Friday, August 6, 2004
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High Court Rejects Preemption Claims, Upholds Law Limiting Use of ‘Napa’ in Wine Labeling
From Staff and Wire Service Reports
A California law that prohibits the use of the name “Napa” or of any Napa County winegrowing region on the label of any wine not made with at least 75 percent Napa County-grown grapes is not preempted by federal law, the state Supreme Court ruled yesterday.
In a unanimous decision, the justices overturned a contrary ruling of the Third District Court of Appeal. The challenge to the statute, brought by low-end producer Bronco Wine Company, was sent back to that court for consideration of other issues, including whether the law violates the First Amendment.
“[W]e conclude...that the historic record amply supports the conclusion that a presumption against preemption applies in this case because the protection of consumers from potentially misleading brand names and labels of food and beverages in general, and wine in particular, is a subject that traditionally has been regulated by the states,” Chief Justice Ronald M. George wrote for the high court.
Bronco, the chief justice went on to say, failed to establish that Congress intended to preempt state regulation of wine labels.
The company, which describes its products as “premium wines at affordable prices,” sells wines under 30 or so labels or brand names. Among its best known is Charles Shaw, which sells in California for $1.99 and is commonly referred to as “Two Buck Chuck.”
The case before the high court dealt with the company’s Napa Ridge, Napa Creek, and Rutherford Vintners labels. Rutherford is the name of a winegrowing region in Napa County.
Bronco acquired the three labels within the past 11 years.
Under their prior owners, Napa Ridge wines were made with wines from several parts of the state, including Napa County, while all Napa Creek and most Rutherford Vintners products were made with Napa grapes. But Bronco makes them with grapes from Lodi or from Stanislaus County, areas “where the cost of grapes, and often their perceived quality as well, is considerably lower,” George explained.
Bronco claims that its right to use the labels is protected by a grandfather clause in a 1986 federal regulation.
The regulation generally prohibits the use in interstate or foreign commerce of a wine label bearing a brand name implying that the grapes were grown in a specific region unless at least 75 percent of the grapes were, in fact, grown there. But the grandfather clause exempts brand names in use before the regulation was enacted, provided that the true source of the grapes is disclosed somewhere on the front label.
Bronco argued that while there is nothing in the rule or the authorizing statute that expressly bars states from imposing more restrictive rules, the state was implicitly preempted from prohibiting that which the federal regulation allows.
Bronco claims that it was unfairly targeted when the labeling law was passed four years ago, since it is the only company making wines it could no longer sell if the law is upheld. The law has not been enforced because the Court of Appeal issued a stay prior to the date it was scheduled to take effect.
But George said in a footnote that there are at least 32 other brands that are exempt from the federal rule but must continue to use at least 75 percent Napa County grapes in order to comply with the state law.
The chief justice extensively reviewed the history of wine labeling regulations in the United States in the last 150 years. He concluded that federal regulation has never been extensive, and that deferring to the states has been the rule, rather than the exception.
Such deference is appropriate, he added, given the importance of the industry to California, where more than 90 percent of U.S. wines are made. California, he pointed out, has had laws on the subject since at least 1860.
“California is recognized as a preeminent producer of wine, and the geographic source of its wines—reflecting the attributes of distinctive locales, particularly the Napa Valley—forms a very significant basis upon which consumers worldwide evaluate expected quality when making a purchase,” the chief justice wrote. “We do not find it surprising that Congress, in its effort to provide minimum standards for wine labels, would not foreclose a state with particular expertise and interest from providing stricter protection for consumers in order to ensure the integrity of its wine industry.”
Linda Reiff, executive director of the Napa Valley Vintners Association, which intervened to defend the law, hailed the decision. “This is obviously a fantastic day for Napa Valley and, we feel, for wine consumers around the world,” she said.
Peter M. Brody, an attorney representing Bronco, said the company might appeal the preemption question directly to the U.S. Supreme Court.
“Bronco intends to press forward in the litigation and the only issue that we’re considering now is where are we going to go next,” he said.
The company issued a statement expressing disappointment in the ruling and defending its labels, noting that they list the origin of the wine.
“Bronco firmly believes that consumers who purchase its wines do so because they appreciate the award-winning quality and excellent value that the wines offer, not because they are misled about the wine’s geographic region,” the company said.
Napa Valley Vintners said the ruling upholds the industry’s efforts to educate consumers.
A wine label “should not suggest the grapes come from Napa unless they really do,” the association said in a statement praising the ruling. “The appropriate use of a geographic name is not only a matter of consumer protection, but also an expectation of quality.”
The case is Bronco Wine Company v. Jolly, 04 S.O.S. 4197.
Copyright 2004, Metropolitan News Company