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California Alcohol Beverage Control Can't Save Booze Distributor From Lawsuit

The recently decided case of Wiseman Park LLC v. Southern Glazer Wine and Spirits LLC may open a floodgate of litigation in California, or not. The case reversed a trial court decision sustaining a demurrer to a lawsuit brought by an alcohol retailer against an alcohol distributor.

The distributor sought the demurrer on the basis that California's Department of Alcohol Beverage Control (ABC) held the exclusive jurisdiction over all legal claims between alcohol retailers and distributors. However, the Second District Appellate Court of California held that the trial court sustained the demurrer in error. It reversed their decision, remanding the case to be litigated. It further held that there was no merit to the assumption that ABC was the exclusive arbiter of these disputes.

Details of the Case

Wiseman Park LLC sought to recover the monies it had paid Southern Glazer for a "carrying charge." The ABC regulations restrict distributors to only charge a 1% interest on late payments. However, Southern Glazer would also charge a 1% "carrying charge" that was structured identically to an interest payment.

In addition to seeking repayment of the "carrying charge," Wiseman Park alleged unfair competition claims based on other state laws. The trial court sustained the demurrer as to these claims as well on the same rationale that the ABC had exclusive jurisdiction over these claims.

However, as the appellate court explained, the department does not have exclusive jurisdiction over any claims, but rather are a forum that the parties can select to engage. It detailed that there is no statutory, or constitutional, basis for the assertion that the ABC is the exclusive forum for these claims. The court further explained that the very nature of unfair competition would be defeated if it could not be based upon industry specific rules and trade practices.

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