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We moved to D.C. in August, and with a transfer from a city like New York to a city like Washington, D.C., comes (perhaps) a greater level of awareness—at least, of governmental regulation. Every day, I am surrounded by the architecture of great minds (and great buildings), and every day I think more about the intersections and the mutual exclusiveness of alcohol beverage and food regulation. After becoming associated with a food and beverage law firm, my daily deductions swerved from wine to an immediate indulgence of food (and beverage).

Washington, D. C. Lincoln MemorialSince starting my work here, I deal a lot with food issues, and I am grateful for the opportunity to do so. Becoming conversant with both food and alcohol regulations means noticing the differences of each—how each are defined and how each are regulated. The Food and Drug Administration (“FDA”) regulates food in the United States and the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) regulates alcohol beverages in the United States. Plainly put, the aforesaid seems uncomplicated and clear, but in practice, the lines separating alcohol beverages and food can be controversial. 

One of the areas of wine and food law of utmost interest to me is the clear difference in labeling. Very generally speaking, TTB has jurisdiction over the labeling of wine containing 7.0% alcohol by volume or greater (e.g., table wine, dessert wine, etc.) while the FDA has labeling jurisdiction over wines containing less than 7.0% alcohol by volume. (Again, this is a generalization; low-volume alcohols are still required to maintain certain requirements stipulated by TTB, and certain wines, depending on the context, may be required to comply with FDA labeling regulations.)

Perhaps one of the clearest differences between FDA labeling and TTB labeling is the requirement that food labels (as regulated by FDA) contain nutrition fact panels and ingredient statements. Two pieces that remain absent from the labels of most wines are the nutrition facts panel and the ingredients statement. And the question posed by this is simple: why not? With the increased trend of consumer awareness and the desire to know how many calories are present in items consumed, the exact ingredient contents, and various nutrition information, why are nutrition fact panels and ingredient statements not found on the labels of most alcohol? (See Alcohol Industry Grapples with Nutrition Labeling.)

While history suggests that TTB (and its predecessor agency, ATF) contemplated requiring nutrition fact panels on alcohol beverages, no measures in furtherance of securing a nutrition fact panel or ingredients list have occurred. (See TTB Issues Ruling on Use of Caloric and Carbohydrate Claims in Advertising and Labeling in Alcoholic Beverages; see also TTB Proposed “Serving Facts” Label and Alcohol Content Statement on All Beverage Alcohol Labels.) In part, this may be due to lack of consumer interest or concern. More so, the impact on the industry may be extremely costly; for wines, wineries could face the requirement of having every vintage and variety to be analyzed for proper nutrition facts and content. Of course, doing so would increase the cost of producing a wine. Perhaps the alternative is to consider an allowance for a more generalized analysis, as opposed to analyzing every vintage and every variety.

But with products like Skinnygirl, purporting “lower calories” and seemingly attractive to calorie-conscious consumers, on the market, one wonders if the lack of a nutrition facts panel and ingredients statement is proper. On a food label under the jurisdiction of FDA, there are regulations from the agency indicating how and in what contexts certain claims (like “low calories”) can be used. (This is not to indicate that TTB does not have similar–products like Skinnygirl do proclaim calorie count and other nutrient counts like fat, but the format is not of a nutrition facts panel nor do such declarations include all nutrients found on a typical nutrition facts panel.) But forget products like Skinnygirl for a moment–aren’t consumers entitled to know what is in any beverage product, even if no “low calorie” claims are made? Such alcohol beverage products are even less likely to disclose items like calorie count and fat. Is this right? Are we living in a time where there is an increased desire for consumer knowledge on food and beverage products, not excluding alcohol beverage labels?

While the full nutrition facts panel that appears on foods many not be ideal on alcohol beverage labels (for sizing, formatting, cost, and aesthetic reasons), one might still ponder why the TTB is yet to require at least a basic nutrition label and ingredients statement on all products under its jurisdiction. But maybe a more appropriate question is as follows: should the nutrition facts and ingredients be a consideration when a consumer purchases an alcohol beverage (and has such ever really been of concern to most alcohol consumers)?

Photograph property of Lindsey A. Zahn

For more information on wine or alcohol law, labeling, advertising, or FDA or TTB matters, 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.

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CLE International is hosting an Alcohol Beverage Law Conference in Denver on March 18, 2013 at the Four Seasons Hotel. The conference is co-chaired by Adam P. Stapen and Patrick D. Tooley and will cover Colorado wine, beer, and spirits. The conference will present topics such as Navigating the Agencies, Consumer Promotions, Land Use and Alcohol, Ethics, The Colorado Wine Industry, and Business Valuation. The conference includes up to seven hours of MCLE credit, including one hour of Ethics. To register, please visit www.cle.com/AlcoholBeverage or call (800) 873-7130. A copy of the brochure is available here.

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Some very interesting updates over the last week have occurred for the wine and law community. Below are three of the most interesting, involving a wine storage facility, potential new rules at auction, and calorie labels in the United Kingdom.

East Coast Restaurants Sue WineCare Storage Facility for $2 Million of Wine After Hurricane Sandy—Most of us are familiar with the boisterous Hurricane Sandy that struck the East Coast last fall. In its aftermath, according to New York Restaurants Sue Storage Facility for $2 Million of Wine in Hurricane Limbo, two of Keith McNally’s NYC restaurants—Minetta Tavern and Morandi—filed a lawsuit against WineCare, a storage facility in downtown Manhattan that sustained damages from Hurricane Sandy and filed for bankruptcy on January 30, 2013. Allegedly, the storage facility is yet to allow its customers to gain access to wines held by the facility. In the jointly-filed complaint, plaintiffs allege that WineCare has not allowed its clients to access their wines, despite both requests and demands of the plaintiffs, which are currently held by the defendant without the consent of the plaintiffs. See the rest of the story at New York Restaurants Sue Storage Facility for $2 Million of Wine in Hurricane Limbo. (Article courtesy of Kevin Swersey.)

New York’s Court of Appeals is to review a recent decision that could have some impact on the wine industry at auction sales. According to Lawyers Fight to Keep Auction Sellers Anonymous, the established practice (in New York) of keeping an auction seller’s name anonymous may come to an end if the Court of Appeals affirms the decision by its appellate division. The current ruling does not require sellers to reveal their names publicly, but does state that buyers are entitled to know the name of the sellers (as opposed to the current practice of stating the work is from a “private collection”). If the New York Court of Appeals is to affirm the lower court decision, this could change the practice for wine sold at auction, including auction houses like Christie’s. See the full story at Lawyers Fight to Keep Auction Sellers Anonymous. (Article courtesy of Kevin Swersey.)

Finally, what I find to be incredibly interesting and relevant to my field of work in wine and food law, recent news maintains that the United Kingdom is considering calorie labels for beer, wines, and spirits. This consideration stems from the UK’s desire to reduce or discourage binge drinking. The government feels that, by adding a calorie count to alcohol beverages, the calorie count could encourage individuals monitoring their weight to drink less. See Calorie Labels for Beer, Wine and Spirits Considered by UK Government. No such requirement exists in the United States, at least not for wines that are at or above 7% alcohol by volume or greater. (Wines with less than 7% alcohol by volume are regulated by FDA and are generally required to have a nutrition facts panel, which includes a calorie count, but there can be exceptions.)

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I read the article outlining the complaint filed by Duckhorn Wine Co. of St. Helena against Duck Walk Vineyards, and I feel particularly compelled to blog about the complaint by means of both legal interest and personal significance. (I spent some of my childhood summers on the eastern end of Long Island, and I am somewhat familiar with Duck Walk Vineyards, but I am especially interested in the area of intellectual property.) According to Duckhorn asks N.Y. Winery to Modify Label and Sales, Duckhorn Wine Co. filed a complaint against Duck Walk Vineyards on January 15, 2013 in Napa County Superior Court. The complaint alleges breach of contract (specifically relating to trademark), which required Duck Walk Vineyard to mention its geographical indication on the front of its labels. Furthermore, the complaint alleges the failure of Duck Walk Vineyards to provide the location of the vineyard on its wine labels lead to consumer confusion. Duckhorn demands Duck Walk Vineyards alter its labels and halt sales of 50% of its wines outside of New York, New Jersey, and Connecticut. Id. 

Duckhorn’s lawyer stated that Duck Walk Vineyards did not follow a 2003 court settlement in which Duck Walk agreed to several constraints, including placing the vineyard’s place of origin on the front label. “Under the settlement, Duck Walk also agreed not to produce and/or bottle more than 84,000 gallons of wine with the word ‘Duck’ or pictures of ducks on the label unless they’re part of the corporate name ‘Duck Walk Vineyards Inc.'” See Duckhorn asks N.Y. Winery to Modify Label and Sales. The lawyers for Duck Walk argue that Duckhorn does not own the word “Duck.”

It is true that Duckhorn and Duck Walk Vineyards both sell wine in the United States, at especially different price points, but to the extent that their products are “similar” to cause even remote disorientation among consumers is a rather weighty argument. A quick search of the TTB COLA database, restricting results to wine and fortified wine labels, indicates that there are over 400 labels since February of 2007 that use the word “DUCK” on either the fanciful name or brand name of the label. (Editor’s note: the aforementioned results are of labels that, to a greater percentage, are from Duckhorn Vineyards; additionally, not all labels from other vineyards with the word “DUCK” also include images of a duck or ducks on the label, but most of the labels do.) 

Finally, the word “DUCK” is what trademark attorneys would say is a generic term—meaning, the word “DUCK” is of common use (a word one would find in a dictionary). And, because I think it is necessary, a closer look at some of the labels at issue: a Duckhorn label and a Duck Walk label. To what extent do these labels look like they originated from the same producer? And some other vineyards that use the term “DUCK” on their labels, just to confirm the presence of “DUCK” on multiple labels: Duck PondButterducks, and Diving Duck. To what degree do any of these labels promote consumer confusion?

For more information on wine or alcohol law, labeling, or trademark, 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.

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Two Sisters Battle Winery-Brewery Law in Arizona

One of the unique aspects of the alcohol beverage industry is the clear and continual regulatory separation of different facets of the industry. For example, in the United States, laws known as tied house laws heavily regulate any form of vertical integration in the alcohol beverage industry. Generally speaking, tied house laws help to divide the basic three tier system—the interests of manufacturers, wholesalers, and retailers are separate and distinct. Essentially, the name “tied house” speaks for itself: houses of different tiers that are tied together by means of ownership (i.e., not separate nor distinct) are generally illegal in the United States. And while tied house laws have populated our federal and state laws as post-Prohibition anti-segregation measures, perhaps the more curious inner-industry regulations are those that separate ownership of one type of alcohol beverage producer from another.

A classic example recently came to news in a heartfelt battle against the law by two Arizona state sisters. The two siblings sought to establish a winery-brewery in Arizona, but were inevitably halted by a strict provision of the law: Title 4, Chapter of Arizona Revised Statutes prohibits a winery from brewing beer on the same property. (See Sisters Fighting Law to Open Arizona Winery-Brewery.) And while other states permit the operation of a winery-brewery, there seems to be no indication why the Arizona statutes explicitly forbid the dual operation. (See, e.g., Sneak Peek at Winery and Brewery in Downtown JacksonVirginia’s First Winery-Brewery Expands this Fall.) Despite the faithful attempt of the sisters to question the Arizona law, the prohibition currently remains in tact.

The above story seems rather curious, as lawmakers—at some point in time—proactively sought to prohibit a winery and brewery from operating under one roof. But the question is why? And is this law destined to change? The answer to the latter is simply this: Perhaps. As has been a recurrent pattern in the wine world, change is often necessary—but how quickly changes in the law are executed remains unknown.

For more information on wine or alcohol law, licensing, or TTB matters, 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.

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The last week presented three very different stories in the context of wine the law, ranging from criminal law to constitutional law issues. The most pertinent are summarized below. On the wine law docket for the week of January 14, 2013:

  • Chateaux Commence Legal Action Against St. Emilion Classification: This week, several chateaux filed a complaint against the classification of the eponymous St. Emilion classification, griping over the selection process. The three châteaux, Château Croque-Michotte, Château La Tour du Pin Figeac and Château Corbin-Michotte, joined together to dispute the recently published classification for Saint Emilion. Last September, the Institut National de l’Origine et de la Qualité  (“INAO”) published a new classification for Saint Emilion, to the discontent of several chateaux. (See generallyOnly Three Chateaux Dropped in new St Emilion ClassificationSt Emilion Classification: First Rumblings of Discontent.) The three chateaux claim there were errors in the selection procedures that decided classification status, such as at the tastings. The grievances will be heard before an administrative tribunal in Bordeaux, and Frank Bicard, director of the Conseil des Vins de Saint Emilion, relayed that the Conseil plans to defend the selection process. However, some feel the revision of a classification should provoke questioning as to the interest best served and as for what purposes such classification systems are upheld. Since the first article was published, Decanter posted an update that ascertains the owner of Château Croque-Michotte will seek compensation damages if a judgment is rendered in favor of the three châteaux.
  • Massachusetts residents still cannot receive direct shipment of wine from out-of-state wineries:  Three years ago, Judge Rya Zobel of the U.S. 1st Circuit Court of Appeals ruled a 2006 Massachusetts law unconstitutional and directed the Massachusetts legislature to correct the law. In its current form, the law bans direct shipments from wineries to consumers for wineries producing more than 30,000 gallons per year and who retain Massachusetts wholesalers. The type of exclusion currently allowed under Massachusetts law is the type of exclusion that was ruled unconstitutional by the 2005 Supreme Court case Granholm v. Heald. The original case, Family Winemakers of California v. Jenkins, was filed September 18, 2006, “stating that current Massachusetts law violated the nondiscrimination principle of the Commerce Clause, which prohibits ‘laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.'” (See Not Improving With Age: Three Years After Court Ruling, Legislative Inaction Stymies Wine Direct Shipping, quoting U.S. Supreme Court, Granholm v. Heald, May 2005.)
  • Finally, in the news of criminal law and wine, a federal judge ruled that FBI agents acted properly when agents searched the home of an accused wine counterfeiter, Rudy Kurniawan, after his arrest last year. Kurniawan’s attorneys originally moved to exclude evidence from admission at trial. The attorneys argued that the search conducted by FBI agents was warrantless–and therefore violated Kurniawan’s Fourth Amendment rights. The government attorneys argued that, while the search may have been conducted without a warrant, there was enough probable cause given the situation to make the search reasonable. “The government lawyers noted that Kurniawan “on multiple occasions” had received shipments of empty bottles of very expensive wine which he had requested from a Manhattan restaurant and a New York collector and that last February he had tried to sell homemade counterfeit wine through a third party at a London auction.” (See Kurniawan Loses Bid to Exclude Counterfeiting Evidence.) Additionally, the government attorneys argued that the FBI agents feared destruction of the evidence by Kurniawan’s mother before the agents could obtain a search warrant from a magistrate. However, District Court Judge Berman disagreed with the arguments posed by Kurniawan’s attorneys. Siding with the arguments posed by the government attorneys, Judge Berman reasoned that, even if the search was conducted without a warrant, there was enough probable cause at the time the search was conducted to render the search reasonable.
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Some interesting news from the last week in the context of wine. On the docket for this week:
 
Transport Company Sued for Over $2 Million Wine Shipment: Owners of a private wine collection, valued at over $2 million, being shipped across the United States sued Cellar Advisors, LLC. The owners, D. Gideon Searle and Nancy Searle, hired Cellar Advisors in June 2012 to transport their personal wine collection from Illinois to Florida. The wine arrived in Florida a month later, and workers noticed that the wines were warm and showed evidence of damage, thus suggesting the wine was not properly maintained or stored during the transportation. (See Transport Company Sued Over $2 Million Wine Shipmen; and Lawsuit Over Lack of Temperature Control for Wine.) The complaint was filed in the United States District Court for the Northern District of Illinois by Great Northern Insurance Company, the Searle’s insurance company. The complaint sets forth arguments against Cellar Advisors on the theories of negligence, negligent misrepresentation, and breach of contract. 
 
On the grounds of negligence, the complaint sets forth that Cellar Advisors owed a duty to the Searles to “receive, handle, transport, and deliver the wine collections with due care under the circumstances” and that the damages to the wine were caused by the negligence, careless, and acts or omissions of the defendant. (Great Northern Insurance v. Cellar Advisors.) On the count of negligent misrepresentation, the plaintiff alleges that Cellar Advisors made false statements of material fact to the insureds with respect to how the insureds’ wine collection would be “received, handled, transported, and delivers by [defendant] . . . in refrigerated containers,” and that the insureds entered into a contract with the defendant in reliance upon the representations made by the defendant. (Id.) As this is not your usual type of shipping case (i.e., direct shipment), On Reserve will follow the outcome of this case and post accordingly.

For more information on wine or alcohol law, direct shipping, or three-tier distribution, 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.

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Recently, Osawa Wines won a labeling dispute against Chateau Mouton Rothschild Estate. The disagreement, which spawned over the use of the wine label Flying Mouton, originated in 2008 when Osawa started producing a new alcohol beverage product with a Flying Mouton wine label. Shortly thereafter, Chateau Mouton Rothschild estate filed a case against Osawa Wines in the Intellectual Property Office of New Zealand. The case entailed a trademark issue, as Chateau Mouton Rothschild estate alleged that the label used by Osawa Wines resembled a label of Chateau Mouton Rothschild’s brand Mouton Cadet. The company reportedly argued that the Osawa Wine label was likely to “deceive or confuse” consumers in New Zealand, as the French wine estate’s products were well known in the New Zealand market. (See Kiwi Label Wins Wine Clash.)

In addition to its trademark infringement claim, Chateau Mouton Rothschild also directed Osawa Wines to withdraw its trademark application to use the Flying Mouton label in Japan and Australia. In total, Chateau Mouton Rothschild filed nine oppositions to the wine label, all of which were rejected by Jennie Walden, trademark assistant commissioner. 
 
The director of Osawa Wines, Mark Lim, relayed that the word “Mouton” derives from many disparate objects and instances. “Osawa Wines claimed that its use of the word ‘mouton’ is meant to be a translation of the French word for ‘sheep’ and referenced the vineyard’s origins as a sheep farm. In fact, the wine’s label displays an image of a flying sheep.” (See Château Mouton Rothschild Loses Trademark Fight Against Flying Mouton; see also New Zealand Winery Wins Mouton Trademark Battle.)
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Last year, On Reserve posted an article about the suit brought by Koch against Christie’s in a New York federal district court. New York District Court Judge, Honorable Barbara Jones, granted the motion to dismiss of the auction house Christie’s and dismissed the suit against the acclaimed auction house. In that suit, William Koch, billionaire and avid wine collector, filed suit against the auction house last year claiming Christie’s “induced” him to buy a fraudulent bottle of 1870 Lafite wine at an auction for $4,200. (See Christie’s Wines Dismissal of Koch’s Counterfeit Wine Suit.) In his complaint, Koch claimed fraud, civil conspiracy, and aiding and abetting — alleging that the London-based auction house has sold counterfeit wine “for many years.” (Id.) Judge Jones, in her ruling, reasoned that while Koch alleged he was injured due to misrepresentation made on behalf of the auction house, Koch placed bids on the wine while he knew it was fake, and could thus not recover for his injury. (See Judge Dismisses Koch Suit Against Christie’s.)

This year, Koch appealed to the United States Court of Appeals for the Second Circuit. On appeal, Koch argued—among other points—that the District Court erred in its application of the legal standard of doctrine of inquiry notice. The doctrine of inquiry notice allows a court—in some circumstances—to impute knowledge on a plaintiff of facts that are sufficient to allow the statute of limitations to run in situations where a plaintiff could have discovered the facts by a reasonably diligent search or examination. His argument was also rejected by the Second Circuit, but this time for matters relating to the statute of limitation. On October 4, 2012, the Court of Appeals for the Second Circuit dismissed the case brought by Koch on the grounds that the statute of limitations expired. (See Koch Brother Loses Suit Due to Statute of Limitations.) The Court of Appeals reasoned that, while Koch bought a bottle of wine from an auction at Christie’s in the 1980s that allegedly belonged to Thomas Jefferson, the statute of limitations had run, as Koch did not file suit against Christie’s until 2011. Despite numerous instances that allowed Koch question the authenticity of the wine, the suit against Christie’s was not filed until 2011. (In the 1990s, Koch reach several articles questioning the authenticity of Jefferson wine and hired attorneys to investigate claims after a lawsuit had been brought against the individual who discovered the alleged Jefferson wine; in addition, in 2010, Koch hired Woods Hole Oceanographic Institute to perform radiocarbon analysis on the wine, results of which indicated there was less than 4.6% probability that the wine was from the time period alleged. Koch later sued the discoverer of the wine in 2006 and received a default jdugment, but Koch did not proceed to file suit against Christie’s until 2011.)

For an interesting and wine-related read, see Judge John G. Koeltl’s opinion here

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Recently, Napa Valley Vintners Association (“NVVA”) announced that Brazil has formerly recognized that Napa Valley is of Geographical Indication (“GI”) status. Brazil will now protect Napa Valley from misuse of the wine region’s name within Brazil’s borders. (See Napa Valley Vintners Announce GI Status Approval in Brazil.)

The news was announced at this year’s International Wine Law Association conference in Bento Goncalves, Brazil. Brazil is a new world wine region, but the country is among one of the top wine producers worldwide. Currently, Brazil ranks as the thirteenth greatest wine producing country, ranking higher than New Zealand and Greece. Currently, the Napa Valley GI is recognized in areas including the EU, Thailand, India, and Canada. (See Napa Deal Bolsters US and Brazilian Ties.)

The new agreement extends from an agreement between the United Stated and Brazil from earlier this year. In the previous agreement, the United States agreed to recognize cachaça as an exclusive product of Brazil while Brazil agreed to restrict the use of the name bourbon and Tennessee whiskey to whiskeys distilled only in Kentucky and Tennessee. (Under previous regulations, the United States required cachaça to be labeled, “Brazilian rum,” without any  restrictions on the use of cachaça  on products from other countries or even within the United States.)  (See, e.g.Brazil, U.S. Move to Boost Cachaca, Tennessee Whiskey, Trade.) The prior agreement between the two countries received favorable responses from many, specifically noting that “[t]his exchange of letters represents a very positive development for both of our industries, and reflects our Governments’ commitment to stronger bilateral trade ties.” (Id. quoting U.S. Trade Representative Ron Kirk.)

The recognition of Napa Valley’s geographical significance throughout the world helps promote the brand identity of the wine region, and will continue to enforce the region’s significance as additional countries recognize Napa. The recent developments between the two world wine regions maintains the importance of geographical significance and identification between different wine regions and enforces the idea that geographical identity is of continuing significance.

For more information on wine or alcohol law, labeling, or geographical indications, 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.

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