Southern Glazer’s Class Action Settlement a Reminder to Comply with Maximum Late Payment Penalties on Retailers

A recent $5.5 million settlement payment from one of the country’s largest alcoholic beverage wholesalers serves as a good reminder that California law restricts the amount of late fees and interest that can be charged in connection with the purchase and sale of alcoholic beverages to retailers.

Cal. Bus. & Prof. Code § 25509 provides that various alcoholic beverage manufacturers and wholesalers who sell and deliver alcoholic beverages to a retailer and who did not receive payment for such alcoholic beverages within 42 days of delivery shall charge the retailer 1% of the unpaid balance on the 43rd day and an additional 1% for each 30 days thereafter.

In 2014, a Los Angeles-based retailer, Wiseman Park, LLC (“Wiseman”), brought an action against Southern Glazer’s Wine and Spirits, LLC (“Southern”) in connection with Southern’s attempt to collect not only the Section 25509 statutory late payment penalty, but also a 1% per month “carrying charge” included in the parties’ written agreement. Wiseman alleged that Southern’s imposition of the separate carrying charge violated Cal. Bus. & Prof. Code § 17200.

In 2021, the action was changed to a class action lawsuit so that other retailers subject to Southern’s carrying charge could join the lawsuit.  In early 2024, the court preliminarily approved the parties’ proposed settlement agreement whereby Southern would make a $5.5 million payment to resolve the class action lawsuit, write off $44.1 million carrying charges yet to be paid by the retailers, and agree not to impose the carrying charge going forward. The deadline for retailers to opt out of, or object to, the class action was March 1, 2024. The final approval hearing for the settlement is scheduled for April 16, 2024.

Industry members should take this opportunity to review their agreements with retailers, and ensure any interest or penalties imposed on retailers do not exceed the statutory limits imposed by the ABC Act.

For assistance with this or any other Alcohol Beverage Law & Compliance or Wine Law matters, email Bahaneh Hobel, John Trinidad, or Alexander Mau.