New York Aims to Modernize State Alcohol Beverage Laws

New York alcohol beverage producers, wholesalers and retailers take note:  there may be some changes coming your way.  Governor Andrew Cuomo has announced the creation of an industry working group to recommend revisions to the state’s Alcoholic Beverage Control Laws.  The group, to be headed up by NY State Liquor Authority Chairman Vincent Bradley, is scheduled to look into “reorganizing or replacing the current alcohol beverage control law” as well as the following issues:

  • Removing outdated and redundant provisions;
  • Modernizing statutory language for clarity;
  • Improving and consolidating various licensing provisions;
  • Clarifying the types of licenses available;
  • Reducing mandatory paperwork; and
  • Eliminating unnecessary restrictions imposed on manufacturers.

The working group’s first meeting is scheduled to take place on November 12, 2015 at 1pm at the NYSLA’s Harlem Office (317 Lenox Avenue).  Video conferencing will be available in the NYSLA’s Albany and Buffalo office locations.  Seating is limited, and parties interested in attending should RSVP by sending an email to [email protected] no later than noon on Wednesday, November 11.

NYSLA Proposes Advisory for Trademark Licensing Agreements

The New York State Liquor Authority is considering adopting an advisory regarding trademark licensing agreements between retailers and alcohol beverage producers.  If adopted, the advisory would prohibit certain trademark licensing agreements between retailers and suppliers (i.e., producers and wholesaler) that involve a licensing fee based upon a percentage of sales or that otherwise “correlate[s] with sales.”  According to the NYSLA, such arrangements violate state tied house law because they are indicia of a retailer having a direct or indirect interest in a supplier.

The draft advisory will be discussed at the June 30, 2015 NYSLA Board Meeting.  Interested parties can submit comments to NYSLA Secretary Jacqueline Held at [email protected] by June 29, 2015.


6/30/2015 UPDATE – According to the NYSLA website, the hearing has been postponed until July 14, 2015.  

Regulatory Hurdles for DTC, Social Media, and Third Party Sales Channels

During last week’s Unified Wine & Grape Symposium, DP&F attorney John Trinidad moderated a panel discussion titled, “Regulatory Hurdles for DTC, Social Media, and Third Party Sales Channels.” Trinidad led off the session with a presentation describing how the Internet has “disrupted” the wine industry’s traditional sales and marketing models.  You can access Trinidad’s PowerPoint presentation by clicking on the image below:

01-2015 Unified Symposium Panel (Revised Trinidad Slides)

Trinidad noted that the promise of e-commerce has become significantly more important for small wineries given the increase in the number of suppliers and continued consolidation of the wholesale tier.  As noted by a respondent to a Gomberg, Fredrikson & Associates study:

“It is tougher than ever int he 3-tier channel.  We have a hard time getting distributor attention as tehy have way too many brands, not enough people and we are just too small to matter.”

While wineries now have a significantly increased opportunity to reach consumers directly without having to find national distribution or share their revenues with intermediary tiers, a number of hurdles still remain.  These include production caps, on site requirements, and other impediments to direct-to-consumer shipping.  Additional issues arise due to regulatory uncertainty regarding how state alcohol beverage agencies will treat “new players” in the wine sales model, including third party providers.  In short, e-commerce and the increased ability to ship directly to consumers offers a number of opportunities for wineries, but also raises a number of unresolved regulatory questions.

Similarly, social media provides wineries with the opportunity to interact and build relationships with consumers, but may still wonder how federal and state regulations apply to “new media.”  Government agencies concerned with transparency and consumer have, by in large, ported their advertising restriction and applied it broadly to social media.  This includes tied house laws, which prevent wineries from providing things of value (including free advertising) to retailers.  Trinidad noted that regulatory uncertainty is likely to continue as new Internet-based business models appear and blur the line between e-commerce and social media.

Finally, Trinidad provided attendees with an update on the Empire Wine / NYSLA dispute.  As noted in prior blog posts, NYSLA has accused Empire Wine, a New York based retailer, of shipping wine to states where retail direct to consumer shipping is prohibited, even though those states have not pursued any disciplinary action against Empire.  NYSLA believes this action is grounds for suspension, revocation, or cancellation of Empire’s New York State License.  If NYSLA prevails, a California winery that illegally ships wine to a consumer in, say, Utah, may be putting their NY Direct Shipper’s license at risk.

NYSLA, Empire Wine and Due Process

On January 23, the New York State Liquor Authority is scheduled to hold a hearing to determine if retailer Empire Wine & Spirits (“Empire”) engaged in “improper conduct” that warrants the suspension, cancellation or revocation of the retailer’s New York liquor license.  According to the SLA’s Notice of Pleading, Empire allegedly shipped wine to consumers in other states, including states that do not allow for retailer direct-to-consumer alcohol shipping, and this amounts to “improper conduct’ that warrants a disciplinary penalty.  (For a summary of the issues involved, including some of Empire’s legal arguments to date, please see

Under New York law, after the SLA has served a notice of pleading, and if the licensee pleads not guilty, the licensee is entitled to a hearing before an impartial decision maker – a basic tenetant of due process rights.  Those same due process rights also prohibit the SLA from prejudging specific facts or laws that will be at issue in a hearing.  For example, New York courts previously held that public statements by the Chairman or a commissioner of the SLA indicated prejudgment of facts at issue in a pending proceeding.  Because the chairman / commissioner that made the statement had not disqualified themselves from the proceeding, licensee’s due process rights had been violated.  If a “disinterested observer may conclude that [the administrative official] has in some measure adjudge the facts as well as the law of a particular case in advance of hearing it,” then that official is disqualified on the ground of prejudgment.  Woodlawn Heights Taxpayers & Cmty. Ass’n v. N.Y. State Liquor Auth., 307 A.D.2d 826, 827 (N.Y. App. Div. 1st Dep’t 2003).

Recently, the SLA used its official Twitter and Facebook accounts to publish a link to an op-ed written by Craig Wolf, president of the Wine & Spirits Wholesalers of America, in which Mr. Wolf states that Empire “has for years shipped alcohol across state lines in violation of recipient states’ tax and licensing laws.”  Mr. Wolf goes on to state that, “The SLA is doing what is right” by going after Empire, and argues that the SLA’s enforcement actions is supported by the 21st Amendment.

2015-01-20 08.01.06


By promoting Mr. Wolf’s article, one could argue that the SLA has already decided the facts before Empire has had any chance to present evidence at the hearing.  Moreover, the SLA has conclusively weighed in on a key legal questions at issue in this hearing:  does the SLA’s disciplinary action attempt to regulate interstate sale and distribution of alcohol in violation of the Commerce Clause, or is the SLA’s action permissible under the 21st Amendment?  (For a review of some of Empire’s other legal arguments, please see

The SLA’s adoption and public promotion of Mr. Wolf’s views and statements may provide the basis for an appeal by Empire  (if needed).

John Trinidad is an attorney at DPF and also serves as pro-bono General Counsel to the American Wine Consumers Coalition, an advocacy organization seeking to protect consumer rights and lower barriers to wine access.  His full bio is available here.  

Updated 1/25/2015

21st Amendment Litigation: NY Wine Retailer Sues NYSLA

Nine years ago, the U.S. Supreme Court held that a New York law that discriminated against out of state wineries violated the Commerce Clause, and rejected arguments that the 21st Amendment protected such laws from constitutional scrutiny.

New York now finds itself at the center of yet another Commerce Clause/ 21st Amendment controversy pitting Empire Wine & Spirits LLC, a New York-based alcohol beverage retailer, against the New York State Liquor Authority (SLA).

The dispute began in August, when the SLA commenced disciplinary proceedings against Empire under 9 NYCRR 53.1(n), a code provision that gives the SLA the ability to suspend, cancel or revoke a license for “improper conduct by the licensee or permittee….”  The SLA has previously used its authority under Sec. 53.1(n)  in cases where the owners, officers, or directors of a licensee were charged with either a drug-related felony (Miracle Pub v. New York State Liquor Auth.,210 A.D.2d 229 (N.Y. App. Div. 2d Dep’t 1994); see also Edto Foods, Ltd. v. New York State Liquor Authority,113 A.D.2d 787 (N.Y. App. Div. 2d Dep’t 1985)) or serious misdemeanors, such as reckless endangerment and obstruction (See Order of Suspension of New Rat LLC).  Here, however, the alleged “improper conduct” is Empire’s shipment of wine to consumers in the following states:  Alabama, Arizona, Arkansas, California, Delaware, Georgia, Illinois, Maine, Massachusetts, Mississippi, Ohio, Louisiana, Pennsylvania, Vermont, Virginia, and Washington.  Some of those states prohibit out of state retailers from ship to in-state consumers; others allow such shipments so long as the retailer obtains a permit; and others have “reciprocal” privileges (i.e., if retailer’s home state allows direct to consumer shipping from state x, then state x will allow such shipments).

On September 23, Empire filed suit in state court in Albany County.  In its complaint, Empire notes that there is no New York statute or regulation that expressly prohibits a licensed retailer from shipping wine to customers in other states.  The SLA apparently concedes this point, as it failed to cite 9 NYCRR 53.1(a) in its Notice of Pleading.  53.1(a) gives the SLA the ability to cancel, revoke, or suspend a licensee when the licensee has violated any provision of the New York State Alcoholic Beverage Control Law or of any SLA rule or regulation.

Empire seeks a court order declaring that the SLA’s disciplinary action attempts to regulate the sale and distribution of alcohol beyond New York’s borders, violates the 21st Amendment, and constitutes an impermissible interference with interstate commerce in violation of the Commerce Clause.  Empire further claims that the SLA does not have the statutory authority to regulate such shipments since, under ABC Law Sec. 2, SLA’s sole function is “to regulate and control the manufacture, sale and distribution within the state of alcoholic beverages for the purpose of fostering and promoting temperance in their consumption and respect for and obedience to law” (emphasis added). Finally, Empire claims that 9 NYCRR 53.1(n) is unconstitutionally vague, as it fails to provide licensees with any warning that out of state shipments could be deemed “improper conduct” such as to warrant suspension, cancellation, or revocation of their alcoholic beverage license.

The case is Empire Wine & Spirits LLC v. New York State Liquor Authority (Case No 004915/2014).  Click on the link below for a PDF of the complaint.

Empire Wine v NYSLA 2014 Complaint

For more information related to direct to consumer shipping laws, please contact John Trinidad at [email protected]