IAL 112807.

• Case Date: November 28, 2007
• Court: New Mexico

New Mexico Attorney General Opinions 2007. IAL 112807. November 28, 2007IAL 112807The Honorable Shannon RobinsonHanosh New Mexico State Senator Representative 716 Indiana SEAlbuquerque, NM 87108 The Honorable George New Mexico State P.O. Box 1299Grants, NM 87020 RE: Request for Opinion - Supplier Termination of a Franchise AgreementDear Senator Robinson and Representative Hanosh: You requested our advice on whether a supplier of alcoholic beverages may terminate its franchise agreement with a wholesaler when the wholesaler is merged with another wholesaler. The New Mexico Alcohol Beverages Franchise Act ("Act"), NMSA 1978, Sections 60-8A-7to -11 (1981, as amended through 1993), governs this inquiry. Based on our examination of the relevant New Mexico constitutional, statutory and case law authorities, and on the information available to us at this time, we conclude that if a supplier terminates a franchise agreement because of a prospective merger, it will violate the Act. The New Mexico Alcohol Beverages Franchise Act generally prohibits a supplier from terminating, canceling, or not renewing a franchise with a wholesaler. See NMSA 1978, § 60-8A-8(B) (1993). A supplier is a "business enterprise engaged in business as a manufacturer, importer, broker, [or] agent. . . that distributes any or all of its brands of alcoholic beverages through licensed wholesalers in this state." NMSA 1978, § 60-8A-7(C) (2003). Excepted from the prohibition is a termination, cancellation or failure to renew that is "done in good faith and for good cause." NMSA 1978, § 60-8A-8(B) (1993). See also NMSA 1978, § 60-8A-10 (in an action brought by a wholesaler, it is a "complete defense for the supplier to prove that the termination, cancellation or failure to renew was done in good faith and for good cause." For purposes of the Act, "good cause" includes:

failure by the wholesaler to substantially comply with the essential and reasonable provisions of a contract, agreement or understanding with a supplier, . . . use of bad faith on the part of the wholesaler in carrying out the terms of the franchise; and does not include failure or refusal on the part of the wholesaler to engage in any trade practice, conduct or activity that may result in a violation of any federal law or regulation or any law or regulation of this state.

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