Special Events: Identifying Legal Issues – Part 2
Special events are a valuable source of supplemental income for wineries, but they also present a variety of legal concerns, which if not properly addressed may have significant consequences. In the first part of this article, we discussed limitations on holding special events as well as the winery’s responsibilities at such events. In this second part, we will discuss various types of events and the specific issues they raise.
Weddings and Family Gatherings
Vineyards provide an attractive backdrop for weddings, family reunions, and company retreats. Many wineries also have indoor event space perfect for receptions and other gatherings. While visiting a winery recently, I spoke with the owner who told me the following story.
One Saturday afternoon, she was in the tasting room, which was about half full at the time. Suddenly, the room filled with people in suits and dresses and in walked a bride and groom followed by an entourage of groomsmen, bride’s maids, a photographer, and a videographer. As the owner approached the bridal couple, she noticed two people in the parking lot unloading a wedding cake from a catering truck. When she finally cut through the commotion to ask the bride and groom if she could help them, the bride matter-of-factly said that they were holding their wedding reception there. After an uncomfortable and somewhat heated conversation, the owner and the couple reached an agreement that they could use the winery’s event space, which had not been booked for that day.
While things worked out in this case and everyone was happy in the end, many things could have gone badly. Because arrangements had not been made in advance, the winery had no idea how many people were attending this reception or whether they would be in violation of fire code restrictions. Depending on the jurisdiction, the reception may have been considered a “special event” and required a permit to be obtained in advance. If food was provided to the guests, some states require that it be provided by a properly licensed and permitted caterer. These are only a few examples.
When a winery agrees to host an event, it is granting a license to use the property. It is extremely important to negotiate the exact terms of the event in advance through a license agreement. At a minimum, the license should include: a clear identification of the parties, including addresses; a description of the portion of the premises the licensee is permitted to use; the number of attendees allowed; the specific time frame of the license including circumstances under which that time frame will be cut short; payment terms; the responsibilities of each party, including who will provide various services and amenities; and provisions that the licensee will monitor its guests alcohol consumption, prevent guests from driving intoxicated, and be liable for any damages to the premises incurred during the event.
Additionally, the license should identify the specific purpose and actions allowed under the license. For example, some jurisdictions have laws about what parts of the human body may not be exposed on a licensee’s premises. If the purpose of the event is a bachelor/bachelorette party, certain forms of “entertainment” may violate these laws. If the licensee wants to have a live band or dancing at the event, some jurisdictions, such as Washington State, require the winery to obtain a permit from the local government.
For events such as a wedding, where it may be the bride and groom who contract with the winery, it is also a good idea to have a designated liaison from the licensee, who is not the primary focus of the event. If there is an issue with a guest being rowdy or intoxicated, it is much easier for the winery to approach “Uncle Fred” to deal with the issue than it is to bother the bride during the father-daughter dance.
In areas where there are a lot of wineries near one another, “passport” or “wine trail” events are very popular. These can take many forms, but commonly, customers purchase access to the event, which may take place over the course of a few days, weeks, or even a year. With the purchase, the customer gets a passport and/or map and sometimes a souvenir wine glass. They then go to each winery associated with the event and present the passport, often getting it stamped. Benefits of the passport may include free tastings, discounts on purchases, or the opportunity to enter a drawing for prizes when the passport is completed. The events are generally marketed and coordinated through a third party, such as a winegrowers association.
Wineries interested in organizing or participating in these events should check their local law to avoid any possible violations. Laws vary state-to-state in terms of what may be included in the purchase of the passport (free tastings or only discounts) and who may benefit from the sales. In California, for example, a third-party organizer of a passport event can only sell access to the experiences or activities, which the wineries must provide under their existing licenses. The organizer may not receive any portion of proceeds from the sale of wine, because that would effectively be selling alcohol without a license.
Most states have laws about how contests, drawings, or sweepstakes must be operated, including; how they may be advertised and what words or phrases may be used, how the drawing is to be conducted, and what records relating to the contest must be maintained and for how long. If the winery is in any way involved in the planning or execution of the contest, it must abide by these laws.
Invitation-only events generate a lot of interest and help build brand reputation and loyalty, but they come with a lot of rules and wineries should check their local regulations before planning such an event. As a threshold matter, the winery should determine if it is even allowed to host an invitation-only event. In California, for example, only holders of type 02 winegrowers licenses may hold these events, not virtual wineries under a type 17/20 license. The next question is where the event may be held; only at the winery, at an associated taproom, at a restaurant, at a festival, etc. Some states place limitations on whether invitations to an event may be sent to the general public or only to specific addresses. Others have rules that cap the number of attendees or dictate how admittance must be controlled.
In states that allow invitation-only events off-site, winemaker’s dinners are a great option for consumers who want a more personal relationship with a winery. Typically held at a restaurant or private club, attendees get a special, “insider” type of experience and the opportunity to interact with the people who best know the wine.
In most cases, the winery may take orders for wine sales, but they may not actually sell wine at the event. Likewise, consignment sales are generally not allowed; any wine sold to attendees must be purchased from the winery by the host facility and it may not return unsold bottles. Local rules may also limit the amount of samples that are provided to attendees and whether full glasses or bottles may be sold at the event.
As with part 1 of this article, because the laws vary significantly from state-to-state, and because there are so many variations on the types of special events a winery may host, it would be impossible to identify every legal issue to be considered. But, while the myriad of laws and regulations may seem daunting, once a winery understands the rules in its jurisdiction, compliance is not overly complicated or burdensome. Given that these special events play a big role in promoting a brand and can be a significant source of revenue, learning the do’s and don’ts is a small price to pay.
Overall, there are several broad questions a winery should ask while planning a special event. Is the winery allowed to host the event (are there any zoning, lease or deed, noise ordinance, or license issues that would restrict the ability to hold the event)? What limitations are there on setting up the event (such as what licenses or permits are required, who may attend, how may it be advertised, how many people will be permitted, and how will attendance be controlled)? Finally, what limitations are there on the event itself (who may be served, what may be served, can product can be sold, what activities are allowed/not allowed)? The answers to these questions are often scattered throughout various sections of state and local statutes and regulations. For advice relating to a specific proposed event, consultation with an attorney is strongly recommended.
Brian Kaider is a principal of KaiderLaw, an intellectual property law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.
Phone: (240) 308-8032