Retailers Hoping Supreme Court Will Hear Case on Texas’ Direct Shipping Law

6 Jan

Wine retailers have issued a Petition for Writ of Certiorari to the Supreme Court and are hoping it will review the decision of the Fifth Circuit Court of Appeals in Wine Country Gift Baskets v. Steen.  The Supreme Court’s prerogative will  have a major impact on the future of direct-to-consumer sales and the discriminatory ability of states to legislate outside of the Commerce Clause when enacting laws regarding the sale of alcohol.

The primary issue in this case is the ability of out-of-state retailers to ship directly to consumers in Texas.  Texas’ three-tier system allows for in-state retailers to sell directly to consumers, but treats out-of-state retailers differently and does not grant the same privilege.  In Granholm v. Heald, the Supreme Court held that laws in which states discriminate between the ability of in-state and out-of-state wineries to sell wine direct-to-consumers was unconstitutional in light of Commerce Clause restrictions that favor equal treatment.  The trial court in Gift Baskets agreed with this, stating in the opinion, “in all but the narrowest circumstances, state laws violate the Commerce Clause if they mandate differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.”  The purpose of the Commerce Clause is essentially to level the playing field between businesses by preventing states from insulating themselves and hindering the growth of interstate commerce in order to benefit in-state businesses.

The Court of Appeals, in a weak and largely unjustified opinion in the face of precedent set by Granholm, reversed the trial court decision in Gift Baskets.  The opinion stated that due to the 21st Amendment, which ended Prohibition and placed the regulation of alcohol sales in the hands of states themselves, a law allowing in-state wine stores to sell directly to consumers but not out-of-state retailers could be enforced.  Granholm held that even though the 21st Amendment vests the regulation of alcohol in the hands of states, the Commerce Clause still applies in situations of interstate commerce such as this.

The interplay between this case and the future of the controversial HR 5034 bill, which seeks to grant states the ability to avoid Commerce Clause restrictions, will dictate the freedom wineries and retailers have to sell to consumers going forward.

Tom Wark at the Fermentation blog, also the Executive Director of the Specialty Wine Retailers Association, has an excellent piece analyzing the current constitutional situation regarding HR 5034 and Gift Baskets, available here.  The SWRA also released a press release on the recent petition to the Supreme Court.

Image credit to Simon Howden / FreeDigitalPhotos.net

San Diego Tiered Winery Ordinance Eases Tasting Room Restrictions

11 Nov

Wine producers and enthusiasts in Southern California are rejoicing as San Diego County has finally eased restrictions on the establishment of tasting rooms for smaller “boutique” wineries. The San Diego County Board of Supervisors unanimously approved a tiered winery zoning ordinance a few months back. Local wineries that bottle less than 12,000 gallons per year will now be able to operate tasting rooms that can also offer retail sales. Also, wineries that bottle 120,000 gallons annually or less can now more easily register under a new “small winery” classification which allows pre-approved events to be held on the winery premise, such as weddings or other types of parties.  The new regulations will allow vintners to finally tap into the potential of San Diego as a winegrowing region and hopefully challenge the many other highly reputed viticultural areas of California.

Friar Junipero Serra, nicknamed the “Father of California Wine”, founded the first California vineyard in Mission San Diego in 1769. The varietal used, dubbed the “Mission” grape, was the premier California wine grape in use until about 1880. Despite its early rich history, the region never recovered from the effects of the Prohibition era, and the onerous regulations that followed. This new county ordinance may be the first sign of a renaissance period for the San Diego wine industry, which one day will hopefully match the prowess of the local microbrew industry.

In 2008, a similar plan was to take effect, but efforts to allow tasting rooms were stunted by worried neighbors of small wineries that feared high maintenance costs, increased traffic, and potential liability for intoxicated tasters driving irresponsibly on the privately shared roads used to access the wineries. Further, California Environmental Quality Act (CEQA) violations were alleged, which put a major damper on the new plans. A major use permit was required to open a tasting room, and this process was cost prohibitive and overly time consuming for most local boutique wineries. Now these wineries will be exempted from these restrictions, and a provision in the ordinance calls for those operating tasting rooms to work out easement issues with the other owners of these private roads.

While many see the rule change as a boon to an emerging industry and a victory for wine lovers, some have not been as welcome to the change.  The San Diego Citizenry Group (SDCG), the same group of landowners that halted adoption of ordinance in 2008, recently filed suit alleging the county did not sufficiently assess the environmental impact of the new zoning ordinance, touting the same traffic and liability concerns as before.  This time around though, the county defends its position with an extensive 500 page environmental impact report costing around a quarter million dollars, upon which the creation and implementation of new ordinance was built.

“In my opinion, this lawsuit is completely misguided,” said County Supervisor Dianne Jacob who represents the community of Ramona on the San Diego County Board of Supervisors. “Vintners worked very hard with the County to develop an ordinance that worked for all parties.  In the end, we found a way to spur the economy by taking measures to enhance an agricultural use, in agricultural zoned areas, while doing our best to preserve the community character of these rural areas.”

“The County prepared a very thorough Environmental Impact Report for this project and I have every expectation that the Court will agree with the County’s position. This is an unfortunate attempt to create an obstacle that would hurt many others and sputter an emerging industry seeking to further promote the County as a successful wine producing region,” Supervisor Jacob said.

The new county ordinance displays a conscious attempt to expand the local wine industry by streamlining regulations and making them simpler to understand. San Diego County is now home to three federally recognized American Viticultural Areas, known as South Coast, Ramona Valley, and San Pasqual Valley, and is the closest U.S. city to the expanding wine region of Guadalupe Valley in Baja California.  San Diego County has a burgeoning “urban” winery industry, with wineries such as Carlsbad’s Witch Creek Winery crafting premium quality wines just steps from the beach, while using grapes from San Diego and the growingly popular Guadalupe Valley of Baja California.  San Pasqual Winery uses grapes from the similar locations, and is the region’s oldest urban vintner. Solana Beach also just welcomed its first urban winery, Carruth Cellars. The growth of this urban niche in the wine market has sparked curiosity and interest, enough so that many wine industry leaders converged yesterday upon San Diego for a seminar dedicated to analyzing the ins and outs of this new urban winery business model.

It is estimated that nearly half a dozen new tasting rooms will open by the end of this year in San Diego County due to the newly amended rules. In addition to spurring growth in the wine industry, the ordinance is aimed at increasing an already booming tourist business, and is expected to boost the number of wine bars, restaurants, cafes, and hotels to accommodate those seeking to explore the new wine trails. If San Diego can successfully expand its wine industry, wine trails could become the next major attraction in an entertainment filled metropolis that already offers some of the best zoos, parks, beaches, sporting, and nightlife that the country has to offer.

From a broader outlook, the new San Diego County ordinance strengthens a California wine industry which already makes up over 90% of the total U.S. wine business. As more established wine regions become increasingly popular and congested, winemakers are seeking to explore new frontiers, one of which will be San Diego County.  The future of the wine industry in this emerging region is indeed bright.

Image credit to Luigi Diamanti / FreeDigitalPhotos.net

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Urban Winery and Brewery Seminar a Great Success!

11 Nov

The second annual seminar on “Owning and Operating an Urban Winery or Brewery” was held yesterday at the DoubleTree Hotel in downtown San Diego. The event was a huge success and a great learning experience for the 50 or so attendees who came. The first speaker was alcohol beverage law veteran Lynne Carmichael, who spoke on the permitting and licensing aspects of starting a winery or brewery. Wendell Lee, General Counsel of the Wine Institute, gave a rousing PowerPoint presentation on the ills of HR 5034 and the bill’s attack on the Commerce Clause.  Seminar co-Chair Charles Reidelbach spoke on trademarking and labeling, while Anil Shrikhande, executive at Constellation Wines (and my father!), discussed the standards and profitability of various price points for wine. Later in the day, urban winery pioneer Michael Brill of Crushpad explained the bright future of urban “wine pubs” and the difficulties faced in starting a business of such.  This was followed by keynote speaker Jack White, owner and founder of Ballast. His passion for the beer industry was obvious. In addition to those I have discussed, I’d like to thank all the other speakers for taking the time to come and share their insight. We are already thinking of ways to make next year’s seminar even better!

Visit TheSeminarGroup.net to viewthe entire seminar, which will be posted online soon.

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The Wine Law Blog featured by the European Union’s Center for Wine Origins

1 Sep

I am currently the Center for Wine Origins’ “Spotlight Blogger”, and they are featuring my piece on the current WTO negotiations for an international registry of geographical indications for wine.

Wine Origins is a campaign funded by the European Union, France, and Portugal, to promote the importance of wine locations and protect the integrity of wine regions by assuring accurate labeling.  The link to the feature is above.

Thanks to the Center for Wine Origins for this great honor!

Image credit to Dan / FreeDigitalPhotos.net

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New California Law to Allow Out of Bottle Wine Tastings at Instructional Events

25 Aug

Senate Bill 1101, recently passed unanimously in both the California Senate and Assembly, has now been made official by Governer Schwarzenegger. The new legislation will amend the previous policy that forced wineries holding winemaker dinners or instructional events at retail premises to serve wine straight from the barrel or tank, and not from bottles. This rule was part of a general scheme under the Alcoholic Beverage Control Act to prevent wine and other alcohol producers from gifting bottles. The purpose of rules such as this trace their descent to post-Prohibition “Tied-House” restrictions that required a separated three tier system of alcohol sales (manufacturer, distributor, and retailer being independent entities). This separation was meant to prevent monopolization in the alcohol business, promote temperance, and ensure proper tax collection by certifying that sales were conducted through the proper channels.

But the alcohol sales environment of today is much different than in the past, with exceptions in 37 states (including California) allowing a broad range of alcohol producers the ability to sell directly to customers or retailers outside of the three-tiered system.  Today only a handful of truly large alcohol beverage companies exist, primarily Constellation, Diageo, and Gallo here in the U.S., whom, due to pressure and a close eye from the many regulatory agencies, follow tied-house restrictions fairly carefully.  Today much of the power in the industry has been concentrated in large alcohol distribution companies and major retail stores such as Costco and Trader Joes, that many times dictate the business models of smaller wine producers.  This power shift is one reason so many states now allow small winemakers to sell directly to consumers. Further, it makes overly burdensome measures like forcing winemakers to transport wine directly from the barrel to attendees of an instructional event less meaningful.

The new plan will limit tastings at these events to three per person, and will retain the rule that disallows the sales of bottles and transfer of gifts or free goods to consumers at these events.

Here is a link to the bill itself

Image credit to Carlos Porto / FreeDigitalPhotos.net

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San Diego Union Tribune: “Booze wholesalers pushing bill to ban interstate wine, beer sales”

16 Aug

I assisted the SD Union Tribune on Sunday’s business section piece analyzing HR 5034, which also quoted the Chair of our Wine, Beer, and Spirits Law practice:

The legislation would hurt San Diego County’s emerging “boutique” wineries, said attorney Charles Reidelbach of Higgs, Fletcher and Mack, a law firm that represents several local wineries and breweries.

“If passed, the CARE Act would take a step back from advances made to secure the ability of smaller wineries and breweries to ship directly to customers,” Reidelbach said. “Further, the bill would limit consumers’ ability to purchase
specialty wines and craft brews that are bought directly through websites or wine clubs, and not through retailers.”

PDF of Article

Online Version

Please contact your local House Representatives and urge them to vote against this blatant attack on small winery interests.  More information can be found at StopHR5034.org.

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History in a Bottle: Opus One

16 Aug

When you’re one of the Napa Valley’s most high profile wines and getting shoutouts in raps from Jay-Z, you know you’re doing something right.  Opus One is the brainchild of famous French winemaker Philippe de Rothschild and California wine guru Robert Mondavi.  The two legends sought to craft a classic Bordeaux blend made with Napa Valley Cabernet Sauvignon, a combination of traditional French winemaking juxtaposed with California’s bold fruit flavors, and successfully did so for the first time in 1979.  Constellation Brands bolstered their portfolio by acquiring 50% of Opus One in 2004 when they purchased Robert Mondavi, Inc.  Last summer I was lucky enough to visit the Oakville winery, which is made of beautiful off-white limestone and built around a lush center courtyard.   Their 2005 vintage “offers concentrated aromas of blueberry, rose petals, white truffle, licorice and nutmeg. Flavors of cassis, black olives, raspberry and dark chocolate (winemaker’s notes).”  A bottle of this collectible wine will cost you around $150-$180 online, so you might have to crack open the piggy bank, but it would be well worth it for that certain special occasion.  Below is an interview with Opus One CEO David Pearson from WineTasteTV.

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