Craft Brewers Guild Files Motion to Dismiss Shelton Brothers Lawsuit

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Nearly one month after being sued by beer importer Shelton Brothers for alleged “unfair and illegal” practices, Massachusetts-based beer distributor Craft Brewers Guild filed a motion to dismiss the lawsuit on Tuesday.

The action stems from a November 4 lawsuit filed by Shelton Brothers, which claimed that Craft Brewers Guild’s illegal pay-to-play practices between 2013 and 2014 had cost the import company $1.7 million in potential sales.

In conjunction with its lawsuit, Shelton Brothers had also filed a notice with the Massachusetts Alcoholic Beverages Control Commission stating that it would discontinue the sale of its products to Craft Brewers Guild.

Tuesday’s filing by Craft Brewers Guild, owned by the Sheehan Family Companies, comes one day after the ABCC approved the wholesaler’s application for relief, ordering Shelton Brothers to supply the distributor with beer until the “matter has been heard and a decision rendered” under Chapter 138, Section 25E of Massachusetts’ General Laws.

That law requires brewers and importers to sell their products to a partner wholesaler, unless they can show “good cause,” which is limited to the following conduct: “Unfair preferment in sales effort for brand items of a competitor, failure to exercise best efforts in promoting the sale of any brand item, engaging in improper or proscribed trade practices, or failure to comply with the terms of sale agreed upon between supplier and wholesaler.”

In its motion, which was filed in Hampshire Superior Court, Craft Brewers Guild listed four primary reasons for dismissing the Shelton Brothers suit.

The distributor claimed that the ABCC, not the court, has “primary jurisdiction” over the matter under Chapter 138. It also argued that plaintiffs are barred with stating a claimed amount of monetary damages, that the statute of limitations for breach of contract claims had been exceeded, and that Chapter 138 does not allow for private right actions for violations of its provisions.

In an email to reporters Tuesday, Tom Schreibel, Craft Brewers Guild’s vice president of government affairs, called the Shelton Brothers lawsuit “patently frivolous” and described the importer as “extremely litigious.”

“CBG will vigorously defend itself against the allegations made in the Shelton Brothers complaint,” Schreibel wrote. “Given Shelton Brothers’ history of nuisance and cut and paste litigation, it is more likely that Shelton Brothers brought this spurious litigation to drive its personal agenda which is to attempt to capitalize on the ABCC’s February 2016 decision concerning CBG, to denigrate CBG’s reputation in the market place and industry wide, to create a false narrative in a legislative battle to attack existing alcohol beverage laws and to extort CBG to release its rights to continue to purchase beer from Shelton.”

Schreibel concluded his email with a list of seven lawsuits filed by the importer, noting that several “contain the same claims as brought in this current litigation.”

Shelton Brothers — known for bringing products like Cantillon, Fantome and Westvleteren into the U.S. — first entered into its wholesale relationship with Craft Brewers Guild in 2009. The importer’s lawsuit alleged that the relationship began to sour in 2011 as sales through the wholesaler began to decline. Shelton Brothers has also claimed that 2016 sales are on pace to be the lowest since 2011.

Tuesday’s filing by Craft Brewers Guild comes several months after the ABCC slapped the distributor with a $2.6 million fine for engaging in an illegal pay-to-play scheme to prioritize sales of its brands over those from other wholesalers via inducements and other unfair discounts to certain retailers.

Craft Brewers Guild is fighting that fine, the largest ever levied by the ABCC against a Massachusetts alcoholic beverage license holder. Discovery in the matter is required to be completed by March 28, 2017 and a joint pre-hearing memorandum is due by April 28, 2017.

The distributor has also submitted a $750,000 payment to the Alcohol and Tobacco Tax and Trade Bureau (TTB), the largest “offer in compromise” ever accepted by the federal agency, for its role in the illegal pay-to-play schemes, which are barred under the Federal Alcohol Administration Act.