CLG’s Recent $2.1 Judgment Speaks Loudly to Enforcement of BIFDA, Credibility and Bad Faith

On May 11, 2020, the Christopoulos Law Group (CLG) obtained a judgment in excess of $2.1 million for its client, beer distributor River North Sales & Service, LLC, after a six-year journey involving Shelton Brothers, Inc. and its efforts to attack BIFDA (Illinois’ Beer Industry Fair Dealing Act) and wholesalers’ rights, resulting in an adverse judgment against Shelton Brothers, with court findings of lack of credibility and bad faith. This is a resounding triumph for BIFDA and the wholesale tier.

The court found that Shelton Brothers failed to comply with BIFDA by unreasonably withholding consent to River North’s sale of the Shelton Brothers’ brands to Lakeshore Beverage, a Hand Family Company, and that it did so in bad faith under BIFDA. River North also had a claim against Shelton Brothers for indemnification relating to Shelton Brothers’ termination of Windy City and appointment of River North in May of 2012. Shelton Brothers refused to pay its indemnification obligations notwithstanding a contractual obligation to do so.

After five weeks of trial and a lawsuit that Shelton Brothers originally filed against River North more than six years ago, an Illinois circuit court ruled that Shelton Brothers violated its agreement with River North. In its ruling, the court stated that it agrees with River North’s assessment: “[t]his litigation was unnecessary and was defended in bad faith.” That court further found that it was unreasonable for Shelton Brothers to withhold consent of the assignment of its brands to Lakeshore without naming an alternate distributor and without paying River North for its brand rights, among many other adverse findings.

This judgment was an emphatic statement about BIFDA, especially as it is rare that BIFDA receives this kind of scrutiny from the court. Indeed, Shelton Brothers had several arguments, many of which the court labeled as “specious,” including a lawsuit against River North for fraud, bad faith and allegations that BIFDA was unconstitutional, all of which the court dismissed. In all, not only did River North obtain a judgment for the brand rights ($702,861) but also for indemnification ($112,558), bad faith ($100,000) and for attorney’s fees and costs ($1,214,066).

CLG’s principal Dimitrios Christopoulos said: “It was a rare opportunity to defend attacks on BIFDA which included constitutional challenges, the criteria for successor wholesalers and the proper interpretation of bad faith under BIFDA.” The irony is that this opportunity arose because CLG’s client was originally being sued. Christopoulos added: “We succeeded in dismissing Shelton Brother’s multiple claims against our client. On top of that, we subsequently won a countersuit for our client. After several years of battle, this victory was important on many levels.”

The court’s rulings were notable not only because it is very rare that the statutes involved get put under a microscope as they did throughout this trial, but also because of the amount of compensatory and penalty damages, which the court awarded in addition to attorney fees and costs. The judgment makes a compelling statement about the strength of state franchise laws and their ability to protect the wholesaler tier. The court in fact affirmed its decision on June 23, 2020, by denying Shelton Brothers’ effort to modify the judgment and reaffirming that Shelton Brothers acted in bad faith, and that the reasons for withholding consent were pretextual and not credible. The court went on to further undermine Shelton Brothers’ case by ruling that Shelton Brothers not only failed to present any competent or credible evidence that Lakeshore was not capable of disturbing Shelton Brothers’ beer, but that Lakeshore is equipped to distribute any type of beer, include Shelton Brothers’ beer. The court also called BIFDA a “beautiful statute.”

Christopoulos agrees with Court and said: “This was a hard-fought victory. As the court stated, there was no reason for River North to have to go through this litigation, but it was left no choice.”

Kevin Gerow and Dimitrios Christopoulos from the Christopoulos Law Group, LLC, represented River North. Christopoulos Law Group is a Chicago-based law firm, which focuses exclusively on representing members of the Beverage Alcohol and Hospitality Industry. For more information, visit Christopouloslaw.com, or call Dimitrios Christopoulos or Kevin Gerow at 312-587-7594.