2017 Changes to Washington Liquor Laws Affecting Producers and Distributors

This post was guest authored by Stoel Rives summer associate Alex Pearson.

With the Washington State Legislature’s third special session at a close, now is a good time for alcoholic beverage producers and distributors to take a moment to look at five bills that passed the Legislature and were signed into law by Governor Inslee this past session. All are effective as of July 23, 2017, and create new opportunities for producers and distributors. What follows is a summary of the more notable additions and modifications made by these new laws. Please note that these laws affect a variety of licensees, so we encourage all producers and distributors to evaluate these changes with their attorney.

Legal Definition of Mead

One of the world’s oldest alcoholic beverages—mead—finally has a legal definition in Washington. S.H.B. 1176 amends RCW 66.24.215 and RCW 66.28.360 to define mead as a wine or malt beverage sold as “mead” and which is fermented primarily from honey, but may contain other agricultural products such as fruit, hops, or spices. Those licensed to sell beer or cider in growlers will also be allowed to similarly sell mead to customers, so long as the mead sold has an alcohol content equal to or less than 14 percent alcohol by volume. Additionally, starting January 1, 2018, mead will be exempt from the assessment on wine production that funds the Washington Wine Commission. Continue Reading

2017 Changes to Oregon Liquor Laws

This post was guest authored by Stoel Rives summer associate Antonija Krizanac.

Since the 2017 Oregon Legislative Session convened on February 1, 2017, the Legislature has introduced a variety of bills that impact the Oregon alcohol and beverage industry. Out of the countless proposed bills, five have already been signed by the Governor and will go into effect this year or early 2018 and may impact your business. Following is a summary of those bills.

House Bill 2150: Relating to electronic administration of alcoholic beverage tax provisions

House Bill 2150 requires the Oregon Liquor Control Commission (“OLCC”) to allow manufacturers or distributors of wine, cider, or malt beverages to file by electronic means:

  • A statement of the quantity of wine, cider, or malt beverages produced, purchased, or received, and
  • Payment of privilege taxes on such activities.

This alters the current filing and payment system, which is done on paper. The measure will apply to statements or privilege taxes due on or after July 1, 2019.

Effective date: January 1, 2018
Link to enrolled bill: https://olis.leg.state.or.us/liz/2017R1/Downloads/MeasureDocument/HB2150 Continue Reading

2017 Changes to Washington Liquor Laws Affecting Retailers

This post was guest authored by Stoel Rives summer associate Emma Vignali.

On July 23, 2017, numerous Bills will go into effect that will meaningfully impact alcohol and beverage retailers across Washington. Governor Jay Inslee will sign four bills that will create opportunities for alcohol retailers and simplify the licensing process for current and future licensees. Additionally, although not yet passed by the legislature, S.B. 5164 would expand the criteria under RCW 66.24.363 to authorize the issuance of a beer and wine tasting endorsement to small retailers of meat, seafood, poultry, and cheese. The following is a summary of some of the notable changes adopted in these bills. Note that many of the changes affect licenses, so we encourage anyone who sells alcohol in Washington to discuss these changes with their attorney.

Special Permit for Wine Auctions

H.B. 1718 amends RCW 66.20.010 to improve the process for non-profits hoping to hold wine auctions at their charitable events. While the previous process for holding wine auctions proved strenuous for many non-profits, this Bill simplifies the process by creating a special permit specifically for private wine auctions. The special permit allows non-profits to auction wine for off-premises consumption and to provide auction guests with tasting samples of the wine to be auctioned at the event. More than one winery may participate in the auction, but each must be listed on the application for the special permit. A $25.00 fee will be charged for each winery listed on the permit. Non-profit organizations considering holding a private auction should be sure to apply for a permit prior to the event. Continue Reading

Proposed Parking Changes Will Increase Portland Hotels’ Flexibility to Utilize Parking Assets

For years, the City of Portland has had an expansive, complex and restrictive regulatory system for parking in the Central City. However, in an effort to promote better utilization of Central City parking spaces, the City is currently considering substantial simplification of its Central City parking code, which hotels may benefit from.

Historically, hotels selling onsite parking spaces to non-guests were potentially vulnerable to zoning code enforcement actions prohibiting rental of those spaces to persons not patronizing the hotel. Because a hotel might not be able to prove that the rental of parking spaces to non-guests was a legal, nonconforming use, predating the City’s extensive parking regulation system, a hotel might be ordered to cease renting spaces to downtown drivers without “business” at the hotel site. Things may, however, become easier.

The proposed parking regulation changes are part of the City’s Central City 2035 planning process. The published draft being discussed by the City’s Planning and Sustainability Commission removes Residential/Hotel as a parking type and instead includes Residential/Hotel parking in the Growth Parking designation. Whereas the existing code requires that Residential/Hotel parking be accessory to the residential or hotel use, serving users of the residence or hotel, Growth Parking is proposed to be available for both accessory and commercial parking at all times so a hotel could, for example, rent its parking spaces to people attending an offsite show or employees of a neighboring business and not risk running afoul of the zoning code. Continue Reading

2017 Food Service Guidance for Oregon Wineries

The January 2017 “Guidance for Food Service at Wineries on Farmland under Oregon Senate Bill 841” issued by the Oregon Land Conservation and Development Commission and Oregon Liquor Commission with input from the Oregon Winegrowers Association, seeks to help answer questions that have arisen since the 2013 enactment of Senate Bill 841.

Prior to enactment of SB 841, food service at permitted use wineries on farm land was limited to “individually portioned prepackaged foods prepared from an approved source by a commercial processor.” Guidance at 2. Counties may no longer enforce that limited service restaurant restriction on wineries that qualify as permitted uses under current law. Guidance at 3. That said, restaurants are still not allowed.

Oregon’s land use system places a high priority on preservation of farmland for farm use, and state law identifies types of uses permitted outright on land with exclusive farm use zoning and uses that may be conditionally allowed on those lands. (See, for example, ORS 215.283.) SB 841 revised ORS 215.452 to provide production and vineyard size standards for wineries classified as permitted outright. Food service is allowed at these permitted wineries on both exclusive farm use land and mixed farm forest lands subject to statutory limitations.

Given that Oregon Liquor Control Commission Rules may require that food be available as part of the onsite consumption of wine, and the fact that tailored events such as wine-food pairings and winemaker dinners may promote winery success, the enhanced flexibility provided by SB 841 is welcome. Still, as the Guidance makes clear, food service may not become the predominant activity. The Guidance ends with a series of questions that may help a winery operation determine whether proposed food service is authorized at a permitted use winery. Among those questions are: Continue Reading

2017 Changes to Utah Liquor Laws

Significant changes are on the way for Liquor Laws in Utah.  H.B. 442 passed the legislature on March 8, 2017 and Governor Herbert signed it into law March 29, 2017.  The new law makes numerous changes to how restaurants, dining clubs and off-premise beer retailers will operate.  These changes will create opportunities for some, and present significant challenges for others.  Following is a summary of some of the more meaningful changes for businesses.  Note that the law affects many licensees though, so we encourage anyone who sells alcohol in Utah to discuss the changes with their attorney.

Restaurants and Bars

The law replaces the current Restaurant – Dining Club – Social Club structure with two categories: Restaurants and Bars, making Dining Clubs obsolete.  Bars and restaurants will have to start displaying an 8.5 x 11 sign declaring that they are either a bar or a restaurant, and not the other.

On the good news front, restaurants will be able to choose how they want to operate their own bars from the following three options: Continue Reading

Sonoma County Rejects Wine Industry Request for Voice in Groundwater Regulations

This blog post was co-authored by Stoel Rives attorneys Wes Miliband and Eric Skanchy.

Under the Sustainable Groundwater Management Act (“SGMA”), California’s landmark groundwater legislation, local Groundwater Sustainability Agencies (“GSAs”) must be formed to assess conditions in their local water basins and to develop locally-based groundwater sustainability plans (“GSPs”).

GSAs, which must be formed by June 30, 2017, will have the ability to register and monitor wells and to potentially restrict pumping and prevent drilling of new wells. GSAs will also have the ability to assess new fees and taxes. These local agencies will be in the driver’s seat when it comes to addressing a very complex problem seen in many areas of California: managing groundwater to ensure long-term sustainability of groundwater supplies.

Given the influence these GSAs will have, it is not surprising that various interest groups and stakeholders covet a seat at the table. This was not lost on wine industry representatives in Sonoma County, who petitioned the County to give the industry voting power on the yet-to-be-formed GSAs. Continue Reading

California Expands Overtime for Farmworkers

The following is an adaptation by my colleague Tony DeCristoforo of a post by Bryan Hawkins, Kirk Maag and Adam Belzberg that originally appeared on Stoel Rives World of Employment blog.

California Governor Jerry Brown recently signed AB 1066, which will require grape growers and other agricultural employers in California to pay overtime under the same conditions as non-agricultural businesses. The bill is the first of its kind in the nation.

California law defines employees “employed in an agricultural occupation” broadly to include any employment relating to the cultivation or harvesting of agricultural commodities, or the maintenance and improvement of a farm and/or farm equipment.  Prior to the signing of AB 1066, such employees were entitled to time-and-a-half pay after working 10 hours in a day or 60 hours in a week.  This is substantially different from the overtime laws for California employees in most other industries and occupations, where overtime pay typically kicks in after eight hours in a day or 40 hours in a week. Continue Reading

EPA Hits Brewery Hard: Is Your Brewery In Compliance With CWA Standards?

This post was guest authored by Stoel Rives summer associate Olivier Jamin.

Last week the Environmental Protection Agency (EPA) and the Department of Justice (DOJ) announced that D.G. Yuengling and Son, Inc., a Pennsylvania brewery, settled Clean Water Act (CWA) violations involving wastewater discharge into public treatment facilities for $2.8 million and a commitment to spend over $7 million to reduce environmental impacts of its brewery operations.

Breweries generally need to obtain a permit to discharge industrial waste into municipal treatment facilities. Breweries’ wastewater is considered industrial waste because the water discharged usually contains high concentrations of nutrients which, although they are not toxic, lead to more costly treatment. In many cases, a permit has limits on the discharge and requires pretreatment of waste before it is discharged. Although Yuengling obtained had the permit required by Section 402 (b)(8) of the CWA for both of its Pottsville breweries, they violated the terms and conditions of the pretreatment program. The Greater Pottsville Area Sewer Authority (GPASA) referred the case to EPA, and the United States identified 141 instances between 2008 and 2015 where Yuengling violated pretreatment permit requirements, and discharged biological oxygen demand (BOD), phosphorus, and zinc to the GPASA treatment plant in quantities exceeding their permit limits.  The resulting fine was hefty, resulting not only in a cash penalty but Yuengling agreeing to make significant facility upgrades and operational changes.  Such measures include having to design and implement an environmental management system for its breweries, conduct environmental audits, or optimize and improve operation and maintenance of the pretreatment system.

Breweries use, on average, 7 gallons of water to produce 1 gallon of beer, which means wastewater discharges can quickly become problematic if not properly monitored pre-discharge. Although it is uncertain whether EPA will start investigating breweries for CWA violations more regularly, this case reinforces the importance of breweries double checking their compliance plans and operational protocols to make sure they are staying in compliance with their discharge limits and that pretreatment systems are adequate to reduce the risk of potential violations.

Idaho District Court finds beer and wine “sub-distributorships” should be afforded same protections for distribution rights as distributor

Beer and wine distributorships are protected under Idaho franchise laws, like the majority of other states, from having their distribution rights terminated unless the reason falls within one of those enumerated under Idaho franchise laws. Without one of the listed reasons, a distributor cannot involuntarily lose its distribution rights.  This franchise protection has increased the marketable value of the distribution rights, so that the distributor’s investment in creating the brand and outlet for that particular product is protected as a transferrable right (one that is bought and sold for up to four times the annual gross revenues).  Once a beer or wine distributor is granted distribution rights, the supplier has little opportunity to unilaterally decide to terminate the distribution rights, short of purchasing those distribution rights for an amount agreed upon by the distributor.

Recently, the Idaho District Court found that the same protections are afforded to “sub-distributors” of beer and wine products, limiting the first distributor’s ability to terminate any sub-distribution. With Idaho’s three-tier system, each tier’s role is broken down as:  (1) a supplier, (2) a distributor, and (3) the retail outlet.  In Idaho, there can be more than one supplier for the exact same product, and an entity can be considered both a supplier and a distributor, depending on its actions and how it handles the product.  An entity’s statutory role determines that entity’s obligations in how it engages in its business activities and how its relationships with its buyers must be handled.

Here is how it works. A producer, supplier, manufacturer, or importer is the original “supplier” of the beer or wine.  The person or entity who receives the product, with the intention to resell to retail outlets, is usually the “distributor.”  In some instances, however, a distributor will buy large volumes of product from a supplier, distribute some of that product, and then enter into an agreement (verbally or in writing) with another distributor to “sub-distribute” the product.  In this situation, the original “distributor” also becomes a “supplier” to the “sub-distributor.”  And the original distributor (now also a supplier) becomes subject to the prohibitions and obligations of a supplier when interacting with its “sub-distributor.”

In the case of Bill Jones Distributors, Inc. v. Boise Sales Co., d/b/a Hayden Beverage Co. and Young’s Market Company of Idaho, LLC d/b/a Hayden Beverage Co., the First Judicial District Court for the State of Idaho held that a sub-distributor’s rights to distribute the product could not be terminated by the original distributor when the original distributor wanted to take back its product.  The court found that the original distributor was considered the “supplier” or “dealer” under the respective beer and wine acts, and as the supplier and dealer, it could not terminate the distribution rights without complying with the enumerated statutory grounds for termination.  While Idaho had not previously addressed the “sub-distributor’s” rights under the franchise laws, it was a logical conclusion based on the clear and unambiguous language of the franchise laws.

For more background, please read the court’s decision here (PDF).

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