Shelton Brothers Files Lawsuit Against Craft Brewers Guild

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The latest twist in Massachusetts’ pay-for-play scandal came Friday as beer importer Shelton Brothers filed a lawsuit against Craft Brewers Guild, owned by Sheehan Family Companies, alleging that the Everett, Mass.-based wholesaler’s “unfair and illegal” practices cost its company $1.7 million in potential sales, according to the Boston Globe.

The lawsuit comes eight months after Craft Brewers Guild was slapped with a $2.6 million fine for engaging in an illegal scheme to prioritize sales of its brands over those from other wholesalers, by offering some retailers inducements and other unfair discounts.

The Shelton Brothers organization, which has a litigious history and in 2014 sued four New York beer wholesalers owned by Sheehan Family Companies, claims the illegal pay to play schemes in Massachusetts cost the company millions.

“These big distributors have framed themselves as friends to small brewers and beer drinkers, all the while using unfair practices like illegal pay-to-play schemes to control the market,” Shelton Brothers said in a statement to the Boston Globe. “They’re limiting access and choice to line their own pockets at the expense of brewers . . . and consumers. We’re hoping this lawsuit will free our products from being held hostage.”

The importer is seeking damages as well as the ability to sell its products through another wholesaler. It’s also asking the court to order Craft Brewers Guild not to harass its beer suppliers.

For its part, Craft Brewers Guild has denied the allegations.

“We’re going to vigorously defend ourselves,” Tom Schreibel, the company’s vice president of government affairs, told Brewbound, echoing a statement to the Boston Globe. “We do feel confident that we will prevail.”

Shelton Brothers — an importer most recognized for bringing products like Cantillon, Fantome and Westvleteren into the U.S. — first entered into its agreement with Craft Brewers Guild in 2009. The lawsuit alleges that the relationship was already beginning to sour in early 2011 as sales via the wholesaler began to decline.

According to the lawsuit, sales of Shelton Brothers brands “have stagnated,” with sales to Craft Brewers Guild in 2016 on pace to be “lower than in all years since 2011.” Meanwhile, Shelton’s labels saw “considerable growth” in total sales nationally.

Shelton Brothers has also simultaneously filed notice with the Massachusetts Alcoholic Beverages Control Commission, stating that it would discontinue the sale of its products to Craft Brewers Guild.

According to Chapter 138, Section 25E of Massachusetts’ General Laws, brewers and importers are not allowed to stop selling their products to a partner wholesaler, unless they are able to 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.”

John P. Connell, a Boston-based alcohol attorney, speculated that two companies might agree to a settlement.

“Nobody who is sued in court wants to produce all of their documents,” Connell said. “There should be good effort by the defendant to resolve this matter prior to any ruling.”

Craft Brewers Guild is currently fighting its $2.6 million fine, the largest ever levied, by the ABCC, against a Massachusetts alcoholic beverage license holder. That appeal is still in the discovery phase, Schreibel said.

Among other allegations in its lawsuit, Shelton Brothers has alleged that Craft Brewers Guild undercut prices of its beer, instead pushing similar products from St. Killian Imports, which is also owned by Sheehan Family Companies.

Shelton Brothers also accused Craft Brewers Guild of running a program offering retailers discounts to buy beer from a selection of brands that didn’t include the Shelton Brothers’ portfolio and removing two dedicated salespeople from working Shelton Brothers’ accounts.

According to Connell, the lawsuit is “important because unlike the current appeal of the Alcoholic Beverages Control Commission fine against the Craft Brewers Guild, it could entail a lot of discovery, depositions of key personnel and key documents.”

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