Save The Craft: Two Down, Three To Go

In Beer Politics by Ryan

The passage of SB754 out of the Illinois House and Illinois Senate was a big step forward for small craft brewers who want to self-distribute in Illinois, but there are still two hurdles left be cleared.  One is of the legislative variety; the other two are judicial.

First and foremost, SB754 still needs Governor Pat Quinn’s signature for it to become law.  And, as of this writing, the bill hasn’t technically been sent to him yet.  According to state law, the legislature has 30 days to send a bill to the governor after it passes both chambers.  Once the governor receives the bill he then has another 60 days to sign it.  We’re hoping, as I’m sure other brewers are, that it doesn’t take the full 90 days for this to become law.  Were he to veto it, the votes in the Senate and House could overturn that veto with ease.  We’re not terribly concerned over whether or not Gov. Quinn will sign it, as we can’t come up with a single reason why he wouldn’t.  That said, it continues to hang over our heads until that bill is signed.

Secondly, there is the matter of Anheuser-Busch v the Illinois Liquor Control Commission which is still playing out in federal court.  On Friday Judge Robert Dow will hear Anheuser-Busch’s motion to continue the stay in his ruling in the case of A-B v ILCC until their appeal is heard before the 7th Circuit Court of Appeals.  Last year A-B sued the ILCC claiming discrimination because Illinois breweries could self-distribute but out of state breweries could not.  Judge Dow agreed and ruled that unless the General Assembly can come up with a solution, no brewery – whether they are in Illinois or not – will be allowed to self-distribute.  Judge Dow then stayed (delayed) his decision until May 31st.

We wrote about A-B’s take two weeks ago.  In a nutshell, the brewing giant wants to postpone the judge’s ruling as long as possible while simultaneously trying to kill any action by the General Assembly in hopes the law stays as vague as possible so they can appeal this case ad infinitum and eventually gain self-distribution rights in Illinois.  SB754 takes away that vagueness, clearly defines a “Craft Brewer” versus “in-state brewers” and opens up self-distribution for small breweries in other states.  Whether or not you agree with the barrel limit to define a “Craft Brewer,” (and judging by what we see on Twitter, it’s pretty evenly split) the language was absolutely necessary to keep A-B from gaining self-distribution rights in Illinois.  We really can’t say that enough.

From discussions that we’ve had among people familiar with the situation, it’s conceivable that allowing A-B to lawyer up and fight the bill in court would have potentially allowed them to wrangle the language themselves, allowing them to then create a vertical monopoly.

They would then set prices so low they could undercut everyone and thus threaten the livelihood of everyone from MillerCoors to Half Acre.  At the end, A-B wants more of Chicago, which MillerCoors currently “owns.”  Allowing this bill to stall in the legislature and go back to the courts was exactly what A-B wanted, which is why early on we decided that the most important aspects of the legislation were to prevent A-B’s self-distribution efforts as well as maintaining those rights for small brewers. It’s because those two points were achieved that we continue to support this legislation, and we hope that the differences over the brewpub amendment can be worked out in the future.

It’s understandable that the Craft Brewer’s Guild decided that the ultimate sticking point was the amendment regarding brewpubs (after all, most of their members are brewpubs rather than production breweries).  It’s unfortunate that that decision essentially put them in agreement right alongside Anheuser-Busch.  If you told us at the beginning of this process that A-B/InBev would be agreeing with the ICBG on opposing this legislation, we’d have said you were crazy.  Strange bedfellows, indeed.

Today, we acquired the response from the Illinois Attorney General outlining the state’s case.  In a motion dated May 20th, the state is asking Judge Dow to delay a ruling on A-B’s motion until after the legislative session and cited the groundswell of support for SB754 as a reason to do.  But that motion was written last Friday before SB754 passed the Illinois House.  According to the motion, the bill’s passage should essentially squash’s A-B’s efforts.  It reads, “If the proposed legislation passes, it will moot plaintiff’s appeal and their motion for a stay pending appeal.”  The key word here being should.

In talking with those involved in the case one of two things could happen on Friday.  The judge could deny A-B’s motion because the legislature acted on the matter, which is exactly what he instructed them to do

“Finally, because the Court’s choice of remedy rests on judgments as to the intent of the Illinois General Assembly and implicates matters of public policy as to which the General Assembly is the ultimate arbiter, the Court temporarily stays enforcement of its ruling to provide the General Assembly an opportunity to act definitively on this matter if it chooses to do so.”

Or, A-B could likely argue that the bill has not been signed in to law yet and therefore the issue of self-distribution is not a done deal.

If the former happens then A-B’s attempts to drag this matter out is likely halted.  But, if A-B argues the latter and the judge agrees then he would likely stay the case again.  The question is for how long?

Still wondering why it’s a big deal if Judge Dow issues another stay?  Look no further than Rolling Meadows Brewery in Springfield.  We’ve discussed Rolling Meadows before – they are a start-up production brewery on a family farm where they’re growing their own brewing ingredients and churning out some kick-ass looking beers.  Unfortunately, Rolling Meadows can’t currently get any of their beer on tap in central Illinois because the stay in this case has frozen new self-distribution licenses in the state.  Ryan talked with RMB owner Chris Trudeau last week after SB754 passed the Illinois House Executive Committee and he said they have beer just sitting in bright tanks begging to get out.

The longer this case is delayed, the longer that beer sits in the tanks and the longer craft beer drinkers in central Illinois stay thirsty.

UPDATE

Then there is the ultimate issue of A-B’s appeal in the 7th Circuit Court of Appeals.  A-B is appealing Judge Dow’s initial ruling to nix self-distribution rights for all breweries, in-state and out of state.  When A-B challenged Illinois’ Liquor Control Act they did it with the intent of demolishing the three tier system.  Taken from Judge Dow’s Memorandum Opinion And Order; “Here, Plaintiffs request that the Court extend the in-state [self-distribution] benefit to all brewers.” And by all brewers they mean ALL brewers – regardless of size. A-B is now, interestingly enough, arguing that Illinois law allows them to self-distribute.

“Anheuser-Busch vigorously argues that (1) Illinois law allows all beer producers — in-state and out-of-state — to be beer distributors; (2) the district court therefore made an error of law by treating Illinois law as prohibiting out-of-state beer producers from being beer distributors; and (3) it consequently committed an abuse of discretion by adopting a remedy that similarly denies out-of-state beer producers the ability to be a beer distributor and, according to Anheuser-Busch, thereby frustrates the intent of the Illinois legislature.”

The Illinois AG’s office filed their brief (which is where the above quote came from) yesterday in the case. We’ve read through the 40 page document the AG submitted and it’s full of arguments on non-resident dealer licenses and the three tier system.  We’ll cut to the heart of this and point to the passage of SB754 as the potential nail in the coffin.

“The Court should also be aware of events that may moot this appeal. As of May 25, 2011, both houses of the Illinois General Assembly had passed Senate Bill 754, which creates a new “craft brewer’s license” for in-state and out-of-state beer producers whose annual production is less than 15,000 barrels (465,000 gallons), and who may then obtain approval from the Illinois Liquor Control Commission (the “Commission”) to self-distribute up to 7,500 barrels of that production in Illinois.  By its terms, this bill will take effect immediately if it becomes law and will eliminate any distinction between the distribution rights of in-state and out-of-state beer producers, which the district court found unconstitutional. At that time, the present appeal — involving only the remedy the district court chose to prevent that distinction — will become moot, and the district court’s judgment should be vacated. See Zessar v. Keith, 536 F.3d 788, 793-95 (7th Cir. 2008); Brooks v. Vassar, 462 F.3d 341, 348-49 (4th Cir. 2006). Defendants will apprise the Court when this legislation takes effect.”

A-B now has until June 15th to respond to this brief. Once that happens the case is in the hands of the appeals court. There is no time-line on when the court will render a verdict.

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Ryan

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Equal parts beer nerd and policy geek, Ryan is now the curator of the Guys Drinking Beer cellar. The skills he once used to dig through the annals of state government as a political reporter are now put to use offering unique takes on barrel-aged stouts, years-old barleywines and 10 + year verticals.