Three Washington Wholesalers Sue Pabst Alleging Wrongful Termination

Austin Ray

THE GIST
Three Washington beer wholesalers have sued Pabst Brewing, alleging the company wrongfully terminated longstanding partnerships to consolidate business with one larger distributor. The suit, filed last week in federal court by Odom (Spokane), Marine View Beverage (Tumwater), and Stein Brewing (Vancouver), claims the switch came without warning, skirting established law. “[T]he termination is painful and costly,” their attorney told the Seattle Times, adding the wholesalers involved “invested millions of dollars to build out the Pabst distribution network.” Pabst, meanwhile, is giving that business to industry powerhouse Columbia Distributing.

WHY IT MATTERS
A fine way to start a brawl between otherwise amicable brewers and distributors would be to have them debate when, if ever, a brewer should be allowed to sever ties with a distributor, and under what circumstances. This is some contentious stuff, and the answers vary state to state.

In Washington, a supplier can terminate its relationship with a wholesaler with 60 days notice. However, immediate termination is permitted “if the reason for such termination is fraudulent conduct…insolvency, the occurrence of an assignment for the benefit of creditors, bankruptcy,” or loss of license for more than 14 days. This kind of framework isn’t uncommon, though the particulars are debated heartily across the country. But that’s not what’s going on here. Rather, the three wholesalers contend they were blindsided by Pabst, which they claim provided neither the required notice nor good cause upon termination.

Pabst did not return a request for comment as of press time. That said, the Times does note that the company has a pre-existing relationship with Columbia in the state, which sells Pabst across the Seattle-Tacoma markets.

[UPDATE: A Pabst spokesperson writes: “We cannot comment in detail at this time, but we are always looking carefully at our network to make sure that we have the right distributor partner and optimal route to market  for our brands.  We value our distributor relationships tremendously, but unfortunately there are times when we need to make difficult strategic decisions in order to ensure the long term success of our brands.”]

There’s also an interesting, if not coincidental, wrinkle here involving a craft brewer. As we reported in December, Pabst has entered into a “long term partnership” with New Holland Brewing, whereby Pabst is tasked with taking the brand nationwide by plugging it into its own vast distribution network. 

At the time, New Holland vice president Joel Petersen said the deal made sense because “80% of our volume is traveling through shared wholesalers” already. New Holland was just breaking into Washington at the time, having announced in November it had signed on with Columbia—the wholesaler at the heart of the lawsuit—for coverage in the state.

As for Pabst, the company is clearly in the midst of a transitional period that concerns far more than just its distribution network. In addition to the New Holland partnership, the company recently named a new CEO, while it was reported last week that it will open its new Milwaukee brewery this April after a two-decade long absence.

—Dave Eisenberg

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