§ 3-5-1111 - Conditions for modification of agreement. - Arkansas Statutes

3-5-1111. Conditions for modification of agreement.

(a) Notwithstanding any agreement and except as otherwise provided for in this subchapter, a supplier shall not amend or modify an agreement, cause a wholesaler to resign from an agreement, or cancel, terminate, fail to renew, or refuse to continue under an agreement, unless the supplier has complied with all of the following:

(1) Has satisfied the applicable notice requirements of this section;

(2) Has acted in good faith; and

(3) Has good cause for the amendment, modification, cancellation, termination, nonrenewal, discontinuance, or forced resignation.

(b) For each amendment, modification, termination, cancellation, nonrenewal, or discontinuance, the supplier shall have the burden of proving:

(1) That it has acted in good faith;

(2) That the notice requirements under this section have been complied with; and

(3) That there was good cause for the amendment, modification, termination, cancellation, nonrenewal, or discontinuance.

(c) (1) Notwithstanding any agreement and except as otherwise provided in this section, and in addition to the time limits set forth in subdivision (d)(4) of this section, the supplier shall furnish written notice of the amendment, modification, termination, cancellation, nonrenewal, or discontinuance of an agreement to the wholesaler not less than thirty (30) days before the effective date of the amendment, modification, termination, cancellation, nonrenewal, or discontinuance.

(2) The notice shall be by certified mail and shall contain all of the following:

(A) A statement of intention to amend, modify, terminate, cancel, not renew, or discontinue the agreement;

(B) A statement of the reason for the amendment, modification, termination, cancellation, nonrenewal, or discontinuance; and

(C) The date on which the amendment, modification, termination, cancellation, nonrenewal, or discontinuance takes effect.

(d) Notwithstanding any agreement, good cause shall exist for the purposes of a termination, cancellation, nonrenewal, or discontinuance under subdivision (a)(3) of this section when all of the following occur:

(1) There is a failure by the wholesaler to comply with a provision of the agreement which is both reasonable and of material significance to the business relationship between the wholesaler and the supplier;

(2) The supplier first acquired knowledge of the failure described in subdivision (d)(1) of this section not more than twenty-four (24) months before the date notification was given pursuant to subsection (c) of this section;

(3) The wholesaler was given notice by the supplier of failure to comply with the agreement; and

(4) The wholesaler has been afforded thirty (30) days in which to submit a plan of corrective action to comply with the agreement and an additional ninety (90) days to cure such noncompliance in accordance with the plan.

(e) Notwithstanding subsections (a) and (c) of this section, a supplier may terminate, cancel, fail to renew, or discontinue an agreement immediately upon written notice given in the manner and containing the information required by subsection (c) of this section, if any of the following occur:

(1) Insolvency of the wholesaler, the filing of any petition by or against the wholesaler under any bankruptcy or receivership law, or the assignment for the benefit of creditors or dissolution or liquidation of the wholesaler which materially affects the wholesaler's ability to remain in business;

(2) Revocation or suspension of the wholesaler's state or federal license by the appropriate regulatory agency whereby the wholesaler cannot service the wholesaler's sales territory for more than thirty-one (31) days;

(3) The wholesaler, or a partner or an individual who owns ten percent (10%) or more of the partnership or stock of a corporate wholesaler, has been convicted of a felony under the United States Code or the laws of any state which reasonably may adversely affect the good will or interest of the wholesaler or supplier. However, an existing stockholder or stockholders, or partner or partners, or a designated member or members, shall have, subject to the provisions of this subchapter, the right to purchase the partnership interest or the stock of the offending partner or stockholder prior to the conviction of the offending partner or stockholder, and if the sale is completed prior to conviction the provisions of this subdivision (3) shall not apply;

(4) There was fraudulent conduct relating to a material matter on the part of the wholesaler in dealings with the supplier or its product. Provided, however, the supplier shall have the burden of proving fraudulent conduct relating to a material matter on the part of the wholesaler in any legal action challenging such termination;

(5) (A) The wholesaler failed to confine to the designated sales territory its sales of a brand or brands to retailers.

(B) Subdivision (e)(5)(A) of this section does not apply if there is a dispute between two (2) or more wholesalers as to the boundaries of the assigned territory and the boundaries cannot be determined by a reading of the description contained in the agreements between the supplier and the wholesalers;

(6) A wholesaler has failed to pay for beer ordered and delivered in accordance with established terms and the wholesaler fails to make full payment within two (2) business days after receipt of written notice of the delinquency and demand for immediate payment from the supplier;

(7) A wholesaler intentionally has made a transfer of the wholesaler's business, other than a transfer to a designated member without prior written notice to the supplier, and has failed, within thirty (30) days from the receipt of written notice from the supplier of its intent to terminate on the ground of such transfer, to reverse said transfer of the wholesaler's business;

(8) A wholesaler intentionally has made a transfer of the wholesaler's business, other than a transfer to a designated member, although the wholesaler has prior to the transfer received from the supplier a timely notice of disapproval of the transfer in accordance with this subchapter;

(9) The wholesaler intentionally ceases to carry on business with respect to any of the supplier's brand or brands previously serviced by a wholesaler in its territory designated by the supplier, unless such cessation is due to force majeure or to labor dispute and the wholesaler has made good faith efforts to overcome such events. Provided, however, this shall affect only that brand or brands with respect to which the wholesaler ceased to carry on business.

(f) (1) Notwithstanding subsections (a), (c), and (e) of this section, a supplier may terminate, cancel, not renew, or discontinue an agreement upon not less than thirty (30) days' prior written notice if the supplier discontinues production or discontinues distribution in this state of all the brands sold by the supplier to the wholesaler.

(2) Provided, however, nothing in this section shall prohibit a supplier from:

(A) Upon not less than thirty (30) days' notice, discontinuing the distribution of any particular brand or package of beer; or

(B) Conducting test marketing of a new brand of beer which is not currently being sold in this state, provided that the supplier has notified the Director of the Alcoholic Beverage Control Division in writing of its plans to test market, which notice shall describe the market area in which the test shall be conducted, the name or names of the wholesaler or wholesalers who will be selling the beer, the name or names of the brand of beer being tested, and the period of time, not to exceed eighteen (18) months, during which the testing will take place.