Why craft brewer’s 1st Amendment lawsuit over the lack of COLAs during the shutdown is necessary and you should thank them; and how it might have been avoided.
In this article by the Washington Times on the matter (and in the complaint and motion) the owner confirmed that this is about their Precious One beer and that they have can labels approved, but want to send kegs. In the motion below, (you can scroll down for the embedded PDF) you can to see the two labels, the can and keg.
Part 1 on this lawsuit by Atlas Brew Works is – if they have a beer label for the beer they want to make approved, then under the guidelines for allowable label changes that don’t require approval, moving from one net contents (a can, say 1 Pint) to another net contents (a keg, say 5.5 Gal) is allowed – with some caveats cautioning you to double check your conclusions on container switching. Here is the link to the TTB’s website page on allowable revisions for COLA’s – see for yourself. (They’ve even got an awesome label change generator that shows you allowable revisions here.)
Now for those caveats: there is a footnote to a recent circular about container changes warning that some container changes might need review, especially if you are adding information like container instructions. (see Footnote 5 of Circular 2018-2) Granted, this would impact can to keg changes if you are including a typical “warning” about tapping and pressure as that warning would not have been on the can, but would be added for the keg, but you’re also free to leave that off as it’s not required; a business decision as it was placed there to help protect you from a liability standpoint. In the examples in the motion below, it looks like that’s a change – the addition of those instructions – that wouldn’t be an allowable revision.
So, there would appear to be a way to get this beer to market in kegs under that can label provided you’re complying with the allowable revisions – with the caveat that even the TTB expressed some concern about container variation as there are factors, like additions, that really need to be considered under the allowable revisions. But that doesn’t solve the problem of new beers – does it? Nor does it solve the problem of wanting to run a business minimizing risks if having that container warning is what causes you to run afoul of the allowable revisions. So…
Part 2 on the lawsuit is really about those (Atlas included) faced with the situation where their beverages (remember, wineries and distilleries are in the same boat here) are new, and they don’t already have some version of that label approved, so they need approval to get to market in the first instance (interstate shipping or they’ve got a state where federal approval is required).
[Aside: Yes, even for beer it is possible that an in-state regulation may say that TTB approval is necessary, even though the FAAA says you do not need a label approval and the TTB doesn’t care whether intra-state beer has approval – take for instance, Illinois, where the regulation says:
3) No manufacturer, nonresident dealer, distributor or importing distributor shall affix any label to any package or container containing alcoholic liquor for sale or delivery in the State of Illinois until such label has been submitted to and approved by the federal government. Such manufacturer, nonresident dealer, distributor or importing distributor shall submit to the Commission a photostatic copy of the federal label approval.
See, Section 100.70(b)(3) of Title 11 of the Illinois Administrative Code
So, preemption arguments aside, it would appear that there are some states that actually require federal approval for intrastate shipments even if the federal government does not. End Aside.]
For those in that hard spot during the shutdown, Atlas’ lawsuit should be a welcome relief (barring the fact that as I point out above, they might not actually have an actual dispute on account of not needing a label revision), as someone is taking the laboring oar on challenging a consequence of the government’s inability to function that has a drastic impact on the alcoholic beverage industry.
The basic gist is that the COLA review and approval process – and the failure to engage in it – is a flat out prior restraint on the craft brewer’s commercial speech rights – which isn’t an allowable prior restraint. (A prior restraint is someone restricting your ability to say something before you say it, telling a newspaper not to print classified documents for instance, rather than just punishing you for the speech/statement after you’ve made it. And prior restraints are not viewed favorably by the law.)
As a prior restraint, it is unlawful, because the failure to approve represents a blanket prohibition on the brewer’s ability to speak – i.e., you cannot speak (label your beer) because the government prohibits that speech (won’t let you label without permission and refuses to engage in review to give you permission… e.g., you will never get permission – be able to speak). If it seems simple, it is, which is why it’s brilliant and a very good argument. While the COLA process may be an allowable restriction as it regulates speech for health, safety, consumer protection – it is only allowable because it functions and properly offers a decision that is either positive or a negative that can be appealed. But, by virtue of the shutdown, the COLA process has become speech suppression as the government will not let someone publish a label to the public (commercial speech which is protected) and could criminally punish anyone who brings the label to market in interstate commerce without approval.
You know we’re no fan of the TTB’s regs and the FAAA’s prohibitions on speech. And I’m a fan of the work of the attorney bringing this lawsuit – who won the Flying Dog Raging Bitch lawsuit. But even apart from that, this is a compelling argument and stands a good chance of convincing a judge of the same.
We’ll try to keep tabs on it. Looks like initial argument is set for next week.