A matter of taste, a sense of place: Exploring both sides of the MN Winemaking Lawsuit

By: Mickey Caulfield

The Institute for Justice has filed a federal suit against the Minnesota Department of Public Safety on behalf of two Minnesota wineries, Alexis Bailly Vineyards in Hastings and Next Chapter Winery in New Prague, alleging that the state’s restrictions on farm wineries are unconstitutional.

Currently, wineries operating under a Farm Winery License in Minnesota are required to use at least 51 percent Minnesota-grown grapes in their wine. Wineries in some other states, such as Wisconsin, have no restriction and are able to sell directly to Minnesota consumers, competing with Minnesota wineries.

The Institute for Justice is a non-profit public interest law firm pursuing issues of constitutionality. It represents clients pro bono.

Constitutionality

Megan Forbes, attorney for the Institute for Justice, explains why her organization believes the current regulation is unconstitutional. “It interferes with farm wineries’ ability to trade freely between states. The U.S. Constitution was crafted to guarantee free trade among states. With this law, Minnesota is violating that founding ideal by imposing a harmful, protectionist restraint on that ability to trade freely.”

Forbes is confident of the Institute’s chances in court because of the precedent set by a similar case, argued by the Institute for Justice against the state of New York in 2005. “We litigated that case all the way up to the U.S. Supreme Court, and we won. The issue was whether the 21st Amendment, which gives states the right to make their own laws regarding alcohol, trumped the commerce clause — and it didn’t. The courts said the commerce clause takes precedence. This is a fundamental right that we all have as Americans to be able to enjoy the benefits of free trade. The court takes this right incredibly seriously.”

A matter of taste

Forbes says that consumers will enjoy the benefits if her organization is successful: “Minnesotans will have access to a wider variety of better-tasting wines, and farm wineries will have more creativity with the wines they can make. Right now they’re very restricted in what they can make. Winemaking is an art. Vintners need access to lots of grapes to make good wine. The current law is like taking blue and yellow off the color palette.”

In a video explaining the case, Nan Bailly of Alexis Bailly Vineyards says: “The key to producing a good wine would be in blending. It would be the alchemy of mixing wines together to create the perfect harmony, the perfect balance.”

Bailly feels the current regulations restrict her ability to make the kinds of wine she would like to and which appeal to the wine-consuming public.

“A lot of the grapes we grow in Minnesota, because we have a cooler climate, tend to be higher in acidity, which is not a style of wine that I like to make because I don’t think it’s a very approachable style, and I think most consumers also reject acidic wines. So to get that proper balance, it’s advantageous to be able to bring in fruit from across, say, California where it’s very hot and they may have low acid. I can blend the two together to find exactly the balance I’m looking for in my wine.”

 

The other side

Many in the Minnesota wine community, however, disagree. In a statement on behalf of the 46 wineries and 500-plus growers of the Minnesota Grape Growers Association (MGGA) to Governor Mark Dayton, the Attorney General and Minnesota Department of Public Safety, MGGA President Dave Mohn said that the MGGA “staunchly oppose[s] this lawsuit and would like to see the state defend the Farm Winery law as it is currently written.”

Tami Bredeson, owner of Carlos Creek Winery in Alexandria and a member of the Minnesota Farm Winery Association (MFWA), also opposes changes to existing law. Bredeson was approached by the Institute for Justice to participate in the lawsuit but declined to join. None of the 28 wineries that are members of the MFWA are a party to the suit. “I understand where they’re coming from,” she says. “However, I support the constraints on the fruit source because I believe in the end it will build a stronger wine industry.”

 

A sense of place

“Wine is far more strongly tied to the soil and place than vodka or beer,” Bredeson explains. “When people go to a winery, they love to be surrounded by the grapes and have a sense of place. When tourists come in, they point to a grape and say they want to taste it. They come to experience a winery, and that is what defines the industry: you grow the grapes, make the wine and taste it right there.”
Mohn says, “Few other products have such a close relationship with the original ingredients as wine. Most of the public assume that if the wine says ‘Produced in Minnesota,’ that means the fruit was sourced from Minnesota vineyards. We desire to protect the Minnesota consumer by eliminating confusion on the part of the wine-buying residents of the state.”

 

A symbiotic relationship

Mohn’s letter outlines the symbiotic relationship between grape growers and winemakers: “The current law has allowed the Minnesota grape and wine production to grow into a healthy industry producing an $80-million-dollar-per-year economic impact. This impact has been a direct result of the growth of both wineries and vineyards throughout the state. The 51 percent rule has been crucial in the development of the state’s agricultural growth.

“A recent report from the director of the Ohio Wine Growers Association stated that after they eliminated their requirement for locally grown fruit, their state’s viticulture dropped to an almost nonexistent level,” he says.

Carlos Creek’s Bredeson fears the state will lose its grape growers if the law changes: “As the wine industry grows, winemakers buy every grape that’s grown here. We need more grape growers, but if we don’t have a market for Minnesota grapes, we’ll lose them. If we can put Minnesota-grown wines on the map, that will elevate our industry, and the demand for our product will exceed our expectations. To go the other way means a quicker road to profitability, but you give up the long-term goal. Vision requires discipline.”

 

Quality from perseverance

Mohn says that Minnesota wineries have been breaking boundaries in quality in recent years. “There have been claims that quality wine cannot be made from local fruit when, in fact, Minnesota wineries have won numerous gold, double gold and even Best of Show awards in national competitions from coast to coast.”

Bredeson agrees: “We’ve come a long way. People are watching us. In California wine competitions, they are adding categories for University of Minnesota-developed grapes. No other state has that. We worked for that, and they’re noticing us. The demand from consumers will come with a little more time and practice fermenting them.

“Wine production has long-ingrained rules from Europe regarding where the grapes are from. There are states who have had great success imposing higher restrictions. You can look to Oregon — they are now arguably the best producers or Pinot Noir in the world and they self-imposed the restriction of 95 percent of the grapes coming from within the state to bear the label Oregon.”

“I don’t think that we can become renowned winemakers fermenting California Cab,” Bredeson says. “At Carlos Creek, we do bring in other grapes to blend or fill in when we have to, but we are able to be at 75 percent Minnesota grapes without too much difficulty, and we shoot for 100 percent every year. I think that extra level of discipline will make Minnesota wine stronger.”

The nitty-gritty: Farm Winery Licenses vs. Wine Manufacturer Licenses

Mohn suggests that wineries that need to continually purchase out-of-state fruit pursue a Minnesota Wine Manufacturer license. “Such a license would allow said winery to pursue their efforts without the 51 percent rule imposed under the Farm Winery license.” A Farm Winery license is only $50 but has a production cap of 50,000 gallons per year, while a Wine Manufacturer license costs $500.

While a Wine Manufacturer license allows a Minnesota business to produce wine without restrictions on importing grapes, it doesn’t allow those wineries to sell directly to consumers like a Farm Winery license unless they use at least 51% Minnesota grapes — a source of income many wineries depend on. And just imagine the confused tourists being told the product being made on the premises isn’t available for sale.

So what if a wine manufacturer does want to use more out-of-state fruit? A wine manufacturer cannot qualify for a retail liquor license and cannot be licensed for wholesale themselves, so they would have to sell their product through a third party wholesalers.

If the Institute for Justice, Alexis Bailly Vineyards and Next Chapter Winery are successful, drastic changes for Minnesota’s wine and grape industry are in store. In the meantime, Minnesotan oenophiles wait on tenterhooks for the verdict.

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