Two winemakers fight on in appellate court against Minnesota-grape law

Nan Bailly of Alexis Bailly Vineyard of Hastings

The owners of two Minnesota wineries have appealed last year's dismissal by a federal judge of their suit that challenged a Minnesota law that limits their feedstock to mostly Minnesota-grown grapes.

In 2017, Alexis Bailly Vineyard and Next Chapter Winery challenged Minnesota's "unusual and severe winemaking restriction" as a violation of the U.S. Constitution's interstate commerce clause.

In dismissing the case last year, a federal judge suggested the wineries could obtain another type of state license. The wine manufacturers appealed the decision to the U.S. Eighth Circuit Court of Appeals because the alternative license is more expensive and also puts limits on the source of their grapes.

"We think the judges were receptive to our argument that our clients have been injured by this Minnesota law that limits where they can buy their products," said Attorney Anthony Sanders of the Institute for Justice, who represents the two wineries and presented oral arguments in court on Thursday. "We are very confident that the Eight Circuit recognizes free trade."

The Minnesota law only serves to protect state's small-grower grape industry from competition, according to the appeal. It also limits the kind of wines Minnesota winemakers can produce. Northern grape varieties capable of surviving Minnesota winters are often too acidic and need to be blended with grapes from elsewhere to make wines familiar to most consumers.

The suit said winemakers Nan Bailly and Timothy Tulloch of Alexis Bailly Vineyard and Next Chapter Winery, respectively, struggle to gather enough grapes from Minnesota alone. Under the commerce clause, discrimination against out-of-state commerce—grapes grown outside the state— is unconstitutional unless the state can prove that the out-of-state commerce at issue is more dangerous than in-state commerce.

The suit, the first legal challenge to the state regulation, noted that Minnesota doesn't place the same agricultural barriers on local beer or spirit makers.

"I want the freedom to make the wines I choose," Nan Bailly said in in 2017. "It's already a difficult climate to grow grapes. We just want the same rights as other makers in the marketplace."

Minnesota is one of a dozen states where small, homegrown-wines must use a majority of local grapes.

The Institute for Justice, a group that litigates civil and business rights cases, said most of the state's 60 small grape growers don't support the lawsuit because the law protects their business.

Bailly and Next Chapter are "farm wineries" that can grow and produce their own wine, including online sales, free samples to visitors and the option to sell wine at county fairs.

In some years, Bailly said hasn't been able to grow enough grapes to comply with the law and has had to buy state-grown grapes at a higher price and sometimes lesser quality. She was allowed to petition for an exemption to buy out-of-state grapes and juices from California and New York to source her wine. The vineyard blended and sold greater wine varieties that became popular with customers and showed "what she could do if given an open book to produce wine," she earlier told the Star Tribune.

Tami Bredeson, owner of Carlos Creek Winery in Alexandria and board member of the Minnesota Farm Winery Association, declined to be a part of the 2017 lawsuit.

She said in 2017: "It's difficult to grow a Minnesota wine industry without using Minnesota grapes.

"I understand the difficulties of growing grapes in the state, but that should challenge us to work harder to make world class grapes. Without the law, grape prices could drop and we would lose talented growers."

Minnesota's cold-hardy vineyards and wineries generates up to $150 million annually in economic activity and the business is growing at a 20 percent-plus annual rate, based on a 2016 study by the University of Minnesota Extension Service and Minnesota Grape Growers Association.