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Bigfoot Beverages says the craft beer maker owes it $5.5 million for seeking a new distributor
By Christian Wihtol
A legal battle is brewing between one of Lane County’s burgeoning craft beer makers and a major regional beer distributor.
Fast-growing Hop Valley Brewing Co. is being sued in Lane County Circuit Court by Eugene-based Bigfoot Beverages, with Bigfoot claiming it is owed $5.5 million by Hop Valley because the beer maker is *trying to switch from Bigfoot to a different distributor, Portland-based *Columbia Distributing.
Bigfoot claims it is suffering that amount in economic damages as a result of Hop Valley’s attempted exit.
The lawsuit revolves around an arcane Oregon law that sets out how and when a beer maker can drop a beer distributor that it previously had signed up with and what penalties it must pay. The law spells out one penalty, but Hop Valley’s contract with Bigfoot spells out a different and apparently lesser penalty.
Hop Valley claims that under its contract with Bigfoot, it can cease using Bigfoot by paying a set dollar amount based on how much profit Bigfoot made in the previous 12 months selling Hop *Valley beverages.
Bigfoot argues it is due more.
It says Hop Valley doesn’t have “good cause” to want out of the distribution contract. So under Oregon’s beer *distribution agreement termination law, *Bigfoot is entitled to “the fair market value of any and all assets, including *ancillary businesses of the wholesaler (Bigfoot) used in distributing the supplier’s (Hop Valley’s) products.”
Also, Bigfoot says that under that law it is entitled to compensation for “the goodwill of the business.”
In business parlance, goodwill is the value of an enterprise above any tangible assets.
Bigfoot used its assets to distribute Hop Valley beer in Lane, Lincoln, Coos, Curry, Jefferson, Deschutes, Crook and Harney counties, as well as parts of Douglas County, according to documents filed with the lawsuit.
In its lawsuit, Bigfoot says that under Oregon’s beer distribution law, any contracts contrary to the law are “void,” and companies cannot enter into contracts that “circumvent” the law.
The law doesn’t apply to the distribution of soda or other nonalcoholic beverages.
Bigfoot filed its lawsuit on June 27. Hop Valley has not yet filed an answer.
Michael Merchant, an attorney representing Bigfoot, said “the parties are in communication and are trying to resolve their differences,” but otherwise declined comment.
An attorney for Hop Valley did not return a telephone call from The Register-Guard. Jonas Kungys, a spokesman for and owner of Hop Valley, did not return a telephone call.
Hop Valley has boomed in the past few years. In 2009, it opened a brewing facility in Springfield’s Gateway area. Last year, it opened a 30,000-square-foot brewpub in Eugene’s Whiteaker neighborhood that produces up to 12,000 barrels — about 360,000 gallons — a year.
The company has about 100 employees.
Bigfoot is a longtime beverage distributor, handling a range of soft drinks, bottled water, juice, tea and coffee, as well as 15 brands of beer.
Documents filed in the lawsuit give a glimpse into the intricacies of beer distribution.
Hop Valley signed up with Bigfoot on Oct. 30, 2012. Under the contract, Bigfoot paid Hop Valley a $640,000 nonrefundable fee for signing up.
The contract spells out how Bigfoot and Hop Valley will pay jointly for marketing the beer and the manner in which Bigfoot will buy beer from Hop Valley, keep track of it, and sell it to retailers.
The contract also spells out how the two sides can part ways.
It says Hop Valley can drop Bigfoot any time after the one-year anniversary, with 90 days’ notice, by making a “termination payment.” That payment must equal 3.5 times Bigfoot’s “gross margin on sales” — the difference between what Bigfoot paid for the beer, and what it sold the beer for — for the previous 12 months.
Hop Valley on May 30 wrote to Bigfoot offering to make that termination payment and asked Bigfoot for sales data so Hop Valley could calculate the payment. The letter was included with the lawsuit.
Another Oregon beer distributor, Medford-based Summit Beverage, has joined with Bigfoot in the lawsuit against Hop Valley.
Hop Valley signed with Summit on May 6, 2013. Summit distributes in Jackson, Josephine, Klamath and Lake counties.
The lawsuit says Hop Valley notified Summit of contract termination on May 30.
Under its contract with Summit, Hop Valley can nix the contract under terms the same as those in the Bigfoot contract: a termination payment of 3.5 times Summit’s gross margin on sales for the previous 12 months.
In contrast to the Bigfoot contract, however, the Summit contract adds that the formula “is both reasonable and fair,” and that it would be “difficult to determine” what compensation might be owed to Summit under Oregon’s beer distribution agreement termination law.
Summit is seeking $750,000 from Hop Valley.
The Oregon Legislature created the beer distribution agreement termination law specifically to “prevent suppliers like Hop Valley from shopping distribution rights and profiting from the difference at the wholesaler’s expense,” Bigfoot asserts in its lawsuit.
Follow Christian on Twitter @ChristianWihtol . Email christian.wihtol@registerguard.com .
By Christian Wihtol
A legal battle is brewing between one of Lane County’s burgeoning craft beer makers and a major regional beer distributor.
Fast-growing Hop Valley Brewing Co. is being sued in Lane County Circuit Court by Eugene-based Bigfoot Beverages, with Bigfoot claiming it is owed $5.5 million by Hop Valley because the beer maker is *trying to switch from Bigfoot to a different distributor, Portland-based *Columbia Distributing.
Bigfoot claims it is suffering that amount in economic damages as a result of Hop Valley’s attempted exit.
The lawsuit revolves around an arcane Oregon law that sets out how and when a beer maker can drop a beer distributor that it previously had signed up with and what penalties it must pay. The law spells out one penalty, but Hop Valley’s contract with Bigfoot spells out a different and apparently lesser penalty.
Hop Valley claims that under its contract with Bigfoot, it can cease using Bigfoot by paying a set dollar amount based on how much profit Bigfoot made in the previous 12 months selling Hop *Valley beverages.
Bigfoot argues it is due more.
It says Hop Valley doesn’t have “good cause” to want out of the distribution contract. So under Oregon’s beer *distribution agreement termination law, *Bigfoot is entitled to “the fair market value of any and all assets, including *ancillary businesses of the wholesaler (Bigfoot) used in distributing the supplier’s (Hop Valley’s) products.”
Also, Bigfoot says that under that law it is entitled to compensation for “the goodwill of the business.”
In business parlance, goodwill is the value of an enterprise above any tangible assets.
Bigfoot used its assets to distribute Hop Valley beer in Lane, Lincoln, Coos, Curry, Jefferson, Deschutes, Crook and Harney counties, as well as parts of Douglas County, according to documents filed with the lawsuit.
In its lawsuit, Bigfoot says that under Oregon’s beer distribution law, any contracts contrary to the law are “void,” and companies cannot enter into contracts that “circumvent” the law.
The law doesn’t apply to the distribution of soda or other nonalcoholic beverages.
Bigfoot filed its lawsuit on June 27. Hop Valley has not yet filed an answer.
Michael Merchant, an attorney representing Bigfoot, said “the parties are in communication and are trying to resolve their differences,” but otherwise declined comment.
An attorney for Hop Valley did not return a telephone call from The Register-Guard. Jonas Kungys, a spokesman for and owner of Hop Valley, did not return a telephone call.
Hop Valley has boomed in the past few years. In 2009, it opened a brewing facility in Springfield’s Gateway area. Last year, it opened a 30,000-square-foot brewpub in Eugene’s Whiteaker neighborhood that produces up to 12,000 barrels — about 360,000 gallons — a year.
The company has about 100 employees.
Bigfoot is a longtime beverage distributor, handling a range of soft drinks, bottled water, juice, tea and coffee, as well as 15 brands of beer.
Documents filed in the lawsuit give a glimpse into the intricacies of beer distribution.
Hop Valley signed up with Bigfoot on Oct. 30, 2012. Under the contract, Bigfoot paid Hop Valley a $640,000 nonrefundable fee for signing up.
The contract spells out how Bigfoot and Hop Valley will pay jointly for marketing the beer and the manner in which Bigfoot will buy beer from Hop Valley, keep track of it, and sell it to retailers.
The contract also spells out how the two sides can part ways.
It says Hop Valley can drop Bigfoot any time after the one-year anniversary, with 90 days’ notice, by making a “termination payment.” That payment must equal 3.5 times Bigfoot’s “gross margin on sales” — the difference between what Bigfoot paid for the beer, and what it sold the beer for — for the previous 12 months.
Hop Valley on May 30 wrote to Bigfoot offering to make that termination payment and asked Bigfoot for sales data so Hop Valley could calculate the payment. The letter was included with the lawsuit.
Another Oregon beer distributor, Medford-based Summit Beverage, has joined with Bigfoot in the lawsuit against Hop Valley.
Hop Valley signed with Summit on May 6, 2013. Summit distributes in Jackson, Josephine, Klamath and Lake counties.
The lawsuit says Hop Valley notified Summit of contract termination on May 30.
Under its contract with Summit, Hop Valley can nix the contract under terms the same as those in the Bigfoot contract: a termination payment of 3.5 times Summit’s gross margin on sales for the previous 12 months.
In contrast to the Bigfoot contract, however, the Summit contract adds that the formula “is both reasonable and fair,” and that it would be “difficult to determine” what compensation might be owed to Summit under Oregon’s beer distribution agreement termination law.
Summit is seeking $750,000 from Hop Valley.
The Oregon Legislature created the beer distribution agreement termination law specifically to “prevent suppliers like Hop Valley from shopping distribution rights and profiting from the difference at the wholesaler’s expense,” Bigfoot asserts in its lawsuit.
Follow Christian on Twitter @ChristianWihtol . Email christian.wihtol@registerguard.com .