By: Scottie Fralin

Back in March of 2016, Pabst Brewing Company filed a lawsuit against MillerCoors for breach of contract.[1] Pabst is seeking at least $400 million in damages.[2] The case finally went to trial on November 12, 2018 after years of unsuccessful negotiations between the two companies.[3] The case centers on a 1999 “brewing agreement” between Pabst and MillerCoors that almost 30 years later has gone sour.[4] Per the agreement, MillerCoors has produced, packaged, and shipped nearly all of Pabst’s products since the two companies teamed up.[5] However, MillerCoors, facing declining volume in the U.S., has said it may not have the capacity to continue that relationship.[6] When MillerCoors announced in 2015 that it was closing one of its seven U.S. plants in Eden, North Carolina, where most of Pabst products were brewed, Pabst alleged that that decision was anti-competitive.[7] In its announcement, MillerCoors said that production had declined by 10 million barrels of beer over the past seven years and that distribution at the Eden plant overlapped with the company’s Shenandoah brewery in Virginia.[8] The brewing agreement is set to expire in 2020, and MillerCoors, citing sales decline and loss of production facilities, does not plan to renew the agreement.[9] This decision is devastating for Pabst, because no other brewery in the U.S. has the capacity to brew for them under a contract.[10] Pabst’s other option is to build their own commercially-sized brewery, which is neither easy nor cheap, likely a project that would cost hundreds of millions of dollars.[11] Pabst’s circumstances help to explain why the company opted for litigation, but the two companies’ allegations against each other hint at more than just lack of resources.

Pabst’s relationship with MillerCoors is what allows Pabst to compete, and the company essentially won’t be able to survive in the domestic beer market without a contract with a larger beer company. MillerCoors has pointed to the rise in competition from everything from wine, spirits, to cannabis for its brewing capacity issues with Pabst.[12] It also claims that it has sole discretion to determine whether it has the capacity to brew Pabst beer, and further, that offering Pabst a solution to those capacity challenges is merely optional.[13] Put simply, MillerCoors is not required to extend the brewing agreement. But Pabst alleges, and a Milwaukee circuit court judge agreed in denying MillerCoors motion for summary judgment, that MillerCoors may be looking solely to its own best business interest, in violation of the brewing agreement.[14] Pabst accuses MillerCoors of considering the potential boost to its own business that would come by ending its contract with Pabst, which would result in less domestic beer competition.[15] Responding to MillerCoors motion for summary judgment, the Milwaukee judge pointed to evidence that MillerCoors may have used information relating to the business effects on Pabst of terminating the brewing agreement, which would be improper as that information does not relate to a sufficient capacity determination.[16] With the trial scheduled through November 30, Pabst fans should have some indication about the iconic American beer’s future by the end of this month.

 

[1]See Owen Covington, MillerCoors Responds to Pabst Lawsuit Over Brewery Closure, Seeks Mediation, Triad Business Journal (May 19, 2016, 3:06 PM) https://www.bizjournals.com/triad/news/2016/05/19/millercoors-responds-to-pabst-lawsuit-over-brewery.html.

[2]See id.

[3]See id.

[4]See id.

[5]See Associated Press, A Major Beer Battle Is Brewing and It Could Mean the End of PBR, Time (Nov. 12, 2018),http://time.com/5451798/pabst-pbr-millercoors-beer-lawsuit/.

[6]See Lauren Hirsch, MillerCoors and Pabst Brewing’s Bitter Legal Battle Is Headed to Trial in November, CNBC(June 17, 2018, 10:00 AM), https://www.cnbc.com/2018/06/17/millercoors-and-pabst-blue-ribbons-bitter-legal-battle-is-headed-to-trial-in-november.html.

[7]See Jonnelle Davis, Pabst Sues MillerCoors About Eden Closure, News & Record (May 17, 2016), https://www.greensboro.com/business/local_business/pabst-s-sues-millercoors-about-eden-closure/article_1ca2663f-0913-557b-bc86-bbb66ae0144e.html.

[8]See id.

[9]See Associated Press, supra note 2.

[10]See Christine Flores, Trial Underway Between Beermakers Pabst and MillerCoors, WDJT – Milwaukee(Nov. 13, 2018, 5:20 PM),https://www.cbs58.com/news/trial-underway-between-beer-makers-pabst-and-millercoors.

[11]See Mike Pomranz, Hold Onto Your PBR: A Pabst Blue Ribbon Shortage Is Looming, Food & Wine (June 18, 2018),https://www.foodandwine.com/news/pabst-blue-ribbon-shortage.

[12]See Hirsch, supra note 6.

[13]See id.

[14]See id.

[15]See id.

[16]See id.

Image Source: https://www.cnbc.com/2018/06/17/millercoors-and-pabst-blue-ribbons-bitter-legal-battle-is-headed-to-trial-in-november.html