ABC Issues First Bar Liquor License

ABC Issues First Bar Liquor License

By William T. Cheek III

September 2, 2010 marked an almost miraculous milestone that slipped by the vast majority of conscious Tennesseans.  The Tennessee Alcoholic Beverage Commission issued the first legitimate liquor license to a bar since before prohibition was enacted in 1919.

What about Tootsie’s World Famous Orchid Lounge? Blue Bird Café? Robert’s Western World?  All three illegally operated under restaurant liquor licenses, as did nearly every bar, music venue and watering hole in Tennessee.

Tennessee legalized liquor at restaurants in the 1960s. Before then, drinks were available, but just like corn whiskey from a still, ordering a Jack and Coke was illegal.  In most cities and towns, before liquor by the drink was legalized in the1960s, bars paid off the police or sheriff to sell drinks.  Many of these places also featured small, but equally illegal, casinos.

Legalizing drinks was very controversial in the 1960s.  Church groups teamed with bootleggers, crooked police and politicians, and illegal bar and casino owners to strongly oppose legalizing drinking.  One supporter’s mailbox was famously bombed.  As part of the compromise to legalizing drinking, lawmakers limited drinking to restaurants - excluding bars.

Over the years, bars claimed restaurant status, or presented falsehoods to the ABC, and liquor licenses were issued to hundreds of bars and nightclubs across Tennessee.  Problem was none were legit under the liquor laws.

When the ABC began cracking down harder on bars in 2009, revoking a couple of liquor licenses for 90 days -- the equivalent of the death penalty for most bars -- the legislature responded.  Pundits thought it may never happen, especially in an election year, but it did.  The legislature has created a new liquor license allowing bars to legitimately operate.

Although very controversial and long overdue, the fix was quite simple.  Lower the minimum amount of food an establishment has to sell to levels that are more practical for a bar.  Restaurants have to sell 50% food.  Under the new law, bars have to sell at least 15% food.

Bar owners are lining up statewide for the new bar liquor license. In a sign of the times, it is interesting to note that Tennessee’s first legitimate bar is not a honky tonk or country music hot spot, but rather an upscale gay bar and fashionable restaurant located on Church Street -- Tribe and Suzy Wong’s House of Yum.  The Alcoholic Beverage Group at Bone McAllester Norton helped this long-standing client obtain the first legal bar license in the State of Tennessee issued on September 2, 2010.

Will Cheek leads the Alcoholic Beverage Team  at Bone McAllester Norton, and regularly writes about issues impacting Tennessee restaurants and bars at his blog, Last Call.

High Alc Beer Incites Legislative Furor

Many industry members thought that brewing high alc beer was already allowed under state law.  Nashville Brewery Yazoo held a liquor manufacturer’s license and had been brewing a high alc beer named “Sue” for some time.

But the law was not clear and a large brewery looking to locate in Tennessee wanted to clarify state law to specifically allow high alc beer production, before it spent millions of dollars to build a brewery in Tennessee.

Tennessee beer laws are unusual.  In most states and under federal law, beer is beer, regardless of the alcohol content.  Tennessee law caps the amount of alcohol in beer at five percent by weight, which includes almost all popular brands of beer.  Regular beer is sold under a beer permit issued by cities and counties, but high alc beer requires an ABC license.

In recent years, beer aficionados have been increasingly enamored by beer that is stronger than five percent.  This is a growth area for high-end craft breweries.

Seems easy enough.  But in the strange world of Tennessee liquor laws, the clarification about brewing high alc beer caused a firestorm.  Lobbyists descended on the bill and turmoil ensued.

During the final hours of the legislative session, an industry compromise was adopted.  Brewing high alc beer was specifically authorized under a liquor manufacturing license.  Tap rooms can serve pints and sell growlers of both regular and high alc beer.  The law is not perfect, but it legitimizes a practice that is vital to most craft breweries.

Change at the TABC

In March we saw a change in the  composition of the Tennessee Alcoholic Beverage Commission.  Governor Haslam appointed two new members,  and in an unusual political move, reappointed longtime TABC member John  Jones.  Given his historical ties to the  Democratic party, Jones was likely reappointed to provide continuity and  historical perspective to the three person commission and bring consistent  application of the complicated and often arcane laws that regulate liquor in Tennessee.  Jones’ father served on the original TABC  when it was established in the 1960’s, and a Jones family member has always  served as a TABC Commissioner.  We see the appointment of Jones as being consistent with the Governor’s broad vision  of enhancing Tennessee's  reputation as a business-friendly state.

The two new Commissioners are  Mary McDaniel and Bryan Kaegi.

Commissioner Kaegi, the Middle  Tennessee representative, has a long history of support for prominent  Republican campaigns.  He currently works  with Persuasion Partners, a high-profile political campaign service.  Commissioner Kaegi served on the 2010  Tennessee Victory Leadership Team that led and funded the successful TNGOP get  out the vote campaign, was Finance Director for Senator Lamar Alexander and  also the former Finance Director for the Tennessee Republican Party. He served  as Finance Director for the Tennessee Victory program for President Bush in  2000 and 2004.  His sister, Kim Kaegi,  was Governor Haslam’s finance director.

Commissioner McDaniel, the West Tennessee representative, is recently retired FedEx  Vice President of Aircraft Materiel.  Her  career with FedEx spanned 30 years and she managed aircraft parts inventory and  technical support for the FedEx global fleet.   She is President of the Board of Trustees for Southwest Tennessee   Community College, her  alma mater, and leads fundraising efforts for the college.

We say farewell to Senator Harlan  Matthews and Cynthia Bond, who served the state as Commissioners for the past  eight years, and welcome Commissioners Kaegi and McDaniel to our insane little  world.  We are glad to see the return of  Commissioner Jones for another term.

At the conclusion of April's  regular TABC meeting, Commissioner Jones announced that he was stepping down as  chair. Commissioner Jones has chaired the Tennessee ABC for longer than we  recall.  Commissioner McDaniel was  appointed the new Chair and promised to spend a lot of time with the staff  helping out with TABC functions.  For  example, Commissioner McDaniel attended the National Conference of State Liquor  Administrators and spoke to the group.

Commissioner McDaniel’s  assistance could not come at a better time.  The staff at the TABC is pretty thin and seems to be getting thinner all  the time.  There are numerous high level  vacancies.  Acting Assistant Director  Melinda Arrington departed in May. Former Assistant Director Carolyn Smith  departed late last year. Senior ABC agents Mike Cawthon and Al Watson have  retired.  Hiring freezes have left a  number of key positions vacant.

The ABC was already a thinly staffed agency charged with overseeing several thousand licenses.  Director Danielle Elks is now filling the role of three staff attorneys and also leading the agency. ABC agents are  sparse.  Although licensees do not look  forward to stings, ABC agents are vital to conducting inspections necessary for  issuance of licenses to new businesses and changes of ownership.  In addition, the General Assembly is passing laws that create more classes of licenses and opening up the number of eligible  locations and entities that can obtain licenses; thus, further increasing the workload of a diminished staff.

So far, the ABC has done an admirable  job of working through this tough time. We hope that help is on the way, as  backlogs are certain to build up and morale can easily suffer.

September 2010 Newsletter Features 11 Awards, Social Media Tips, Rappelling Off a Building, Economic Tips, ABC's First Liquor License & New Health Care Laws

September has been an especially busy month at Bone McAllester Norton.  To read the rest of our newsletter, click here.