On July 1, 2019, we blogged about the Supreme Court’s ruling striking down various Tennessee regulations whose purpose and effect was to limit the ability of non-Tennessee actors to compete in the retail market for alcoholic beverages. Tennessee Wine & Spirits Retailers Ass’n v. Thomas, 139 S.Ct. 2449 (2019). Last month, the Fifth Circuit addressed a somewhat different restriction imposed by the State of Texas. Wal-Mart Stores, Inc. v. Texas Alcoholic Beverage Com’n, 935 F.3d 362 (5th Cir. 2019).

Continue Reading Texas Ban on Retail Liquor License for Public Corporations

Bacardi U.S., Inc. is facing a class action lawsuit in Florida due the use of grains of paradise in Bombay Sapphire® Gin.  In Uri Marrache v. Bacardi USA, Inc., et al., Case No. 2019-023668-CA-01 (Miami-Dade Cir. Ct. Aug. 9, 2019), the plaintiff alleges that the use of grains of paradise violates a Florida state law preventing the adulteration of liquor with certain ingredients resulting in a violation of Florida’s Deceptive and Unfair Trade Practices Act (FDUTP).

Continue Reading Class Action Tests Allowed Ingredients in Gin under Florida Law

On May 9, 2019, we blogged about the challenge to the Minnesota farm winery statute. The statute allows Minnesota farms to bypass the traditional three-tier method of distributing alcoholic beverages and sell directly to retailers and consumers. To qualify as a farm winery, however, more than 50% of the grapes it uses must be grown in Minnesota. Two farm wineries argued that the statute violated the dormant commerce clause by discriminating against out-of-state grape growers.

Continue Reading Minnesota Wine Update

Avoiding Trademark Disputes in the Alcoholic Beverage Industry

In the first installment of our series on trademark disputes in the alcoholic beverage industry, we identified the risks facing industry participants on the branding front, regardless if they are “entrepreneurs” entering the market for the first time or established companies launching a new brand.  As we advised, the risks are significant and have the potential to completely derail your new brand.


Continue Reading Steer Clear with Your Beer Branding

On October 15, 2018, we blogged about Tennessee’s regulations on licensing for retail sales of alcoholic beverages. Tennessee requires residency within the state for two years in order to obtain an initial license. It requires residency for 10 consecutive years to obtain a renewal of the initial license.  But the initial license only runs for a year. The statute also requires that all officers, directors and shareholders of corporations to satisfy these residency requirements. The effect of this statute is to prohibit publicly traded corporations from obtaining a liquor license. It also gives a clear edge to Tennessee residents at the expense of out-of-staters.

Continue Reading Tennessee Alcohol Update

Avoiding Trademark Disputes in the Beverage Alcohol Industry

It is undeniable that craft beverage marketplace – both with beer and spirits – has seen tremendous growth over the past several years. The result is a crowded, somewhat confused and competitive environment where standing out from the crowd is increasingly challenging. While producing a quality product is, of course, paramount, developing a distinctive and eye-catching brand for your latest beer, wine, or craft spirit has become a critical component to success in the industry. In the beverage alcohol business, brand is (nearly) everything. Ideally, that brand will provide a springboard toward future expansion of your product line as the brand becomes known in the market and specifically requested by consumers.
Continue Reading Steer Clear with Your Beer Branding

On June 7, 2019, the Office of Environmental Health Hazard Assessment (OEHHA) announced that it has adopted a final regulation eliminating the requirement for coffee to carry a Proposition 65 warning label. The regulation overturns a California State Court decision that found that coffee retailers failed to prove that the chemicals present in coffee, such as acrylamide, pose no significant risk of harm, requiring coffee to bear a warning.  
Continue Reading California’s OEHHA Finalizes Regulation Rescinding Warning Requirement for Coffee

Like most states, Minnesota has a three-tier system for distributing alcoholic beverages – the manufacturer sells to a wholesaler who sells to a retailer. Minnesota allows local wineries to apply for a farm winery license, which permits the holder to sell direct to both retailers and consumers.  The catch is that the winery must use more than 50% of its grape juice from grapes produced in Minnesota.  A winery may obtain a one-year dispensation from this requirement if it certifies that sufficient supplies of Minnesota grapes are impossible to obtain.

Two farm wineries sued the Minnesota Commissioner of Public Safety, who enforces the statute, alleging that it violates the dormant commerce clause by discriminating against out-of-state grape juice. The District Court granted the Commissioner’s motion for summary judgment.  The Court acknowledged that the statute caused plaintiffs injury in fact, because it interfered with their ability to expand their businesses.  But it reasoned that, if plaintiffs wanted to use more out-of-state grapes, they could apply for a wine manufacturing license, which imposes no such limitation.  Thus, the injury they sustained was the product of their own voluntary business decision.  The catch, however, is that a wine manufacturer must use the three-tier distribution system.  It cannot sell directly to either retailers or consumers.
Continue Reading Minnesota Wine Regulation

The Alcohol and Tobacco Tax and Trade Bureau (TTB) recently issued an industry circular which makes clear that cannabidiol (CBD), a product derived from hemp, is not permitted in alcohol beverages.

TTB generally consults with the U.S. Food and Drug Administration (FDA) when establishing whether an ingredient for use in an alcoholic beverage is safe. Last December, the Agriculture Improvement Act of 2018, which is commonly referred to as the 2018 Farm Bill, was enacted. The 2018 Farm Bill amended the definition of marijuana under the Controlled Substances Act to exempt “hemp”, which is defined as:

the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9-tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis. Source: 7 U.S.C. 1639 o(1).


Continue Reading TTB Follows FDA’s Lead and Prohibits use of CBD in Alcoholic Beverages

The Supreme Court recently granted certiorari to review an opinion of the Sixth Circuit on constitutional limits on states’ ability to regulate the distribution of alcohol beverages. Tennessee Wine & Spirits Retailers Ass’n v. Byrd, No. 18-96.

With the advent of the 21st Amendment in 1933, which turned control of alcohol beverage regulation over to the states, temperance groups insisted on a rigid, three-tier system for the distribution of alcohol. Typically, under state laws a manufacturer of alcohol beverages can only sell to a distributor and it may not have any ownership interest in the distributor. The distributor in turn sells to retailers who sell to the general public. Neither the manufacturer nor the distributor may have any ownership interest in the retailer. Consumers can only purchase alcohol beverages from retailers.

The rise of the internet and direct delivery companies such as Amazon has undermined this rigid distribution system. The State of Michigan amended its statute to permit wineries located in Michigan to sell directly to consumers. Out-of-state wineries, however, could only sell to Michigan distributors. In Granholm v. Heald, 544 U.S. 460 (2005), a surprisingly divided Supreme Court held, 5-4, that its anti-discrimination holdings under the Commerce Clause trumped the states’ residual authority under the 21st Amendment. It also held that the direct-sale statute impermissibly discriminated in favor of in-state wineries.

Granholm settled the question of whether states could discriminate against out-of-state manufacturers. It left open the question of whether the Commerce Clause also protected wholesalers and retailers and the lower courts are divided on that point. Granholm clearly held that the three-tier system is not a per se violation of the Commerce Clause. Based on that holding, the Second, Fourth and Eighth Circuits have all held that Granholm does not apply to wholesalers and retailers.  The Fifth and Sixth Circuits have reached the opposite result.
Continue Reading Constitutional Requirements For Distribution Of Alcohol