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Empire Wine Bills Delivered to Governor Cuomo

A5920 delivered Governor CuomoOn November 30, 2015, the two talked about bills, A05920 and S04446, in New York’s Assembly and Senate were delivered to Governor Cuomo. A05920 was introduced to the Assembly in March of this year by Assemblyman Phil Steck and 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. A05920 was passed by the Assembly in June and its sister bill, S04446, was passed by the Senate one day later. See Empire Wine Bill Passes in New York Assembly and Empire Wine Bill Passes in New York State Senate. Since June, the bills have been waiting to reach the Governor’s desk in hopes of being signed into law. 

For more information on the origin of the bills, see Bill Introduced to New York State Assembly Supports Empire Wine.

For more information on New York State wine or alcohol law, or establishing a winery, brewery, or distillery in New York, 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 NYSLA announced on its website that the second industry working group meeting will take place on December 8, 2015. The group will continue to consider changes or modifications to New York’s alcohol beverage laws. The first meeting devised a list of significant issues relating to New York’s alcohol beverage laws, which can be read about in a prior entry of On Reserve here. The webcast from the first industry working group meeting can be listened to here

The upcoming meeting will take place on December 8, 2015 at 10:30 AM in the New York City office’s full board room, and will be available via video conference at the Buffalo and Albany offices. Parties interested in attending are asked to e-mail the NYSLA, who can be reached at  RSVP@sla.ny.gov, by December 6th to reserve a seat.

For more information on New York State wine or alcohol law, or establishing a winery, brewery, or distillery in New York, 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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It is truly an honor to share that On Reserve was named one of the top 100 legal blogs or “blawgs” of 2015 by the American Bar Association Journal (ABA Journal). This is the second year that On Reserve received this honor from the ABA Journal, and I am incredibly proud to share this great news. From the ABA directly:

For this year’s annual Blawg 100 feature—our ninth—we’re going beyond announcing our list of 100 excellent legal blogs and the promotion of 10 more blogs to our Hall of Fame. We explore how the legal blogosphere has changed since we first started publishing this list. Do legal blogs have a waning or a thriving readership? And how has the emergence of new bloggers from BigLaw and elsewhere and other social media platforms in recent years changed blogging for the better—or worse?

As in years past, we looked to readers and bloggers to help us compile our list. But this year, no blogs are being forced into categories, and there will be no online voting. Read below to find out more about the blogs on our list, and click here to find our Blawg 100 Twitter list, which includes both the handles of our Hall of Famers and this year’s nominees.

Thank you to all of those who continue to make the wine world (and the wine law world) stimulating and worth writing about. This last year has been an incredible year in the wine industry to write about, and I certainly hope the next year will only prove better. 

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Last Thursday I attended the first open meeting of Governor Cuomo’s new alcohol beverage industry working group. The group, whose main mission is to modernize New York’s alcohol beverage laws by reviewing current statutory provisions, spent the entire meeting identifying a list of issues for further discussion and/or consideration. 

The first eighteen issues, below, were initially brought up by the New York State Liquor Authority (“NYSLA”). Members of the working group were allowed to comment about whether the issues should be considered for further discussion or tabled (for a variety of reasons, with respect to this working group).

  1. A general reorganization of New York’s alcohol beverage laws.
  2. Consolidation of licenses—for example, eight different on premise licenses currently exist. Is there a way to consolidate the types of licenses available without taking rights away from current or potential licensees?
  3. Should the 500 foot rule be incorporated in the statute? Further, what is “good cause”? Should its definition be left to case law and the Authority’s interpretations of decisions?
  4. Tied house laws—while the group on Thursday agreed that the state’s tied house laws are important, many conflicting opinions existed in regard to whether the laws should be further examined by the group and potentially modernized. As a result, the Authority decided to table this particular issue, with respect to this working group.
  5. Brand owners in New York—should there be a separate state license available for brand owners in New York who want to sell their alcohol beverage product to New York-licensed wholesalers? As acknowledged by the group, the state wholesale license often impractical for industry members who own one or two brands and only want to sell their product to wholesalers.
  6. Primary source laws—Should New York have a primary source law? As many industry members fight back against counterfeit goods in the marketplace, does it make sense for the state to consider adapting primary source laws that are found in the laws of a handful of other states? A strong concern presented by one member was that primary source laws may drive the cost of sale up.
  7. Is there a need for a solicitor’s permit (on either the manufacturer or wholesaler side, to be analyzed individually)?
  8. Hours of sale—(1) Should there be a change in Sunday hours? (2) Can towns and cities be allowed to determine hours? (The latter was tabled with respect to this working group.)
  9. With respect to the 200 foot rule, should the NYSLA have discretion when there is no objection (i.e., when an applicant is not within the restrictions of the rule and interested parties do not object)?
  10. Family pricing—should volume discounting be allowed with respect to mixing and matching products of different sizes? (This group stated there was no point in pursuing this discussion at this time.)
  11. Should there be one generic wholesale license?
  12. Manufacturers—currently, several licenses, each providing the licensee with different types of rights or privileges, can be obtained for the same location. Does it make sense to have one license that will cover these rights and privileges?
  13. Co-op buying—should different licensees (package stores) be allowed to take advantage of discount pricing? (I  believe this was tabled.)
  14. Price posting—should there be a change in deadlines for manufacturers and/or wholesalers with respect to price posting?
  15. Qualified convictions—should misdemeanors and felonies have to be disclosed when completing an application, or just felonies?
  16. Certificate of relief and good conduct—how should out-of-state applicants be handled with respect to this requirement? (i.e., as discussed last week, currently out-of-state applicants cannot obtain such certificates if they are not New York residents.)
  17. Should industry members be able to pay wholesalers by credit card? (This issue was also tabled by the group.)
  18. Growlers—should wineries be allowed to sell growlers?

The remaining issues were brought up by working group members, as well as the large group of public attendees. Several issues were either removed or tabled because they were considered to be policy or administrative, i.e., not statutory.

  1. Can the laws make parody between farm distillers, wineries, and breweries? For example, farm wineries, breweries, and cideries in New York can open up to five branch offices within the state, but farm distilleries are only allowed one.
  2. Should there be legislation regarding out-of-state retailers who ship into New York without a license? Should these retailers be fined and/or subject to New York’s jurisdiction?
  3. COD (electronic system notifying wholesalers of delinquent retailers)—should there be a 10-day grace period? Issue is that many retailers are accidentally placed on this list and it automatically notifies every wholesaler that they are on COD. (Tabled.)
  4. Wine Product versus Wine in grocery stores—the sale of wine in groceries stores is illegal in New York. Grocery stores can only sell “wine products,” which are generally wines that do not contain more than 6% ABV and further meet NY’s definition of “wine product” (e.g., added juice, flavoring, water, citric acid, sugar and carbon dioxide). But some grocery stores advertise selling “wine” in flyers and in specific sections in the store. This causes confusion among industry and consumers. Should the brand label approval process for these products change? (Unclear where the group came out on this issues.)
  5. Ancillary businesses in New York (specifically in regard to temporary wine and beer permits, e.g., beer festivals)—because New York’s law allows temporary permitees to purchase the commodity from a wholesaler, individual will still purchase a supplier’s brand and misrepresent the brand even if the brand has chosen not to participate in the festival. How should the law deal with this issue?
  6. Tap handle deposit—how should this be handled?
  7. Should the license fee for New York City-licensed retailers be reduced?
  8. Should the marketing permit be codified within licenses?
  9. Should multiple wine brands (i.e., from different wineries) be allowed to be directly shipped to consumers?
  10. How should industry members’ online presence be regulated? Further, how should third party vendors, most of whom are not licensed with the NYSLA, be regulated?

The first working group meeting concentrated on identifying statutory issues for which there was a consensus to discuss at future group meetings. Although several of the above issues were identified as important and relevant, some of the issues were tabled because there were controversial opinions as to whether a further discussion was necessary. In other instances, there was a consensus that topics were not worth pursuing. That being said, many of the issues are still open for discussion, and the progress will be interesting considering the group’s aim to provide recommendations to legislature by January 2016.

For more information on New York State wine or alcohol law, or establishing a winery, brewery, or distillery in New York, 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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Last week, as reported by the Times Union, a decision by Acting Supreme Court Justice Debra Young ruled against the New York State Liquor Authority (“NYSLA”) with respect to an ongoing legal battle with Colonie-based retailer Empire Wine. See In Empire Wine Case, SLA Must Release Communications With Illinois Officials. Empire originally sought production of the NYSLA’s communications with the Illinois Liquor Control Commission, documents that the NYSLA argued were attorney work product or were otherwise exempted from disclosure requirements because such communications were part of an ongoing investigation or judicial proceeding. These types of communications are exempted from disclosure under New York’s Freedom of Information Law. Id. Additionally, the judge rejected the Authority’s arguments that such communications were interagency communications, which are exempted from disclosure under New York’s Freedom of Information Law, reasoning that the Illinois Liquor Control Commission is not an entity of the New York State government. Finally, Young ordered the NYSLA to disclose communications and records the Authority had with UPS in regard to the interstate shipment of alcohol. The index number for the October 28, 2015 decision is 003656/2015.

Interestingly, hardly two weeks later, Governor Cuomo announced the creation of an industry working group which aims to recommend revisions to New York State’s alcohol beverage laws and regulations. See Governor Cuomo Announces New Industry Working Group to Modernize New York Alcohol Laws. In particular, the group “will review existing statutory provisions and explore approaches to clarify and modernize the 80-year-old statute.” Id. The Governor’s website cites the third annual Wine, Beer, Spirits, and Cider Summit as the originator of this new working group and further emphasizes that the group will focus on reorganizing or replacing the state’s current laws governing alcohol beverages including: (1) removing outdated and redundant provisions; (2) modernizing statutory language; (3) improving and consolidating various licensing provisions; (4) clarifying the types of licenses available; (5) reducing mandatory paperwork; and (6) eliminating unnecessary restrictions imposed on manufacturers. Id.  The working group will hold an opening meeting on November 12, 2015 at 1:00 pm at the State Liquor Authority’s office in Harlem. More information is available here

In the last few years, the Governor—and many other industry players—has made a strong effort to improve the state’s beverage industry, as well as eliminate many regulatory hurdles and create opportunities and incentives to attract new industry members. A few noteworthy changes are the tax law amendment and the Craft New York Act. While the state’s industry has improved drastically in the last ten or fifteen years, industry can still benefit from changes (and modernization) in legislation and regulations. The meeting on Thursday is a noble effort to bring together respected industry members from all tiers, along with regulators, to resolve some of New York’s most pressing regulatory issues in the beverage industry. 

For more information on New York State wine or alcohol law, or establishing a winery, brewery, or distillery in New York, 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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On October 26th, TTB released a press release stating the agency planned to public a notice in the Federal Register the following day which would reopen the comment period for the proposed Lewis-Clark Valley American Viticultural Area (AVA), which is comprised of 306,650-acres found in locations including Nez Perce, Lewis, Clearwater and Latah Counties in Idaho and Asotin, Garfield, and Whitman Counties in Washington. In that same press release, TTB also noted that it was reopening the comment period for additional public comment on the proposed realignment of the Columbia Valley AVA. There is a potential partial overlap with the proposed Lewis-Clark AVA and the current Columbia Valley AVA. The current proposed realignment would remove the region from the Columbia Valley AVA and place it entirely within the proposed Lewis–Clark Valley AVA. (The original proposal was published on April 14, 2015 in the Federal Register as Notice No. 149.)

In Notice No. 149A, published October 27, 2015, TTB specifically notes that the agency believes the 60-day comment period originally available for Notice No. 149 was sufficient. However, the agency recognizes that the alteration of an AVA’s boundary has a significant impact on industry members, particularly winemakers and vintners using wine or grapes eligible for the “Columbia Valley” AVA. TTB notes this specifically in Notice No. 149, as below:

TTB notes that if the proposed realignment area were to be removed from the Columbia Valley AVA and placed into the proposed Lewis-Clark Valley AVA, wines made primarily from grapes grown within the proposed realignment area would no longer be eligible to be labeled with the ‘‘Columbia Valley’’ appellation of origin. Therefore, because of the potential effect on label holders if TTB were to adopt the proposed modification of the Columbia Valley AVA boundary, TTB has determined that it would be appropriate in this instance to re-open the comment period, for the specific purpose of obtaining further public comment on the proposed boundary modification, before taking any further regulatory action on this matter. 

The original proposed rule received 38 comments, the majority of which were quite favorable of the establishment of the Lewis-Clark Valley AVA. However, it does seem that the above issue raised by TTB may not have been considered by many of the commenters, or perhaps did not impact those persons who voiced an opinion on the original Notice No. 149.

The comment period for both proposals will close on November 27, 2015. Comments can be submitted through the Regulatons.gov website through the online comment form for Notice No. 149 as posted within Docket No. TTB-2015-0005.

For more information on wine or alcohol law, AVAs, 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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TTB Makes Small Change to COLA Process

In an industry circular dated October 2, 2015, the TTB announced that it made a minor administrative change—and perhaps a very welcome update—to the label approval process. TTB will no longer return label applications to fix discrepancies between what appears on the label and what is stated on the application itself with respect to the net contents, the alcohol content, and the wine vintage date. This holds true provided that:

  1. The information that appears on the label is compliant with applicable regulations; and
  2. The information provided on the application is authorized under the agency’s list of Allowable Revisions to Approved Labels

The agency noted that, when a label is approved under the above circumstances, TTB will add a qualification to the COLA stating that TTB approved the label in spite of the inconsistency. There are some caveats, of course. The net contents statement still has to be considered an authorized standard of fill (for wine, the standard of fill regulations are generally found in 27 CFR 4.72). For alcohol by volume discrepancies, the inconsistency would still have to be within the permissions of Rule 11 on the Allowable Revisions to Approved Labels. For example, it seems possible that an applicant’s wine label could state “Table Wine” with an alcohol by volume of 11% on the label, but the application states 14.5% alcohol by volume (thus putting the wine into a different class and type, dessert wine). The outcome may be different if, for example, the wine label contains a varietal designation (which can be used in lieu of a class designation as a wine’s class and type statement for still grape wine) despite the change in tax classification.

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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Recent Publication: Label Lawsuit Lessons

label lawsuit lessons wine law lawsuits supreme court pom coke

The November/December 2015 issue of Vineyard & Winery Management magazine features one of my most recent articles, Label Lawsuit Lessons. The article details the implications the 2014 Supreme Court case POM Wonderful LLC v. Coca-Cola Co. may have on the wine industry. Specifically, the article looks at the idea that a COLA may simply be a floor and not a ceiling when it comes to liability against third party and class action lawsuits. 

For more information, please see the current issue of Vineyard & Winery Management here.

For more information on wine or alcohol law, labeling, or trademark, please contact Lindsey Zahn.

Photograph property of Vineyard & Winery Management.

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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Chateau Lafitte Rothschild trademark China

As reported by Decanter, Château Lafitte claimed victory against an ongoing trademark case and can reportedly sell Bordeaux wine in China under the name Château Lafitte. See Chateau Lafitte Claims Trademark Wine in China. The dispute in China has been ongoing for about two years and has been between Château Lafitte and Château Lafite Rothschild, but an earlier version of a similar dispute between the two châteaus existed in France as early as 2003. Id. In 2008, the Court of Appeals in Paris approved the use of Château Lafitte, which is said to have origins dating back to the eighteenth century. Id. 

Chateau Lafitte trademark winePrior reports detailed by On Reserve have outlined the perilous atmosphere with which trademark owners are often greeted when registering a mark in China, and such was no different for Château Lafite Rothschild who fell victim to unauthorized uses of the Château Lafite Rothschild name. Rothschild originally launched a complaint against Château Lafitte in 2013, asking China to overturn the trademark registration for Château Lafitte. As reported by Decanter, in August 2015, the Administration of Industry and Commerce said it would not uphold Château Lafite Rothschild’s complaint as the Administration found there was no likelihood of consumer confusion. Id. The two wine companies both sell products under their respective names in France, but at significantly different price points (i.e., in February 2014, Wine Spectator noted that Château Lafitte wine sells for approximately $25 whereas, as many wine aficionados know, a bottle of Château Lafite Rothschild can reach up to $2,000. See Unfiltered: Bordeaux LaFight Club: Lafite vs. Lafitte).

In the past, registering a mark in China has proven difficult for many winemakers and brand owners who often discover that squatters have sought and obtained registration to well known names, like Château Lafite Rothschild. See, e.g., The New Chinese Trademark Law In Effect: The Wine VersionIs China Making a Step Forward in Wine Trademark Law?; and French Wine Company Castel Frères to Pursue Trademark Battle Against Panati in China’s Supreme Court. China trademark law changed in the last year and has shown some progress, albeit limited in the wine sector. See, e.g., Penfolds: The Unfolding of China’s New Trademark Law. While the above conflict between the two French châteaus is certainly different from the more common brand squatter issue many beverage companies fall victim to, it still creates interesting discussion for several reasons. First, it calls to question whether China is taking a step forward—or even a step backward, in the eyes of Château Lafite Rothschild—in regard to trademark registration and international brand owners. Further, one wonders how the Administration may have reacted had the original registration been held by a domestic party or whether the Administration’s ruling would have changed if this had been a traditional brand squatting issue. Lastly, it suggests some level of international comity may be harvested by China, i.e., by recognizing (and perhaps, more so, indirectly) France’s decision to honor the two names despite similarity of goods and even name. 

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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On Tuesday, September 15, 2015, TTB published a rule in the Federal Register detailing the agency’s revision of wine regulations that govern the return of wine to bonded premises. See Return of Wine to Bonded Premises. The final rule was issued without prior notice and comment. The new rule is summarized below:

  • TTB’s new rule removes a regulatory requirement that wine returned to bond must be unmerchantable. 
  • The new rule revises current regulations to clarify that the refund or credit of excise tax applies to any wine removed from a bonded wine cellar and subsequently returned to bond (current regulations only allow a refund or tax credit for wine produced in the U.S.). 

The Internal Revenue Code outlines relevant excise tax collection for the production and importation of wine and, generally speaking, federal excise tax is imposed on wine in bond in, produced in, or imported into the U.S. (determined at the time the wine is removed for consumption or sale). Tax on domestic wine is generally determined when wine is removed from the bonded premises whereas the tax on imported wine is generally imposed when the wine is imported into the U.S. and determined and/or paid when the wine is removed from bonded premises or Customs custody. 

TTB’s current regulations in regard to the return of taxpaid wine are found in 27 CFR Part 24. In summary, the regulations state that when wine produced in the U.S. is removed from bonded premises and later found to be unmerchantable, the wine can be returned to bonded premises for reconditioning, reformulation, or destruction (assuming tax was paid on the wine upon removal from bond). Such wine returned to bond may allow the proprietor to be subject to a tax credit or refund. If the wine is untaxpaid, the proprietor or the individual responsible for paying the tax may be relieved from liability upon return of the wine to bond. 

Section 1416 of the Taxpayer Relief Act of 1997, Public Law 105-34, 11 Stat. 788, amended the relevant section of the Internal Revenue Code. In particular, the requirement that wine returned to bond must be unmerchantable was removed from the Code—which prompted TTB to amend its provisions (i.e., “unmerchantable” will now be removed from relevant portions of 27 CFR Part 24, including 24.66(a), as well as other sections of the CFR).

Section 6014(b)(2) of the Internal Revenue Service Restructuring and Reform Act of 1998, Public Law 105-206, 112 Stat. 685, amended the relevant section of the Internal Revenue Code in regard to the requirement that wine returned to bond (and subsequently eligible for a tax credit or refund) must be produced in the U.S. The amended section now requires that wine first be removed from a bonded wine cellar and, accordingly, the new rule issued by TTB removes references to “United States” or “produced in the United States” in connection to “wine” (i.e., in relevant portions of 27 CRR Part 24) and “domestic” in connection to “wine” (i.e., in relevant portions of 27 CFR Part 70). In practice, the eligibility for tax credit or refund should extend beyond domestic wine once the final rule becomes effective on October 15, 2015.

For more information on wine or wine law, licensing, or winery reporting and excise taxes, 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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