Cuomo Signs ABC Law Modernization Bill

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On Wednesday, September 7, New York Governor Andrew Cuomo signed legislation intended to modernize the State’s Alcoholic Beverage Control Law (“ABC Law” or “ABCL”). Senate Bill 8140, often referred to as the “Brunch Bill,” implements the recommendations made by the Alcoholic Beverage Control Working Group (“Working Group”) in April 2016. The most talked-about provision took effect immediately and allows the sale of alcohol for on-premises consumption before noon on Sundays—hence the legislation’s moniker—but boozy brunch is just one of many changes, most of which will take effect on November 6, 2016. Read on to learn more about these reforms.

Authorizing Sunday Morning On-premises Sales

As the “Brunch Bill” nickname suggests, the modernization law repeals the long-standing prohibition against serving alcoholic beverages before noon on Sundays. Effective September 7, on-premises licensees throughout the state will be allowed to serve alcoholic beverages starting at 10 a.m. on Sundays. A separate provision of the law that will take effect on November 6, creates a special permit that will allow on-premises licensees to sell alcoholic beverages on Sundays between 8:00 a.m. and 10:00 a.m. There are several restrictions on this permit:

  • This permit is available only to on-premises licensees in a cities with populations under one million (i.e., not New York City).
  • The permit is valid for only one calendar day.
  • Each eligible licensee can apply for no more than twelve permits per calendar year.
  • Each permit application requires notice to the local municipality. Only on-premises licensees in cities with populations under one million are eligible to receive the permit.

For those who wake up early enough on Sundays to start pouring or drinking before noon, the brunch provisions are a welcome change.

Codifying the Process for Filling State Liquor Authority Vacancies

The New York State Liquor Authority (“NYSLA”) consists of three commissioners, one of whom is designated by the Governor as Chairman; however, the original ABC law does not provide for the appointment of a temporary Chairman when a vacancy arises abruptly, as happened last year. The Chairman must be nominated by the Governor and confirmed by the state senate, which can take considerable time. The modernization law authorizes the Governor to designate a commissioner as acting Chairman for up to nine months[1] in the case of a vacancy of that position, pending the qualification of a new Chairman. The modernization law establishes a protocol for the designation of an acting chair.

Permitting the Sale of Wine in Open Containers

The modernization law allows wineries and farm wineries to sell wine in open containers, such as growlers. So what is a growler? In a ruling that it later suspended, the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) defined “growler” as “any container that is designed to be securely covered and is intended to be filled (or refilled) with wine for purposes of off-premises consumption, as well as any similar container designed to facilitate the secure transportation of the wine for later consumption off of the premises.” Basically, this is the bring-your-own-bottle concept in the literal sense. A consumer brings her own reusable vessel in which to a producer to be filled with wine. Click here to see a growler in action in Sardinia.

The old law required that wine sold at retail stores for off-premises consumption be kept in sealed containers, and it prohibited an individual from leaving a winery with an open bottle of wine. The modernization law will permit wineries to sell wine in growlers and allow consumers to take left-over wine home for off-premises consumption.

Combining and Simplifying Certain Licenses

The law creates a combined craft manufacturing license and an importer's license. Currently, New York craft manufacturers are allowed to manufacture different products at the same location, but they must obtain a different license for each product. This means that a craft manufacturer must apply for multiple licenses, pay multiple fees, and apply for multiple renewals. The modernization law eases this administrative burden by allowing craft producers to apply for a single license for their various activities, requiring just one filing fee and one renewal application.

The law also creates an importer’s license, which will enable holders to import alcoholic beverages into the state and sell them to licensed wholesalers. Under current law, importing for wholesale is cost-prohibitive for many small businesses. A wholesaler’s license can can cost up to $19,200, plus a bond of $20,000 and other administrative fees. For a small business that is just getting started, this is a significant up-front investment. The alternative is to move outside of New York and sell products to wholesalers located within the state, which would obviate the need for a wholesaler’s license. The new importer’s license will enable businesses to import and wholesale alcohol for a fee of $125.

NYSLA may impose civil penalties (i.e., fines) of up to $30,000 upon combined craft manufacturing license and importer's license, but penalties associated with combined manufacturing licenses may apply to only the prosecuted manufacturing activity.

Other Provisions

In addition to the provisions above, the modernization bill will:

  • Repeal the surety bond requirement for a solicitor’s permit. A solicitor’s permit authorizes a person to offer alcoholic beverages for sale to licensees or to solicit orders for alcoholic beverages from licensees. The bond requirement caused financial hardship for small businesses.
  • Extend the duration of a temporary solicitor's permit from sixty days to six months
  • Eliminate the requirement of a solicitor's permit for salespeople who work for craft manufacturers.
  • Allow a person with an on-premises liquor or wine license establishment adjacent to such person's off-premises beer license establishment to transport liquor and wine through the off-premises establishment.
  • Permit liquor and wine stores to sell gift bags and gift wrapping.

What’s not in the law?

Conspicuously absent from the modernization law is any mention of direct-to-consumer interstate shipment. The ongoing Empire Wine saga, in which an Albany-based retailer was tenaciously pursued by NYSLA for allegedly shipping wine to out-of-state consumers in violation of other states’ laws, highlighted the failure of the law to keep pace with technology and consumer behavior. A separate bill (Senate Bill 7728) that is still pending would indirectly address the issue of interstate shipment of alcohol by limiting NYSLA’s jurisdiction over out-of-state conduct.[2] Senate Bill 7728 passed both chambers of the Legislature and awaits the Governor’s signature. In addition, the Alcoholic Beverage Control E-Commerce Task Force created by Governor Cuomo in February 2016 “to develop a clear framework for regulating sales of alcoholic beverages through third party providers” continues its work.

Not all of the Working Group’s recommendations became law. I think it’s important for context to include here the recommendation that did not make into the Brunch Bill.

The Working Group recommended that NYSLA be granted general rulemaking power. Currently, the Authority’s rulemaking power is derived from specific sections of the ABC Law, so its authority is limited. For example, if a statute creates a new type of license but does not allow NYSLA to promulgate rules for that license, there will be an element of uncertainty regarding the implementation and enforcement of the license. To fill the “holes” in its legal authority, NYSLA issues guidance in the form of advisories and bulletins. The Working Group reasoned that general rulemaking power would enable NYSLA to respond to industry changes in a more nimble fashion.

The ABC Law currently prohibits individuals convicted of a felony or certain misdemeanors from holding a license in their own name [A.B.C.L. § 126(1)] or in partnership with someone else [A.B.C.L. § 126(4)]. The Working Group recommended that this prohibition be limited to felony convictions within the five years immediately preceding the filing of the license application.

Current law prohibits the issuance of certain licenses for a location that is on the same street as and within two hundred feet of a building that is exclusively occupied by a school or place of worship. Citing instances in which applications were denied despite the approval of a nearby school or place of worship, the Working Group recommended that NYSLA be given discretion to approve license applications that would otherwise be denied based on the 200 Foot Law.

Current law also prohibits on-premises licensed locations from having “any opening or means of entrance or passageway for persons or things between the licensed premises and any other room or place in the building containing the licensed premises or any adjoining or abutting premises…” [A.B.C.L. § 106(9).]  The Working Group recommended that this prohibition be repealed.

Under current law, a “majority of the [M]embers of the [A]uthority shall constitute a quorum for the purpose of conducting the business thereof and a majority vote of all the Members in office shall be necessary for action.” [A.B.C.L. § 14.] This means that when only two Members are in office, both must be present for the Board to conduct business. The Working Group suggested that:

  • The Governor be allowed to appoint an acting Member to serve at any time when there are fewer than three Members in office;
  • The Chief Executive Officer of NYSLA (“CEO”) or other senior staff member be authorized to vote on an application when there are fewer than three Members in office;
  • The CEO or other senior staff member be authorized to serve as an acting Member “when, due to a vacancy, illness, or other incapacity, there is an insufficient number of Members present at a Full Board meeting to constitute a quorum for purposes of conducting business;” and/or
  • The Chairperson’s vote be able to decide matters when there are only two Members in office.

The Alcoholic Beverage Control Working Group

Shortly after the 2015 Wine, Beer, Spirits and Cider Summit, Governor Cuomo created the Alcoholic Beverage Working Group and tasked it with reviewing the state’s ABC Law and identifying ways to modernize and streamline it. The Working Group was comprised of a diverse group of industry stakeholders, including producers, retailers, wholesalers, and attorneys. Its report, which includes 15 recommendations for the overhaul of the ABC Law, can be viewed here.

Outlook

The modernization law sailed through the Legislature in a session that was marked by election year inertia. The bill was introduced on June 13, 2016, at the request of the Governor, passed by the Senate three days later, and passed the Assembly in just one day. While significant issues remain unresolved, this law is reflects promising cooperation among industry stakeholders and between industry and government. Given this collaborative spirit and the Governor’s commitment to supporting New York’s alcoholic beverage industry, further reform could be within reach.

 

[1] The Governor must designate one of the commissioners to serve as acting chair for up to six months. If, at the end of six months, the Governor has made a nomination but the Senate has not yet confirmed it, the acting chair may serve for another 90 days.

[2] The provision of law that gave rise to the Empire Wine case, subsection 3 of Section 17 of the ABC Law, provides that NYSLA may revoke, cancel, or suspend a license or permit and/or impose a civil penalty against a holder of a license or permit “for cause.” “For cause,” however, is undefined. Senate Bill 7728 would limit the circumstances under which out-of-state conduct would constitute “cause.”

Growlers are not yet widely used for wine in the U.S., but they are fairly common in other countries. They reduce waste and enable consumers to buy exactly as much wine as they want. Here’s one of my favorite moments from my trip to Sardinia in July: the filling of a growler at the Cantina di Sorso in Sardinia. That’s a lot of Vermentino!