Death of the Fox Brewing, in Clarksboro, filed a lawsuit in a state appellate court on Sept. 22 against the NJ Division of Alcoholic Beverage Control (ABC), challenging the division’s Special Ruling that limits the amount of events (like trivia and sports on TV) it can host and advertise, prevents breweries from coordinating with food trucks, bans coffee and a host of other limitations.
Lead attorney on the case, Caleb Trotter of the Pacific Legal Foundation, says the ABC didn’t follow the proper procedure to enact these rules, like going to the state legislature for approval and holding a public comment period as codified in the state law.
“The primary claim is that the ruling and the license condition violate the New Jersey Administrative Procedure Act,” says Trotter. “When agencies create what are in effect rules and regulations, there’s a very specific process that they have to go through to ensure transparency and the opportunity for the public and the regulated members to fully participate in that process. And here it wasn’t done.”
The lawsuit also contends that the state is unjustly limiting breweries’ rights to free speech by limiting the amount of advertising they can do.
The ABC issued an initial ruling in 2018 on how breweries operate, but Death of the Fox Brewery Co-Owner Chuck Garrity, and several other brewery owners banded together and created a petition that garnered more than 35,000 signatures. That killed the 2018 regulations, but a new Special Ruling from the ABC surfaced in 2019, and as breweries renewed their licenses on July 1, 2022, those rules went into effect.
Among those rules: 1) Breweries are limited to holding only 25 on-site events and attending 12-offsite events per year; 2) Breweries must not offer a free drink as a gesture of goodwill, or hold happy hours; 3) Breweries can’t sell coffee; 4) Breweries can’t run pop-up shops or craft sales; and 5) Breweries can’t “collaborate or coordinate” with food vendors (including food trucks) to provide on-site food.
Garrity says the lawsuit is intended to “stop the bleeding” of the Special Ruling—a concerted effort to get the rules right, and done the right way, in an open and transparent process through the legislature, will hopefully come after.
“We are losing revenue. Dozens of breweries are losing revenue in the state because we can’t advertise events,” Garrity says. “We can’t do what every other business is allowed to do. And when I say an event, it’s a guy playing a guitar, it’s a trivia night, it’s an open mic. Now we are reverted to being speakeasies. That is what the state is saying.”
Trotter and Garrity say the ABC has been swayed by the state’s restaurant industry, and that influence is evident in the Special Ruling. Some restaurateurs, and their trade groups, claim allowing breweries to sell hot food and hold regular events would create an unfair level of competition. Breweries, they say, handle the production and distribution of their product in house, thus lowering their costs, while restaurants and bars have to work with distributors and, critically, pay a ridiculously high price for a liquor license. (This argument, of course, ignores the hundreds of thousands, if not millions, of dollars brewers must spend to buy and maintain equipment and taproom spaces.)
In fact, James B. Graziano, acting director of the ABC, wrote back in 2019, when the initial rules were made, that, “the Legislature never intended the limited licenses to give craft breweries the same privileges of a consumption venue, such as a sports bar or restaurant.”
But it’s not the ABC’s right to enact regulations that level the playing field in their eyes, contends the lawsuit.
“For the 6,000 bars, liquor stores and restaurants to basically kneecap a nascent, fledgling industry that can sell one product is the height of unfairness,” Trotter says. “And to say they need this in order to compete says a lot more about themselves than it does about breweries, if it were actually true. … One discrete industry is using the government to target another for their own cynical benefit and it’s just wrong, and in this instance, it’s also illegal.”
“The ABC is not a fair player and has been unduly influenced—anybody who reads the Special Ruling and the license conditions can see that,” Garrity adds. “They’re clearly trying to stack the cards for one side or the other. They should not be regulating entertainment, they should be regulating alcohol and that’s the heart of it, but they also didn’t follow their own process and that’s really the shocking thing.”
This isn’t Garrity’s first go-round taking on the state or the ABC. When the first rules were floated in 2018, they banned coffee (the new rules do, too). Well, Death of the Fox roasts and sells coffee in its space, and was given a license to do so by the state in 2016. Garrity says they were grandfathered in, but that he couldn’t expand with the same business model to another location, nor could any brewery in the state.
Though he’s been in contact with other brewers and serves on the regulatory committee of the state’s Brewers Guild, he decided to go alone in this lawsuit because 1) he’s willing to, and 2) The crux of the lawsuit, focused on the perceived regulatory failings of the ABC, won’t necessarily be bolstered by the addition of other breweries.
“I have been sticking my neck out now for almost five years, and I’m not afraid to call bullshit. And this is all bullshit,” Garrity says.
Some folks contend that breweries have known about the potential limitations on how they operate their businesses for some time, and should fall in line with ABC’s Special Ruling. It’s kind of a weak argument.
“I don’t think it’s fair to put the onus on breweries for complying with the statute when an unreasonable and illegal agency action stands in their way, even if they had an idea it might be enforced, because it’s illegal and unconstitutional,” Trotter says.
While legislators are, ostensibly, working on a long-term solution to the restrictions placed on breweries, Garrity isn’t holding his breath that a solution will come via that avenue any time soon.
“We’ve been waiting for the legislature for years to address this issue,” he says. “I would be pleasantly surprised, especially with an election coming up; I just don’t know if there’s enough days to get it done. … In a perfect world, I would love for the Office of the Attorney General to look at this and go, ‘You know, we really messed up here,’ and just suspend the ruling so we can just conduct our business.”
Garrity also wonders why Gov. Murphy has failed to comment, publicly at least, on the Special Ruling or what the long-term plan is for the industry.
“It’s just like, what are you doing? Just wake up. Get control of your department. Your department is going rogue, man,” Garrity says.
Trotter suggests they’ll have their opening legal brief filed in the coming weeks, and the ABC has, by rule, 30 days to respond. The hope is arguments will be heard by early next year, with a decision coming, at the latest, by next summer.