Pennsylvania Wine and The Law: Hey William Penn! Pennsylvania Inquiring Minds Still Want to Know

Quaker-William-Penn.jpg 194X267 pixelsI’m still amazed at the number of times I’ve met new people and engaged in a conversation about Pennsylvania’s wine industry only to find them quite surprised to discover that Pennsylvania wineries are serious industry players that are here to stay.

I get a certain level of enjoyment steering their minds off of California and New York wine regions. Instead, I use the opportunity to speak about Pennsylvania’s rich wine history. It’s a history that dates as far back as 1683, when William Penn first planted vinifera vines. I also get a kick out of letting them know that it was a 1793 meeting of the American Philosophical Society that records America’s first commercial vineyard in Pennsylvania as proposed by Frenchman Peter Legaux to encourage the domestic production of grapes, wines and knowledge of viticulture.

Then… there’s the law! In 1968, the State legislature enacted the Pennsylvania Limited Winery Act . The Pennsylvania Limited Winery Act was the beginning of commercial winemaking in Pennsylvania. It allowed for the establishment of wineries, which currently have a production limit of 200,000 gallons annually. The law also permits the operation of retail sales locations and direct sales to businesses and individuals. Many states in the U.S. now model their state’s legislation on Pennsylvania’s Act.

But the best is yet to come! Surprise! Surprise! Surprise! They soon learn that Pennsylvania is now home to about 120 licensed wineries and 150 grape growers producing approximately 14,000 acres of grapes! Together these Pennsylvania wineries contribute over $600 million dollars in commercial activity to the State.

Pennsylvania’s wine industry is the fastest growing segment of the State’s agricultural community. New world growers recognize that Pennsylvania’s unique climate and attributes allow them some of the best growing conditions to compete on a world level with new varietals appealing to the American palate.

Today, the Pennsylvania wine industry has grown in production. The State ranks fourth nationally for grapes grown and eighth in the nation for its wine production.  This growth has positioned Pennsylvania at the forefront of the U.S. Wine Industry. Pennsylvania’s vintners maintain a well established reputation producing a vast array of award winning varietals gaining critical acclaim nationally and internationally.

So, the next time you have that conversation with friends about distinctive wine regions and those inquiring minds want to know…skip California and New York. Boastfully, tell them about Pennsylvania’s wine industry and don’t forget William Penn.

It’s In the Bag! Bringing Your Own Bottle In A Tough Economy!!

totes_10-slideshowVerticle.jpg 286X430 pixels-1One of my favorite Bring Your Own Bottle (BYOB) restaurants is very nearby to my home. If you didn’t know whether liquor was served, one could soon figure that out by watching the brown bags and rattan wine cases under the arms of its many loyal patrons exiting the restaurant.

Today’s tough economy has caused foot traffic to increase in BYOB establishments. Restaurants with BYOB policies are now attracting avid foodies reluctant to pay $12.00 for a glass a wine when they can enjoy the entire bottle—BYOB. BYOB’s are great because you can bring your own wine without breaking the bank while at the same time sharing your favorite brand that was previously tucked away in your cellar.

In Pennsylvania the Liquor Code currently does not prohibit a person from bringing his or her own alcohol into any establishment. A restaurant is typically free to allow or disallow patrons from bringing their own alcohol on to its premises. The alcohol however, must be legally procured in the Commonwealth of Pennsylvania. If the restaurant chooses to prohibit the BYOB practice by a “house policy”, it must apply the policy uniformly without discrimination prohibited by law.

The Code however makes it unlawful for any person to possess any wine or liquor within Pennsylvania that has not been purchased through a Pennsylvania wine and spirits store, a licensed limited winery, or from an entity licensed to sell malt or brewed beverages for off-premises consumption. But foodies and wine lovers beware –what happens if you only partially consume the bottle you brought to dinner and now want to take it with you when you leave?

Well, in Pennsylvania if you leave the restaurant’s premises with an unfinished bottle of wine or liquor, you might be required to prove that you lawfully acquired the liquor or wine pursuant to Pennsylvania law. Thus, it is often suggested that folks bringing their own wine or liquor into a restaurant should have in their possession a receipt reflecting the purchase of their wine or liquor. Do keep in mind, that local ordinances may restrict BYOB establishments so you should consider checking in advance with the restaurant to see if any such ordinances or limitations exist.

Restaurateurs may still be held strictly liable of any violations of the Liquor Code that may occur on it premises regardless of whether they involve alcohol provided by the establishment or brought onto the premises by a customer. Potential civil liability can arise from permitting individuals to bring their own alcohol onto premises. As such you should contact an attorney on matters involving liquor law liability.

Bringing your own bottle is a great response to a tough economy. But remember, for both patrons and restaurant owners, potential liability resides “in the bag”.

Intergenerational Transitions and Succession Planning for Wineries

estate-planning-attorney.jpg 425X282 pixelsWhat’s Love Got to Do with It?

I read an article recently about the family feud taking place at the Korbel Champagne Cellars Winery between father and daughter. Both parties are embroiled in a fight to the finish currently entangled in a defamation lawsuit wherein millions of family dollars are now at stake.

While dysfunctional families can be found in almost any business today, the wine industry is not immune from its fair share of family friction. Family feuds have caused damage to the reputation of some of America’s finest wineries. The battle for power between the Mondavi brothers of the Charles Krug Winery in 1965 or the 1986 trademark infringement suit between the Gallo brothers– Ernest, Julio, and Joseph represent just a few of the scathing yet bitter battles that can go on within a family.

Many of Pennsylvania’s winery and vineyard operations are multi-generational closely held family owned businesses. When the time comes to change hands and hand down a family owned business, family rivalries can ensue. With millions of dollars at stake, it’s easy for love and happiness to take a back seat to sibling rivalry and jealous behaviors. It is not at all unusual for family hostilities to seep into the family business, eroding the united front and focus that makes for a successful business. Building a successful presence in the community should be reflective of a family business that can also transfer leadership for the benefit of continuing the family legacy.

Succession Planning is about the future. When the time comes, carrying the family brand into the future can be the single most critical and difficult challenge a family business has to endure. It can also be an opportunity to reinforce and embody the founder’s mission and core principles long after the business has changed hands.

Looming questions about how to treat the family members equitably, planning for the surviving spouse, and determining who should be at the helm are just a few key decisions to be determined. Oftentimes, these decisions are made in a vacuum by the founder or virtually not at all. This can result in family conflicts and friction later as one heir seeks to retain the business while the other heir seeks to acquire his or her value and move on.

Winery owners who are able to embrace family members in an open dialogue regarding succession planning will stand to be more successful in the future. Thus, you should consider long term succession planning in order to:

  • Establish guidelines to define the transition.
  • Identify the next generation of leadership for the business.
  • Maintain wealth preservation and asset protection for family members.
  • Determine timetables for retirement, estate and tax planning purposes.
  • Educate the next generation on operational, financial and interpersonal issues.
  • Minimize tax liabilities passed down to heirs

The future of your business deserves well executed succession planning. If the founder’s dreams are not the same dreams shared by their heirs, the likelihood is greater that the transitioning winery will end up in the hands of a third party. Prepare for the future. Leave a legacy for the company founder because at the end of the day, love’s got everything to do with it!!

Wine Labels and The Law

Wine-labels-small.jpg 370X260 pixelsWas that you I saw doing a wine label drive-by?

I’m often amazed at the events I’ve attended wherein wine was served, the guests complimented the wine, but rarely took the next step to view the label of the wine they were enjoying. In other words, they were socially doing what I call a “wine label drive-by”.

Wine labels typically catch my attention. I have even been known to use a “wine label saver” now and then, to collect wine labels for wines I might desire to re-visit again. I capture the label and my impressions in a wine label tasting journal with notes on whether the wine was a gift, who shared it, what foods were paired and whether the wine was worthy to be served, gifted or purchase down the road.

Wine labels can be both interesting and insightful. U.S.and State regulatory requirements require the label notify the buyer what he or she is purchasing. This is helpful in that the wine label reveals to the buyer, the wine’s country or region of origin, producer, shipper, what grapes were used and the year of harvest. The wine label may also include other non-mandatory, yet fun elements putting the buyer on notice that a hint of peach or pear may be part of the tasting experience. The wine label might alert the user that an aromatic experience of oakiness or soil might reveal itself in the flavors. Perhaps the wine may surprisingly suggest what foods are best paired with the wine.

Alternatively, other wine labels may focus on the brand. If done well, a good brand can make for an incredibly great conversation piece at dinner. Some wine labels may display an artistic creation of a home grown graphic designer or artist on display. Others may simply convey a catchy phrase for which the purchaser cannot resist the opportunity to buy. Certainly, I’ve known a few folks that have been the life of the party, showing up to that very stiff affair at the boss’s party with a bottle of “Fat Bastard” in hand. Today’s millennials might be pleased to know that they can hit that twitter speed tasting party wearing their favorite Ed Hardy graphic tattoo apparel while tweeting on Christian Audigier’s 2008 Ed Hardy Rose!

On occasion, I’ve gone looking to gift a particular wine only to my surprise find the wine label had changed. The wine label was given a fresh new look and appearance leaving me to contemplate whether I could expect major changes in the wine as well. In any case, the wine label is purposeful.

The label is regulated by law so you as the consumer will know what you’re buying. The winemaker on the other hand has gone through great lengths to catch your attention to buy, perhaps even trademarking the label so as to carve out the winemaker’s brand as his own and give it full comprehensive protection registering it with the U.S. Patent and Trademark Office.

So, the next time you’re at that special social event, or dining experience commenting on how much you’re enjoying the wine—take a moment to stop, forego your “wine label drive-by” and instead, introduce yourself to the winemaker….and remember the winemaker’s work is done with you in mind.

Do Your Grapes Have A Home?

GrapesWithLeaves.gif 239X206 pixelsConstructing a Grape Contract That Works For Both Grower and Winery.

Not all grapes will have a home by harvest time. But many will–having found a home by way of a Grape Purchase Agreement. Unlike, the old fashion handshake, or oral agreement, the Grape Purchase Agreement now commonplace, memorializes in writing the understanding between the Grape Grower and the Winemaker. Unlike the oral agreement, you don’t have to chase down the truth later should the deal turn sour.

A carefully drafted agreement can be beneficial to both parties. The parties can avoid the potential for unforeseen disputes resulting in litigation actions later. When disputes arise, both parties can refer back to the agreement and determine their original intent as it is spelled out in the verbiage of the agreement. In some circumstances, the Grape Purchase Agreement is used as the “Pre-Plant Agreement” for the Grower. A Grape contract agreement that is used as a pre-plant agreement typically includes four years for a pre-plant agreement and four years thereafter for the grape contract agreement. For the Grower, the Grape Purchase Agreement can be beneficial in helping the grower secure financing for a new vineyard development. The Grower can negotiate pricing that reflects the state of the market and his efforts and expertise.

For the Winemaker, specific production practices can be contractually specified and verified at harvest time. The winery’s ability to secure a supply of grapes that meets the quality standards of the winery can often be imperative. Thus the Winemaker may wish to give voice to viticulture techniques to be used by the grower concerning pest, mold, pruning, or disease control. Too reasonable long term pricing relationships can be established. If the harvest is not of the quality the winemaker seeks, he may have the option but not the obligation to purchase the grapes. In essence, each party’s goals and priorities can be firmly understood and contemplated at the time of agreement and thought given to what is controllable and what is not.

Here are a few key provisions to be considered when contemplating a Grape Purchase Agreement:

  • Description and Price (often identified by varietals and priced by ton or acre)
  • Payment Terms and Schedule
  • Condition of Grapes
  • Use of Vineyard Name
  • Vine Identification
  • Grape Quantity and Quality
  • Method of Harvest (machine vs. hand harvest)
  • Title (warranty acknowledgment for who owns the grapes)
  • Transport and Delivery
  • Force Majeure ( occurrences due to acts of God, fire, flood or war)
  • Termination

The Grape Purchase Agreement should consider the allocation of risks between the Grower and the Winery. Whether or not disputes will be mediated, arbitrated, or litigated should be spelled out specifically in the agreement. If the Grower-Winemaker relationship turn sour, the responsibility for legal costs have been readily pre-determined.

Numerous decisions must be made when considering entering into a Grape Purchase Agreement. Grape Purchase Agreements when drafted properly work to serve both parties. Both parties should always consult a lawyer when contemplating the preparation and execution of a Grape Purchase Agreement.

The intersection of the winemaking business and law

winemaking.gif 451X352 pixelsOne day while reading Carlo De Vito’s East Coast Wineries blogspot, I came across his post reviewing nine films about wine. Curiously, I made it a point one Friday night to trek over to my local Blockbuster to rent one of his recommended movies—Bottle Shock. As an aficionado of all things wine, I was excited about pausing a moment to kick my feet up for a spell and enjoy a movie that I expected would momentarily take me away via images of beautiful wine country, themes, and storytelling about wine.

I found Bottle Shock to be a delightfully cute and charming movie. It was about the “Judgment of Paris”, a 1976 blind wine tasting wherein French judges shockingly awarded the highest honors to wines made in California, dispelling the notion that only the French could make great wines. A sub-theme of the movie was the hurdles it took to get the wines to be judged, across the transatlantic to France without experiencing “bottle shock” that often comes with transport. The multitude of efforts and passion reinforced the fact that one can’t really watch this movie without being mindful of the winemaker’s love affair with the vine!

As I stopped to reminisce about my own past experiences and enjoyment of what I believed to be was a great bottle of wine, I recalled how I paired the wine with a great meal I prepared or shared in a memorable dining experience. My mind glimpsed back to that special sentimental evening I spent with Mr. Charming who whispered sweet nothings in my ear as we listened to soft sounds of the jazz quartet in the background. Each of us can likely look back on that special anniversary, graduation or new birth of a child wherein that favorite wine helped to make the moment du jour.

But in our reminiscing, what is often forgotten are the long hours of frustration, toil, and painstaking efforts the winemaker must have gone through in order for us to get lost in our magical momentary state of emotional bliss experiencing the end result of the winemaker’s good works. Surely by design, the winemaker nurtured his wine and perfected his craft in such a way so as to entice our taste buds into that very emotion causing us to appreciate those unforgettable moments wherein we look back in our pasts and say to our friends and loved ones, “do you remember the time”.

But, let us not forget, that someone made it their business to get that great wine from the vineyard, to the winery, to our table. And what a business it is indeed! This intersection of the winemaking business and law historically dates back over 100 years. As a lover of wine and law, this appreciation distills my reasons for marrying my profession of law and my passion for wine together. When I contemplate the merger, I think about the value, the pride and the amount of people who had a shared passion to bring their dreams to reality.

But despite the artistic factors, sweat, and love that go into the winemaking process, one must not forget that it is a business. It’s a business that if not done properly, can be filled with numerous landmines for failure. Immersed in acting on one’s creative juices can often overtake one’s good wisdom for protecting one’s winery, wine-producing, or hospitality business.

In Pennsylvania, many of these multi-generational businesses are family owned. New generations are joining the industry following in the footsteps of the founding winemaker. At the end of the day, lots of decision-making and responsibility comes with financially and legally protecting the fruits of the winemaker’s labor. Getting past the hard work and sweat that went into the dirt, the chemistry, energy and efforts necessary to bring the winemakers vision to reality, a new chapter begins. You must turn the page, and consider how to protect the fruits of your labor? If you’re that vintner there are protections to be had all long the continuum of getting your wine to our dining room tables responsibly.

Whether these legal protections takes the form of a well though out succession planning, grape or employment contracts for that “gold medal” winning enologist, or establishing requisite safeguards for that upcoming wine event staged on your premises, —-at the end of the day you must legally protect your dreams and your brand.

Subsequently when you as winemaker have your own quiet moment to kick back and enjoy your own tasting, you can do so with ultimate peace of mind. You’ll rest easy knowing that neither “Bottle Shock” nor “Business Shock” prevailed for the day. Instead you created a shockingly great wine the business of which is legally well protected!