Breaking up can be hard to do — especially when it comes to ending a beer distribution agreement in Colorado.

A special set of laws governs the distribution and sale of beer and malted beverages in Colorado, with a basis that goes to pre-Prohibition times when breweries like Coors and Tivoli directly controlled the saloons that served miners and cowboys.

Colorado’s beer laws could face an unprecedented test as Denver-based Coors Distributing Co. (CDC), a subsidiary of Molson Coors, faces off in court against two of its largest suppliers.

Constellation Brands, which owns the popular Corona and Modelo beer lines, and Mark Anthony Brands, purveyor of Mike’s Hard Lemonade and White Claw, informed Coors Distributing last month that they want out of their decades-old contracts.

“Neither provided any reason whatsoever for their termination, and doing so without cause is a direct violation of the Colorado beer franchise law. So, we’ll fight their attempts to terminate our contracts using the wide range of legal levers available to us,” CDC said in a statement.

Although representing only 21 of the 171 brands that Denver-based CDC distributes along Colorado’s central Front Range, the lines are very popular, accounting for about 40% of the company’s volume, according to Brewbound, a beer industry news site.

Attorneys with Bartlit Beck, the Denver law firm representing CDC, filed separate but similar motions for preliminary injunction in Denver District Court on Friday to prevent the two suppliers from terminating their distribution agreements.

The injunctions request the existing agreements remain in place and that any disputes be resolved via mandatory arbitration. Those talks could eventually include compensation for the investments that CDC has made in establishing and distributing the various Constellation and Mark Anthony brands in Colorado.

“CDC faces a danger of real, immediate, and irreparable injury that cannot be adequately compensated by money,” the injunction filed against Constellation argues. “Customer relationships and goodwill built over 30 years cannot be adequately compensated by money damages.”

CDC notes the two companies have awarded it with their top honors for distribution services, which would argue against a breach of contract or poor service.

Emails sent to the two suppliers for comment were not returned before the publication deadline.

Mark Anthony Brands informed CDC in a letter that it won’t renew its contract because it wants to switch over to Chicago-based Reyes Beverage Group (RBG), the nation’s largest beer distributor.

Although Constellation hasn’t said why it is leaving, beer industry sources suspect that it also plans to switch over to RBG.

Reyes entered the Colorado market in May of this year through the acquisition of Republic National Distributing Co. and operates as RBG Spirits & Wine of Colorado.

RBG’s distribution network stretches across multiple states. It has attracted suppliers by offering them a one-stop option versus having to contract with multiple local distribution companies, market by market.

But beer franchising laws, which rule in 40 states, are designed to protect local distributors from being steamrolled by larger players.

RBG has typically avoided tripping beer franchise restrictions by buying out smaller competitors in multiple markets and inheriting supply agreements.

Colorado represents a different scenario. While CDC may be a local player with a limited geography, it has 450 employees and is part of the Molson Coors family of companies.

As the country’s second-largest beer producer, Molson Coors has the financial and legal resources to stand its ground and protect one of its subsidiaries.

Commercial law generally prevents parties from being forever bound in a business relationship they don’t wish to continue. Contract terms govern the breakup.

But beer franchise laws make breaking a distribution contract difficult to do. While such protections can seem excessive or one-sided, they have a historical context.

Western movies and television often show only one saloon in a town or mining camp. Hollywood depictions tend to severely underplay the intensity of alcoholic consumption in that era.

Booze was almost always the first product sold when mining camps emerged. Creede, Leadville and Telluride had dozens of saloons packed in a few town blocks.

By 1900, there were roughly 300,000 retail saloons in the U.S., which worked out to one for every 300 residents. Denver had an even higher concentration, with one saloon for every 270 residents, according to one study from that era.

Breweries large and small owned, funded or controlled many of those drinking establishments, blocking the competition. And those “tied-house” saloons had a strong economic incentive to overserve patrons.

Binge drinking was common and good for business, even if it was detrimental to society. The competition was fierce, and eventually so was the backlash.

Colorado voters approved statewide prohibition four years before the 18th Amendment took effect nationally in 1920 and outlawed the consumption of alcohol.

When Prohibition ended in 1933 via the 21st Amendment, most states adopted a three-tiered system, with suppliers, distributors and retailers operating independently.

Colorado took a more lenient course, allowing brewing companies to wholesale their own products directly to licensed retailers.

In 1971, Coors Distributing Co. got its start with 14 delivery trucks moving Coors Banquet cans and bottles, which needed to remain refrigerated, across the Denver region.

Over time, CDC began distributing products for independent third parties within its service area, which extends from the foothill counties east of Boulder and metro Denver out to Limon.

Coors was slow to expand into other states, and when it did so, it relied on independent distributors in those markets. Its rivals followed a more aggressive strategy.

They expanded rapidly across state lines and built up a dominant market share, which they in turn used to strong-arm independent distributors and retailers.

After spending decades of effort and millions of dollars to build up a customer base for a beer line, distributors could see their contracts terminated with 30 days’ notice without a reason provided.

To protect the three-tiered system from an emerging threat, states in the 1970s began passing “beer franchise laws,” with Colorado one of the last to do so in 2007.

Most follow a similar model. Suppliers can’t end a distribution agreement without providing a “good cause,” such as a bankruptcy, the end of a product line, a severe breach of contract, or the failure to maintain health standards.

A supplier who wants out, or the new distribution company it chooses, must provide the prior distributor a fair market value for distribution rights and the investments made.

If the parties can’t agree on terms, a valuation is usually hammered out via binding arbitration, and the existing distribution agreement remains in place until the payout is received.

Franchise rules provide wholesalers with defined geographic territories. Suppliers aren’t allowed to contract with a second distribution company in a given area.

CDC attorneys cite the protections under Colorado’s beer franchise law in their injunctions.

One of the ironies of beer franchise laws is that they were created to protect small, independent distributors from being strong-armed by big breweries and their distribution arms.

CDC is now using them to defend its rights and fend off poaching efforts by a larger multi-state distribution competitor.

Alcohol is one of the few products specifically addressed in the U.S. Constitution, and states have taken a heavier hand in regulating it.

But free market advocates argue the system is a product of decades-old political influence that carved out special protections for makers of beer and malt beverages.

Distributors of wine, liquor, and soft drinks don’t have similar protections in Colorado, despite also making substantial investments in their distribution networks.

Colorado allowed large manufacturers, Coors initially and later Anheuser-Busch, to establish company-owned distribution arms, granting them control over two of the three legs of the supply chain.

And in 1996, the Colorado legislature carved out an exemption for microbreweries, essentially granting them permission to create a “tied-house” system that the three-tiered system sought to prevent.

It remains to be seen if Constellation and Mark Anthony, the nation’s third and fourth largest suppliers, will resolve any disputes via arbitration or if they will challenge Colorado’s beer franchise laws directly.

Pop open a cold one — this fight could get interesting.

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