Atlas Brew Sues Over the TTB COLA Shutdown

by Robert C. Lehrman on January 24, 2019

Atlas Brew Works sued the United States on January 15, 2019 in the DC District Court. Atlas is a brewer based in Washington, DC and argued that the law does not allow the government to, at the same time, require a label approval for beer, when the shutdown makes it impossible to obtain such an approval.

As of this writing, Google has 48,600 articles about the controversy, so I will refrain from summarizing the case, or trying to guess who will win. Instead, I will set out some of the juiciest morsels, from the fascinating arguments presented by both sides. On one side is the famous lawyer Alan Gura, representing the beer company. On the other side is the Acting Attorney General Matthew Whitaker and Assistant U.S. Attorney Jason T. Cohen. The judge is the hugely accomplished Christopher R. Cooper.

Atlas’ complaint, filed January 15th, begins:

The First Amendment never “shuts down.” … The [FAA Act] subjects Atlas to criminal penalties should it ship beer with unapproved labels in interstate commerce. But Congress has not enacted legislation funding the issuance of [COLAs] for beer labels at the present time. There is no telling whether or when such legislation might be forthcoming, or how long it might take the government to approve COLA applications should funding for this activity be someday restored.

Atlas does not seek a mandatory injunction to reopen the COLA function. It does not seek the redirection or appropriation of any federal funds. It raises no challenge to the COLA process itself, or to any of the standards the government would apply in licensing beer labels were the government back in the licensing business. Rather, Atlas’s propositions are simple: It cannot be denied the right to speak for lack of meeting an impossible condition. The right to free speech is not a favor that the government affords Americans when political circumstances allow. Moreover, the COLA requirement, a content-based prior restraint on speech, is currently unconstitutional because the licensing authority withholds permission indefinitely. Under these circumstances, the COLA requirement’s enforcement must be enjoined.

Atlas Brew Works expresses itself through the labels it places on cans and kegs containing its beers. … Beer labels are a form of expression protected by the First Amendment.

Atlas’ accompanying memo goes on to assert:

The government can shut down speech regulators. It cannot shut down the First Amendment.

This Court may be unable to solve the political branches’ budgetary standoff, but it remains in the business of securing fundamental rights.

The Government’s memo in support of a motion to dismiss, filed three days later, said:

On December 22, 2018, the Department of the Treasury (including TTB) was partially shut down due to a lapse of appropriations. … As a result, approximately 90 percent of TTB’s employees were placed on furlough, i.e., in a non-work, non-pay status, pursuant to TTB’s shutdown plan … . In accordance with the designated TTB shutdown plan, none of the functions in the Alcohol Labeling and Formulation Division, including reviewing applications for label approval, is considered “excepted.” … Accordingly, all employees assigned to that division were placed on furlough and, in accordance with the Anti-Deficiency Act, must stay away from the work place and may not perform government work. … As of the date of filing of this brief, TTB remains unfunded and its employees thus may not review or process label applications at this time. … Once TTB receives funding, it will resume its review of applications for label approval.

Here, the government argues, there is no real harm to Atlas because:  “the statutory and regulatory scheme, which Plaintiff has not challenged, permits Atlas to produce a permissible keg label for “The Precious One” with only minimal changes to the proposed label that it submitted to TTB on December 20, 2018.”

Accordingly, Plaintiff’s activities constitute nothing more than self-inflicted injury, to the extent that Plaintiff has even suffered injury, and fail to establish irreparable harm.

On January 21, 2019, Atlas replied:

Even were Atlas to reconfigure its PRECIOUS ONE can label for keg use, it would still suffer significant First Amendment harm in being unfree to speak as it wishes with respect to this product. Using an undesirable label for one beer alleviates neither the First Amendment injury with respect to that product, nor the First Amendment injuries with respect to all the other products which cannot obtain any label approval at all.

Atlas is principled, but not impractical. Atlas would take whatever action necessary to mitigate its damages—but doing so would not undo the injury to its constitutional rights and the rights of its consumers. Atlas wants to publish its label, designed to communicate with its customers, not some other label designed by government lawyers seeking to avoid an injunction. If the government threatened the Coca Cola Company with prosecution for selling red cans, insisting instead on green cans, the Company might well resort to selling Coke in green cans while it seeks injunctive relief for its First Amendment injury. Likewise, book publishers and movie studios, whose products are inherently expressive, would be heard to object to censorship on First Amendment grounds, even if their primary motivation would be the protection of their commercial interests. But the government cannot censor books and movies, and claim that there is no First Amendment injury because the publisher remains “free” to sell the censored work.

Atlas appreciates that the TTB might want to assist brewers in mitigating the shutdown’s damage. Atlas might well take advantage of Ms. Scalese’s proposal and concoct a rudimentary and unsightly keg label scavenged from its approved can-specific label, lacking Atlas’s trade dress and standing inconsistent with the rest of Atlas’s lineup, if that is what it would take to avoid a complete loss of the beer destined for interstate shipment. But it would not be speaking freely.

People do not injure themselves by speaking in a way subject to censorship. The government injures people by censoring them, whether they remain silent or not. The notion that Atlas has created its own injury, because it requires the ability to speak notwithstanding the speech licensing office’s indefinite closure, cannot be the law.

This case seems to be on a very fast track. The last hearing was two days ago, and it seems like the court could make some decisions any moment. Unless more parts of the government run out of cash first.