Hinman & Carmichael LLP

Hinman & Carmichael LLP provides expert corporate, administrative and regulatory legal services exclusively to the alcoholic beverage and hospitality industries and assists other law firms and in-house counsel as special counsel on alcoholic beverage issues.

We are experienced specialists in the law as it relates to all aspects of the production, distribution and sale of alcoholic beverage products. Because of this specialization, we readily answer our clients' questions concerning alcoholic beverage qualification, licensing, business practices and marketing, and represent them in administrative proceedings before federal and state agencies who regulate alcoholic beverages. We also assist other counsel in related civil, administrative and criminal proceedings that may affect alcoholic beverage license privileges.

All alcoholic beverage licensees must be sensitive to federal and state regulation of alcoholic beverage business practices. The firm interacts on a regular basis with all levels of the Alcohol and Tobacco Tax and Trade Bureau (TTB) and the State Department of Alcoholic Beverage Control (ABC). We are thoroughly familiar with the statutes, rules and policies that apply to alcoholic beverage business operations.

Contemporary corporate, limited liability company and partnership arrangements are constructed to achieve tax, liability protection and other goals. Unfortunately, structures which may be useful for these purposes often run afoul of state and federal alcoholic beverage regulations designed for simpler businesses and aimed at clearly identifying true owners of alcoholic beverage

Working closely with our clients' regular corporate counsel and advisors, we routinely give advice about corporate, LLC and partnership matters in connection with alcoholic beverage licensing. We assist start-up enterprises in forming appropriate legal entities, and restructuring existing licensees when necessary to meet regulatory requirements. We advise licensees on the licensing consequences of changes to their corporate and partnership arrangements. We work with state and federal regulators to simplify and streamline the investigation and qualification process for complex corporate, limited liability company and partnership structures.

For example, we successfully helped clients qualify for licensing in the following situations:

Qualified foreign nationals from Europe, Asia, South America and the Arabic countries (individuals, entities and trusts) as holders or ultimate owners of alcoholic beverage licensed businesses in California.
Formed a closely held corporation to hold alcoholic beverage licenses and operate alcoholic beverage business when it became apparent that the world-wide joint venture owner of the business could not qualify for licensing.
Formed and licensed one of the first limited liability companies in California to merge and operate two former sole proprietorship wineries.
Organized and implemented the integration of over 600 licenses formerly held in separate subsidiary corporations in order to take advantage of single-entity purchasing and storage of alcoholic beverages.

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We often negotiate with the ABC for a waiver of some of the requirements for licensing in complex partnership and corporate ownership structures. We work on a daily basis with personnel in the district offices throughout the state and in Sacramento headquarters. We are frequently successful in reducing the paperwork burden, limiting the officers and directors who must be personally qualified and making sure that the application process is completed smoothly and quickly. Our experienced paralegal and clerical staff efficiently prepares the application papers. To our knowledge, we are the only law firm that is "on-line" with the ABC computer data base system.

In this age of anti-alcohol sentiments, many of our clients are faced with regulatory attempts to impose conditions on alcoholic beverage licenses that will seriously impair their ability to operate their businesses profitably. We negotiate with ABC personnel, local police and planning agencies and protesters, if necessary, to reduce the scope and impact of proposed conditions on hours of operation, percentage of alcoholic beverage sales and other restrictions on use of the license.

Our expertise enables us to identify tied-house and rehabilitation concerns likely to arise in qualifying persons and entities for licenses. Early planning allows us to clear such issues with the regulators and obtain timely waivers and consents that insure the trouble-free completion of a project.

In addition to our typical transactions, which include obtaining temporary permits and permanent licenses for all types of licensed premises, establishing alternating premises for winery and brewery licensees and counseling start-up businesses in their licensing and regulatory issues, we have successfully overcome the following licensing problems:

Established the rehabilitation of, and issuance of an alcoholic beverage license to, a client with a substantial "rap" sheet, including prison time for disorderly house offenses.
Assisted with drafting and passage of legislation enabling a brewpub to obtain an on-sale general license.
Negotiated conditions that permitted use of an outdoor area that was not contiguous to the indoor premises of a restaurant.

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The trade practices of alcoholic beverage licensees are regulated by the ABC and the TTB in various, and often inconsistent, ways. The firm's experience in dealing with the legal aspects of the business practices of alcoholic beverage industry members, allows us to identify promptly and without elaborate and expensive research the legal difficulties a suggested project or program will encounter.

Examples of our efforts to tailor business practices to regulatory requirements include:

Advising a client on establishing his business of marketing wine through the Internet.
Convincing the California ABC to permit alcoholic beverage advertising on in-store shopping cart video monitors.
Obtaining approval of alcoholic beverage supplier advertising on computerized in-store menu kiosks.
Obtaining approval for use of unlicensed "order points" for alcoholic beverage retailers.
Obtaining approval for use of retailer-sponsored advertising mailers that contain advertisements paid for by alcoholic beverage suppliers.
Designing national "direct shipment" programs that comply with the laws of the state of residence of the recipients of the products.

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The firm is experienced with traditional and novel marketing and distribution aspects of the industry, including importation, wholesale and retail marketing, and other distribution arrangements, such as direct marketing programs. The firm represents clients on every tier of the marketing system.

We provide our clients with negotiated sophisticated distribution agreements, or alternative short form agreements when suitable for a client's needs. Both forms take into account (in various ways) the laws and particular policies of the control states, including franchise protection statutes and similar laws of other jurisdictions to obtain protection of brands and the parties' pricing policies and sales goals. We are commonly involved in distributor termination and brand movement situations. We counsel our foreign clients on issues involving international distribution, financing and trademark protection related to the alcoholic beverage business.

The firm's chain store representation, has given us extensive experience in developing retail marketing and promotional programs that take into account the TTB and ABC business practice regulations in such diverse areas as computer support, vendor involvement in retailer advertising and in-store support, and insurance and indemnification issues.

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Hinman & Carmichael LLP regularly works with creditors' counsel and bankruptcy lawyers to assist them regarding license transfers and protecting creditors' interests in connection with financially distressed licensees. Although an alcoholic beverage license is clearly an asset, it cannot be seized or operated by creditors through foreclosure or bankruptcy proceedings without participation by the Department of Alcoholic Beverage Control. Similarly, creditors cannot count on obtaining security interests in alcoholic beverage licenses or inventories unless attention is given to complying with alcoholic beverage regulations and provisions of the Uniform Commercial Code that apply specially to wine, beer and spirits.

We advise clients on the means of protecting their interests before entering into financing agreements with producers, hotels, and restaurants, and we advise creditors on the best means of obtaining control over and transferring licenses in the course of bankruptcies, foreclosures, and work-outs.

Examples of our efforts in this area include:

Protecting the ability of a hotel to operate during the course of adverse litigation between the licensed restaurant tenant and the hotel owner by negotiating alternative licensing arrangements with the ABC.
Drafting bankruptcy court orders in conjunction with bankruptcy counsel allowing the continued operation and reorganization of a major off-sale retail chain.

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Today, most hotels are managed by professional management companies rather than the owners. Additionally, many owners prefer that their management companies obtain, hold, and operate alcoholic beverage licenses. We assist management companies and owners in preparing contracts relating to the management of hotel and motel properties, large and small. In such situations, we prepare management agreements and liquor license concession agreements designed to separate alcoholic beverage operations and revenues from other operations and revenues, allowing the management company to hold the license(s) while protecting the owner's interest in orderly transfer in the event of subsequent sale of the property.

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Our litigation services are limited to hearings and appeals of license protests, trade practice violations or disciplinary accusation proceedings commenced by the TTB, the ABC or other agencies (including police departments and local planning commissions) with jurisdiction over industry members. When a client's license application is protested, we aggressively pursue mediation and other alternative dispute resolution strategies to resolve the protest before hearing. Often this enables our clients to operate with fewer conditions and helps build positive relations with neighbors, local police and government agencies.

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While the cost of any specific project is dependent upon the time necessary to complete it, our experience enables us to complete any given task faster, and more effectively, than a corresponding non-specialized operation.

When we are included in our clients' projects at the planning stage, we can usually provide accurate estimates of anticipated legal costs and include recommendations for lowering those costs by taking full advantage of existing client staff resources. Well-planned and carefully coordinated procedures for initial license qualifications or business transfers often results in significant cost and time savings for our clients.

With respect to initial federal and state applications for personal, partnership or corporate qualification as an industry member, one of the strengths of our firm is our ability to work efficiently with a client's existing staff so that maximum cost-effectiveness is achieved.

When unusual questions about new procedures or special approval requirements cannot be clearly answered from the Federal Alcohol Administration Act and its implementing regulations, or from the relevant state law, we will confer with the most knowledgeable local, regional or national agency personnel necessary to get a quick and cost-effective resolution.

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Whether or not you utilize the services of the Hinman & Carmichael LLP, we encourage all existing or potential industry members to engage in comprehensive legal planning before embarking on new alcoholic beverage programs or ventures.

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