The legal dispute between Constellation Brands and Olympic Eagle Distributing in Washington might be nearing an end.
Last week (July 20), the U.S. Court of Appeals for the Ninth Circuit vacated a preliminary injunction issued in district court that blocked Constellation’s termination of Olympic Eagle “on the ground that plaintiff has not shown a likelihood of success on the merits, and we remand.”
The appeals court listed three factors in its decision:
- “Plaintiff is unlikely to succeed on its claim under the Washington Wholesale Distributor/Supplier Equity Agreement Act. … Although the text of the Act does not expressly state that suppliers always have the right to terminate distribution agreements without cause, it clearly allows a supplier to contract for that right.”
- “The Agreement grants Defendant the right to terminate without cause.”
- “Plaintiff is also unlikely to succeed on its claim under the Washington Franchise Investment Protection Act (FIPA).”
The case now returns to the district court with Constellation now having a pathway to giving a 60-day notice to terminate Olympic Eagle.
Last year, Constellation – which sells popular Mexican imports Modelo, Corona and Pacifico – informed Olympic of its intention to terminate their 19-year relationship in Pierce and King counties, effective September 8.
U.S. District Judge David G. Estudillo, who previously granted the preliminary injunction blocking the termination, wrote that Constellation’s “letter did not state the termination was for cause, without cause, or because Olympic failed to meet its obligations under the distribution agreement. In essence, no information was provided.”
Court records noted that Columbia Beverages had made an offer of around $70 million to Olympic Eagle as compensation since Constellation had designated Columbia as the successor wholesaler, per court records. However, Olympic had stated that without the Constellation business, the business would lose around $5.5 million annually, making it unprofitable, per court filings.