U.S. files response in craft brewery’s First Amendment case for TTB’s failure to grant COLAs during shutdown; brewer replies (we’ve got the briefs – argument is this afternoon)
Recap: For those of you not following the fun, Atlas Brew Works out of D.C. filed for an injunction against the U.S. Government’s enforcement of fines and penalties (misdemeanor or up to $1000) for bringing an alcoholic beverage to market (in this case, great craft beer) without a certificate of label approval issued by the TTB arguing that the shutdown prevents it from getting a certificate because the TTB is not open and reviewing certificates for approval; so, in effect, since no approval will be given, the failure to act is tantamount to a restraint on the brewery’s commercial speech rights.
The request for a temporary restraining order against the TTB is fully briefed and argument set for 2:00 p.m. EST this afternoon, so there should be more to this great case shortly provided the court rules promptly.
If you’d like to read our original article explaining the points argued initially in greater detail, as well as obtain copies of the complaint and the motion for a temporary restraining order filed by the brewery, you can find that here.
The day after we posted that article, the government filed its response in opposition to the request. You can read the government’s response to the request for a temporary restraining order here (link).
As anticipated, the government argued along the lines of the points we raised in our article.
First the government made a claim that the district court lacks jurisdiction because on the Precious One label issue, there is a way for Atlas to modify the already approved can label to create a label for kegs:
Here, the statutory and regulatory scheme, which Plaintiff has not challenged, permits Atlas to produce a permissible keg label for “The Precious One” with only minimal changes to the proposed label that it submitted to TTB on December 20, 2018. The COLA Form, at Section V (“Allowable Revisions to Approved Labels”), provides that industry members may make certain specified changes to previously approved labels without applying for a new COLA, see https://www.ttb.gov/forms/f510031.pdf, and TTB has published a complete list of allowable changes to approved labels on its website at https://ttb.gov/labeling/allowable_revisions.shtml. Consistent with these allowable revisions, Atlas may put the same information that appears on its approved COLA for “The Precious One” on new keg labels for the product without applying for a new COLA.
The government went so far as to obtain a declaration from the Director, Alcohol Labeling and Formulation Division (ALFD) of the Alcohol and Tobacco Tax and Trade Bureau (TTB), U.S. Department of the Treasury, supporting this position and making these points. The argument is pretty much lock-step with what we put in our post the day before, and they even went so far as to address the arguments we made about the revisions that wouldn’t be allowed:
Moreover, while the “Attention – Read Before Tapping” warning statement may not be added as an allowable revision without a new COLA unless it falls within one of the specified allowable revisions (e.g., in order to comply with the requirements of the State in which the malt beverage is to be sold), this information could be included in a hangtag tied to the container without obtaining new label approval.
This argument does not apply to the other labels Atlas has in process or has applied for which are not the subject of a prior approved label for a different container type.
This is not an interesting argument as you can’t force someone to just accept a watered down version of their speech rights, but it does provide some guidance on the “cautionary” footnote in the recent TTB circular about changes in container (see notes below for more interesting “guidance” on this from the Director’s declaration).
However, the government did make an interesting additional argument, the failure to exhaust administrative remedies, pointing out that the regular wait time under 27 C.F.R. § 13.21(b) is up to 90 days which can be extended up to an additional 90 days. That shouldn’t matter though, because here, the government isn’t even acting or pretending to consider the labels; moreover the TTB’s own website confirms it is down and that they are not making these determinations so there’s a futility argument there as well as a constructive denial argument in that they say they won’t review it, not that they are reviewing it and it may or may not be denied. (NOTE: the reply argument from the brewery eviscerates this logic given that the total number of allowable extensions for review would let the government review for up to 540 days under the regulations for alcoholic beverage label approval before having to make a decision – and that wouldn’t just be unconstitutional, every winery, brewery and distillery in the country would bring a lawsuit challenging that kind of abuse of an administrative power.)
The government also made a final argument that distillers, wineries and breweries considering making new product requiring labels should be aware of – the first part of the argument is that the product can keep for up to 120 days, so there’s no harm yet. The second part though, is that by its own admission, at least for the Precious One beer, the government claims that beginning to brew the beer on January 3, 2019, so well after the shutdown had begun and they were aware labels weren’t being approved. So the decision to brew and the failure to obtain approval is a self-inflicted harm and an injunction should not issue based on a self-inflicted harm.
Plaintiff’s activities constitute nothing more than self-inflicted injury, to the extent that Plaintiff has even suffered injury, and fail to establish irreparable harm. See Lee v. Christian Coal. of Am., Inc., 160 F. Supp. 2d 14, 33 (D.D.C. 2001) (noting that it is “well-settled that a preliminary injunction movant does not satisfy the irreparable harm criterion when the alleged harm is self-inflicted”); see also Safari Club Int’l v. Salazar, 852 F. Supp. 2d 102, 123 (D.D.C. 2012).
Thankfully, Atlas (yesterday) filed a reply to these arguments as compelling as the original motion (link). The reply begins by pointing out that the circular cited by the Director actually reads as more of an admonishment at footnote 5 – against trying to change containers without new label approval – rather than a handy form of guidance – hence the “cautionary” language of the footnote. The reply points out as well that the government offering a chance to publish a label that suffices is not the same as being allowed to publish the label you want:
If the government threatened the Coca Cola Company with prosecution for selling red cans, insisting instead on green cans, the Company might well resort to selling Coke in green cans while it seeks injunctive relief for its First Amendment injury.
There are many other well taken arguments in the brief about the labeling review timing regulations as well as the important point that the admonition against harming oneself and viewing it as a bar to injunctive relief is a different beast when the First Amendment is at issue:
People do not injure themselves by speaking in a way subject to censorship. The government injures people by censoring them, whether they remain silent or not. The notion that Atlas has created its own injury, because it requires the ability to speak notwithstanding the speech licensing office’s indefinite closure, cannot be the law.
In short, the arguments raised in the government’s brief are not compelling in light of First Amendment jurisprudence.
For those looking for a little more on the subject of footnote 5 and allowable revisions, we embed the Director’s Declaration below for your review and assessment as it contains a myriad of important points and even advice and TTB understandings that did not appear in footnote 5 but appear to be an acceptable interpretation/elaboration proffered by a TTB official on those matters both addressed and left unanswered by the circular and the footnote regarding allowable label revisions for changes in containers for alcoholic beverages: