June 11, 2014 – Tennessee state regulators have dropped their inquiry into Diageo’s use of its warehouses at the Stitzel-Weller Distillery in Louisville for maturing whiskey from its George Dickel Distillery in Tennessee. A state law requires whiskey distilled in Tennessee to be matured in the same county as the distillery or an adjacent county, and the Tennessee Alcohol Beverage Commission asked Diageo in March to explain why it was moving whiskey distilled at Dickel out of state. Diageo responded with a federal lawsuit challenging the constitutionality of the law, which dates back to the end of Prohibition.

During a hearing on that lawsuit in Nashville Tuesday, Dickel master distiller John Lunn testified that the spirit moved to Kentucky has been earmarked for blending into other Diageo spirits, and has never been used in a George Dickel-branded product. According to the Associated Press, Lunn said approximately 16,000 barrels of Bourbon and wheat whiskey have been moved from the Tullahoma facility since 2009 because of a lack of warehouse space on-site. Diageo was unable to find additional warehouse space within Tennessee, and had considered stopping production at Dickel until the decision was made to move barrels to Stitzel-Weller.  The company completed work in April on a new $7 million warehouse, and is considering plans to build another warehouse in the near future. Diageo’s Alix Dunn told WhiskyCast’s Mark Gillespie in a June 13 telephone interview that casks were only moved in 2009, with no movement of casks since then.

After Lunn’s testimony, Tennessee Assistant Attorney General Kyle Hixson told the court that he had decided Diageo did not violate the state’s law, and would not be seeking penalties against Diageo. Alcohol Beverage Commision executive director Keith Bell told WhiskyCast in April that no formal investigation had ever been opened, but that his office had only inquired informally into Diageo’s practices after they were mentioned in a Louisville Courier-Journal article.

The hearing was adjourned immediately after Hixson’s announcement, but the lawsuit has not been dismissed. “We can’t comment on the specifics of the lawsuit because it is still pending, but we’re going to be working cooperatively with Director Bell and with his colleagues at the ABC in Tennessee and the AG’s office, and that agreement that we’ll work on together will resolve the underlying lawsuit,” Dunn said.

Editor’s note: This story was updated on June 13 with additional information following an interview with Diageo’s Alix Dunn.

Links: Diageo | George Dickel | Tennessee Alcoholic Beverage Commission