Ettelman & Hochheiser, P.C.

100 Quentin Roosevelt Blvd • Garden City, NY 11530 • Tel (516) 227-6300 • Fax (516) 227-6307,,,

ARTICLES AND NEWSLETTERS

FOR IMMEDIATE RELEASE – May 29, 2003

Ettelman & Hochheiser P.C. Wins Major Court Decision on behalf of
Wholesaler Stawski Distributing Co., Inc. –
Federal Court Applies 21st Amendment to Prevent Circumvention of
State Beer Wholesaler Statute

Garden City, NY. Ettelman & Hochheiser, P.C. a corporate and commercial law firm, fast gaining a national reputation for its effective representation of beer, wine and spirits distributors, announced another major victory for its wholesaler clients; a victory with significant national and international implications.

The case, Stawski Distributing Co., Inc. vs. Zywiec Breweries PLC, 2003 WL 21209860 (N.D. Ill.) involves an attempt by a Polish brewer (Zywiec) to terminate its Chicago, Illinois based distributor (Stawski), without cause, in violation of the Illinois Beer Industry Fair Dealing Act, 815 ILCS 720 ("IBIFDA"). Zywiec attempted to avoid the protections afforded Stawski under the IBIFDA by commencing arbitration against Stawski in Poland under Polish law pursuant to a provision of the parties' distribution agreement. Zywiec then tried to stay the action commenced by Ettelman & Hochheiser on behalf of Stawski in the United States District Court, Northern District of Illinois, relying upon precedent issued by the very same court on virtually identical facts (Geneva International v. Pilsner Urquell, 2000 WL1898573 (N.D. Ill.). In the Geneva case, the District Court held that the IBIFDA is pre-empted by the Federal Arbitration Act ("FAA") and ordered the local wholesaler to arbitrate with the brewer in Czechoslovakia. Accordingly, Zywiec was confident that the court would compel Stawski to arbitrate its dispute under Polish law before a tribunal in Poland; effectively circumventing the protections afforded Stawski under the IBIFDA.

Undaunted, Ettelman & Hochheiser conceived an argument which Judge Joan H. Lefkow, the judge presiding over the Stawski case, recognized as being one of first impression: the IBIFDA was an exercise of the core power granted to the Illinois legislature under the Twenty-first Amendment to the Constitution to regulate the importation and sale of liquor and the structure of the liquor distribution system within its borders and, therefore, the federal statute (the FAA) had to yield to the IBIFDA. In granting Stawski's motion to stay the arbitration commenced by Zywiec in Poland, the Illinois Federal Court adopted Ettelman & Hochheiser's argument that the Twenty-first Amendment "saves" the state statute from pre-emption by the FAA.

The decision has profound implications since it closes what was an enormous loophole in the enforcement of the IBIFDA (and similar statutes) created by decisions holding that the FAA pre-empts state regulations. Presently, approximately 39 states have passed legislation similar to the IBIFDA which govern the relationship between brewers and wholesalers and which, among other things, protect beer wholesalers against termination without cause. Had FAA pre-emption prevailed, as in Geneva, any brewer (foreign or domestic) would be able to avoid the application of any similar state statute, as Zywiec attempted, by simply including a clause in their distribution agreement requiring the arbitration of all disputes under the law of a jurisdiction which does not have a protective statute. Judge Lefkow accepted Ettelman & Hochheiser's contention that this would eviscerate the protection of these state statutes and render the 21st Amendment inconsequential. Instead, the Stawski decision stands as a firm foundation to support the enforcement of these many state statutes in accordance with the intentions of the legislatures that have enacted them, and reaffirms that under the authority of the 21st Amendment, the states have "virtually complete control over the importation and sale of liquor and the structure of the liquor distribution system".

For additional information on this case or to speak with the partners of Ettelman & Hochheiser, contact:
Ettelman & Hochheiser, P.C., 100 Quentin Roosevelt Boulevard, Suite 401, Garden City, NY 11530
Telephone: 516-227-6300, Fax: 516-227-6307 or Email: gettelman@e-hlaw.com or khochheiser@e-hlaw.com