Other cities in the County are considering passing similar ordinances. The main concern behind the push for giving winery groups a say in the update is the county’s special event ordinance for wineries. Currently, the ordinance limits the number and size of special events a winery can hold in a year, and defines “special events” broadly. The industry groups are asking that the county exclude from the definition any occasions sponsored by and for the primary benefit of religious, civic, educational, health care and humanitarian organizations, other charities or tax-exempt nonprofit organizations. This would allow the wineries to host community and charitable events without limiting the number of events they could book on their property for a profit.

Opponents of the proposed change, many nearby residents, complain about the noise, traffic and night-time light that they create. They also argue that the events are a commercial use of agricultural property, an argument that has been raised against allowing special events at wineries around the state.

The current Santa Barbara County Ordinances can be accessed on their website. As of now, no specific date is set for the County to consider a new ordinance, although they have noted that any concerned groups or individuals will be allowed to participate in public comment at the Board of Supervisors’ meetings.

Reata had no intention of expanding its facilities at the winery. Instead, they planned to utilize off-site areas near the Napa airport for barrel storage. The way the Planning Commission saw it, Reata was moving 2/3 of the wine-making process off-site. This raised the question, would Reata still be an agricultural operation, or would the changes in operations due to the proposed expansion warrant reclassification as a commercial-industrial operation? If so, Reata’s plan would not comply with zoning restrictions on the property.

Separately, the Planning Commission raised concerns over Reata’s intention to adhere to the “75% rule” after expansion. The rule requires all Napa County wines to be made with at least 75% Napa County fruit.  According to the planning staff report, to comply with the rule and achieve the proposed production level, Reata would need the fruit from 11% of Napa County’s 43,267 total vineyard acres at current yield levels. Industry experts testified for both sides on whether this was feasible; supporters of the expansion said that the necessary increase in yield could be achieved just by replanting vineyards to yield 4 1/2 tons per acre (currently the average yield is 3 1/2 tons). Opponents argued the current yield is the maximum for producing the highest quality grapes.

The commissioners also expressed concerns about the precedent approving such an aggressive expansion plan would set, and the potential threat to the county’s Ag Preserve.

Ultimately, the Planning Commission approved a smaller expansion plan recommended by staff, which allows Reata to expand to 800,000 gallons, which could include 350,000 gallons of bulk wine bottling. A video of the planning commission meeting and the agenda and minutes (which includes links to the staff report and documents submitted by the applicant) can be viewed on the Planning Commission’s website.

The Constitutional Council in Paris determined that it is legal for CIVB and other growers’ organizations to make membership payments mandatory for merchants and winemakers in their region. According to CIVB, the fees are necessary for them to continue their activities aimed at marketing and promoting Bordeaux wines, and research it conducts to benefit its members.

The Constitutional Council is the highest constitutional authority in France. Its chief function is to rule on whether statutes, regulations, and other laws in France conform with the French Constitution, though it also oversees elections and referendums. Some review is compulsory, but, as in this case, a party involved in any proceeding before a French court may also make an application for a “priority preliminary ruling in the issue of constitutionality” where they argue that a statutory provision at the center of the proceedings infringes on rights and freedoms guaranteed by the Constitution. With its decision upholding the mandatory fees, the Constitutional Council sends the matter back to the courts where CIVB is seeking to enforce payment of fees the protesters refused to pay over the past 5 years.

More information on CIVB and its activities can be found at http://www.bordeaux.com/en. There does not appear to be a published decision as of yet, but information on how the Constitutional Council handles applications for priority preliminary rulings can be found on their website.

Cities and Counties in California adopted general plans and zoning ordinances pursuant to Government Code section 65000 et seq. In these plans and ordinances, cities and counties designated areas where only agricultural uses were permitted, what activities were “agricultural uses” permitted by right, and what activities fell outside that category and were either prohibited or required a permit. Before the local government implemented land use planning measures a grape grower could build a winery and process his grapes on-site, open a shop in the winery to sell his wine, and host public and private events at the estate winery, all likely without needing to seek any approvals or permits from local government. By contrast, as an example of what most cities and counties require today, in Monterey County a vineyard owner or prospective buyer who wanted to build a winery on site would need to apply for and obtain a special use permit prior to construction of a winery on land zoned for agricultural/industrial use (See Monterey County Zoning Code 21.06.020 & 21.24.060(F)). Almost every zoning code in California contains a similar requirement.

California law also requires that any discretionary government action be taken within full public view (See California Govt. Code §§ 54950-54962). This includes decisions of a local planning commission and/or board of supervisors to approve or deny a special use permit (or to change zoning or grant a variance which, in some counties, may also help a vineyard owner establish an on-site winery). The local agency responsible for the decision must provide public notice, publish the agenda of the meeting where the permit will be considered, allow members of the public to attend the meeting and comment, and deliberate in open session. What this means for applicants is that any neighbor, competitor, or teetotaler is given the opportunity to attempt to persuade the agency to deny the permit. There are, however, legal requirements the agency must follow in making its decision, and an attorney can assist any applicant facing opposition in understanding the validity of the opponents’ views and the basis for an agency’s final decision.

What’s more, any discretionary action taken by local agencies must be analyzed in terms of its direct, indirect, and cumulative environmental impacts pursuant to the California Environmental Quality Act (CEQA, Cal. Pub. Res. Code § 21000 et. seq.). The local agency cannot approve a project if there are any significant adverse impacts on the environment that will not be mitigated according to the project’s plans (there is some room for approval even if there will be significant environmental impacts, but discussion of CEQA and winery operations could be an entire post in itself, so for now, know that significant environmental impacts will be a problem for an applicant). Thus the applicant should consider any potential environmental effects, including increased runoff, impact on endangered or threatened species, and how to deal with waste water, among other considerations, in planning construction of a winery.

Finally, one additional California law that can impact estate winery operations is the California Land Conservation Act, more popularly known as the Williamson Act. Passed in 1965, the purpose of the Williamson Act was to provide an incentive for the preservation of prime agricultural land in California, which was being threatened by rapid suburban sprawl. The Act allows counties to enter into ten-year renewable contracts with land owners to retain the land for agricultural or compatible uses for the contract term. In exchange, the land owners receive a tax break on their property taxes because the value of the land can only be assessed based on its use for agriculture, and not for potential uses that would increase the value of the land such as subdivision for residential development. At least one estate winery in California has faced allegations that its activities violate the Williamson Act’s restrictions; in the Lodi area, the San Joaquin Farm Bureau Federation challenged the decision to allow an estate winery to cater weddings and other special events on their property, claiming this is a non-agricultural use prohibited by the Williamson Act. The Farm Bureau raised their concerns by testifying in opposition to the use at public hearings held by the county planning commission and board of supervisors, and filing a complaint with the California Department of Conservation, which oversees Williamson Act contracts. More information on the Williamson Act and the effects it may have on use of vineyard land can be found on the Department of Conservation’s website.

If you own a vineyard, or are thinking of purchasing one, and would like to establish a winery on-site, consider contacting a wine law attorney to determine how these considerations could affect you.

Division Nine of The Business & Professions Code, along with Title 4, Sections 1-150 of the California Code of Regulations,  govern intrastate alcoholic beverage operations. B&P Code sections 23771-23772 and 25500-25512 specifically address tied-house restrictions. The restrictions begin by prohibiting a supplier from owning any interest, directly or indirectly, in a retailer (on-sale or off-sale). It also prohibits ownership of a winegrower (or brewery or distiller) by a retail licensee. This seems to be a much broader prohibition than the federal law and most counterpart laws in other states; there is no requirement, on the language of the statute, that the supplier has actual control of the retailer.  However, the range of exceptions provided in the subsequent sections of the B&P Code have become equally broad.

The statutory exceptions were created based on individual fact situations, and as such, they are narrowly tailored. Rather than being categorical and policy-based, nearly every exception is individualized. Therefore the next time a need arises to allow activity otherwise prohibited by California’s broad tied-house restriction, a new exception must be created. For instance, section 25503.11 permits a supplier to own a diminutive amount of stock in a publicly-traded corporate retail licensee or serve on the board of a publicly-traded corporate retail off-sale licensee, subject to the ABC’s approval (this exception was purportedly created to benefit Joseph E. Seagram by allowing him to serve on the board of Safeway Stores). The converse is also permitted (retail licensee owning a diminutive amount of stock in publicly-traded supplier) by section 25503.12. Another section allows a supplier to own a single retail license within a county with a population of less than 15,000 (section 25500(b)).

More specific to winemakers, section 25503.15(a) allows a winegrower to own on-sale licenses if none of its products are sold at the licensed premises. Obviously, this may defeat the purpose for many winemakers looking to participate in restaurant ownership, so section 25503.15(b) allows small winegrowers (less than 125,000 gallons of wine produced) to own an interest in up to two licenses, subject to a long list of conditions. The legislature later extended this privilege to winegrowers of any size, permitting ownership in any number of on-sale licenses, provided their own wines are sold by no more than two of the licensees and the number of wines produced by the winegrower does not exceed fifteen percent of the wines offered for sale by the retailer (section 25503.30).

The numbering of the examples above may have given away the fact that there are many other exceptions provided by the Code, but each comes with very specific requirements. If you are a winegrower interested in participating in the ownership of a restaurant (or a restaurant looking to own part of a winemaking operation), but thought the tied-house restrictions prohibited you from doing so, an attorney may be able to assist you in understanding whether any of the exceptions applies to you or how to structure your ownership so that they do.

I say more than 51 systems because after Prohibition ended, many states chose to return to the pre-Prohibition practice known as the “local option”, which allowed cities and counties to vote on when and where, or even if, alcohol could be sold within their jurisdiction.  The decision is made by the voters, usually by way of a local ballot measure. The most widely known aspect of the local option is the existence of “dry counties” where the sale of all alcoholic beverages is still prohibited within its borders. The local option is still available in 41 states today, though several of those states no longer have any cities or counties exercising the option. The local option is not available in California.

In addition to deciding whether or not to allow the local option, states also chose between being a “license state” or a “control state”. In a control state, the state has a monopoly on the wholesale and/or retail distribution of alcohol. The number of control states has decreased in recent years; Washington recently voted to privatize their liquor industry, and Idaho is looking at getting out of the business as well. Further, control states do not necessarily control the wholesale and retail sale of all alcoholic beverages; some only monopolize wholesale distribution of spirits, leaving wholesale of wine and beer and all retail sales to private entities, others retain full control. The extent of the government monopoly in the control states seemingly varies to every degree in between these extremes, making it hard to know how wine can be distributed in a given state. Richard Mendelson, in his book Wine in America, provides a useful table of the systems in control states as of 2011, but  even this is already out of date. If you are concerned about distribution in a particular control state, an attorney can advise you as to how to get your product to consumers in that state without violating any local laws.

In a license state, such as California, a state agency takes responsibility for licensing private entities to import, produce, distribute, and sell alcoholic beverages. The licenses are strictly controlled – that is, they are not freely transferable – and often come with conditions specific to a particular licensee’s operation. The state agency often controls the number of licenses available in a given area; for example, in California, the ABC will not issue a retail license in an area of “undue concentration of licenses” unless the applicant can show that public convenience or necessity requires the additional license (see, e.g., Cal. Bus. & Prof. Code Section 23958). The agency is also responsible for enforcing the state’s laws, regulations, and rules concerning trade practices, and in some states the alcoholic beverage control agency even collects excise taxes due.  The California licensing system is quite complex, so it will be covered in depth in a later post.

As mentioned above, the federal government regulates alcoholic beverages in interstate commerce. The agency charged with enforcing the two primary sources of federal regulation of alcohol (the Internal Revenue Code and the Federal Alcohol Administration Act) is the Alcohol and Tobacco Tax and Trade Bureau, aka the TTB. The laws and regulations enforced by the TTB cover viticultural practices, wine production, distribution, marketing, and even trade practices (by way of tied-house restrictions). Since the regulations in each of these areas are complex and important, coming posts will discuss them individually in further detail.

If you’re thinking of getting into the wine business for yourself, or taking your home winemaking hobby commercial, an attorney can help you understand the regulations that will apply to your new venture. In the mean time, more background information can be found on the TTB website.

In 1935, congress adopted the Federal Alcohol Administration Act (FAA Act) to protect consumers by ensuring they get accurate information on wine labels. While the place of production has routinely been included on wine labels for centuries elsewhere, in the post-prohibition recovery era, many U.S. wines did not state an appellation, and those that did use geographic designations typically relied on states or counties with mapped boundaries.

Gradually, however, wines began to use terms like “North Coast” and “California Mountain”, which had no connection to mapped geographic regions. In 1978 that the TTB adopted a regulatory system to ensure customers were not being misled by the geographic information emerging on labels. Section 4.25(e)(1)(i) of the TTB regulations (27 CFR 4.25(e)(1)(i)) defines a viticultural area for American wine as a delimited grape-growing region distinguishable by geographical features, the boundaries of which have been recognized and defined in part 9 of the regulations (27 CFR part 9). The designation of an AVA does not impose any quality controls, as appellation of origin designations do in many parts of Europe, they simply allow a winemaker to designate the wine’s geographic origin on their labels.

Thus the rules set by the TTB in 1978 set up a procedure for establishing an AVA. Any interested party may file a petition, containing the following information (See 27 C.F.R. section 9.3(b)): evidence that the name of the viticultural area is in fact used to refer to the proposed area, either locally and/or nationally; evidence relating to the geographic features, such as climate, soil, and topography, which distinguish the proposed area; specific boundaries of the area based on features found on the topographic maps of the U.S.G.S.; and historic or current evidence in support of the boundaries proposed.

The TTB then commences a public rulemaking process, which requires public notice of the proposed rule, a period for public comment, publication of information for public review so that public commentary is meaningful, and review and response by the agency to significant comment when it issues its final rule. The proposed and final rules are published in the Federal Register (see, e.g., the Final Rule establishing the Calistoga Viticultural Area, or the accumulated comments on the Coombsville Viticultural Area). As of November 28, 2011, there are 200 approved AVAs (see the TTB list).

Many of the 200 AVAs overlap or fall within larger general AVAs. These are known as sub-appellations or nested AVAs.  Last year, the TTB rejected a proposal to prohibit the creation of nested AVAs moving forward. Instead, the rules require that a petitioner must state, in the petition itself, why the proposed AVA is “sufficiently distinct” from the existing one and must explain why the “establishment of the [new] AVA is acceptable.”

Other changes to the regulations last year affect the process for amending boundaries of AVAs.  The 2011 revisions impose more scrutiny of amendment proposals, by requiring detailed evidence of the distinguishing features of expansion area that justify inclusion in the existing AVA, and that those features are not found in surrounding, excluded areas. Names can also be amended if, over time, a region comes to be known by a different name (ex: Temecula AVA became Temecula Valley AVA).

The TTB protects the integrity of AVAs through the label review process (see 27 C.F.R. section 4.50, 4.39(a)(1)). If an applicant can’t justify use of AVA on label, the TTB rejects or revokes its COLA, which prevents the sale of wine under that label in the U.S. If the winemaker sells without approval of their COLA the wine can be seized, and the winery’s federal operating permit can be suspended or revoked.

More information on AVAs and links to proposed rules creating new AVAs can be found on the TTB website.

In spite of the lack of a bases for criminal charges, though, Whitney Farms may still face repercussions for the continuing to dispose of pomace in the pits. The issue arises out of traditional premises liability principles. Whitney Farms sold property to a  family in 2010, and according to a complaint filed by the new owner, did not disclose the existence of the pits and their potentially dangerous nature. The owner fell into a hidden pit and suffered second and third degree burns in March, and claims Whitney Farms is responsible for his injuries. Meanwhile, the Environmental Protection Agency is supervising the clean up of the property, and has reportedly already spread 11,000 acres of debris and dug up approximately 2,500 buried pits. The state Department of Ecology has asked Whitney Farms to disclose the location of other pits on the property.

Trial is scheduled for June of next year. Information on the previous case (and information about landowner premises liability in general) can be found on the National Agricultural Law Center’s website.

The truck safety issue was reportedly resolved early this year, and Mexico agreed to lift the tariff. It was dropped to 10% in July and completely eliminated this month.

Recent TTB action also aims to ease US wine exports. On October 20, the US, along with Chile, Argentina, New Zealand, Australia, and Georgia signed a Memorandum of Understanding (MOU) to help reduce barriers to international wine trade and support exporters of wine in each participating country by encouraging the elimination of burdensome requirements and certifications of wine products and ingredients. More information on the MOU can be found on the TTB Website.

The rules, which were adopted late last month, are intended to protect the salmon and steelhead by placing restrictions on the growers’ practice of spraying their vines with water for frost protection. When temperatures drop below freezing, the growers pump water from the Russian River  to keep the vines at 32 degrees. Federal officials from the National Marine Fisheries Service said that when growers removed water from the river for frost protection in 2008 and 2009 they stranded and killed salmon and steelhead. The plaintiffs say there were only two isolated incidents, and that the regulations go well beyond addressing these concerns.

The new regulations require growers who engage in this type of frost protection between March 15 and May 15 to submit a water management plan to the state or to be part of a larger water plan developed by a “governing body”. The plans are due at the beginning of February, and opponents argue that if the plans are rejected, there will be little time to come up with a solution before the frost comes. Others are working on alternative frost protection methods; the group Trout Unlimited has been working with growers to create off-stream storage pond to pump from and installing fans to prevent frost. They lauded the passage of a bill that streamlined the permitting process for such ponds earlier this month.

Case information can be found through the Superior Court of Sacramento County, case number 2011-80000984.