Liquor laws going to court

Well, its the final days of 2011.  A whole year expended, and a big decision about changing the alcohol game in Washington has been made. 2012 will bring big changes set forth in Initiative 1183 – unless two groups of litigants can bring implementation to a stop.

Just this week, we got word that the court in Washington Association for Substance and Violence Prevention (WASAVP) v. State, a Cowlitz County lawsuit, decided that intervening supporters of I-1183 would be allowed to join the defense and that a preliminary injunction request was denied. In doing so, the court lends a big blow to the plaintiffs trying to knock I-1183 back.

As we ease into 2012, I presume that there will be a lot of talk about this lawsuit (as well as the other suit in King County. Stay tuned – and Happy New Year!

Sen. Schumer gets behind beer.

For all that Washington has been doing for beer, someone went ever further. A few months back, we were talking about the BEER Act on this blog. But check out what NY Senator Charles Schumer has decided to do.

Sen. Schumer has launched a new beercentric campaign called “I Love NY Brew,” in an effort to convince NY restaurants and retailers to sell more NY beer. While the effort is not backed by any significant legislative action, its a strong statement from one of the more highly regarded lawmen in the Senate.

Here is the press release that was sent out today to media outlets. Got to hand it to Chuck and his group; they are really giving credit to a growing brewing industry that is ripe for job creation. Here is the release:

SCHUMER LAUNCHES “I LOVE NY BREW” CAMPAIGN TO BOOST NY’S BREWERIES – PUSHES NYC & NY STATE RESTAURANTS, BARS AND CONVENIENCE STORES TO SELL LOCALLY BREWED BEER FROM UPSTATE, NYC & LONG ISLAND

Schumer, Joined By Upstate Brewers, Calls On NYC & NYS Restaurants, Bars & Heads Of Convenience Store Associations To Sell More Locally-Brewed Beer From New York – Plan Would Help Boost One Of NY’s Fastest Growing Industries

 

Plan Would Be A Shot In The Arm For 7 Breweries In The Hudson Valley, 15 Breweries In The Southern Tier, 7 Breweries In The Capital Region, 10 Breweries on LI

Today, joined by the head of the New York Brewers Association and several brewery owners from Upstate New York, U.S. Senator Charles E. Schumer announced the creation of his “I Love NY Brew” campaign to place more locally-brewed, New York beer in New York City and state restaurants, bars and convenience store shelves. Schumer, a strong supporter of New York’s growing craft brewery industry, is pushing to expand New York brewers’ market share so that they can grow their business and hire more employees in a business that currently supports nearly 60,000 New York jobs. In a personal letter to the National Association of Convenience Stores and Fuel Retailing and the NYS Restaurant Association, Schumer urged both associations to offer more beer brewed at the 77 micro-breweries, regional craft breweries, and brewpubs across the state. Schumer said that pushing New York-brewed beer onto convenience store shelves and restaurants in major cities like New York would be a major step forward for an industry that pumps billions of dollars into the state’s economy each year.

“Local breweries across the state are proven job creators, helping support 60,000 New York jobs and brewing not simply great beer, but billions for our local economy too,” said Schumer. “Craft breweries have catapulted New York to the top shelf of beer states, and our beers are more than ready for prime time. Whether you are searching for a six-pack at your local 7-Eleven or grabbing Buffalo wings with a beer after work, you should have a wide assortment of locally brewed beers to choose from. I’m strongly urging New York restaurants, bars and convenience stores alike across the state to take a close look at New York’s beers, and consider putting them on their shelves or on their menu. It would be a win-win, both for those selling the beer, and for the breweries making it.”

“The growth of the craft brewing industry in New York State is tremendous,” from David Katleski, President of NYS Brewers Association. “Continued growth will greatly contribute to the number of jobs, tax dollars, and economic benefit to NYS.  Of all the beer sold in NYS, NY craft beer currently represents a 7.5% market share. One can only imagine the economic impact to our state if craft beer sales here reflected that of craft beer sales in Oregon, where they’re 30%.”

The approximately 2,000 small breweries across the country combine to employ nearly 100,000 American workers. In New York, the beer industry directly supports approximately 60,000 jobs in brewing, distribution and sales. According to the Beer Institute, these jobs paid nearly $4.6 billion in wages last year, and accounted for more than $13.2 billion in economic activity during 2010. New York breweries paid $1.13 billion in federal taxes, and $1.14 billion in state and local taxes last year. In a meeting with New York brewers from across New York earlier this month, the brewers told Schumer that local convenience stores and restaurants, particularly those in New York City, represent the largest untapped markets for Upstate and Long Island beer. Several breweries that have tapped into these markets told Schumer that they had quickly become an integral part of their business. Genesee Brewing in Rochester has become incredibly popular in Brooklyn, helping to drive up sales and overall revenue. In order to help brewers sell more beer within the state, Schumer today is launching a new campaign to encourage restaurants and convenience stores to look locally when stocking their shelves.

Schumer is asking the New York State Restaurant Association to encourage their member restaurants to offer locally brewed beer on their menu. In addition to getting more beers into restaurants close to where it is brewed, Schumer will be pushing the New York City members of the Restaurant Association to consider offering beers brewed across Upstate New York and Long Island. While some beers like Genesee and Saranac have gained popularity in the downstate market, Schumer and New York brewers believe this market is vastly underutilized and represents the chance to dramatically grow craft brewing across the state. Many smaller breweries don’t have the resources to launch extensive marketing campaigns. To combat this problem, as part of Schumer’s campaign the New York State Brewers Association will be providing promotional material, on behalf of its members, to restaurants and convenience stores to help boost awareness of locally brewed beer in hopes of increasing sales. Schumer, who toured breweries throughout the state earlier this year, noted that brewery owners tend to put increased revenue back into the business in the form of capital improvements or hiring new workers. Today, Schumer also called on the National Association of Convenience Stores and Fuel Retailing to encourage their major chain members to carry locally brewed beers at their New York location.

“Getting New York beers on convenience store shelves and in local menus would help pour jobs into New York’s breweries,” continued Schumer. “Our local breweries provide good-paying jobs and help draw tourists and visitors to the Empire State – I’m going to do everything I can to help them grow and expand even further.”

 

 

 

Lawsuits pop up challenging the implementation of I-1183.

I have to start this article by giving full credit to Susan Johnson and her wonderful alcoholic beverage law for breaking this news. Kudos to you guys.

Two Superior Court suits have sprung up, challenging the validity of I-1183. As you are probably aware by now, I-1183 won a successful battle in November. The bill requires the state’s Liquor Control Board to start phasing out of the liquor business in 2012, along with other items like setting new licensing regulations for private vendors and new pricing regulations for wine.

According to Susan, the plaintiffs in each of the two suits have challenged the initiative on the basis that it potentially embraces more than one subject. Article II of the Washington Constitution specifically restricts both legislative and initiative-based legislation from encompassing regulation of two or more subject areas. In fact, this is a uniform rule of law that appears in probably every jurisdiction.

Back in my legislation days with the New York City Council’s General Counsel, I ran into this problem a number of times. Bills and proposals for law are typically tradeoffs, accommodating the needs of a number of different parties. With I-1183, the drafters had to offer additional criminal penalties for liquor law violators in order to gain support for privatizing the liquor market. This is one of the items that these lawsuits allege is improperly bundled.

General Teamsters Local Union No. 174 v. State is filed in King County Superior Court, while Washington Association for Substance and Violence Preventation (WASAVP) v. State in Cowlitz County Superior Court. Each of the complaints can be found by visiting the article posted on Susan’s blog.  Perhaps most interesting is that the WASAVP have a pending motion for preliminary injunction, which will be decided later this week. So, stay tuned for that result.

I am extremely curious about who will intervene in these lawsuits. Of course, a number of serious governmental, public interest and trade organizations are likely to add to the legal fuss. One would certainly expect Costco to once again open their wallet to fight for private liquor.

As an early prediction, I presume that the courts will fend away these challenges in the preliminary stages. All of the regulation bundled within I-1183 deals directly with regulation of alcohol, and differentiating these industries, and the enforcement mechanisms designed specifically for them, is perhaps an improbable task.

We will keep an eye on this as it develops.

Where can you find this? Dont ask the brewery - apparently (Photo: Wayoutwestaustin.com)

Hey Texans: Are you enjoying that 6% Lager “Ale” or that 4% Pale “Beer”? Confused why the brewery can’t tell you where to score a six-pack Jester King Pale Ale ? What? Huh?

Well, according to one of your state’s best and brightest breweries, Texas law prohibits the use of commonly-used descriptive beer terms. That brewery has decided file a lawsuit, in federal court, challenging those regulations.

Austin-based Jester King Craft Brewery has filed a lawsuit in US District Court for the Western District of Texas. The lawsuit was filed to challenge six particular portions of Texas beer regulations enforced by the Texas Alcoholic Beverage Commission. If we ever thought we had it tough here in Washington, check out these allegations about the Texas code:

1.  Prohibit breweries and distributors from telling customers where their products

can be bought;

 

2.  Mandate the use of inaccurate statutory definitions of “beer,” “ale” and “malt

liquor” to describe malt beverages;

 

3.  Prohibit advertising the alcoholic content of brewery products and using words in

advertising and labeling that suggest alcoholic strength;


4. Prohibit breweries from selling their products at the point of production while

allowing wineries and brewpubs to do so;

 

5.  Prohibit brewpubs from selling their products to distributors and retailers while

allowing wineries and microbreweries to do so; and

 

6.  Treat foreign breweries as the first American source of supply of malt beverages

while treating importers as the first American source of supply of wine and
distilled spirits.

My initial reaction is that much of what is found in the Texas code is probably located in many other state codes. The restrictive language is part of a slowly-decaying uniform three-tier regulation package that was pushed decades ago. Many states have slowly altered former portions of that code, updating it to make sense for their brewers. This is especially true in states with proactive brewer groups, who demand change. Washington, Oregon and California have responded favorably to pressure from their brewing industry members.

Here, Jester King is up against a difficult task. Booze is heavily regulated and states have strong interests in regulating how it is produced, marketed and sold. The interesting argument here is whether the state’s means of regulating booze actually serves that interest.

• Does improperly labeling a product recognized otherwise by the mass consumer base actually help better inform the consumer? Surely not.

• Does preventing the direct sale of beer from one type of beer producer while allowing it from another almost identical producer serve a governmental purpose? Probably not.

• Does prohibiting brewers from providing public information about the location and availability of alcoholic beverage help to sustain a government’s interest? Maybe, depending on whether that purpose of reducing consumption or preventing brewers from looking like distributors.

I think that Texas, and several other states, will have trouble upholding some of the labeling regulations. But those laws directly resulting from the three-tier model regulations may prevail. The courts have already clearly permitted three-tier regulations. Regardless, its a clear sign that Texas needs to take the time to better understand an industry that has grown incredibly over the past decade.

Jester King has wisely approached its action with an open mind about the challenges it faces. The brewery informed its consumers about the case in an open letter, correctly reflecting that the state only needs to show a rational basis for the challenged regulations. But, I think that their hearts and brains are in the right frame of mind – the challenge is a worthwhile one.

Here is what the brewery had to say about its claims. You can read more at their website and in the pleadings which can be found here (Beernews.org):

Our claim under the Equal Protection Clause of the 14th Amendment, maintains that breweries, like wineries, should be able to sell their products directly to the public. Right now in Texas, we cannot sell our beer at our brewery. We can only sell beer through a retailer or distributor. When people visit Jester King and ask to buy our beer, we have to tell them, “Sorry, that’s illegal.” Brewpubs are faced with an equal and opposite restriction. They can sell beer on-site, but cannot sell beer through a retailer or distributor. Texas wineries on the other hand are allowed to sell on-site and through retailers and distributors. We are suing because the State has no rational interest in maintaining special restrictions aimed at limiting the sale of beer.

Finally, the lawsuit challenges the State’s requirement that every foreign brewery wishing to sell beer in Texas obtain its own separate license. Foreign wineries and distilleries are not burdened by this requirement. They may simply sell their products in Texas through an importer that has one license for all the wine and spirits it brings into our state. The result is that small, artisan beer makers often have their beer kept out of Texas by unduly burdensome fees.

 

 

 

Sound Spirits' Ebb & Flow Gin may find more consumers if I-1183 passes

The liquor initiative is all I hear about. If you watch television ever, you are bound to see an ad supporting I-1183 followed immediately by an ad opposing I-1183. Costco has dumped more than $22 Million into its support for the initiative! Its pandemonium.

Last year, I really got into the discussion, posting regularly here on the Brewery Law Blog. But last year, the craft brewer was heavily involved. The Washington Beer Commission came out strongly opposing I-1100 with concerns that complete deregulation would harm their ability to earn a reasonable margin. But this year, the WBC has been silent.

Someone that has been lost in the shuffle of big corps trying to gain market share and public interest groups lobbying for safety: craft distillers. Yesterday, the Seattle Weekly ran an interview with Steven Stone. Steven is the owner of Seattle’s first craft distiller, Sound Spirits, located on 15th Avenue. In addition to making an unbelievable craft gin (get the oak-rested one), Steven has always been willing to talk about his industry. Here, he talks about the burden set on craft distillers:

“Most of the small guys, we’ve tended to stay out of it,” says Steven Stone, founder of Sound Spirits in Interbay. “If we come out for it, we’ve pissed off the only retailers of our products. And if you come out against it, you might upset the public.” Stone says that when he criticized an earlier liquor-privatization measure on hisFacebook page, he was called a communist.

 

Check out the full article by following this link. I have always thought that the craft distilling industry might benefit from the brewery/winery model, that allows for direct sales to the public. Steven correctly points out that grocery store competition will be fierce, but with a wider market, I am sure that craft distillers will see sales pick up.