Beginning next year, a new law will allow wineries to serve full glasses and/or bottles of wine to their customers anywhere within their licensed premises. Wineries will need to learn to comply with the increased legal responsibilities that will come along with their new wine service privileges.
Brief History of the Picnic Area Issue
On July 16, 2008, Governor Schwarzenegger signed Assembly Bill 2004 into law. The Bill originated as attempt to clarify the liquor licensing rules that apply to wineries' picnic areas. In California, wineries operate under a Type 02 "Winegrower's" license. This license authorizes Winegrowers to produce and sell wine within the portion of the winery's property that is identified in the license. It also permits Winegrowers to conduct winetastings at the winery and at one branch office. California's Department of Alcoholic Beverage Control ("ABC") has traditionally interpreted "winetaste" to mean a one-ounce pour. Under current law, a Winegrower can serve multiple winetastings, but may not allow their customers to drink full glasses or bottles of wine.
Some wineries, however, have long permitted their customers to drink full glasses or bottles of wine in unsupervised "picnic areas" that are on winery property, but that fall outside of the wineries' licensed premises. These picnic areas have been a gray area in California's current liquor license law, because some customers drink bottles of wine in the picnic area that they purchased in the winery's tasting room. Why should a winery be allowed to sell wine that they assume some of their customers will drink in the picnic area, some asked, when they can't sell that same wine for customers to drink in the tasting room?
The New Law
The original draft of Assembly Bill 2004 would have allowed Winegrowers to obtain a picnic area-specific duplicate license that would have permitted wineries to exercise certain wine service privileges in such areas. The law that the Governor actually signed, however, implements a much more dramatic liquor law change. As of January 1st, Winegrowers will have broad authority to sell full glasses or bottles of wine for customers to drink anywhere on a winery's licensed premises. Unlike establishments that operate under most other types of liquor licenses, the new law will permit wineries to allow customers to take partially consumed containers of wine with them when they leave the licensed premises.
But these new privileges come with increased responsibilities. Wineries will need to learn about, and carefully comply with, these new responsibilities because a liquor license infraction occurring anywhere on a winery's licensed premises could put its entire business at risk. The new law does not separate the picnic area from the rest of the winery for the purposes of supervision and discipline by the ABC, so a serious liquor law infraction that occurs in a winery's picnic area could lead to the suspension, or even revocation, of the Winegrower's license itself.
The Licensed Premises Limitation
First, a winery must make sure that customers only drink wine within the Winemaker's licensed premises. Usually, a Winegrower's licensed premises only include the area of the winery that is bonded under U.S. internal revenue laws. This area can include bonded production areas, tax-paid areas, and the winery's tasting room – it typically does not include a winery's picnic area, deck, patio, garden area, or vineyards. If a winery wishes to permit customers to drink wine in any unlicensed areas, then it will need to apply to the ABC to expand the scope of its licensed premises.
The ABC has not yet developed specific procedures for expanding wineries' licensed premises. But it is unlikely that Winegrowers will need to go through the federal bonding process again because customers will need to pay point-of-sale tax for their wine before they remove it to the picnic area.
The Local Zoning Limitation
In addition, before a winery can take advantage of the new law, it will need to work with local zoning authorities and the ABC to determine how and whether each Winegrower's new wine service privileges will apply to that Winegrower's particular premises. The ABC is not permitted to grant liquor licenses that conflict with local zoning laws (e.g., the ABC cannot grant a beer and wine license to a restaurant this is located in an area where zoning regulations prohibit the sale of beer and wine).
Current law offers some protection to a licensee if local zoning laws change after a license has already been granted. But no rule resolves the issue that Assembly Bill 2004 creates – namely, what happens if the zoning laws stay the same, but an existing licensee is granted new privileges that might bring the license into conflict with those zoning laws?
Assembly Bill 2004 attempts to address this issue by giving the ABC the right to tailor the privileges that are granted by specific Winegrower's licenses to the limitations imposed by local conditions. Cities and counties are likely to use this provision to require wineries and the ABC to negotiate limitations on each Winegrower's license that are specific to each particular winery.
The Service To Minors Issue
When Assembly Bill 2004 was first proposed, the wine industry expressed concern that the new law would convert wineries into "public premises," which the law defines as "premises operated and maintained to sell alcoholic beverages to the public for consumption on the premises." This would pose a problem for family oriented wineries, because "public premises" cannot admit persons under the age of 21.
In response to the wine industry's concerns, the ABC issued an opinion letter that states that it will not interpret Assembly Bill 2004 as converting wineries as "public premises." Instead, the ABC will continue to define "public premises" as including only on-sale retail establishments such as bars and nightclubs, and not "a producer or manufacturer of wine who happens to have the ability . . . to exercise certain retail privileges." The ABC's letter is good news for wineries, because courts generally defer to the ABC's interpretations of the laws that it enforces. Also, because the ABC is responsible for enforcing California's liquor licensing laws, there's a good chance that the "public premises" issue will never end up in court in the first place.
If the issue does reach the courts, however, an argument can be made that the ABC's interpretation of Assembly Bill 2004 contradicts the definition of "public premises" that is set forth in the statutes that the ABC is supposed to enforce. If a court decides that wineries' new wine service privileges do convert them into "public premises," then Winegrowers' entire licensed premises – including the winery, the cellar, the tasting room, and any other licensed area – will become off limits to persons under the age of 21. Because Assembly Bill 2004 will grant the new wine service privilege to all Winegrowers, furthermore, these stricter legal restrictions will apply to all wineries, not just those with picnic areas. Wineries might also find it more difficult to comply with local zoning laws, because many local authorities that accept wineries with tasting rooms may be more hesitant to approve businesses with licenses that authorize them to operate as "public premises."
Conclusion
When Assembly Bill 2004 goes into effect on January 1, 2009, it will expressly legitimize some wineries' current tasting room and picnic area activities. It also will present California's Winegrowers with an opportunity to expand and improve the experiences of their customers, and to increase their revenues by selling wine for safe consumption on the premises. But Assembly Bill 2004 also will require Winegrowers to grapple with new legal requirements. Wineries will need to carefully evaluate the new law's implications, therefore, so that they can take full advantage of Assembly Bill 2004's benefits, and avoid its pitfalls.
For more information, please contact Marco D. Costales at 213.612.7800 / mcostales@nossaman.com.