Current through Register Vol. 28, No. 3, September 1, 2024
7.1 Notwithstanding the provisions of the
distribution contract between the parties, when, for good cause, a licensed
supplier seeks to withdraw involuntarily distribution rights for alcoholic
beverages already being sold in this State from a licensed wholesaler by
termination of the relationship, transfer of brands or otherwise, and to confer
those distribution rights on another licensed wholesaler, the Commissioner
shall not approve the request unless the supplier establishes that "good
cause", as defined in this Rule, exists to permit such termination or transfer
as a result of the acts or omissions of the existing wholesaler.
7.2 Because good cause can only be
established based upon the acts or omissions of the existing wholesaler, it is
not a sufficient basis that a supplier has obtained the rights to supply such
alcoholic beverages in Delaware by means of a merger, purchase of stock,
purchase of assets, or other acquisition, or by otherwise becoming the new
regional or national supplier of such products. Any supplier obtaining such
rights does so subject to the existing distribution relationship in Delaware
for such alcoholic beverages.
7.3
The term "good cause" as used in this Rule shall include:
7.3.1 The failure or refusal of the
wholesaler to comply substantially with a material provision of the
distribution contract (including any provision establishing standards of
performance), which provision is essential, fair and reasonable, after having
received written notice of such failure from the supplier and having failed
within sixty days thereafter to correct substantially such deficiency;
provided, however, that such notice and opportunity to correct the deficiency
is not required when the deficiency results from a licensed wholesaler's (i)
felony conviction, (ii) fraudulent conduct, (iii) sales of the supplier's
brands outside of its agreed upon sales territory, or (iv) failure to pay and
continued failure to make payment to the supplier after receipt of written
notice of the delinquency and demand for payment within the period of time
agreed upon by the parties or ten business days, whichever is
greater.
7.3.2 In the absence of
any express provision in the distribution contract establishing standards of
performance, the failure of the wholesaler to meet reasonable and fair
standards of performance based upon the custom and practice of the industry,
after having received written notice of such failure from the supplier and
having failed within sixty days thereafter to correct substantially such
deficiency; provided, however, that such notice and opportunity to correct the
deficiency is not required when the deficiency results from a licensed
wholesaler's (i) felony conviction, (ii) fraudulent conduct, (iii) sales of the
supplier's brands outside of its agreed upon sales territory, or (iv) failure
to pay and continued failure to make payment to the supplier after receipt of
written notice of the delinquency and demand for payment within the period of
time agreed upon by the parties or ten business days, whichever is
greater.
7.3.3 The insolvency or
bankruptcy of the wholesaler;
7.3.4
The dissolution or liquidation of the wholesaler's business;
7.3.5 The loss for more than thirty
consecutive days by the wholesaler of any federal or state license necessary to
carry out the provisions of the distribution contract between the parties
whether by revocation, cancellation, failure to renew, suspension, or
otherwise;
7.3.6 The assignment,
transfer or sale of the ownership or substantial assets of the wholesale
licensee's business whenever the wholesaler to be substituted is financially
unable to assume the obligations under the distribution contract, or lacks the
business experience or qualifications necessary to protect the legitimate
interests of the supplier. The burden of establishing such inability shall be
upon the supplier.
