Second Empire Wine Bill Vetoed
/On Friday, November 4, New York Governor Andrew M. Cuomo vetoed Assembly Bill 10248 (“A10248,” same as Senate Bill 7728), a legislative measure that would have curtailed the State Liquor Authority’s jurisdiction over activities with out-of-state consequences.[1] A10248 was Assembly Member Phil Steck’s second attempt to clarify the conditions under which the State Liquor Authority (“NYSLA”) may punish a licensee or permittee for conduct that occurs outside of New York. A10248 and its predecessor, Assembly Bill 5920 (“A5920”), were precipitated by a long, bitter dispute between the State Liquor Authority (“NYSLA”) and Albany wine and liquor retailer Empire Wine (“Empire”). It is unclear at this point how NYSLA, Empire, and the Legislature will proceed.
Background
In August 2014, NYSLA issued Empire a citation pursuant to Section 53.1(n) of NYSLA's Rules for “improperly” shipping wine to customers in 16 other states. According to NYSLA, several of Empire’s shipments violated the laws of other states. The following month, Empire sued NYSLA in state court, arguing that the Authority lacks the jurisdiction to prosecute out-of-state conduct and asking the judge to block NYSLA from taking punitive action.[2] The judge avoided the question of NYSLA’s jurisdiction, however, dismissing the case as premature because Empire had not yet been penalized.
Empire then turned to the State Legislature for help, and in March 2015, Assembly Member Phil Steck introduced A5920. That bill would have prohibited NYSLA from revoking, canceling, or suspending licenses or imposing civil penalties for out-of-state activity unless the activity (1) independently violates New York’s Alcoholic Beverage Control Law; or (2) has led to a criminal conviction in the state in which the activity occurred. A5920 was quickly approved by both the Assembly and the Senate, but in December 2015, the Governor vetoed the bill. According to the Governor:
- The bill would allow New York licensees to violate other states’ laws with impunity because they could withhold consent to another state’s jurisdiction, making a conviction impossible.
- The so-called tied house law (A.B.C. § 101(1)(a)), which prohibits manufacturers and retailers from having interests in each other, would be rendered meaningless because a manufacturer could hold an interest in an out-of-state retailer, or vice versa.
Assembly Member Steck took the Governor’s veto message for A5920 to heart in drafting A10248. A10248 would allow NYSLA to punish a licensee if:
- The licensee’s conduct violates a specific provision of New York’s Alcoholic Beverage Control Law;
- The licensee is found guilty of violating another state’s laws or regulations by that state and with due process;
- Another state notifies the licensee that its conduct violates that state’s law and asks the licensee to stop, but the licensee knowingly and repeatedly engages in the illegal conduct;
- The licensee has knowingly made illegal sales to minors in another state; or
- The licensee has failed to pay taxes in a state where taxes are owed.
A10248 was more deferential to NYSLA and addressed the Governor’s concern about a personal jurisdiction loophole by allowing NYSLA to take disciplinary action without a conviction (i.e., when a licensee ignores another state’s request that it stop violating that state’s law).
Veto of A10248
The Governor was not satisfied that A10248 adequately addressed his personal jurisdiction concerns. In his veto message, he reasoned:
Similar to the legislation I vetoed last year, this bill would allow State licensees to break other states' laws with no fear of reprisal by the SLA. Furthermore, even if other states did pursue these entities, they would likely refuse to submit to the other states' jurisdiction. This would essentially create a regulatory gap in which these entities would be immune from prosecution.
Notwithstanding the changes noted above, the Governor concluded that A10248 “would severely constrain the SLA's authority to ensure that licensees and permit[t]ees act in a legal and ethical manner.”
Implications
The veto of A10248 is anticlimactic for those who seek a little more clarity regarding NYSLA’s jurisdiction over out-of-state conduct and a framework for enforcement—as well as for those who just want a resolution to the Empire Wine saga. Meanwhile, NYSLA’s disciplinary action and Empire’s first lawsuit (which is now on appeal) remain pending. Furthermore, the Alcoholic Beverage Control E-Commerce Task Force, formed by the Governor in February 2016, was initially charged with drafting legislation addressing online alcohol sales by third parties, so it is not clear when comprehensive alcohol e-commerce legislation will be introduced. Stay tuned for updates, and click the “Empire Wine” tag below to view previous posts about this ongoing dispute.
[1] This bill is the companion bill, or “same as” of Senate Bill 7728. It is common practice for an identical bill to be introduced in both the Assembly and the Senate.
[2] Empire sought an injunction, which would halt the disciplinary proceeding. The complaint also alleged that section 53.1(n) is unconstitutionally vague. In a separate suit under the Freedom of Information Law ("FOIL"), Empire sought the release of certain NYSLA records.
