No Wine Before Its Time
My wife is a product of Oregon. So is her favorite beer, Bridgeport Coho Pacific Extra Pale Ale. Years ago, when she first made the move to join me in Maryland, I tried to surprise her with a case of Oregon’s finest. Unfortunately, the brewery did not ship product farther east than Colorado. It was not willing to make an exception in my case.
Maryland law required that I first obtain a distributor’s license to facilitate the transaction. I did not qualify for one. I tried to get a few of our retail stores interested in serving as my proxy, but no one would bite. And as much as I revere Baltimore’s Natty Boh roots and tradition, the two products were hardly interchangeable.
My memory of this failed gift came flooding back to me yesterday when I read Scott Calvert’s article in the Baltimore Sun reporting on the possible loosening of Maryland’s prohibition against direct shipment of alcoholic beverages. The Sun cited Maryland’s wine industry lobbyists as basing their opposition to direct-shipping on two arguments: (1) that direct shipment to consumers would make it easier for minors to obtain wine; and (2) aggressive out-of-state competition would imperil Maryland’s own wine retailing industry.
We’ll leave the first argument by the wayside, saying only that on its face it makes no sense, given that how alcohol gets into the dining room liquor cabinet is much less significant an issue than the parentally-imposed controls over how it gets out.
It’s the second argument that attracted my attention. According to the Sun, the Maryland wine industry lobby favors the existing statutory environment because it limits competition. Now, I completely understand why an industry lobbying group would want to insulate its members from competition. In fact, I’m certain that there are very few businesses in the country that wouldn’t benefit from a little statutorily-imposed exclusivity.
But that’s hardly the point.
The point is that a business in our economic system should be constructed to beat the competition, rather than rely on the law to do it for them. If a company is not able to articulate to its prospective customers at least one (and ideally three) clear benefits to doing business with it as opposed to its competition, then it deserves to lose those potential customers. Price, service, selection, trust, relationships, knowledgeable sales staff, value-added services, an expanded product line…something. These are the elements of successful competition – regardless of industry.
Friend of the firm, Mitch Pressman of Chesapeake Wine Company was exactly on point when he was quoted in the Sun article as saying that he welcomed the competition. He welcomed anything that would bring about an increased interest in his product. And it is precisely his confidence in his business, staff, selection, knowledge, etc., rather than a reliance on antiquated statutory protections, that positions him to overcome the competition.
And that’s the way it should be.
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However, in some circumstances, Maryland courts will interpret a shareholders’ agreement to be an employment contract. If a shareholder, who also happens to be an employee, enters into a shareholders’ agreement with the employing corporation, and the agreement includes the employee’s duties, compensation, and other employment related terms, the terms of the shareholders’ agreement will govern the employment of the employee-shareholder. A shareholder’s agreement that doesn’t speak to the issue will not change an employee’s at-will status, or provide post-termination benefits, but courts will enforce all written terms. Also, Maryland law requires all parties to a contract to deal with each other fairly and in good faith, even if no such requirements appear in the parties’ agreement. Since a shareholder’s agreement that addresses terms relating to employment will be construed as a an employment contract, this implied covenant of good faith and fair dealing will be implied in the parties’ employment relationship. 
