Second Department Extends ABC Law § 55‑c “Good Cause” Protections to Oral and Implied Beer Distribution Agreements

Case: Oak Beverages, Inc. v. D.G. Yuengling & Son, Inc. (2025 NYSlipOp 04730) — Appellate Division, Second Department (Aug. 20, 2025)

Introduction

In a decision of first impression for the Second Department, the court held that the “good cause” and opportunity-to-cure protections contained in Alcoholic Beverage Control Law (ABC Law) § 55‑c(4) apply to non‑written agreements between brewers and beer wholesalers. The case arises from longstanding distribution relationships—allegedly oral—from 2001 between Oak Beverages, Inc. and Boening Bros., Inc. (multibrand wholesalers) and D.G. Yuengling & Son, Inc. (brewer). After a 2011 federal settlement permitting the wholesalers to continue distributing Yuengling, the brewer served 2021 letters asserting underperformance and purporting to terminate the relationships, while disputing that § 55‑c applied absent a written agreement. The wholesalers sued Yuengling and Manhattan Beer Distributors, alleging violations of § 55‑c, breach of contract, trade secret misappropriation, breach of the implied covenant, tortious interference, and a Donnelly Act conspiracy.

The trial court (Nassau County) dismissed the complaint and denied leave to amend. On appeal, the Second Department clarifies the scope of § 55‑c, but ultimately affirms dismissal (with a modification on attorneys’ fees).

Summary of the Judgment

The Second Department holds:

Key holding (new rule): ABC Law § 55‑c(4)’s prohibition on cancelling, failing to renew, or terminating a brewer–wholesaler “agreement” without good cause (and an opportunity to cure) applies to non‑written agreements, including arrangements, courses of dealing, and commercial relationships.
Pleading failure: Despite that protection, the plaintiffs’ § 55‑c claims were properly dismissed under CPLR 3211(a)(7) because the amended complaint did not plead the essential and material terms of the alleged distribution agreements necessary to evaluate whether Yuengling had “good cause” to terminate.
Other claims: Breach of contract claims were duplicative of the § 55‑c claims; trade secret, implied covenant, tortious interference, and Donnelly Act claims were insufficiently pleaded and properly dismissed.
Leave to amend: Properly denied as the proposed second amended complaint was palpably insufficient and did not cure defects.
Attorneys’ fees: The trial court erred in awarding Yuengling its motion fees; absent a contract or statute, the American Rule applies, and the plaintiffs’ conduct was not frivolous under 22 NYCRR 130‑1.1. The appellate court modified to deny fees.

Analysis

Precedents and Authorities Cited

The court anchored its statutory interpretation in established canons and related precedents:

Textual primacy and plain meaning: Patrolmen’s Benevolent Assn. v City of New York, 41 NY2d 205, and Majewski v Broadalbin‑Perth Cent. School Dist., 91 NY2d 577, stress that legislative intent begins with the statute’s text.
Legislative history and purpose: People v Badji, 36 NY3d 393; Lubonty v U.S. Bank N.A., 34 NY3d 250; and Saul v Cahan, 153 AD3d 951, permit reliance on legislative history and avoidance of absurd results undermining statutory purpose.
Holistic statutory reading: Matter of Albany Law School v NYS OMRDD, 19 NY3d 106, requires construing interrelated provisions together.
Remedial statutes: Matter of Scanlan v Buffalo Pub. School Sys., 90 NY2d 662; People v Brown, 25 NY3d 247, call for broad construction to effectuate remedial aims.
ABC Law § 55‑c history and character:
- JRC Beverage, Inc. v K.P. Global, Inc., 223 AD3d 53, canvassed the legislative history of § 55‑c, emphasizing wholesaler protections.
- Garal Wholesalers v Miller Brewing Co., 193 Misc 2d 630 (Sup Ct, Suffolk County), and John G. Ryan, Inc. v Molson USA, LLC, 2005 WL 2977767 (EDNY), characterized § 55‑c as remedial.
- Amtec Intl. of NY Corp. v Beverage Alliance LLC, 2011 WL 13244183 (EDNY), read the statutory definition of “agreement” to include non‑written relationships.
Pleading standards: Leon v Martinez, 84 NY2d 83, and Connaughton v Chipotle Mexican Grill, Inc., 29 NY3d 137, on CPLR 3211(a)(7) dismissals; Simkin v Blank, 19 NY3d 46; Maas v Cornell Univ., 94 NY2d 87.
Other doctrinal guideposts:
- Duplicative claims: Tulino v Hiller, P.C., 202 AD3d 1132; Pacella v Town of Newburgh Volunteer Ambulance Corps., 164 AD3d 809.
- Trade secrets: Tri‑Star Lighting Corp. v Goldstein, 151 AD3d 1102.
- Implied covenant: Saltiel v FM Home Loans, LLC, 206 AD3d 778; Michaan v Gazebo Hort., Inc., 117 AD3d 692.
- Tortious interference: Plymouth Capital, LLC v Montage Fin. Group, Inc., 230 AD3d 1361; Kimso Apts., LLC v Rivera, 180 AD3d 1033.
- Donnelly Act: Shaw v Club Managers Assn. of Am., Inc., 84 AD3d 928.
- Attorneys’ fees (American Rule): 214 Wall St. Assoc., LLC v Medical Arts‑Huntington Realty, 99 AD3d 988; Matter of A.G. Ship Maintenance Corp. v Lezak, 69 NY2d 1.
- Leave to amend: Bleakley Platt & Schmidt, LLP v Barbera, 136 AD3d 725; US Bank N.A. v Murillo, 171 AD3d 984; Singh v T‑Mobile, 232 AD3d 662.

Legal Reasoning

The interpretive task centered on reconciling two features of § 55‑c:

Written-agreement language: § 55‑c(1) (policy) and § 55‑c(3) (operational mandate) state that brewer–wholesaler relationships “shall be” pursuant to a written agreement setting forth all essential and material terms, performance standards, and conditions.
Broad “agreement” coverage and remedial protection: § 55‑c(2)(a) defines “agreement” expansively to include “any contract, agreement, arrangement, course of dealing or commercial relationship,” and § 55‑c(4)(a) bars termination, nonrenewal, or cancellation of an “agreement” without good cause.

The court harmonized these provisions, reading the written‑agreement mandate as a legislative policy that seeks to protect wholesalers—not a loophole enabling brewers to evade “good cause” constraints by withholding a writing. The court leaned on:

Legislative history (1996 enactment): Sponsors, the Governor’s approval memo, and lobbying materials emphasized protecting wholesalers—especially those dealing with importers operating through oral agreements—from arbitrary termination and to help wholesalers secure financing via formalized terms.
Remedial construction: Because § 55‑c is remedial, it must be construed to effectuate its protective purpose. A literal reading conditioning protection solely on the existence of a writing would create an “absurd or unreasonable” result by allowing brewers to sidestep the statute through the very practice the Legislature sought to curb.
Consistent authority: Federal and state decisions have likewise characterized § 55‑c as remedial and, in at least one EDNY case, recognized that “agreement” includes non‑written relationships.

Having established that § 55‑c(4) protections reach non‑written agreements, the court then turned to pleading sufficiency. Although the absence of a writing does not defeat a § 55‑c claim, the statute itself requires that the agreement “sets forth all essential and material terms, requirements, standards of performance and conditions of the business relationship” (§ 55‑c[3]). To adjudicate whether a brewer had “good cause” to terminate—defined narrowly in § 55‑c(2)(e)—a court must know what those essential terms and performance standards were. The complaint here did not plead those terms with factual specificity (e.g., territory definitions, exclusivity, sales or marketing obligations, performance benchmarks, notice/cure procedures). Without them, the court could not test the brewer’s asserted reasons (underperformance, ineffective marketing) against the agreement’s material obligations. Hence, the § 55‑c claims were dismissed under CPLR 3211(a)(7).

The court then disposed of the remaining claims:

Breach of contract: Duplicative of the § 55‑c claims because they arose from the same facts and alleged no distinct damages.
Trade secrets: The wholesalers’ client information was not pleaded with facts showing secrecy and protectability under New York trade secret law.
Implied covenant: No allegations that Yuengling prevented performance or withheld contractual benefits independent of the asserted contract breach.
Tortious interference (against Manhattan Beer): The complaint lacked specific, intentional conduct designed to induce breach and failed to plead but‑for causation.
Donnelly Act: The pleading omitted the nature and effect of any conspiracy and the manner in which competition in a defined market was restrained—fatal under New York antitrust pleading standards.
Leave to amend: Properly denied as the proposed amendments failed to cure the core defects and were “palpably insufficient.”
Attorneys’ fees: Modified to deny fees; no contractual or statutory basis, and plaintiffs’ conduct was not frivolous under 22 NYCRR 130‑1.1.

Impact and Implications

This decision recalibrates the risk dynamics in New York’s beer distribution sector and clarifies litigation strategy for both brewers and wholesalers:

Broadened statutory shield for wholesalers: Wholesalers now enjoy § 55‑c(4)’s good‑cause and cure protections even when the brewer never reduced the relationship to writing. Brewers cannot leverage the lack of a writing to terminate at will.
Heightened pleading discipline: Plaintiffs relying on non‑written arrangements must plead, in detail, the “essential and material terms” and “standards of performance” that governed their relationship—gleaned from course of dealing, consistent practices, communications, and the parties’ conduct—so courts can assess “good cause.” Conclusory assertions of under/overperformance will not suffice.
Contract v. statute: Courts may treat breach claims as duplicative when § 55‑c provides the operative framework and damages overlap. Plaintiffs should articulate any distinct contractual duty and damages to avoid dismissal as duplicative.
Pre‑litigation best practices: Brewers should adhere to § 55‑c’s notice and cure procedures and maintain performance records aligned with contractually defined standards. Wholesalers should contemporaneously document territory, exclusivity, expected sales/marketing efforts, and the parties’ performance metrics—even if no formal writing exists.
Antitrust and ancillary torts: Routine distribution disputes are unlikely to survive as Donnelly Act claims absent market‑level harm, defined markets, and pleaded anticompetitive effects. Tortious interference claims must detail specific, intentional, causally operative conduct.
Litigation economics: The fee ruling underscores the American Rule: absent contract, statute, or frivolity, victory on a motion does not carry fee shifting.

Complex Concepts Simplified

ABC Law § 55‑c: New York’s “beer franchise” statute regulating brewer–wholesaler relationships. It aims to protect wholesalers from arbitrary termination by requiring written agreements and restricting termination to “good cause,” with notice and an opportunity to cure.
“Agreement” under § 55‑c(2)(a): Broadly defined to include not only written contracts but also arrangements, courses of dealing, and commercial relationships.
“Good cause” under § 55‑c(2)(e): A narrow set of grounds (e.g., material breach by the wholesaler) that may justify termination; not mere dissatisfaction or generalized underperformance.
Remedial statute: A law designed to remedy a specific harm. Courts construe it liberally to effectuate its protective purpose.
Duplicative claims: A breach of contract claim that adds nothing to a statutory claim founded on the same facts and seeking the same damages can be dismissed as duplicative.
CPLR 3211(a)(7): A motion to dismiss for failure to state a cause of action, testing whether alleged facts (assumed true) fit within a cognizable legal theory.
Donnelly Act (GBL § 340): New York’s antitrust statute. Plaintiffs must plead a conspiracy that restrains trade in a defined market and show anticompetitive effects beyond injury to an individual competitor.
American Rule on attorneys’ fees: Each party bears its own fees unless a contract, statute, or sanction (e.g., for frivolous conduct) allows shifting.
Leave to amend: Freely granted absent prejudice, but courts deny when the proposed amendment remains legally insufficient or fails to cure defects.

Practical Guidance for Stakeholders

For Wholesalers

Plead with specificity: Identify territory, exclusivity, pricing/ordering protocols, marketing/sales obligations, performance metrics or benchmarks, service levels, notice-and-cure practices, and duration/renewal expectations—drawing from emails, directives, sales programs, and consistent course of dealing.
Document performance: Preserve evidence of compliance, investments, and sales/marketing efforts; respond to brewer performance concerns in writing.
Leverage § 55‑c strategically: Even without a writing, assert § 55‑c(4) protections; but be prepared to show what the “agreement” required and how the brewer’s stated grounds for termination fail to qualify as “good cause.”

For Brewers

Use written agreements: Memorialize essential and material terms, including objective performance standards and clear cure procedures, to reduce litigation uncertainty.
Build a “good cause” record: If termination is contemplated, ensure contemporaneous documentation of material breaches, provide statutory notice/opportunity to cure, and apply standards consistently across wholesalers.
Avoid reliance on lack of writing: The absence of a written contract will not defeat § 55‑c’s good‑cause constraints and may be viewed unfavorably given the statute’s purpose.

Conclusion

Oak Beverages v. Yuengling meaningfully expands the protective reach of ABC Law § 55‑c(4) by confirming that New York’s “good cause” termination safeguards extend to oral and implied distribution relationships. The court’s purposive, remedial reading forecloses a common evasion strategy—declining to sign a contract to preserve at‑will termination—aligning the text with the Legislature’s 1996 aim to protect wholesalers from arbitrary terminations and to stabilize distribution markets.

Yet the decision also delivers a cautionary procedural message: plaintiffs must plead the concrete terms and performance standards governing their relationship to enable judicial review of “good cause.” Without that detail, § 55‑c claims will fail at the threshold. On ancillary theories (contract, trade secrets, implied covenant, interference, antitrust), courts will continue to insist on precise, non‑conclusory allegations tailored to the distinct elements of each claim.

In sum, the case establishes a significant precedent on the scope of § 55‑c while underscoring rigorous pleading demands. It will influence how brewers and wholesalers structure and document their relationships and how counsel frames and litigates distribution disputes in New York going forward.