Sunday, September 29, 2013

Eighth Circuit Rejects Southern Wine and Spirits Appeal, Says States May Discriminate Against Out of State Wholesalers.

Despite being the 32nd largest private company in the U.S. according to Forbes Magazine and operating in almost a dozen states, Southern Wine and Spirits of America continues to have trouble entering the Missouri market.  Last week, the U.S. Court of Appeals for the Eighth Circuit denied Southern’s appeal challenging the constitutionality of Missouri's alcohol beverage wholesaler residency requirement.  The opinion can be found here.  

Under Missouri law, only "resident corporation[s]" may hold an alcohol beverage wholesaler license.  Resident corporations must not only be incorporated under Missouri law, but all of its officers and directors must be "qualified legal voters and taxpaying citizens of the county … in which they reside" and have been "bona fide residents" of Missouri for at least three years. 

Southern filed suit in 2011, claiming that the residency requirement violated the Commerce Clause and Equal Protection Clause of the Fourteenth Amendment by discriminating against out of state wholesalers in favor of in-state wholesalers. 

Despite acknowledging that residency requirements are “impermissible under Commerce Clause jurisprudence,” the Eight Circuit upheld Missouri’s residency requirement for the wholesale tier of Missouri’s three-tier system. 

In reaching its conclusion, the court relied heavily on dicta from the Supreme Court's opinion in Granholm v. Heald – the case that struck down discriminatory state laws that prohibited out-of-state wineries from exercising the same direct-to-consumer shipping privileges enjoyed by in-state wineries.  Specifically, the Eight Circuit relied on a passage in which the Supreme Court stated that it had previously recognized the three-tier system was "unquestionably legitimate" and that "State policies are protected under the Twenty-first Amendment when they treat liquor produced out of state the same as its domestic equivalent."

The Eight Circuit interpreted this language to mean that so long as the wholesaler residency requirement did not discriminate against out-of-state producers, it is immune to a constitutional challenge.  In other words, according to the Eight Circuit's opinion, states are free to discriminate against out-of-state wholesalers or retailers under Granholm (a case that presented no questions regarding the wholesale or retail tier) so long as there is no discrimination against out of state products.

Southern was represented in its appeal by Neal Katyal, a noted constitutional scholar who has argued before the Supreme Court on multiple occasions, including in Hamdan v. Rumsfeld in which Katyal successfully argued that President George W. Bush did not have authority to establish military commissions to try detainees held at Guantanamo Bay.  According to this news report, Southern has not stated whether or not it will appeal the Circuit Court's ruling.

For more information contact, John Trinidad (

Thursday, September 26, 2013

California’s Minimum Wage will Increase July 1, 2014

On September 25, 2013, California Governor Jerry Brown signed AB 10, increasing California’s minimum wage for the first time in six years.  The current minimum wage is $8.00 per hour.  This legislation will increase the minimum wage to $9.00 per hour effective July 1, 2014 and to $10.00 per hour effective January 1, 2016


Previously proposed versions of this Bill provided the increase over a five year period and that after January 1, 2016 annual increases would be tied to California’s Consumer Price Index.  The final version accelerated the increase, but does not provide for any increase after January 1, 2016.


Governor Brown called the Bill an overdue piece of legislation that will help working-class families and close the gap between "workers at the bottom and those who occupy the commanding heights of the economy."


The federal minimum wage is $7.25 per hour.  California is among 19 states and the District of Columbia that set a higher state minimum wage. 

For more information or assistance on wage and hour matters contact Jennifer Phillips at

Monday, September 23, 2013

Employers: Mandated Insurance Notice Deadline October 1st

By October 1, 2013, all employers covered by the Federal Labor Standards Act (FLSA), regardless of size, must issue a notice to their employees about the new health insurance options available under the Patient Protection and Affordable Care Act (ACA). Health insurance options will be available through health care exchanges and marketplaces on January 1, 2014. ACA requires employers to provide notices to their current employees about these new options no later than October 1, 2013. AfterJanuary 1, 2014, employers will be required to provide such notice to new employees within 14 days of their start date. Employers must give the notice even if they do not offer health insurance coverage to employees.


Employers are covered by FLSA if they employ one or more employees who are engaged in, or produce goods for, interstate commerce with at least $500,000 in annual dollar volume of business. FLSA may also cover employees of companies that do not meet the $500,000 annual dollar volume test in any workweek employees are individually engaged in interstate commerce, the production of goods for interstate commerce, or an activity that is closely related and directly essential to the production of such goods. Wineries and wine-related companies with annual dollar volume of less than $500,000 should carefully consider if their employees are nevertheless covered by FLSA.


Information about what to include in the notice, as well as model notices, can be found on the Department of Labor’s website here ( Employers may wish to modify the model forms so that they provide effective notice to their employees. Some of the language on the model form may cause additional confusion. We encourage you to consult with your legal counsel and health plan administrators for assistance.

For more information or assistance please contact Jennifer Phillips at 

Tuesday, September 17, 2013

Harvest Time and Grape Growers' Liens - Custom Crushers Beware

A few years ago, I wrote about the producer’s lien.  As I explained in my prior post, the law provides a grape grower with an automatic lien against any wine made from the grower's grapes.  This lien, called a “producer’s lien,” means that the winery cannot lawfully sell the wine without paying the grower.  It gives a grower great legal protection.


While the concept behind the producer’s lien is simple, it can get complicated in practice.  For example, a recent situation involved a grower who sold grapes to a winery, but delivered the grapes to a custom crush facility for crushing and fermentation.  The winery then failed to pay both the grower and the custom crush facility.  Does the grower still have a producer’s lien?  Does the custom crush facility have a producer’s lien?


In this situation, the custom crush facility claimed it was a “producer” and consequently entitled to a lien against the wine it had now made for the winery.  The custom crush facility would not, therefore, release the wine to the grower or the winery until it was paid.  The grower, however, also claimed a lien against the wine, and demanded that the custom crush facility give the wine to the grower, even though the grower had not been paid.  The winery also demanded the wine, because it needed to sell the wine to pay both the custom crush facility and the grower.


Unfortunately for the custom crush facility, only the grower can claim a producer’s lien.  While the custom crush facility might argue it is a “producer”, the producer’s lien applies only to a producer who “sells any product which is grown by him. . .”  (See CaliforniaFood and Agricultural Code § 55631.)  The custom crush facility didn’t grow anything; it couldn’t, therefore, obtain a producer’s lien.


This means that the grower can force the custom crush facility to return the wine to the grower so the grower can sell the wine to recover what it is owed.  The grower obtains the lien automatically (and this lien takes priority over all other liens), but the grower may need to take legal action to force the custom crush facility to cooperate and turn over the wine to the grower.


But what is the custom crush facility to do?  In this situation, the custom crush facility will need to take action to obtain a junior lien against the wine.  It will want to make sure that, if the grower sells the wine, it can still get whatever money is left after the grower’s bills are paid.  It does not automatically obtain the benefit of a lien, as the grower does.  It has to go out and get its lien.


Happily in this situation, the grower, the custom crush facility, and the winery were all able and willing (with the assistance of counsel) to cooperate without legal action.  The grower sold the wine and took a portion of the proceeds to satisfy its bills.  The custom crush facility then took some of the proceeds left over to satisfy its bills.  And, there was still a little left over for the winery. 


If you have any questions about contract disputes or producer’s liens, please contact John N. Heffner

Monday, September 9, 2013

Wine & Trademark Law: Creating, Protecting & Building Equity in Your Wine Brand

Dickenson, Peatman & Fogarty attorney Katja Loeffelholz, a registered attorney with the United States Patent and Trademark Office, recently presented “Creating, Protecting & Building Equity in your Wine Brand” at the Wine Industry Forum.  You can download a copy of Ms. Loeffelholz's presentation here:

The presentation provides an introduction and overview of trademark law as it specifically applies to the wine industry.  It includes several examples of what aspects of a wine label, bottles and packaging can be protected.  In addition to trademarks, other things closely associated with brands -- such as  slogans, colors, specific product features, designs and bottle configurations -- are protectable assets.  

In addition, Ms. Loeffelholz's presentation addresses what makes a strong mark; adopting and clearing a brand; trademark registration; enforcing your intellectual property rights; and how copyright in label designs and design patents in bottle shapes create additional brand equity.  The presentation also points out various pitfalls wine industry clients encounter in selecting and protecting their brand, and how to avoid them.  

For more information on trademark or patent matters, please contact Katja Loeffelholz at

Sunday, September 8, 2013

Charlie Trotter Files Answer in Wine Fraud Lawsuit

In June 2013, Plaintiffs Ilir and Bekim Frrokaj filed a lawsuit claiming that celebrated chef Charlie Trotter sold them a counterfeit magnum of 1945 Domaine de la Romanee-Conti in June 2012.

Trotter filed his answer yesterday, in which he denies that the wine sold to Plaintiffs is counterfeit or fraudulent.

Trotter's answer can be found via the link below: