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How Do I Transfer a Liquor License When I Purchase a Restaurant or Bar in Tennessee?

By - March 12, 2017 | Alcoholic Beverage Law | Email Will Cheek

We hear it all the time.  A top of the charts question is how do I transfer the liquor license when I purchase a restaurant or bar in Tennessee?

Here is a simple guide.

1. Liquor licenses in Tennessee are not bought and sold.  Unlike many states, liquor  licenses and beer permits are issued to any qualified applicant in Tennessee.  Licenses have no value.

2. When you buy a business that serves beer, wine and spirits, you have to obtain your own beer and liquor licenses.  You can be looking at a prolonged interruption in service if you fail to apply and obtain your own beer and liquor licenses.

3. Make sure you understand local beer board practices.  The rules vary widely from city to city.  For example, in Nashville, it is best to apply at closing, or the beer inspector may visit and tell you to stop selling beer.  Check with your local beer board before closing and make sure you know what you need to do to.  Most importantly, do what you are told by your local beer board.

4. The Tennessee ABC will accept an interim management agreement that allows you to “use” the seller’s liquor license.  The interim management agreement must have some magic language and we strongly advise that you file a copy of the agreement with the ABC at closing.  Otherwise, you risk the ABC revoking the license, which means an interruption in service.

5. Make sure you complete all the steps to obtain your own beer permit and liquor license.  Too often, we hear from well-intentioned purchasers that are facing an interruption in service because they do not obtain their own licenses.

Classic Hank Williams Jr. comes to mind:

Play me the songs about ramblin man
Put old Jim Beam in my hand
Cause you know I still love to get drunk
And hear country sounds

 

 

Original author: William T. Cheek III
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Tennessee Restaurants, Bars and Hotels Be on the Alert for Immigration Raids

Just today, we heard from a restaurant that was “inspected” by agents looking for illegal immigrants and asking about proper documentation.  Scary stuff.  We understand that one or more Tennessee ABC agents lead the investigation.

Bone McAllester immigration expert Raquel Bellamy offers these Top 5 Immigration Tips for Employers.

Unauthorized immigration is a hot topic these days. Undocumented immigrants are roughly 5% of the U.S. civilian labor force, as reported by the Pew Research Center.  We suspect that many restaurants, bars and hotels have a much higher percentage of illegals.

Some employees give employers fake documents. Other employers intentionally hire undocumented immigrants, to gain a competitive advantage by offering lower pay and fewer protections. In the most egregious scenarios, employers falsify records and participate in labor trafficking by recruiting and smuggling workers from abroad (a big no no!).

A recent federal immigration executive order deputizes state and local law enforcement authorities to act as ICE agents.  Legally, TABC agents, local police and even beer board inspectors can now search your business for illegal or improperly documented immigrants.

Here are our top five immigration tips for employers:

1. Anticipate increased auditing of records to verify I-9 compliance. Locate and organize your records to avoid costly delays. You should have a completed I-9 for each employee.

2. Prepare for the inevitable by conducting an internal audit, which will help you identify any I-9 compliance issues.

3. Consult a competent employment attorney regarding any potential liability for violations of I-9 regulations.

4. Train front office staff (receptionists, hostesses, etc.) on how to respond to law enforcement officials who enter the premises to inquire about immigration violations. Know your rights to limit access of law enforcement officers.

5. Avoid discrimination based on national origin against potential employees. During the interview phase, limit your inquiry to whether the applicant is authorized to work in the United States and whether the applicant will require sponsorship to obtain work authorization. If an applicant or a current employee is confused about work authorization, you should encourage him/her to seek independent counsel.

6. I know I said 5, but who doesn’t love a bonus? Show compassion for workers who are experiencing personal trauma as a result of the changes in immigration enforcement priorities. Even U.S. citizens may experience a high level of anxiety over the potential impact to their family members and friends. Be mindful of negative interactions between employees. Some of my clients have reported workplace harassment. In one instance, a worker was blackmailed by a co-worker who threatened to call ICE. Employers should be aware of any workplace intimidation and maintain a policy against bullying. Again, regardless of your position on the debate, we are all less safe when pockets of our population are particularly vulnerable.

Ray Stevens controversial tune “Come to the U.S.A.” seems timely:

If you thinkin’ about illegal immigration
Be careful when you’re choosin’ the nation
‘Cause breakin’ the law in some countries is frowned upon.
Imagine that.

In a rare bit of shameless self-promotion, we can help you make sure you are properly documented, in case agents come a knockin’.  Feel free to e-mail us at This email address is being protected from spambots. You need JavaScript enabled to view it.

Original author: William T. Cheek III
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Duncan Liquor Law Letter

In this edition:

  • EN BANC REVIEW OF RETAIL DIGITAL NETWORK CASE IS UNDERWAY - Read

  • Missouri Broadcasters Association Wins Appeal of Lawsuit Challenging the State's Restrictive Alcohol Advertising Statute and Regulations - Read

  • US appeals court reinstates suit over Missouri alcohol ads - Read...

And more for more news - go to Duncan Liquor Law Letter

EN BANC REVIEW OF RETAIL DIGITAL NETWORK CASE IS UNDERWAY

All 11 judges from the 9th Circuit gathered in San Francisco this past week to hear oral arguments on the Retail Digital Network appeal, per Alcohol Law Review blog. This step marks the beginning of the "en banc" review of the case.

The blog gave us a brief summary of what took place last week saying, the "judges did seem to struggle with the specific details of the law in question [tied-house laws] and how it works in the marketplace" and the panel also had plenty of "questions on the state of commercial free speech law in the United States Supreme Court."

The blog didn't offer up its guess on the final outcome as it is a "terribly imprecise science," but it did say, "with additional cases on commercial free speech pending before the Supreme Court, the Ninth Circuit may take awhile to issue a decision."

Missouri Broadcasters Association Wins Appeal of Lawsuit Challenging the State's Restrictive Alcohol Advertising Statute and Regulations

JEFFERSON CITY, MO, January 20, 2017 - Yesterday the U.S. Circuit Court of Appeals for the Eighth Circuit unanimously revived our lawsuit that challenges a Missouri statute and two Missouri regulations that we believe illegally limit alcohol advertising.

These Missouri laws prevent consumers from receiving truthful information in advertising. Specifically, although retailers can offer price discounts and promotions on alcoholic beverages, these laws keep citizens from learning about those discounts in advance, through radio, television, and newspaper ads.
Our radio and television stations are key sources of information for Missourians. Just as with news, listeners and viewers learn about the availability of goods and services through radio and TV advertising, and a restriction on advertising truthful information only keeps relevant and useful information from consumers. That's why the MBA and several other entities challenged these laws under the First Amendment, and its guarantee of commercial free speech.

The antiquated Missouri laws at issue prohibit our advertisers from being able to advertise alcohol discounts, even though those discounts can be advertised on premise. The state contends that the restrictions are intended to discourage binge drinking, but binge drinking is more likely to be encouraged by promotions inside a bar than from media advertisements heard or seen in one's living room.
The MBA is pleased that the appeals court pointed out the many inconsistencies in the regulations, which we believe demonstrate their unconstitutionality. The Supreme Court's precedents protecting truthful commercial speech permit restrictions on commercial speech only if they are closely tailored to the state's needs, and we believe the many inconsistencies in Missouri alcohol advertising regulations show that these laws are not so limited.

Additionally, because advertising of special pricing is allowed in all our bordering states, we believe that these laws create an unfair competitive disadvantage to Missouri businesses.

The laws are also ill-suited for the era social media, which college students in a bar can use to instantly publicize alcohol discounts, and to today's world of ubiquitous and growing microbreweries and wineries, which have special exemptions from some of the restrictions.
If these laws are found unconstitutional, or removed by legislative and regulatory action, price-conscious consumers will have better information and be able to make better alcoholic beverage purchasing choices.

The immediate effect of the Eighth Circuit decision is to send the case back to the U.S. District Court for the Western District of Missouri. MBA and its co-plaintiffs intend to vigorously pursue their claims in that court, particularly in light of the Eighth Circuit's legal analysis which is highly favorable to the strength and validity of these claims.

For more information contact: Mark Gordon, President/CEO Missouri Broadcasters Association 573-636-6692

US appeals court reinstates suit over Missouri alcohol ads
By JIM SUHR Associated Press Updated Jan 19, 2017

KANSAS CITY, Mo. (AP) - A federal appeals court on Thursday revived a lawsuit challenging Missouri regulations that broadcasters and others say illegally limit how they can market alcohol.

In reinstating the case, which was tossed out last year by U.S. District Judge Fernando Gaitan Jr. at the state's behest, an 8th U.S. Circuit Court of Appeals panel unanimously ruled the plaintiffs "plausibly stated a claim upon which relief could be granted."

The 8th Circuit noted the state's justification that the restrictions are in the public interest by trying to blunt irresponsible alcohol use and underage drinking. But the appellate court cited inconsistencies in the application of the regulations, which permit advertising such generic things as "Happy Hour" and "Ladies Night" - as well as marketing all sales, promotions and discounts - on the retailer's premises.

The defendants "apparently are not as concerned with retailers baiting consumers to drink excessively once they arrive," Chief Judge William Jay Riley wrote for the three-judge panel.

In their 2013 lawsuit, the Missouri Broadcasters Association, Zimmer Radio group, Springfield winemaker Meyer Farms and Uncle D's Sports Bar & Grill in St. Joseph challenged, among other things, the state's Discount Advertising Prohibition Regulation. That rule makes it illegal for an alcohol advertisement to mention prices, rebates or discounts, essentially barring references to such things as two-for-one beer specials, a wine shop's going-out-of-business sale or a restaurant special offer of a free drink with a meal purchase.

Calling such regulations an unconstitutional and "chilling" infringement of free speech, broadcasters pressing the lawsuit have said the restrictions have cost them immeasurable potential advertising money.

On Thursday, the St. Louis-based 8th Circuit declared that those suing over the regulations have "included sufficient allegations that the challenged provisions did not directly advance the substantial interest of promoting responsible drinking."

"A theoretical increase in demand for alcohol based on a lower price does not necessarily mean any consumption of that alcohol is irresponsible," Riley wrote, adding that "the multiple inconsistencies within the regulations poke obvious holes in any potential advancement of the interest in promoting responsible drinking."

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And the Envelope Please…Oscars Not Alone in Accounting Problems: Tennessee Revenue Partially Shut Down for Liquor License Holders

Bone McAllester paralegal extraordinaire, Jennifer Maxey, tells us that the Tennessee Department of Revenue will not process new registrations for sales tax numbers, known as Certificates of Registration, until March 6, 2017.  Apparently, Revenue is the lucky recipient of a computer upgrade.

We understand that as long as a liquor license holder already has a sales tax number, Revenue can accept a new liquor-by-the-drink bond or bond rider.  Distilleries, wineries and breweries can also register new brands, as long as they already have a certificate of registration.

Original author: William T. Cheek III
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Survey Says: Tennesseans Want to Buy Wine in Groceries on Sundays

We figured that following passage of Wine in Grocery Store legislation, which we affectionately call WIGS, popular demand among consumers would lead to more changes in Tennessee law.

We blogged about pending legislation to legalize the sale of many wine coolers and niche products like sangria mixes in groceries and other food stores.  https://www.lastcalltn.com/tennessee-considers-more-wine-in-grocery-stores-with-legislation/

In our not so humble opinion, one of the biggest changes in Tennessee law is legalizing Sunday sales of wine in Kroger, Publix, Wal-Mart and other food stores.  We figure that the vast majority of shoppers would love to be able to buy wine on Sundays.

If Tennessee legalizes Sunday sales of wine in grocery stores, it seems only fair that liquor stores would also be allowed to open on Sunday.  Problem is, we think Tennessee liquor stores will oppose Sunday sales.

Based on our unscientific observations, Sunday is a big day for grocery shopping.  Grocers probably figure that many Sunday shoppers will put a couple of bottles of wine in their carts, if Sunday sales of wine are legal.  Sunday wine at a grocery is essentially an impulse purchase; if I can buy wine when I am Krogering on Sunday, great, if not, I am not going to trek back later in the week to buy wine from a grocery or a liquor store.

Tennessee liquor stores probably see Sunday sales as something they have to do, if food stores can sell wine.  But for a liquor store, being open on Sunday is not likely to draw many new sales.  Grocers already do huge business on Sunday.  Liquor store owners are closed.  Opening Sunday increases employee salaries and other liquor store expenses.

Plus, Tennessee restaurants could see a decline in wine sales from folks that cannot buy wine on Sunday, but want a glass with lunch or dinner.

Our buddy Willa reminds us of “Sunday in the South” by Shenandoah:

Mill worker houses lined up in a row, 
Another southern Sunday morning blow 
Beneath the steeple all the people have begun 
Shakin’ hands with the man who grips the gospel gun

Original author: William T. Cheek III
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Tennessee Considers More Wine in Grocery Stores with Legislation

Wine in Grocery Store legislation, which we affectionately call WIGS, allowed Tennessee grocery stores to sell wine beginning July 1, 2016, with a food store license issued by the Tennessee Alcoholic Beverage Commission.

WIGS was a messy compromise.  We expected that WIGS would be revised to fix thorny issues.

A bill pending in the 2017 Tennessee Legislature will change the legal definition of wine and, in our humble opinion, allow food stores to legally sell many wine coolers and wine cocktails that are already on shelves.

Here is the problem.  Current law says that wine sold by a grocery store must be:

the product of the normal alcoholic fermentation of the juice of fresh, sound, ripe grapes, with the usual cellar treatment and necessary additions to correct defects due to climatic, saccharine and seasonal conditions, including champagne, sparkling and fortified wine of an alcoholic content not to exceed eighteen percent (18%) by volume. No other product shall be called “wine” unless designated by appropriate prefixes descriptive of the fruit or other product from which the same was predominantly produced, or an artificial or imitation wine.

Are you asleep yet?  Seriously, the definition is so hopelessly complicated that in our opinion, it is pretty much unenforceable by the TABC.

Pending legislation expands the definition of wine to eliminate the controversy.

The Tennessee ABC describes the legislative change at Sections 4, 5, and 6 – Definition of Wine  SB695-HB435 Legislation Summary

The entire bill is here.  HB0435 HB0435

Paralegal extraordinaire Vicki reminds us of a fitting Kenny Chesney song:

Mama told them Jesus loves a sinner
His daddy said that music saved his soul
Between the rockers and the band
It’s a fitting promise land

Original author: William T. Cheek III
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Tennessee Legislature Looks to Legion of Liquor Laws

The Tennessee state legislature is in session again and several changes are proposed for alcoholic beverages.  Our friends at Nashville law firm Gullet Sanford have done such a good job summarizing the biggest bill that we link to their post here.  http://gsrmalcoholicbeveragelaw.com/alcoholicbeveragecleanupbillfiled/

Here is a copy of the bill, for anyone having problems with insomnia.  http://www.capitol.tn.gov/Bills/110/Bill/HB0435.pdf

Our good friend Willa reminds us of the Eric Church classic Drink in My Hand:

To fill it up, or throw it down
I got a forty hour week worth of trouble to drown
No need to complicate it, I’m a simple man
All you got to do is put a drink in my hand

Stay tuned as we continue our coverage of the 2017 legislative session.

Original author: William T. Cheek III
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Tennessee State Legislature Proposes to Sidestep Metro Nashville Beer Board Approval for Restaurants, Hotels and Other Liquor License Holders

As we read it, a bill pending before the Tennessee State Legislature would essentially bypass the Metro Nashville beer application process for restaurants, hotels and other establishments with an on-premise liquor license issued by the Tennessee Alcoholic Beverage Commission.  Just file an application, pay the $250 fee and you can serve beer.

The legislation is here HB0351.

The law also seems to eliminate the 100 foot distance requirement from houses, churches, schools and other disqualifying uses.  Metro Nashville requirements for beer applicants would not apply, based on our take of the bill.

The classic 1975 “I’m Just a Bill” Schoolhouse Rock Saturday morning cartoon lesson is compelling:

I’m just a bill
Yes I’m only a bill,
And I got as far as Capitol Hill.
Well, now I’m stuck in committee
And I’ll sit here and wait
While a few key Congressmen discuss and debate
Whether they should let me be a law.
How I hope and pray that they will,
But today I am still just a bill.

Frankly, we hope the legislation gets stuck in committee.  We are not a fan of state laws that eliminate local laws.  Although we would love to see Metro Nashville modernize the beer laws and the beer application process, Metro Nashville can and should do so by passing a city ordinance.

We also see the legislation as yet another step by the state to eliminate local beer boards.  For decades, Tennessee law has given cities and counties considerable leeway to decide how and where beer can be sold.  Tennessee beer laws and beer boards are often cumbersome for businesses to navigate, but are an important local control over alcoholic beverages.

For example, the 100 foot distance requirement in Metro Nashville has been the subject of considerable debate.  Currently, a restaurant that is too close to a house, church or school has to publish a public notice and have their local council member introduce a city law to waive the requirement.  In our humble opinion, Nashville should decide the fate of the distance requirement.

Original author: William T. Cheek III
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Which Employees Can My Restaurant or Bar Legally Tip?

We hear lots of questions about tipping.  Can I include kitchen staff in tips?  Can food runners share tips?  What about my sushi chef?

Restaurants, bars, caterers and venues often surprise us with innovative ideas about tipping employees.  Unfortunately, tipping has not so clear laws about who can – and more importantly – who cannot share in tips.

Bone McAllester employment guru Anne Martin gives this sage advice.

There are three basic factors to consider when determining if you can share tips with an employee:

Does the employee meaningfully participate in the customer experience? Is the employee part of management, which is undefined but disqualifies tipping? Is the position customarily and regularly tipped in the industry?

Whether an employee can be tipped really depends on specific job duties.  Servers and bartenders can clearly be tipped.  Prep chefs and bus boys generally cannot.

In our humble opinion, the third factor, “is this a position that is normally tipped,” works against innovative entrepreneurs.  For example, some of our restaurant clients feature food prep as a key part of the customer experience.  Like innumerable cable food shows, watching your food being prepared is entertainment.

The roles of traditional servers and chefs, for example, have blurred in recent years.

In our experience, the law is slow to accept new practices.  Sharing tips with chefs and other food prep staff could be risky.

It all boils down to the specific facts.

We encourage folks with good questions to reach out to Anne with specific asks This email address is being protected from spambots. You need JavaScript enabled to view it..  Anne really knows her stuff and is well worth paying for staying out of trouble.

A classic Michelle Shocked tune comes to mind, although wethinks Michelle is celebrating the jam that makes Music City famous, and not so much the sweet stuff you find at Loveless Cafe:

Yeah, we have a little revolution sweeping the land
Now once more everybody’s making homemade jam
So won’t you call your friends up on the telephone
You invite ’em on over, you make some jam of your own
You’ll be making jam
Strawberry jam
If you want the best jam
You gotta make your own

Original author: William T. Cheek III
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Carding Sting for Tennessee Retail Liquor Stores Delivering Alcoholic Beverages

We recently learned of a new downside for Tennessee retail liquor stores delivering bottles of alcohol to customers.  The Tennessee Alcoholic Beverage Commission cited at least one off-premises license holder for delivering hooch to a confidential informant.

The sale to minor citation involved a call to the package store for delivery of a bottle of alcoholic beverages to a nearby hotel.  The store took the order, processed a credit card and sent an employee to deliver the booze.  We understand that the employee met the “customer” in the hotel lobby and carded the “customer.”

Unfortunately for the retail store, the employee misread the age and completed the sale by delivering the bottle to the underaged informant.  The ABC issued a citation for sale to minor.  Based on what we know, the informant presented an authentic Tennessee driver’s license with a red box around the photo, indicating that the informant was under 21.

Time and time again, we remind license holders to train employees to focus on under 21 Tennessee IDs. Please, please please. The ABC is doing a great job with underage stings.  We recently blogged about 429 ABC sale to minor citations over the past year.

Willa brings up The Police’s 1983 massive hit:

Every move you make, every vow you break
Every smile you fake, every claim you stake, I’ll be watching you

E-mail us if you would like to learn more about our Red Box Carding techniques at This email address is being protected from spambots. You need JavaScript enabled to view it..  The ABC is definitely watching you.

Original author: William T. Cheek III
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Tennessee ABC Updated Citation List Shows Seriousness of Sales to Minors

We love that the new Tennessee ABC under Clay Byrd is committed to transparency.  A huge new development under Director Byrd’s leadership is compiling and releasing comprehensive reports of all ABC citations against license holders.

The most recent report is here.  The 98 page report summarizes citations from January 2016 through the first few days of January 2017.

Our rough count shows 429 sales to minor citations in just over a year.  The Tennessee ABC has deployed well-trained agents that, based on our casual observations, are successfully targeting large chains and independent restaurants, hotels and venues.

We strongly encourage license holders to double down on carding of Under 21 Tennessee driver’s licenses, which have a red box around the photo.  We have been teaching Red Box Carding to help prevent failing ABC compliance checks and encourage readers to let us know if they want more info about this tested ID technique.

Our friend Willa reminds us of Brad Paisley’s classic song “Alcohol”

I got you in trouble in high school
And college now that was a ball
You had some of the best times
You’ll never remember with me
Alcohol, alcohol

The report also shows $771,050 collected by the ABC in fines during the past year and a few days.  That hits your bottom line.

Be vigilant and please let us know if you want to focus on Red Box Carding.

Original author: William T. Cheek III
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Don’t Expect Tennessee ABC Commissioner McDaniel to Stop Rockin’

Turnover among Tennessee Alcoholic Beverage Commissioners is inevitable.  Although the alcoholic beverage industry is relatively glamorous, as compared with morticians and auditors, for example, serving as a Commissioner is no walk in the park.  Believe it or not, we are a demanding group of constituents that often have vastly conflicting agendas.

It comes as no surprise that West Tennessee Commissioner Mary McDaniel announced her resignation at this month’s January 24, 2017 ABC meeting.  Commissioner McDaniel has served approximately six years.  And the verb “served” sums it up nicely.  Through wine in groceries, five legislative sessions and three ABC Directors.  Can someone toll the Bell for Commissioner McDaniel – well, maybe not…

In all seriousness, we thank Commissioner McDaniel for all she has done for the Tennessee alcoholic beverage industry.  Run DMC seems appropriate:

I’m the king of rock, there is none higher
Sucker MC’s should call me sire
To burn my kingdom, you must use fire
I won’t stop rockin’ till I retire

Commissioner McDaniel hasn’t let retirement slow her down.  The ABC is only one of many social endeavors blessed by Ms. McDaniel’s hard work.  Keep on rocking!

Original author: William T. Cheek III
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What to Expect During Alcoholic Beverage Recalls

Recalls of alcoholic beverage products can impact any part of the industry. Learn why the TTB may think a product recall is necessary and what you will need to do.


Last year, Constellation Brands issued a voluntary product recall for a small batch of their popular Corona Extra lager due to the potential of small glass particles in some bottles. Unfortunately, it seems to be a process the company is all too familiar with. For a massive company like Constellation Brands, a small-scale product recall is hardly damaging. But what if your brewery or distillery finds itself in a similar situation?

While you can initiate a product recall of your own accord, it usually starts when the TTB has reason to believe that an alcohol beverage is, or may be, adulterated. Before taking any recall action, the TTB first consults with the FDA. If the FDA identifies an urgent health hazard, or the TTB decides there are significant mislabeling issues, the TTB will contact the responsible party and recommend a product recall. As part of this process, you will need to create a strategy for removing affected products from the market, present this strategy to the TTB, and inform the TTB of the final results of the recall effort.

Technically, the TTB does not have statutory authority to require you to recall products, but they are far from powerless. They can notify trade associations and the public by any means they see fit, detain product shipments, and suspend or revoke permits and licenses. They can also examine financial records and other documentation relating to the manufacture, removal, or sale of the product in question. So, if they request that you conduct a product recall, it’s in your best interest to comply and act quickly.

After your recall strategy has been implemented, the TTB will follow-up by requesting a Recall Status Report to determine whether your recall efforts were effective. Generally, this report should include:

•Dates customers were notified
•Number of customers notified
•Number of customers responding
•Quantity of product returned and when this occurred
•Additional details and benchmarks attesting to the effectiveness of the recall

Once the TTB double-checks with the FDA and is satisfied with the results, they will advise you to stop your recall efforts. Unfortunately, a successful recall doesn’t guarantee that you’re in the clear – the TTB can still take administrative action against responsible parties after the recall is complete. If that occurs, you should contact a lawyer with experience in alcohol beverage law (if you didn’t already at the start of the recall process) to clarify your rights, liabilities, and which courses of action are best for your unique situation.

Original author: Robert Pinson
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Duncan Liquor Law Letter

Longtime bev alc attorney Marc Sorini of McDermott Will & Emery lead the Brewers Association Power Hour yesterday, giving a 50,000 foot view of trade practice law in the beer business. 

Marc kicked things off with a thorough rundown of the ins and outs of the federal and state laws, which we plan to report on later. But for now we're going to jump to the end of Marc's presentation where he discussed some of the current legal issues percolating in the industry. First up was category management.


You may recall that this decades-old concept came under fire last year when Kroger proposed to place alcoholic beverages in a single category under the watch of a single nationwide captain (Southern Wine & Spirits). 

WHAT THE TTB'S RULING MEANS. Shortly after Kroger's proposal, the TTB published Ruling 2016-1. The ruling says essentially all category management practices are inducements, that includes providing scan data or even following up to monitor or revise the schematic. 

"Another interesting part of the ruling," Marc said, "is it doesn't really spell out what constitutes exclusion." Generally, exclusion is defined as doing something that threatens the retailer's independence, Marc said. "But these programs are initiated by the retailer, and in today's economy the large chain retailer has the most economic leverage." So the TTB has "left us all guessing" on that one, Marc said.

He then noted an interesting observation from a number of brewers that have told him "it's actually kind of comforting that instead of having an Anheuser-Busch or a MillerCoors being the category captain, you would have Southern in charge, which frankly we don't do business with." So he's heard some people question whether Kroger's program was the one that bothered TTB the most, but he doesn't agree with that view. He thinks everybody paying one 3rd party made it materially different.

Before moving on to the next current development, Marc presented one final argument on the TTB ruling: "If you're bringing data to a retailer to help them decide on how to set up their shelf sets, isn't that truthful non-misleading speech?" 

SPEAKING OF THE 1st AMENDMENT. That argument segues right into the next current development - the Retail Digital Network case - which challenges tied-house laws as a violation of the First Amendment.

For those of you who don't know, Retail Digital Network (RDN) is a third-party company that puts video ads in retailers and takes money from bev-alc producers/distributors to do it. But when RDN went shopping around for business, the suppliers and distributors said "no thanks" out of fear that they were indirectly paying a retailer to advertise and therefore violating the state's tied house law.

RDN finally got tired of suppliers/distributors telling them "we would, but we can't" and they brought suit to challenge the ban on paying a retailer for advertising, arguing that this is truthful non-misleading commercial speech. 

9th CIRCUIT SET TO RE-HEAR THE APPEAL THIS MONTH. The District Court dismissed RDN's challenge relying on the 1986 Stroh case. But a 9th Circuit panel surprisingly sent the case back to the lower District Court (remanded) and instructed them to apply heightened judicial scrutiny to restraints on commercial speech. But the decision is not up to the lower court anymore, as a few months ago the 9th Circuit Court granted an "en banc" review meaning the entire 9th Circuit would re-hear the appeal. The appeal is now set for oral argument in a few weeks to decide whether the entire 9th circuit agrees with that panel, Marc said.

THE LATEST ON THE CRAFT BREWERS GUILD CASE. Then we have the case surrounding the Sheehan's Craft Beer Guild in Massachusetts. As you know, CBG currently has a lawsuit pending challenging the ABCC's legal position towards CBG's payments to retailer affiliates. 

THEY'VE GOT SOME "PRETTY INTERESTING" ARGUMENTS. Marc says they have some "pretty interesting" arguments. One of them is that apparently the "thing of value prohibition" is not in the Massachusetts statute. The prohibition was actually repealed in the '70's. The ABCC has since passed a regulation that in effect continued the ban, Marc said. But CBG argues that if legislators pulled the law from the books then the regulators (who are subordinate to the legislature) can't reinstate it, Marc says.

Another one of their arguments is that the anti-discrimination prohibition are all tied to post-and-hold as well as price affirmation schemes, which were struck down many years ago as a violation of the Sherman Antitrust Act. "So the vestiges of this, which is the general non-discrimination rule, are all tied to this illegal and unenforceable scheme and should be equally unenforceable," says Marc.

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How Whisky Distillers use Peat Bogs to Create Unforgettable Flavors

Many Scottish distilleries utilize peat bogs to create whiskies with very distinctive flavors. Learn how “peaty whiskies” are made in this blog post.


Similar to our local regulations regarding the production of Tennessee whiskey, Scotland has legal requirements regarding the production methodology and labeling requirements for the country’s world famous style of the spirit. The Scotch Whisky Regulations of 2009 (an update to the Scotch Whisky Act of 1988) outline everything a distiller needs to know if they’re producing Scotch whisky. Like Tennessee’s House Bill 1084, Scotland’s production guidelines grant enough leeway for distillers to create Scotch whiskies with a wide variety of flavor profiles – several of which have intense smoky/umami/medicinal-tasting characteristics. While that type of bouquet is certainly a signature of the Scotch style, the unique method by which the flavor is achieved it is not actually required by the Scotch Whisky Regulations.

Large parts of Scottish land are covered in peat bogs. Peat forms when plant matter starts to decay, then stops due to specific environmental conditions. For centuries, the Scots have cut slices of peat out of the bogs, dried them, and used them as an energy source – like coal briquettes but faster-burning. Peat is also what gives certain Scotch whiskies (especially those from the Islay region) the unique flavor profile mentioned above. Once the grains are malted, they are dried over the smoke of a peat fire for about 30 hours.

Since bogs only accumulate peat at a rate of about 1 millimeter per year, it’s a semi-non-renewable resource. I’m not familiar with the laws protecting the peatlands, but I do know that many Scottish distilleries use methods to reduce their peat consumption. For example, instead of using whole briquettes, the Bowmore distillery grinds their peat into powder that is gradually added to a fire to produce just the right amount of peat smoke. Several of the more modern and industrialized distilleries use closed systems that pass the same smoke over the malted grains multiple times to ensure none of it is wasted.

So even though it’s not a legal requirement, many distilleries make their Scotch whisky by literally incorporating the country’s land into the process. Perhaps Tennessee’s distilleries could take inspiration from Scotland and incorporate wood from the tulip-poplar tree to put a little more “Tennessee” in Tennessee whiskey.

Original author: Robert Pinson
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Space-Aged Whisky Could Soon Become a Reality

Distilleries have been aging whisky in microgravity to discover new flavor profiles. Learn how the space-aging process works in this blog post.


Whisky masters and enthusiasts are forever questing for tweaks to traditional distilling and aging methods to create unique flavors of the spirit. They’ll go to the ends of the earth in pursuit of whisky’s secrets – and when they run out of earth, they’re not afraid to head into space.

In 2011, the famous Ardbeg distillery in Scotland partnered with aerospace research company NanoRacks to test the effects of gravity (or lack thereof) on the whisky aging process by sending whisky to the International Space Station and aging it there for two and a half years. Since the available room on any space vessel is extremely limited, a traditional barrel was out of the question. Instead, newly distilled whisky and charred oak wood shavings were placed in a specially designed vial that kept the whisky and wood separated until they reached orbit and the seal between them was broken. A control sample was left back on Earth for comparison.

When the whisky returned to Earth in 2014, a battery of tests confirmed that the microgravity environment made a definitive difference. The ratio of wood extractive compounds found in the space-aged whisky was notably lower than the control sample, creating a dramatically different flavor profile. According to the results of the “organoleptic assessment” (aka, taste-test) released by Ardbeg, the space sample could summarily be described as more peaty and pungent. Whether that’s desirable or not is subjective – either way, it confirms the potential for space-aging to create an untold number of new and unique flavors for whisky.

Seemingly inspired by Ardbeg, the Suntory distillery in Tokyo sent samples of its whiskies to the International Space Station last August. Their experiment is broken up into two groups – one to be aged for a year, and the other to be aged for two or more years. The first group is scheduled to return to Earth sometime next month, but the results may not be publicized until sometime later.

Currently, outer space is identified by international law as one of the four global commons – meaning it is outside the territory and jurisdiction of nation states (the other global commons are the high seas, atmosphere, and Antarctica). So, if space-aged whisky catches on, it makes me wonder what the TTB’s regulatory response would be, if any…

Original author: Peter Beare
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Photos from Liquor Conferences

We have been remiss in not posting photos from liquor conferences.  Sorry.

Reminds us of Nirvana’s All Apologies:

What else should I write

I don’t have the right

What else should I be

All apologies

Here are photos from the 2016 annual meeting of the National Association of Licensing and Compliance Professionals.

And from the 2016 Regional National Conference of State Liquor Administrators.

Last but not least, from the Tenth Anniversary Hawaii Meeting of the Alliance of Alcohol Industry Attorneys and Consultants.

 

 

Original author: William T. Cheek III
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The Lincoln County Process and the Law

If you want to call your product “Tennessee whiskey,” it must go through the Lincoln County process. Learn how to comply with the process here.


For many years, the legal definition of “Tennessee whiskey” was bland and straightforward. At the federal level, the North American Free Trade Agreement (NAFTA) requires that Tennessee whiskey be “a straight Bourbon Whiskey authorized to be produced only in the State of Tennessee.” However, we can be very particular about our whiskey. With that in mind, governor Bill Haslam signed House Bill 1084 back in 2013. This state-level law outlines specific quality and production standards that a distiller must follow if they want to call their product Tennessee whiskey. One of these production requirements is that the whiskey must be “filtered through maple charcoal prior to aging” – a process more popularly known as the Lincoln County Process.

If a distiller is calling their product Tennessee whiskey, but is found to not be meeting the manufacturing requirements for the spirit, they can have their license revoked or suspended for at least a year. Naturally, every distiller wants to follow these requirements to the letter – which would explain why I get so many questions about the specifics of the Lincoln County Process. “What ratio of charcoal-to-whiskey do I need for my stills?” “How long am I required to filter the whiskey for?” “Does the wood for the charcoal have to be grown in Tennessee?”

The truth is, House Bill 1084 deliberately omits these details to give distilleries flexibility. Imparting a specific flavor profile to any whiskey is an extremely delicate process. Changing the amount of charcoal or filtering time will change the flavor of the final product – so a lack of specific guidelines for the Lincoln County Process gives distilleries the flexibility they need to make their own styles of Tennessee whiskey.

Many distilleries have unique or proprietary takes on the Lincoln County Process. Jack Daniel’s first runs their charcoal through a grinder to get consistent bean-size pellets. The pellets are packed into vats 10 feet deep and the whiskey gets filtered by trickling through. The George Dickel distillery is similar, except they chill the whiskey first and allow it to fill a 13-foot vat instead of just trickling through.

Benjamin Prichard’s Tennessee Whiskey foregoes the Lincoln County Process entirely. They can still call their product “Tennessee whiskey” because they meet the exemption requirements outlined in Section 1(c) of the legislation. Ironically, this also makes them the only distillery in Lincoln County that doesn’t use the process!

As long as your Lincoln County Process involves some form of filtering through maple charcoal prior to aging – and you meet the other requirements from the law – your product can legally be called Tennessee whiskey in the eyes of the state. If you’re worried your filtration process could be interpreted another way, or you have other concerns regarding regulatory compliance, contact me and I’ll be happy to advise.

Original author: Robert Pinson
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The Rising Popularity of ‘Accelerated Aging’ among Whiskey Distillers

The Rising Popularity of ‘Accelerated Aging’ among Whiskey Distillers


Most whiskey distillers have a love/hate relationship with time. On one hand, time can mature whiskey into an exceptional spirit. On the other hand, it takes so much time – 12 to 24 years in many cases. New barrels (which are a legal requirement for most whiskey in the U.S.) are quite expensive and take up storage space, so a distiller has to eat those costs and wait years to see a return on investment. Faced with those obstacles, it’s no wonder more distilleries are developing ways to accelerate the whiskey aging process.

As whiskey ages, it develops subtly complex flavors by absorbing compounds from the wood of the barrel in which it’s contained. Instead of waiting for this to naturally happen over several years, speed-aged whiskey uses a variety of techniques and technology to move flavors from wood to whiskey in less time. Among the simplest of these techniques is to use smaller barrels, which increases the surface area of the wood that is exposed to the whiskey. Tuthilltown Spirits in upstate New York takes this a step further by pumping low-frequency sound waves throughout their aging storehouse. Allegedly, the sound waves “agitate” the spirit, helping their award-winning Hudson Baby Bourbon reach sufficient maturation in only four months.

The Copper Fox Distillery in Virginia takes a different approach to increasing the surface area exposed to the whiskey. To create Wasmund’s Single Malt Whiskey, they load the distillate into normal-sized barrels. Then they add a mesh sack filled with toasted oak and apple chips, which works like a teabag to impart flavor. After about 12 months, they remove the mesh bag and put the whiskey in another barrel, which is heated and rolled several times over 2 months. Despite being aged for only 14 months, this whiskey was once “Best in Class” at the American Distilling Institute.

Right in our backyard, the O.Z. Tyler Distillery in Kentucky is planning to utilize a proprietary process called “TerrePURE.” According to the patent for the process, it basically uses ultrasonic energy and oxygen and temperature manipulation to create a better tasting whiskey in a shorter amount of time. Could accelerated aging catch on among Tennessee’s distillers?

Original author: Robert Pinson
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Tennessee Department of Revenue Revamps Liquor-by-the-Drink Bond Process

The Department of Revenue recently announced major changes to liquor bonds for Tennessee restaurants, bars, venues and other liquor license holders.  Read more here.

We expect some chaos, which at least keeps it interesting for us jaded old fools.

Speaking of old folks, chaos reminds us of this classic Cold War parody from Get Smart:

For those that hold more than one license in Tennessee, the proposed changes are fantastic.  You will only need one bond, if you file the proper election.  We will let you know when the election becomes available, probably late this year.

As we read the announcement, Revenue also says it will not change bond amounts until after September 30, 2017.  No more dreaded LBD bond audit and worrying about increasing the amount of your bond at renewal, at least for a few months.

In the meantime, we strongly encourage licensees to renew bonds, CDs and cash deposits in lieu of bonds.

Original author: William T. Cheek III
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