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Bill Introduced to New York State Assembly Supports Empire Wine

As reported by The Albany Times Union and Capitol Confidential, a bill was introduced this week to the New York State Assembly by Assemblyman Phil Steck that proposes to amend New York State’s alcohol beverage laws. See Bill Supports Empire Wine SalesBill Would Curb SLA’s Power Over Out-Of-State Wine Shipments. The bill will reportedly stop the NYSLA from revoking licenses of an in-state alcohol business if the business violated the law of another state. Id. It is alleged that the bill is a response to the Authority’s pursuit of Empire Wine, a Colonie-based retailer to whom the Authority issued a Notice of Pleading several months ago. In its Pleading, the agency alleged that Empire engaged in “improper conduct” by shipping wine directly to consumers in other states in violation of laws of several other states. For more information, see Retailer Empire Wine Sues New York State Liquor Authority: Direct Shipping. The ongoing situation between Empire and the NYSLA has attracted the attention of many industry professionals, and some have called into question the authority of the state agency with respect to regulating beyonds it borders. See, e.g., NY Liquor Regulators Slapped Down For Shady Enforcement Tactic.

This bill arrives just several weeks after an extremely strong letter written by State Director Michael P. Durant, on behalf of the National Federation of Independent Business, expressed concern of overregulation and pleaded with the agency to take a “sensible and fair approach to regulation of small retailers like Empire Wine & Spirits.” Mr. Durant specifically highlighted the relentless efforts of Governor Cuomo and his team to foster the growth of the state’s wine, beer, and spirits industry—especially with respect to smaller producers. In particular, Mr. Durant noted:

Overregulation and agency overreach threaten not only the wine and spirits industry but also many other industries across the state . . . . Small business owners in New York spend countless hours on compliance, including the administration and implementation of rules and regulations, which easily computes to billions of dollars in lost productivity annually. If agencies make it a regular practice to interpret and enforce vague laws, small business owners will face an even greater burden, and such course of action will threaten to dampen business growth in our state. NFIB is also concerned that discouraging internet sales conflicts with Governor Cuomo’s initiative to promote the wine, beer, and spirits industry in New York. The state recently has taken positive steps to promote growing facets of our economy and the modernize the Alcohol Beverage Control Law, which suggest a promising future for the industry.

See NFIB Letter Dated February 19, 2015

Late last year, Governor Cuomo signed the New York Craft Act into law. See Governor Cuomo Signs Craft New York Act, Promoting Craft Beverage Industry. A number of state beverage producers dedicated a significant amount of time to modernizing the state’s law, and most of the producers to whom I’ve spoken had positive reactions to the new law and are optimistic that the changes will have a strong impact on local industry. While the Craft Law focuses predominantly on small in-state producers, it sends a strong message that New York State is working to cut regulatory hurdles to foster growth of local businesses. It is quite possible that the alteration of New York’s ABC laws is just the beginning—i.e., it is certainly conceivable that additional provisions of the state’s alcohol beverage law affecting other tiers of industry may undergo changes in the future.

Assemblyman Steck’s bill is listed as bill number A05920 in the New York State Assembly and serves to “[l]imit the authority of the state liquor authority to penalize licensees based on perceived violations of the laws of other states, unless the conduct in question amounts to an independent violation of the alcoholic beverage control law or has resulted in a criminal conviction in another state.” Specifically, the bill adds language to the state’s current law that indicates the NYSLA does not have the power to revoke, cancel, or suspend any license or establish a civil penalty on a licensee based on conduct which the Authority deems to be in violation of another state’s law “unless such conduct independently violates a specific provision of this chapter, or unless due process of law has been provided by authorities of competent jurisdiction in such other state and the licensee or permittee has exhausted its due process rights and have been determined to have violated the laws of such other state.” While this may be good news for those in support Empire’s side, if this bill is signed into law, it will be rather interesting to see it in effect. Given the extreme and unprecedented reliance on the term “improper conduct,” future arguments may be even more inventive.

In its justification, the bill states the following:

It is concerning that the State Liquor Authority (SLA) is conducting enforcement activity on behalf of other states, when these states have not requested their enforcement or intervention, nor has the New York merchant been found to have violated the law of those states. The area of law the SLA is attempting to enforce is vague considering that 9 NYCRR 53.1 (n) does not specifically list out-of-state shipments as constituting “improper conduct”. While the SLA has used its authority under 9 NYCRR 53.1 (n) in the past to appropriately sanction licensees for “improper conduct” involving the committing of felonies or serious misdemeanors, the notable difference in this case being that the New York merchant has not violated any provision of the New York State Alcoholic Beverage Law, or any SLA rule or regulation, nor has it been found to have violated such other state’s law or regulation.

Emphasis added.

What is perhaps important to think about is why these laws have been drafted. Yes, the ABC laws of New York were written to prevent criminals and felons, who plagued the industry in or around the Prohibition era, from gaining industry interest or influence. This is true for many state laws, as well as for those of the federal government, and most of the laws are written with this concern in mind. It is certainly within the state’s interest to regulate the industry from undue influence, and from corruption and misconduct—but there is an extent. Is Empire’s conduct really apace with a felony or serious misdemeanor? From commentary I’ve read, many would zealously say “no.” Is the law in application functioning far beyond the intention or foresight of its drafters? Perhaps this is the point where the law needs to change.

For more information on New York State wine or alcohol law, direct shipping, or establishing a New York beverage business, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

Lindsey A. Zahn

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Lindsey is the founder and author of On Reserve: A Wine Law Blog. She is an alcohol beverage and food attorney and is admitted to the New York State Bar.

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