On February 5, 2018, the US District Court for the Eastern District of Missouri issued an opinion in one of the many false advertising class actions brought against the industry in the past five years.

Penrose v. Buffalo Trace Distillery, E.D. Mo. 4:17-cv-00294-HEA, involves the labeling of Old Charter bourbon. For years, Old Charter sold an 8-year-old version and a 12-year-old version, with their labels very prominently displaying “8” and “12” (respectively) in several places. According to the complaint, in January 2014 Old Charter “8” was re-formulated to use less-aged bourbon, described by the court as “non-age stated” or “NAS” bourbon. The labels, however, continue to prominently display the number “8” in the same manner as the prior label. In addition, while the label previously stated “aged 8 years,” the NAS bourbon’s label states “gently matured for eight seasons.” The court’s opinion catalogues a number of alleged complaints by consumers that they were deceived into purchasing the NAS product on the mistaken belief that the bourbon was still aged for eight years. Significantly, the complaint alleges that the price for Old Charter “8” remained the same after the reformulation. Continue Reading District Court Issues Opinion in Old Charter Bourbon False Advertising Class Action

Earlier this week the Trump Administration presented its Fiscal Year 2019 Budget Proposal. While many portions of a president’s proposed budget do not get enacted, such proposals provide insight into the thinking of the administration.

With respect to the alcohol beverage industry, the budget proposal would transfer to the Alcohol and Tobacco Tax and Trade Bureau the remaining (criminal) authority the old Bureau of Alcohol, Tobacco & Firearms (ATF) has over alcohol beverages, stating:

ATF would transfer the entirety of its alcohol and tobacco regulatory and enforcement responsibilities to the Alcohol and Tobacco Tax and Trade Bureau (TTB) in the Department of the Treasury. This transfer would enable the ATF to hone its focus on activities that protect U.S. communities from violent criminals and criminal organizations, while consolidating duplicative alcohol and tobacco enforcement mechanisms within the TTB.

We suspect TTB would welcome an expansion of its authority to include criminal matters involving alcohol (e.g., diversion a/k/a “bootlegging”).

Two sections of Craft Beverage Modernization and Tax Reform Act (CBMTRA) that were dropped from the 2017 federal tax reform law were subsequently added to the Bipartisan Budget Act of 2018, signed into law by President Trump on February 9, 2018.

The new law mandates a temporary (two year) change in tax recordkeeping requirements for domestic breweries to eliminate duplicate reports and accounting obligations for breweries that have pub and sampling areas. The intent of the new law is to allow brewers to keep one set of books covering (a) beer removed from brewery for sale for distribution to retailers and (b) beer sold or provided for sampling to consumers at a brewery. Existing regulations and policies led to unnecessary complexity in accounting for brewers and for auditors from the Alcohol and Tobacco Tax and Trade Bureau (TTB). While the recordkeeping changes are required for calendar years 2018 and 2019, TTB may be able to make changes in regulations and policies that will provide permanent relief from unnecessary administrative burdens. Continue Reading 2018 Federal Budget Legislation Provides Breweries with Administrative Relief and Acknowledges 21st Amendment

Early this morning, both houses of Congress approved the “Bipartisan Budget Act of 2018,” complex legislation that includes important modifications to an arcane law known as the “rum cover over,” which is an important revenue source for the Commonwealth of Puerto Rico and the US Virgin Islands (USVI).

The temporary excise tax relief provided to distillers in the 2017 federal tax reform law will not diminish the amount of federal excise tax revenue covered over to the treasuries of Puerto Rico and the USVI. The 2017 tax reform law included a two year reduction in the federal distilled spirits excise tax rate from $13.50 per proof gallon to $2.70 per proof gallon on the first 100,000 proof gallons of distilled spirits, and $13.34 per proof gallon on the next 22,130,000 proof gallons produced by each distillery or each controlled group of distilleries. The 2018 Budget Act treats all rum subject to the rum cover over as if it is subject to the full $13.50 per gallon excise tax rate. Continue Reading Additional Rum Cover Over for Puerto Rico and the US Virgin Islands Approved in 2018 Budget Legislation

US Attorneys, state officials and cannabis industry representatives met in Portland, Oregon on February 2 to discuss how to enforcement will change after Attorney General Jeff Sessions announced changes to Department of Justice (DOJ) policies on the prosecution of marijuana cases. The answer: a crackdown on illegal overproduction in states where cannabis production is legal and a focus on reducing the amount of cannabis being diverted to states where it is still illegal.

On January 4th, the DOJ released a memo that directed all US Attorneys to enforce “the laws enacted by Congress” and “follow well-established principles when pursuing prosecutions related to marijuana activities.” The memo rescinded the Cole Memo and other DOJ guidance that reduced the likelihood of federal prosecution of cannabis businesses in states that permit medical and recreational cannabis use. After the DOJ announcement, the cannabis industry was unsure of how these changes would affect cannabis operations legal under state law and uneasy about the future of the industry. Continue Reading DOJ Attorneys Explain New Cannabis Enforcement Plans at Summit

Over the past few years, news headlines have been filled with reports of large data security breaches impacting major brand names and affecting millions of people. It seems like with each new day comes a new breach. The reports are alarming for businesses and consumers alike.

No industry is immune from the soaring increase in data security breaches—not even craft brewing. Many small businesses owners erroneously believe they are too small to attract a hacker or fall victim to a breach. Scotty’s Brewhouse, the Indiana-based brewery and restaurant chain, experienced a data breach in January 2017 when an employee emailed 4,000 employee W-2 tax forms to an unknown scammer posing as the brewery’s CEO. Continue Reading.

Originally published in the January/February 2018 issue of The New Brewer. 

On January 17, 2018, the United States District Court for the Northern District of California issued a decision in yet another putative class action alleging that a beer brand’s labeling and marketing was false and deceptive. In this case, the defendant is The 21st Amendment Brewery Café (21st Amendment), a successful California-based craft brewery. See Peacock v. The 21st Amendment Brewery Café, LLC, N.D. Cal. No. 17-cv-01918-JST (Jan. 17, 2018). Continue Reading District Court Denies Motion to Dismiss Deception Claims against Brewer

The Food and Drug Administration (FDA) recently issued a draft guidance on the agency’s voluntary recall process and announced the agency’s intention to notify the public faster when a product is recalled. The guidance aims to assist and provide recommendations to industry and FDA staff regarding the use, content and circumstances for issuance of public warnings and public notifications for firm‑initiated or FDA‑requested recalls. In addition, the guidance discusses what information to include in a public warning, as well as the parties responsible for issuing it. Notably, the draft guidance does not specifically address recalls of alcohol beverage products regulated by the Federal Alcohol Administration (FAA) Act or the primary role of the Alcohol and Tobacco Tax and Trade Bureau (TTB) in seeking and monitoring recalls of such beverages. Comments on the draft guidance are due by March 20, 2018. Continue Reading FDA Releases Draft Guidance on Public Warnings and Notifications of Recalls

Today, Attorney General Jefferson B. Sessions announced, in a memorandum to all US Attorneys, the immediate revocation of five Obama Administration policies on federal marijuana enforcement, including Guidance Regarding the Ogden Memo in Jurisdictions Seeking to Authorize Marijuana for Medical Use, Guidance Regarding Marijuana Enforcement and Guidance Regarding Marijuana Related Financial Crimes. These three Obama-era guidance documents were drafted by then Deputy Attorney General James M. Cole in response to state legalization initiatives. Continue Reading Cannabis Chaos: Justice Department Revokes Obama-Era Guidance on Marijuana Enforcement