The Eighth Circuit recently applied a novel, broad reading of the Missouri Franchise Act granting franchise protection to distributors which previously would not likely have been considered franchisees.
In Pinnacle Imports, LLC v. Share A Splash Wine Co., LLC, a Missouri-based wine distributor, Pinnacle, entered an oral agreement in 2013 to be the exclusive Missouri distributor for California wine supplier, Share A Splash. Share A Splash ended the agreement in 2021 and appointed Pinnacle's competitor as its new Missouri distributor. Pinnacle sued, alleging the termination violated the Missouri Franchise Act and that Share A Splash needed “good cause” to end the alleged franchise agreement.
The district court found that Pinnacle was not a “franchise” as defined by the Act and granted Share A Splash summary judgment. More specifically, the court found that as a matter of law, Pinnacle did not “demonstrate or display” the product to customers, a requirement of franchises under the Act. The court reasoned that although Pinnacle occasionally brought customers to their headquarters and allowed them to peruse wine for purchase, this was not a part of Pinnacle's regular course of business, and they are consequently excluded from protection as a franchisee under the Act.
The Eight Circuit reversed. It found that “displaying or demonstrating” goods did not have to be a regular occurrence to satisfy this requirement. The court held Pinnacle presented sufficient evidence to raise a genuine dispute of fact as to whether it would qualify for protection as a franchisee under the Act. While the Eight Circuit did not provide guidance on a floor to meet this requirement, it did open the door to allow more distributors access to franchisee protection under the Act.
Key Takeaways:
- Distributors may qualify for franchise protection under the Missouri Franchise Act, even in oral agreements where no explicit franchisor-franchisee relationship is established
- A distributor does not need to regularly demonstrate or display goods in a fixed location to find potential protection under the Missouri Franchise Act
Special thanks to JJ Gramlich, a summer clerk in Foley's Dallas office, for his contributions to this article.
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