer. If the brewer neither approves nor disapproves of the sale or transfer within 6 calendar days of the date of the receipt of the notice, the sale or transfer shall be considered approved.

13.2.c.2. In the event the brewer disapproves of the sale or transfer, the brewer must give written notice to the distributor, setting forth the reasons for the disapproval.

13.2.c.2.A. The brewer may not unreasonably withhold approval of the sale or transfer. The fact that the prospective franchisee, transferee or purchaser has not had prior experience in the nonintoxicating beer business or beer business is not considered sufficient reason for a valid disapproval; however, lack of experience may be considered in conjunction with other adverse factors in supporting the position of the brewer.

13.2.c.2.B. The brewer may not impose requirements which are more stringent or restrictive than those currently demanded or imposed upon the brewer's other distributors in the state of West Virginia.

13.2.c.3. A copy of the notice of disapproval must be forwarded to the Commissioner and to the prospective franchisee, transferee or purchaser. If the issue is not resolved within 20 calendar days from the date of the disapproval, any of the parties may demand arbitration and shall notify the other parties and the Commissioner of the demand for arbitration.

13.2.c.3.A. The matter must be submitted to a board of three (3) arbitrators in the county in which the distributor's principal place of business is located; the party requesting arbitration shall name one arbitrator. The party receiving the notice for arbitration shall, within 10 calendar days after receipt, by notice name the second arbitrator.

13.2.c.3.B. If the party receiving notice fails to name the second arbitrator, the appointment may be made by the chief judge of the circuit court of the county in which the distributor's principal place of business is located if such action is requested by the party requesting arbitration in the first instance.

13.2.c.3.C. The two (2) appointed arbitrators must name the third, or if they fail to do so within 10 calendar days after appointment of the second arbitrator, the third arbitrator may be appointed by the chief judge upon request of either party.

13.2.c.4. The arbitrators shall promptly hear and determine the questions submitted pursuant to the procedures established by the American Arbitration Association. The arbitrators shall render the decision with all reasonable speed and dispatch but in no event later then 20 calendar days after the conclusion of evidence. The decision must include findings of fact and conclusion of law and it must be based upon the justice and equity of the matter. The arbitrators shall give each party shall be given notice of the decision.

13.2.c.5. If the decision of the arbitrators approves the proposed sale or transfer, the brewer shall forthwith agree to the same and shall immediately transfer the franchise, unless notice of intent to appeal the decision is given the arbitrators and all other parties within 10 calendar days of notification of the decision. If any party considers himself or herself aggrieved by the decision, that party has a right to bring an appropriate action in circuit court. Any and all notices shall be given to all parties by certified or registered mail, return receipt requested.

13.2.d. The violation of any provision of this subsection by any brewer constitutes grounds sufficient for revocation of the brewer or resident brewer's license. Moreover, any circuit court of the county in which a distributor's principal place of business is located has the jurisdiction and power to enjoin the cancellation, termination, or rescission of any franchise agreement between a brewer and the distributor, and, in granting an injunction to a distributor, the court shall provide that the brewer so enjoined shall not supply the customers or territory of the distributor while the injunction is in effect.

13.3. Brewers, Resident Brewers, and Distributors Interceding for Licensed Retailers: No brewer, resident brewer, or distributor may intercede on behalf of any licensed retailer with respect to the application, approval, refusal, sanctioning, suspension, or revocation of a license.

13.4. Brewers and Distributors Territorial Assignments: All brewers or resident brewers shall submit to the Commissioner, in duplicate, a written description showing the assigned territories by brewers or resident brewers to each distributor. The description shall bear the signature of the brewer, resident brewer, or its authorized agent and the distributor involved. A territorial assignment shall bind the distributor and brewer or resident brewers, and its successors, unless both parties mutually agree in writing to a change in territory as specified in sub-section 13.4.a.

13.4.a. Duly assigned territories shall then become the responsibility of the brewer or resident brewer, and distributor. No distributor shall sell any nonintoxicating beer to any licensed retailer not located within the distributor's assigned territory, and no licensed retailer shall purchase any nonintoxicating beer except from duly authorized distributors in whose assigned territory the licensed retailer is located. The brewer or duly authorized agent is responsible for submitting, by registered mail, to the office of the Commissioner, two (2) copies of any new written description showing any proposed change of territory, including signatures of the brewer or his or her authorized agent or the distributor. The new territorial assignment then becomes effective upon receipt by the parties of the written approval of the Commissioner.

13.5. Resident brewers who are producing his or her own product over 10,000 barrels or who are using the services of licensed distributors must appoint distributors, utilize franchise agreements and be subject to those requirements and violations in the manner provided in the code and this rule. For the purpose of appointing distributors and utilizing and enforcing franchise agreements, a resident brewer must meet and abide by the requirements in the Code and this rule for brewers in that respect.

W. Va. Code R. § 176-1-13