The highest court in Massachusetts has ruled against a challenge to the commonwealth’s franchise law by an out of state importer. The importer was terminated by its supplier and it sought protection under the Massachusetts franchise law.
However, importers are defined under section 18B of the MA code while wholesalers are under a different part of section 18. Franchise protections in 25E are only extended to licensed wholesalers. The lawsuit sought to extend franchise protections that wholesalers receive to importers, and in the alternative, declare that the franchise law violates the dormant commerce clause by not protecting out of state importers.
The Massachusetts Supreme Judicial Court called for amicus briefs for this matter in January 2024. An amicus brief was filed on behalf of the Beer Distributors of Massachusetts, the Wine and Spirits Wholesalers of Massachusetts, and the National Beer Wholesalers Association. An opposing brief was filed by Sean O’Leary.
Oral arguments were held in May and can be viewed here.
The decision can be found here. The Court quickly recognized that under the Massachusetts system importers and wholesalers are defined specifically and have separate functions noting that “the Legislature’s choice of words is significant.” The Court noted the impossibility of the plaintiff’s position stating that “allowing 25E’s protections to depend on out-of-state licensing activities uncontrolled by the commission, as advocated by S&H, would thwart the central role played by the commission in the Commonwealth’s statutory scheme.“
Finally, the court dismissed the dormant Commerce Clause challenges noting that importers and wholesalers are not similarly situated, are defined differently, and serve different roles in the regulatory framework of Massachusetts. “Because section 18B certificate holders and section 18 licensed Wholesalers serve different roles in the the three-tiered regulatory framework, disparate treatment between the two sets of entities is permissible.”
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