Winery Ownership Legal Disputes in the News

A couple of prominent California wineries have been in the news recently regarding ownership disputes between "winemaker owners" and their partners. The first dispute relates to Pax Wine Cellars in Sonoma where the namesake winemaker, Pax Mahle, has been fired and is locked in a dispute with the majority owner . The second dispute relates to Napa flagship winery, Joseph Phelps, where a former employee (the winemaker) and the estate of the late Tom Shelton who was the CEO (and widely known throughout the industry) are also fighting over the value of minority ownership shares with the majority owners .

While these disputes are no doubt unique and while some disagreements are inevitable, these types of lawsuits do show the value of ownership and succession planning. Wineries are not unique to these issues - many, many businesses (particularly family owned ones) do not pay sufficient attention to succession planning until either a dispute arises or one of the key people leaves or passes away. Does your winery have a succession plan for key personnel? If not, you should contact your legal and financial advisors for assistance in implementing one.



Wine Law in the Globe & Mail

Yesterday's Globe and Mail contained an excellent article by Beppi Crosariol on Canada's arcane inter-provincial barriers for shipping wine . This site was referred to in the article and WineLaw's principal, Mark Hicken, was quoted and two photos were included.

The national coverage on this issue is appreciated. Hopefully and since we are in the middle of a federal election campaign, this will bring the issue to the forefront and there will be some action from the relevant governments and liquor boards to fix this problem.

We are currently working on an updated article on shipping law which has now been posted . Of course, if you have any questions, please do not hesitate to contact us directly .

BC Out of Province Wine Shipping Ends

The LCBO and the Manitoba liquor control board have recently threatened two BC wineries for direct shipping to out of province customers (see Vancouver Sun story ). In addition, they contacted the BC LCLB who is now warning wineries that it is illegal to make such shipments under the Importation of Intoxicating Liquors Act. The legal background to these issues is covered in my earlier article on shipping for the industry .

The impetus for all of this is, of course, lost revenue. Direct shipments to wineries in other provinces bypass the relevant liquor boards and their regime of markups/fees/taxes. However, Manitoba and Ontario do not have a monopoly on this type of behaviour. BC's rules with respect to wine coming into this province are exactly the same (see s.65 of the BC Liquor Control and Licensing Act).

With 2010 on the horizon, isn't it time for Canada's liquor boards to reform this system? A prohibition era system of liquor distribution is simply not appropriate for Canada in the 21st century ... particularly, as we try to encourage and expand an increasingly successful wine industry.

Update (Sept  19/08): Please see my updated article on shipping for more information on this issue . A thorough legal analysis will also be posted shortly. Please contact me directly for additional information.

BC's Real Sales Tax on Wine: 90% or More?

When you buy a bottle of wine in a store or restaurant in BC, your receipt will usually indicate that you paid 10% provincial sales tax and 5% GST on your purchase. Have you really paid 15% tax on your bottle of wine? Absolutely not.

It may surprise you to hear that the real tax rate on imported wine in BC is much, much higher. It varies with the price of the bottle but, for example, if you go into a BC liquor store and buy a bottle of $14 California wine, the real cost of selling that bottle to you is about $6.45 (including LDB operating costs). The remaining $7.55 goes to both levels of goverment with the vast bulk going to the BC government. If you express the part that goes to BC as a percentage of the actual cost of selling the wine, then the "real" BC sales tax rate is about 111%.

Read more: BC's Real Sales Tax on Wine: 90% or More?

Wine Labelling Laws: Lessons from CA

There is an interesting article on California's wine labelling laws in the San Francisco Chronicle today . It covers the issues and obstacles that the Napa Valley Vintners have had in dealing with new sub-appellations within the larger designated California appellations such as Napa and Sonoma. The article explains the problems that arose when a new sub-appellation was proposed for Calistoga which affected the winery, Calistoga Cellars, which buys most of its grapes from outside Napa.


Read more: Wine Labelling Laws: Lessons from CA