Brewery and Distillery Law - ABC, TTB, Municipalities, contracts, regulations

1. NBI Brewery & Distillery Law
William A. Adams, APC
Norton, Moore, & Adams, LLP
525 B Street, Suite 1500
San Diego, CA 92101
619-233-8200
wadams@nmalawfirm.com
www.calbevlaw.com

2. Regulatory Tiers
1) Federal: Alcohol & Tobacco Trade and
Tax Bureau (TTB)
2) State: ABC
3) Municipal: Land use / zoning

3. Brewery License Types
•License Types
•01 Beer Manufacturer
•23 Small Beer Manufacturer
•75 On-Sale General Brew-Pub

4. Distillery License Types
•License Types
•03 Brandy Manufacturer
•04 Distilled Spirits Manufacturer
•06 Still
•07 Rectifier
•74 Craft Distiller

5. Brewery License Types
• 01 BEER MANUFACTURER - (Large Brewery) Authorizes the sale of
beer to any person holding a license authorizing the sale of beer, and
to consumers for consumption on or off the manufacturer’s licensed
premises. Without any additional licenses, may sell beer and wine,
regardless of source, to consumers for consumption at a bona fide
public eating place on the manufacturer’s licensed premises or at a
bona fide eating place contiguous to the manufacturer’s licensed
premises. May conduct beer tastings under specified conditions
(Section 23357.3). Minors are allowed on the premises

6. Brewery License Types
• 23 SMALL BEER MANUFACTURER - (Brew Pub or Micro-brewery)
Authorizes the same privileges and restrictions as a Type 01. A
brewpub is typically a very small brewery with a restaurant. A micro-
brewery is a small-scale brewery operation that typically is dedicated
solely to the production of specialty beers, although some do have a
restaurant or pub on their manufacturing plant. <60k barrels/yr.
Licensee may hold up to 6 other retail licenses without tied house
violation. (None for Type 1)

7. Brewery License Types
• 75 ON SALE GENERAL – BREWPUB - (Restaurant) Authorizes the sale
of beer, wine and distilled spirits for consumption on a bona fide
eating place plus a limited amount of brewing of beer. This license
does not authorize the sale of alcoholic beverages for consumption
off the premises where sold (no growlers). Minors are allowed on the
premises.

8. Distillery License Types
• 03 BRANDY MANUFACTURER - The following pertains to brandy
manufacturers' licenses, and to duplicate brandy manufacturer's
licenses issued after September 17, 1965. This license authorizes the
holder to manufacture only brandy and not other distilled spirits
(Section 23014). Brandy made by the distillation of wine or fermented
fruit.

9. Distillery License Types
• 04 DISTILLED SPIRITS MANUFACTURER - The following pertains to
new distilled spirits manufacturer's licenses issued after September
18, 1959. The Act defines a distilled spirits manufacturer as "...any
person who produces distilled spirits from naturally fermented
materials or in any other manner" (Section 23015). The functions of
this type of license, in addition to that of production, include
packaging, bottling, rectifying, flavoring and others as found within
Section 23356. The functions apply only to distilled spirits; they do
not include wine or beer.

10. Distillery License Types
• 06 STILL – For the making of alcoholic beverages or capable of such
use. A still is "...any apparatus capable of being used for separating
alcohol, or alcoholic vapors or solutions from alcohol or alcoholic
solutions or mixtures ..." *This license is required in conjunction with a
type 4 or 74 license.

11. Distillery License Types
• 07 RECTIFIER - also permits the rectification of wine. This license to
cut, blend, rectify, mix, flavor and color distilled spirits and wine upon
which excise tax has been paid and, whether rectified by the licensee
or another person, to package, label, export and sell the products to
persons holding licenses authorizing the sale of distilled spirits
(Sections 23016 and 23368). This licensee may sell distilled spirits and
wine without the need for any other license, but he/she may not sell
wine to a person who does not hold a license that also authorizes the
sale of distilled spirits. A rectifier may also elect to function as a
distilled spirits wholesaler, but when doing so, he/she must comply
with all of the provisions applicable to a distilled spirits wholesaler
(Section 23371).

12. Distillery License Types
• 74 - Craft Distiller - Authorizes the licensee to: Manufacturer up to 100,000
gallons of distilled spirits per fiscal year; Package, rectify, mix, flavor, color,
label, and export distilled spirits manufactured by licensee; Only sell it’s
distilled spirits to a licensed wholesaler, manufacturer, winegrowers,
manufacturer’s agent, or rectifier; Sell up to 2.25 liters of distilled spirits
manufactured by the licensee to a consumer attending an instructional
tasting; May sell all beers, wines, brandies, or distilled spirits to consumers
for consumption on the premises in a bona fide eating place located on the
licensed premises; May have upon its licensed premises all beers, wines,
and distilled spirits, regardless of source, for sale or service only to guests
during private events not open to the general public; Serve a total of one
and one-half ounces of distilled spirits per individual per day to be as
tastes.

13. Brewery Tasting Rooms (Duplicate Licenses)
• Brewery “branch office locations” Limit 6 (2 restaurants) B&P Code
23389
• Minors (children) can come into a premises with a duplicate brewery
license but not a bar license.
• Tied house restrictions exception. (Section 25500, et seq., Business &
Professions Code.) I.e., the brewery can supply the beer directly to its
duplicate license location.
• Exempt from Health & Safety regs. applicable to retail food facilities
• Distilleries – no offsite, limited to type 74 premises
• Wineries (type 2) – 1 offsite tasting room
retail food facilitie
retail food facilitie

14. Zoning - Don’t find out too late

15. Application Review Process
https://www.abc.ca.gov/legal/P
rotest_Process/Protest%20Proc
ess001.pdf

16. Application Review Process
Public convenience OR necessity (PCN)
(90 days)
Discretionary permit (NUP, CUP, PDP,
ec.)
Alcoholic Beverage Control (ABC)

17. Application Review Process

18. Public Convenience or Necessity
•Bus. & Prof. Code sec. 23988.4:
•ABC: nonretail license, a retail on-sale bona fide
eating place license, a retail license issued for a
hotel, motel, or other lodging establishment, a
retail license issued in conjunction with a beer
manufacturer’s license, or a winegrower’s license.
•Local Gov. (Police Dept. or CUP): All others
(Distillery tasting room duplicates)

19. Public Convenience or Necessity
• Retail vs. non-retail;
• Public convenience or necessity – integrated vs
separate;
• If local gov. agency: 90 days from filing of both PCN
and ABC;
• Appeal denial – hearing;

20. Discretionary Permit
• Retail trigger, e.g., tasting rooms: SDMC §141.0507
“Retail Tasting Stores”
• “Limited Use”
• Industrial zones and commercial zones
• Commercial broker
• www.d6beer.com

21. ABC Disciplinary Process
• Violation of Statute
• Serving minor
• Administrative
• Criminal
• Serving intoxicated person
• Drug sales
• Disorderly House
• Hours
• Tied house
• Etc.
• Violation of License Condition
• Hours
• Noise
• Dancing and entertainment
• Etc.

22. ABC Disciplinary Process - Enforcement
•Undercover ABC
•Police / Sheriff’s Dept.
•Advertising

23. Adams – ABC Disciplinary Process
POIC?

24. ABC Disciplinary Process Adjudication
• ALJs – Division of ABC
• Only ABC matters
• Limited tolerance and leeway
• Openings and closings – brief
• Esoteric

25. Municipal Disciplinary Process
•CUP Hearing
•Deemed Approved Hearing

26. “Tied House”
• Prohibits vertical integration
• Manufacturer
• Distributor / Wholesaler
• Retailer
• 27 CFR 6 et seq., Business & Prof. Code § 24076 §§ 25500
et seq.
• Prohibits horizontal integration
• Things of value
• Exceptions

27. Liens
•The law prohibits a licensee from pledging
the license as security for a loan or as
security for the fulfillment of any
agreement. Business & Prof. Code § 24076

28. Summary of Esoteric Concepts
•Tied House
•Liens
•Escrow
•Previous Conforming Use / ABC 90 days

29. ABC Trade Enforcement Unit
Brett Musselman
Supervising Agent in Charge
Brett.Musselman@abc.ca.gov
(916) 419-2507 ABC Headquarters
Lee Riegler
Supervising Agent
lee.riegler@abc.ca.gov
(916) 419-2575 ABC Headquarters
Diana Villanueva
diana.villanueva@abc.ca.gov
ABC Act, Constitution, & Regs
(916) 419-2571
https://www.abc.ca.gov/forms/ABC
Act_2015.pdf
ABC Headquarters:
Price Posting, Beer Labels, Shipping
Certificates

30. Multi-state
• UTAH: Distribution Licenses
• Certificate of Approval
Out of State Brewer, Importer, or Supplier of Beer, Heavy Beer, and Flavored Malt
Beverages
• Brewers located outside of Utah, and importers or suppliers of beer, heavy beer,
and flavored malt beverages must obtain a “Certificate of Approval” from the
department before selling or delivering beer to a beer wholesaler in Utah or a
flavored malt beverage to the department or a military installation. If the brewer
located outside of Utah is a small brewer, it must obtain a “Certificate of
Approval” before selling or delivering beer in Utah to a beer wholesaler, a beer
retailer, or an event permitee.
• The license year runs from January 1 to December 31.
• Fees
Initial fee - $300
Application fee - $75
License Fee Schedule

31. TTB Label Application Process
COLA - certificate of label approval – online faster:
www.ttbonline.gov

32. TTB Label Application Process
• “1. 3 months out from the bottling date the label design and
details should be decided.
2. Once this is finished the completed label proofs are given
to the person responsible for submitting the label approval
applications. They look them over for all required items and
details and submit.
3. In 2 to 6 weeks time the approval (hopefully) comes back.
4. The go ahead can be given to the printer to process.”
• www.winecompliancealliance.com

33. TTB Label Content
• BEER: brand name, the class designation (such as draught or lager),
volume / contents, its country of origin, if it is a light beer, and the
name and address of the bottler or importer; if over 0.5 oz., alcohol
content and government warning label
• DISTILLED SPIRITS: Brand name, the name and address of the bottler
or importer, its country of origin, the net contents stated in metric
units, alcohol content, and the class or type of the spirit; government
warning label.
• Type size.

34. TTB Label Content
• GOVERNMENT WARNING:
• (1) According to the Surgeon General, women should not drink
alcoholic beverages during pregnancy because of the risk of birth
defects.
• (2) Consumption of alcoholic beverages impairs your ability to drive a
car or operate machinery, and may cause health problems.

35. Summary
• What are They? – type of license
• Mfrg / how much?
• Distrib’r
• Retailer
• Other products / makers
• Ownership in other alc
retailers
• Zoning / Municipal
• Planning / Development svcs
• Police
• Waste
• ABC
• Census tract – crime / # of existing
licenses
• Ownership
• Proximity to residences, parks,
schools, churches
• Protestants
• Public notice
• Hearing
• Time / cost

36. Compliance
• Labels TTB
• Tied House - marketing
• Operations
• ABC / PD
• Complaints
• Cal. OSHA, DLSE-DIR, EEOC, etc.

37. Contracts
• Territory
• Exclusivity / Term
• Performance standards and expectations
• Termination
• For cause / default / cure
• Voluntary
• Notice
• Liquidated damages / Buy out
• Indemnification

38. Contracts
• Distributor Agreements: Manufacturer – Distributor/
wholesaler
• Contract Brewing: Manufacturer – Retail; Mfr - Mfr
• http://contracts.onecle.com/hansen/rello.mfg.2000.03.23.shtml
• Alternating Proprietorships
• Agreements with Suppliers
• Licensing Agreements
• Equipment, Retail, Production and Distribution Space Leases

39. Licensing Agreements
• Intellectual property
•World Beer Cup licensing agreement:
www.worldbeercup.org

40. Alternating Proprietorships
• Looking For a Brewery Location on the West Coast? – Paso Robles CA.
*
We are seeking a Brewery from outside the area who wants a
presence in California.* This location is within several miles of
Firestone Brewery. We are purchasing the building and have more
space than we can use for our Brewery Operations.* The available
remaining square footage is 34,000 +/- sq. ft.* First years lease, $3.00
(per annum/per foot NNN), the second year $6 with negotiated long
term rates or option to buy space.* Contact Burt
@ FusionBrewery@gmail.com or phone 805-441-1867 **

41. Leases
• Land / Building – triple net
• Contingency period (90 days)
• Extension
• Commercial broker
• Zoning
• Retail component?
• Tenant improvements / free rent
• Environmental – esp. wastewater
• ADA, Indemnification, Seismic, Environmental

42. The End
• (ABC FAQs)
• www.slideshare.net/williamaadams92101/nbi-brewery-amp-
distillery-law
• www.slideshare.net/williamaadams92101/abc-craft-distiller-faqs
• www.calbevlaw.com