Breweries, cidermakers, sue state alcohol regulatory agency

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Legislation passed late last year during the frantic Lame Duck session has, in part, led to a lawsuit against the state by some of Michigan’s best-known brands for craft beer and cider. 

The lawsuit, which was first reported on Sunday evening by West Michigan business publication MiBiz, alleges that the Michigan Liquor Control Commission (MLCC) has engaged in “improper enforcement activities” that “disrupt and burden the Michigan wine industry.” 

Vander Mill Cidery and Restaurant | Nick Manes

The plaintiffs in the lawsuit are Southwest Michigan brewery Greenbush Brewing, Grand Rapids- and Hudsonville-based cidermakers Vander Mill and FarmHaus Cider, as well as cider industry trade group Michigan Cider Association. The plaintiffs plan to ask for an unspecified amount of damages.

According to the lawsuit, which was filed last week in the U.S. District Court for the Western District of Michigan in Grand Rapids, Greenbush had been engaging in the common practice of purchasing cider — which is classified as wine — from other cider manufacturers and making it available for purchase in its Sawyer taproom facility. The company also has a small winemaker’s license and does produce some of its own wine, according to the lawsuit.

Known as a “bonded transfer,” the purchase of wine by a beer manufacturer is allowed under federal regulations. The MLCC, however, last year began taking the position that those practices were illegal and has seized wine that breweries purchased, according to the lawsuit. The suit notes the agency last month confiscated Greenbush’s wine inventory, some of which was made by Vander Mill. 

FarmHaus Cider | Nick Manes

“[The MLCC] didn’t really change the law; they just began interpreting it differently in the beginning of 2018 when they started seizing wine and giving breweries and wineries violations for engaging bonded transfers,” said Joe Infante, an attorney in the Grand Rapids office of Miller Canfield, the law firm representing the plaintiffs.

The lawsuit says MLCC officials told Greenbush that it “was required to ferment every drop of wine that it sold,” and then also “also made the contrary direction to Greenbush that it needed to modify every drop of wine it received in bond.”

A spokesman for the MLCC declined to comment on the lawsuit, citing pending litigation. 

At issue for Infante and his clients is the notion that wineries and breweries have invested in their businesses with the belief that they could operate under the federal standard that allows those transfers. Now he says those businesses are in conflict between state and federal regulations.

Joe Hune

Part of that, he said, stems from two bills passed during last year’s Lame Duck session which part of a larger package of legislation dealing with alcohol regulation. 

Those bills were Senate Bill 1155, sponsored by former state Sen. Tory Rocca (R-Sterling Heights), and Senate Bill 1160, sponsored by former state Sen. Joe Hune (R-Fowlerville). 

Both were term-limited last year and neither could be reached for comment. 

Aside from conflicting federal and state statutes, the lawsuit says the two bills are too vague and offer manufacturers little clarity about when bonded transfers are deemed acceptable. 

“But the problem is, we wound up with two statutes that are vague and don’t really clear up the problem because, as you see, [MLCC] enforcement is still going around interpreting it as they see fit,” Infante said. “Frankly, I don’t know that there is any one interpretation of the two statutes that are universally applied by MLCC, by the breweries. … No one really knows what they mean.”

The lawsuit says that the state’s cidermakers have suffered a significant loss of business as a result of the uncertain regulatory framework. The plaintiffs are asking the court to uphold federal law and to issue a temporary restraining order allowing for bonded transfers to continue until a trial can commence, where they plan to ask for damages, which have yet to be determined. 

Nick Manes
Nick Manes covers West Michigan, business and labor, health care and the safety net. He previously spent six years as a reporter at MiBiz covering commercial real estate, economic development and all manner of public policy at the local and state levels. His byline also has appeared in Route Fifty and The Daily Beast. When not reporting around the state or furiously tweeting, he enjoys spending time with his girlfriend, Krista, biking around his hometown of Grand Rapids and torturing himself rooting for the Detroit Lions.

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