Dear Client: 

Walmart continues to make its case to sell spirits in the Lone Star State. But it’s been losing ground in its case against the Texas Alcoholic Beverage Commission in the Fifth Circuit Court of Appeals. Yesterday, the court denied the retailer’s en banc review request, though there will be a rehearing. 

BACKGROUND. Walmart can sell beer and wine in Texas, but is prohibited from owning a package store permit, and therefore from selling spirits. The retailer filed a lawsuit challenging sections of the ABC code that prevented it from doing so, claiming it is irrationally banned for being a public company.

Last year, US District Judge Robert Pitman sided with Walmart, ordering the TABC to cease enforcement on three of the four challenged sections; the ban on public corporations, the five-permit limit, and the consolidation exception for family members [see WSD 03-21-2018]. However, Judge Pitman granted the TABC’s motion to stay the decision until after the appeal.

In August, the appellate court affirmed part of the district court’s decision —rejecting Walmart’s equal protection challenge on the public corporation ban— but “because the district court erred in its findings regarding the discriminatory nature and burden imposed by the public corporation ban, Walmart’s dormant Commerce Clause challenge is remanded,” per court documents [see WSD 08-16-2019]. 

Notably, this marked the first time a federal court decision on a state’s alcohol laws used the dormant Commerce Clause since the recent Supreme Court decision in the Total Wine & More v. Tennessee case. 

A REVISED OPINION. Earlier this week, the Fifth Circuit withdrew their August opinion and filed a new one. There were no major changes to its previously ruling – still affirming the district court’s rejection of Walmart’s Equal Protection claim and vacating (render null and void) judgement that the public corporation ban violates the dormant Commerce Clause.  

What’s new is the appellate court ruled in favor of the TABC and TPSA on the Pike balancing test under the Commerce Clause, reversing the district court’s ruling. (The Pike balancing test weighs the burdens on interstate commerce against local benefits.) 

NBWA’s Paul Pisano also noted on Alcohol Law Review that the reworked opinion “repeated the timely clarification that ‘the burden of establishing that a challenged statute has a discriminatory purpose under the Commerce Clause falls on the party challenging the provision.'”

Moreover, in a separate order, the court granted the TABC and TPSA’s petition for rehearing on Monday. 

EN BANC DENIED. Walmart filed for an en banc review (asking the entire Fifth Circuit to review the case) shortly after the appeals court ruled against the retailer in August. Walmart claimed “the panel undermines three important Commerce Clause doctrines, contradicts Circuit and Supreme Court precedent, creates or deepens two circuit splits and breaks with the Court’s guidance in Tennessee Wine,” per the petition.

Yesterday, the court ruled the retailer’s en banc review as moot, after  granting the defendants’ petition for a rehearing.

Now it’s back to trial court or Walmart can take the case to the US Supreme Court. Stay tuned.

“TO KALON CREEK” PULLED INTO TRADEMARK DISPUTE 

A small creek near Oakville has now found itself tangled up in the To Kalon trademark dispute. 

Napa area grape grower Graeme MacDonald worked with the US Board on Geographic Names to name the creek near his cottage “To Kalon Creek.” Recall, Constellation Brands owns the “To Kalon” trademark. As such, the company has petitioned the board to remove “To Kalon” from the creek’s name, reports Napa Valley Register. 

A handful of owners have come forward to lay claim to sections of the 678-acre To Kalon estate originally owned by H.W. Crabb in the late 19th century. Graeme claims his family grows grapes on 15 acres of the original estate. 

The main issue here is whether “To Kalon” is a product trademark or a geographic designation. If that sounds familiar, that’s because Napa-based The Vineyard House is suing Constellation over its “To Kalon” trademark, claiming anyone who owns land part of the To Kalon estate should be able to use the name [see WSD 11-22-2019]. 

“Now I’ve found myself in quicksand with these two dueling entities,” says Graeme, adding, “It’s really about honoring the site. I don’t think they [Constellation] really understand that…”

But Constellation didn’t pull any punches in its petition, claiming, “Whether intended or not, Mr. MacDonald’s proposal was not about assigning an innocuous name to an otherwise nondescript feature – it was the first shot in a campaign to weaken or usurp Constellation’s To Kalon trademark rights.”

But, the decision has not been overturned and the name of the creek is still To Kalon Creek, according to Jennifer Runyon, a researcher with the US Board of Geographic Names. “We are just taking another look.”

WSD BRIEFS:

3 BADGE BEVERAGE MIXOLOGY NAMES NEW MIDWEST MARKET MANAGER. 3 Badge Beverage Corporation’s Mixology division has hired Gustavo Baena as the Midwest market manager. Gustavo joins the company from Stoli group USA, where he was the state manager of Illinois. “Gustavo’s relationships with retailers and distributors are outstanding,” says 3 Badge president August Sebastiani. “We’re delighted to have him head our business in the Midwest region. He will be a great asset in continuing to grow our spirits business.”

BARDSTOWN BOURBON CO. INTRODUCES COLLAB WITH PRISONER WINE COMPANY. The Bardstown Bourbon Company has partnered with Constellation Brands-owned The Prisoner Wine Company to introduce a bourbon finished in the Prisoner red wine barrels. This nine-year-old Tennessee bourbon is aged for 18 months in the same French oak red wine barrels used to age the the brand’s flagship product, the Prisoner. It is bottled at 100 proof and is available with a suggested retail price of $125. Recall, Constellation purchased a minority stake in BBCo in 2016 through Constellation Ventures.

TWE INKS DISTRIBUTION AGREEMENT WITH COLUMBIA DISTRIBUTING. Treasury Wine Estates has awarded the distribution rights in the state of Oregon to Columbia Distributing, effective January 2, 2020. “This has been a huge year of growth for Columbia’s Wine & Spirits portfolio, and cap off 2019 with the addition of TWE is incredible,” says Columbia chief Chris Steffanci. “This will allow us to bolster our dedicated wine team in Oregon by providing improved service and selection to our customers.” 

WE REGRET TO REPORT that industry public relations and marketing pro Jim Caudill has died. Jim began his wine career with Kendall Jackson as VP marketing communications director and ultimately Treasury Wine Estates, where he specifically looked after public relations for Beringer, Chateau St. Jean, Sterling Vineyard, Etude, Provenance vineyards and many others. In honor of Jim, TWE is encouraging donations to a fund to ensure his wife and their Sonoma property, Windborne Farm, will be looked after. 

A GREAT REASON TO ATTEND THE WSD SUMMIT: BABE WINE 

Canned wine continues to grow like gangbusters, up 82% in sales and nearly 67% in volumes–albeit still off of a relatively small base– for the year through November 2 in all Nielsen-measured channels. 

Canned wine brand Babe Wine launched as Swish Beverages in 2016 by co-founders David Oliver Cohen, Tanner Cohen and Josh “The Fat Jewish” Ostrovsky. The founders are primarily known for having created wildly successful social media personas. Indeed, they leveraged their social media prowess to grow the brand, grabbing the attention of a big brewer.  

In 2018, Anheuser-Busch InBev acquired a minority stake in Babe Wine through its innovation group, ZX Ventures. Earlier this year, the brewer fully acquired Babe. The goal is to make Babe the top US canned wine. Currently, Babe Rose Sparkling 250 ml 4-packs is the fourth largest sparkling canned wine SKU by sales in tracked channels, per IRI package analysis report. 

David Oliver Cohen and Josh “The Fat Jewish” Ostrovsky will be taking the stage at the Wine & Spirits Daily Summit in January. That’ll be a conversation you won’t want to miss. 

OUR AGENDA IS LIVE. We’ve got a stellar lineup this year, check out our current agenda. To register for the event, click here, or give Jessica a call at 210-805-8006.

Until tomorrow,
Sarah

“Expect the best. Prepare for the worst. Capitalize on what comes.” – Zig Ziglar

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