March 31, 2014 – Diageo may have lost a battle temporarily to change last year’s Tennessee state law setting standards for what can be called “Tennessee Whiskey”, but is now challenging part of that law and the state’s interpretation of it in a Nashville federal court. The 2013 legislation also updated a long-standing state law requiring Tennessee distilleries to mature all of their spirits within the same county as the distillery. That law has been on the books since 1937, when Tennessee repealed its Prohibition-era ban on distilling for Moore, Coffee, and Lincoln counties only. The 2013 change allows distillers to expand their maturation sites to adjacent counties only.
Diageo is suing the Tennessee Alcoholic Beverage Commission and director Keith Bell with the hopes of overturning not only the 2013 expansion, but the original 1937 requirement. According to the Nashville Business Journal, Bell notified Diageo on March 20 that it was potentially in violation of the “Storage Statute” for moving spirits from its George Dickel Distillery in Tullahoma (Coffee County) to the Stitzel-Weller Distillery’s warehouses in Louisville, Kentucky for maturation. Bell’s letter requested the company’s response by March 28, which was the day Diageo’s lawsuit was filed. In an email, Bell explained that his agency was following up on a media report that Dickel-produced spirits were being moved to Louisville.
“Our inquiry was the first step to determine whether further investigation was warranted. At this time, no citations have been issued nor administrative proceedings initiated by the TABC.”
In its court filing, Diageo acknowledges that it has moved some of its distilled spirits — other than the distillery’s flagship George Dickel Tennessee Whiskey — from Tullahoma to Louisville (while not specifying which products those spirits were being used for). The lawsuit claims Tennessee’s law violates the U.S. Constitution’s protection of interstate commerce, and would force the company to either invest in new maturation facilities near the distillery or lease warehouse space from other property owners in the immediate area. The lawsuit also suggests that Diageo could cut back on production of those spirits at Dickel or move that production outside of Tennessee, with a potential loss of jobs in either case.
Bell and the Commission have not filed a response to Diageo’s lawsuit with the court. WhiskyCast has reached out to Diageo for more details, and this story will be updated as more information becomes available.