Southern Glazer’s Class Action Settlement a Reminder to Comply with Maximum Late Payment Penalties on Retailers

A recent $5.5 million settlement payment from one of the country’s largest alcoholic beverage wholesalers serves as a good reminder that California law restricts the amount of late fees and interest that can be charged in connection with the purchase and sale of alcoholic beverages to retailers.

Cal. Bus. & Prof. Code § 25509 provides that various alcoholic beverage manufacturers and wholesalers who sell and deliver alcoholic beverages to a retailer and who did not receive payment for such alcoholic beverages within 42 days of delivery shall charge the retailer 1% of the unpaid balance on the 43rd day and an additional 1% for each 30 days thereafter.

In 2014, a Los Angeles-based retailer, Wiseman Park, LLC (“Wiseman”), brought an action against Southern Glazer’s Wine and Spirits, LLC (“Southern”) in connection with Southern’s attempt to collect not only the Section 25509 statutory late payment penalty, but also a 1% per month “carrying charge” included in the parties’ written agreement. Wiseman alleged that Southern’s imposition of the separate carrying charge violated Cal. Bus. & Prof. Code § 17200.

In 2021, the action was changed to a class action lawsuit so that other retailers subject to Southern’s carrying charge could join the lawsuit.  In early 2024, the court preliminarily approved the parties’ proposed settlement agreement whereby Southern would make a $5.5 million payment to resolve the class action lawsuit, write off $44.1 million carrying charges yet to be paid by the retailers, and agree not to impose the carrying charge going forward. The deadline for retailers to opt out of, or object to, the class action was March 1, 2024. The final approval hearing for the settlement is scheduled for April 16, 2024.

Industry members should take this opportunity to review their agreements with retailers, and ensure any interest or penalties imposed on retailers do not exceed the statutory limits imposed by the ABC Act.

For assistance with this or any other Alcohol Beverage Law & Compliance or Wine Law matters, email Bahaneh Hobel, John Trinidad, or Alexander Mau.

Cannabis Wine? Not so fast, says Oregon Liquor Control Commission

With the legalization of marijuana spreading across major wine producing states, including Washington, Oregon and (most recently) California, many believed that it was only a matter of time before licensed cannabis retailers would stock their shelves with marijuana-infused wines.

But earlier this month, the Oregon agency in charge of regulating the sale of alcohol and recreational marijuana in the state, the Oregon Liquor Control (OLCC), issued guidance that prohibits the sale of marijuana-infused alcohol beverage products.  Under Oregon Rev. Statute 471.446(2), OLCC may “prohibit any licensee from selling, any brand of alcoholic liquor which in its judgment …contains injurious or adulterated ingredients.”   OLCC concluded that any alcohol beverage that contains “marijuana or marijuana items” (including extracts) should be deemed adulterated and, therefore, prohibited the sale of such products.  OLCC, however, created an exception for alcoholic beverages produced using industrial hemp (as that term is defined under ORS 571.300) so long as the U.S Alcohol and Tobacco Tax and Trade Bureau has issued a formula for that product and the product’s label complies with TTB requirements.

California may adopt a similar view of the sale of marijuana-infused alcohol beverage products.  Under California law adopted pursuant to Prop 64, a licensed marijuana retailer will be the only entity that could sell products infused with marijuana for recreational use (such as marijuana-infused wine).  However, in order to do so, that retailer would also have to hold an alcohol beverage  retail license issued by the Department of Alcoholic Beverage Control, and laws adopted under Prop 64 specifically prohibit a party from holding both licenses.   Thus, unless new rules are enacted that allow either an alcohol beverage retailer or a licensed marijuana retailer to sell marijuana infused alcoholic beverages, there is no legal sales outlet for such products in California.

There is also a serious question as to whether such products could be legally produced by a state licensed and federally bonded winery.  Those concerns are entirely separate from, and in addition to, concerns as to whether the current administration will impede state-sponsored efforts to legalize adult-use marijuana.

In short, cannabis wine entrepreneurs should proceed cautiously.