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Judge’s ruling leaves bitter taste for 2 Minnesota winemakers

April 10, 2018 GMT

As if nasty weather didnt make things hard enough, two Minnesota wineries say the state and now a federal judge are unfairly suppressing their vineyard sales by requiring most of their grapes to be homegrown.

A ruling from U.S. District Judge Wilhelmina Wright on Monday dismissed a lawsuit by Alexis Bailly Vineyard and The Next Chapter Winery. Bailly in Hastings and Next Chapter in New Prague sued the state a year ago, saying state law restricted their ability to expand their businesses because of a licensing requirement that 51 percent of their grapes be Minnesota grown.

The lawsuit, filed by the nonprofit, self-described libertarian Institute for Justice on behalf of the two wineries, claims Minnesota law governing their wine sales violates the commerce clause of the U.S. Constitution. Minnesota law unfairly restricts business across state lines, the lawsuit said.

Im an artist making wine. Wine is my craft. Im limited in the palette I can choose, said Nan Bailly, owner of Alexis Bailly, the states oldest winery started in 1973.

She and her lawyer Anthony Sanders said the law is unconstitutional so they will ask the 8th U.S. Circuit Court of Appeals to overturn the ruling. Wrights 10-page ruling issued Monday didnt address the constitutionality of the Minnesota law. Instead, she said the wineries lacked the authority to sue over the law because they still have the option of expanding their businesses through a manufacturers license.

51% isnt a huge ask

Like Bailly, Winehaven in Chisago City is one of the states oldest and largest growers. But winemaker Kyle Peterson, who is also a lawyer, agreed with Wrights ruling, saying it protects the unique appeal of Minnesota agritourism and wines sold on the farms here.

If people want a West Coast merlot, they can buy it off the liquor store shelves, Peterson said. Fifty-one percent isnt a huge ask. You can still blend 49 percent.

At the heart of the case is Minnesotas three-tiered law for how alcohol can be manufactured, delivered wholesale and sold retail. The system limits a business to one of three types of licenses. So a manufacturer cannot sell directly to consumers or retailers.

Farm wineries, however, are exempt from the law provided that at least 51 percent of the components of their wine come from within the state and produced on their land. Farm wineries are allowed to sell directly to consumers, which draw for tourists.

Bailly said shes been selling wine from her winery for 40 years. With that manufacturers license, I would have to close my doors to the public, she said.

Not enough MN grapes

Bailly and Next Chapter both want to expand, but say they cant get enough grapes from Minnesota to grow business as much as they would like. Bailly would like to expand from 10,000 gallons of wine to more than 25,000, Sanders said. Next Chapter would like to increase production from 5,000 gallons to more than 20,000, he said.

Bailly said the requirement creates an artificial market for Minnesota grapes when she can get them much cheaper from California.

In the court documents, the state countered that the winemakers can expand their businesses by obtaining a manufacturers license, which frees them from the 51 percent threshold of Minnesota grown grapes. But then, the winemakers say, they wouldnt be allowed to sell directly to visitors at their wineries.

Wrights ruling dismissed that predicament, writing, There is no right to sell wine directly to the public, and the state of Minnesota is not required to configure its licensure laws to allow the wineries to conduct business in any fashion they choose.

The state does allow wineries to apply for waivers from the 51 percent threshold requirement something Bailly said she has done often because of the difficulty of growing French grapes the original ones her father planted in Minnesota. But the need to apply for the waiver and the potential for rejection makes it difficult to plan, Bailly said.

What about brewers terroir?

The grape growers pointed out in their filings that beer makers, such as Surly and Summit, can sell beer composed of grain imported from everywhere at their Twin Cities breweries. She pointed to Summits new Dakota Soul beer, which the St. Paul brewery boasts uses barley grown exclusively in Rugby, N. D. Bailly called the brew delicious and said she wants the same freedom to craft.

Peterson didnt find the beer comparison analogous. He said that unlike beer, wine is about terroir, the French term describing the character of a wine created by climate and soil conditions where its grown.

The charm of Minnesota wineries is the surprise over what can be grown here, Peterson said, adding that he disagreed with the lawsuits insinuation that Minnesota grapes werent ready for prime time.

At Winehaven, Peterson said he uses 75 percent Minnesota-grown grapes.

Bailly was blunt, calling terroir an antiquated European concept from wineries where grapes have been grown for centuries. Sure I have a flavor that comes from my vineyard. ... But who cares about terroir? What does terroir mean to anybody? she asked.

Rochelle Olson 612-673-1747 Twitter: @rochelleolson