Law of the Vine: The practice of wine law

Daily Record and the Kansas City Daily News-Press, Dec 6, 2005 by Correy E. Stephenson

Since May, certain states have solved the problem by leveling down, or taking away the rights of in-state wineries to sell direct.

But other states have leveled up by allowing direct sales. Federal courts in Florida, Massachusetts, Pennsylvania and Ohio have all struck down laws prohibiting out-of-state-wineries from making direct sales, and cases are currently pending in Arkansas, Indiana, Kentucky, Maine and New Jersey.

The issue is far from settled.

Granholm is just one event of many events over the course of time dealing with the distribution of wine, Lee said. It's never-ending.

The Future of Wine

In addition to the continuing effects of Granholm, Mendelson predicted an increasing focus on land use issues for wineries.

Environmental law issues are of major importance, he said. There are a host of environmental regulations like the Clean Water Act, the Clean Air Act and the Forest Practices Act, and a number of very active groups who oppose new vineyard plantings because habitats may be fragmented or erosion will occur as a result of removing trees.

Lee agreed, particularly with respect to air quality.

When wineries ferment, they produce ethanol, which gets into the environment [and is] a volatile organic compound that contributes to smog, he explained. While the fermentation process of vineyards is currently not regulated, several districts in California are now considering the issue.

The growth of the industry has also created different business models for wineries, necessitating more legal work, Hermann said.

In the beginning, a single investor would use his own capital to buy a vineyard, plant the grapes, make his own wine and then get it distributed.

We still see a lot of people following that traditional model, but we also have people who want to be an alternating proprietor - with people independently licensed to run tasting rooms and retail sales as well as the winery itself, or separate crushing agents, he said. And that creates a lot of work for lawyers, like custom crush agreements and various contracts for all the different levels of capital investment in a winery.