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Atlas Brew Work, LLC v. Barr

United States District Court, District of Columbia

July 31, 2019

WILLIAM P. BARR, in his official capacity as Attorney General of the United States, Defendant.



         The 34-day government shutdown that began in December 2018 and ran through most of January 2019 disrupted the lives of hundreds of thousands of federal employees and countless others who depend on their services. Families missed paychecks, furloughed workers were forced to moonlight, and critical public functions were curtailed after unpaid civil servants called in sick. All of those effects were entirely predictable. But the shutdown also had myriad other, more surprising consequences. One of them even threatened the country's most treasured libation: beer. This case shows how.

         Under federal law, any brewer who wishes to ship an alcoholic beverage in interstate commerce must first submit for regulatory approval the labels it will affix to its containers. If a brewer forgoes the pre-approval process and ships a container anyway, it risks criminal prosecution. The government shutdown, however, effectively put the regulator out of business, stalling the approval process for any labels already in the pipeline. District of Columbia-based craft brewer Atlas Brew Works had a few such labels, including one for a perishable pale ale, “The Precious One, ” that Atlas had already brewed. Without label approval, The Precious One sat waiting in an Atlas fermenting tank, rather than flowing freely at area watering holes. This pinched the company's bottom line and left its expectant customers in the lurch. But it also, Atlas said, constituted a First Amendment violation: a law that prohibits speech without regulatory approval becomes an outright ban on speech when the approval process is shuttered. As Atlas puts it, “[i]t cannot be denied the right to speak for lack of meeting an impossible condition.” Am. Compl. at 2.

         So Atlas filed suit on January 15, 2019-24 days into the shutdown. It sought a temporary restraining order and preliminary injunction preventing the Justice Department from prosecuting Atlas for proceeding with its labels without pre-approval. See ECF No. 3. Given Atlas's request for expedited review, the Court ordered the government to promptly reply and held a hearing on the matter. Within days of that hearing, the Court was poised to issue a ruling.

         But then, on January 25, the shutdown ended. Just a few days later, The Precious One label was approved, and Atlas was once again able to speak via its beer labels without the fear of prosecution. With Atlas no longer suffering an immediate and potentially irreparable injury, the Court denied as moot Atlas's motion for a temporary restraining order and preliminary injunction. See Order, ECF No. 13. The government asked the Court to go a step further, dismissing the entire case as moot. Atlas countered that the case was not moot and, in any event, that it fit within the capable-of-repetition-yet-evading-review exception to the ordinary mootness rule. It argued that another shutdown would likely come, and that when it did, Atlas would suffer a similar injury. The Court reserved judgment on that question and ordered the parties to fully brief it. Id.

         The government has since followed up with a motion to dismiss focused exclusively on the mootness question. Because the shutdown that started this dispute has ended and the likelihood of the same injury recurring is too speculative, the Court finds the case moot and will grant the government's motion.

         I. Background

         A. Statutory Framework

         This case involves the interplay of two fields of federal law-one governs how the federal government can spend money, the other regulates how purveyors of alcoholic beverages can label their products. The Court will say a bit about each before turning to the facts at hand. 1. The Appropriations Clause and Anti-Deficiency Act Congress, per the Constitution's Appropriations Clause, holds “exclusive power over the federal purse.” Rochester Pure Waters Dist. v. EPA, 960 F.2d 180, 185 (D.C. Cir. 1992); see U.S. Const., art. I, § 9, cl. 7 (“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”). The Constitution thereby “prevents Executive Branch officers from even inadvertently obligating the Government to pay money without statutory authority.” U.S. Dep't of Navy v. Fed. Labor Relations Auth., 665 F.3d 1339, 1347 (D.C. Cir. 2012). “Federal statutes reinforce Congress's control over appropriated funds.” Id. Key among these statutes is the Anti-Deficiency Act (“ADA”), 31 U.S.C. §§ 1341-42, which “makes it unlawful for government officials to ‘make or authorize an expenditure or obligation exceeding an amount available in an appropriation, '” U.S. Dep't of Navy, 665 F.3d at 1347 (quoting 31 U.S.C. § 1341(a)(1)(A)). The ADA also prohibits any federal officer or employee from working without an appropriation “except for emergencies involving the safety of human life or the protection of property.” 31 U.S.C. § 1342.

         2. The Regulation of Alcohol Labels

         The Federal Alcohol Administration Act (“FAA Act”), 27 U.S.C. § 201 et seq., regulates the content of labels affixed to malt beverages shipped in interstate commerce. It requires or forbids various types of speech on the labels and makes it a crime to introduce into interstate commerce any beverage that is not “bottled, packaged, and labeled in conformity with” regulations established by the Secretary of the Treasury. 27 U.S.C. § 205(e). Those regulations prohibit false, misleading, and obscene statements, and statements that disparage competitors' products. Id. They also require that labels contain certain other information, including the beverage's manufacturer, identity, and net contents. Id.; 27 C.F.R. Part 7.

         To facilitate compliance with these regulations, the FAA Act created a regulatory process that requires sellers to obtain a Certificate of Label Approval (“COLA”) attesting to a label's conformity with the Act and its attendant regulations before shipping a product in interstate commerce. 27 U.S.C. § 205(e). A Treasury regulation provides likewise. 27 C.F.R. § 7.41(a). An entity within the Treasury-the Alcohol and Tobacco Tax and Trade Bureau (“TTB”)- administers the FAA Act, including the COLA requirement. The Attorney General of the United States is authorized “to prevent and restrain violations of” the FAA Act. 27 U.S.C. § 207. Shipping beer in interstate commerce without a COLA, in violation of 27 U.S.C. § 205, is a misdemeanor punishable by a fine up to $1, 000 per offense. Id. § 207.

         B. Factual Background

         On November 28, 2018, Atlas sought a COLA for a label that would adorn individual cans of The Precious One. See Mot. for TRO, Ex. 2, ECF No. 3-2. The TTB approved that COLA on December 17, 2018. Then, on December 20, Atlas sought a COLA for a “keg collar” label for the same beer. Am. Compl. ¶ 29.[1] But just two days later, appropriations lapsed for scores of government agencies, including the TTB, which had not yet acted on Atlas's COLA application for The Precious One's keg collar label. Id. The TTB's home page informed visitors that the appropriations lapse had led to a “cessation of TTB operations with limited access to” its web site. Id. ¶ 26. The TTB web site also stated that COLA “submissions will not be reviewed or approved until appropriations are enacted.” Id.

         The TTB's closure put Atlas over a barrel. Id. ¶¶ 33-35. The Precious One is perishable, and Atlas intended to market it as a seasonal beer February through April. Id. ¶ 34. But without label approval, Atlas said all of the beer set aside for out-of-state distribution via its kegs was languishing in a fermenting tank. Id. Atlas feared that it would lose thousands of dollars if the shutdown persisted much longer, and it lamented the opportunity cost incurred by the tying up of one of its fermenting tanks. Id. ¶¶ 34-35.[2]

         To put an end to the stalemate, Atlas on January 15, 2019 filed suit and sought a temporary restraining order and preliminary injunction against then-Acting Attorney General Matthew Whitaker.[3] See ECF No. 3. The temporary restraining order would have enjoined the government from prosecuting Atlas for proceeding with The Precious One keg collar label without a COLA, while the preliminary injunction would have applied more broadly to all of Atlas's pending COLA applications and perhaps even to other brewers nationwide. See id. The Court ordered the government to file an opposition by January 18, see Minute Order, Jan. 15, 2019, and held an expedited hearing on the motion four days later, see Minute Entry, Jan. 22, 2019.

         But on January 25, before the Court had issued a ruling on the motion, leaders in Washington announced that a deal had been reached to restore appropriations. The Court held a status conference the following Monday to discuss whether Atlas's demands had been mooted by the end to the shutdown. See Minute Order, Jan. 27, 2019. Atlas argued that its request for emergency injunctive relief had not yet been mooted because the TTB had not yet approved The Precious One label. The government, for its part, assured the Court that the approval was imminent. The Court thus deferred ruling on the matter until the government had provided notice that the label had been approved. That notice came the next day, see Notice of Label Approval, ECF No. 12, and the Court proceeded to deny as moot Atlas's motion for a temporary restraining order and a preliminary injunction, see Order, ECF No. 13. The Court did not, however, dismiss the entire case as moot, instead inviting the government to submit an answer or revised motion to dismiss regarding Atlas's demand for declaratory relief. See id.

         The government, on February 28, filed its motion to dismiss. See Motion to Dismiss for Lack of Jurisdiction (“MTD”), ECF No. 14. Two weeks later, Atlas opposed that motion, but it also amended its complaint. See Amended Complaint, ECF No. 19; Memorandum in Opposition, ECF No. 20. The parties thereafter agreed to reset the briefing schedule, this time focused on the new allegations in the amended complaint. See Joint Motion for Briefing Schedule, ECF No. 21. The motion has now been fully briefed, and it is ripe for the Court's resolution.

         II. Legal Standard

         The government has filed a motion to dismiss Atlas's complaint as moot, which “is properly brought under [Federal Rule of Civil Procedure] 12(b)(1) because mootness itself deprives the court of jurisdiction.” Indian River Cty. v. Rogoff, 254 F.Supp.3d 15, 18 (D.D.C. 2017). “Unlike some jurisdictional questions such as standing or ripeness, the party asserting mootness . . . bears the ‘initial heavy burden' of establishing that the case is moot.” Zukerman v. USPS, -- F.Supp.3d --, No. 15-cv-2131, 2019 WL 1877173, at *4 (D.D.C. Apr. 26, 2019) (quoting Honeywell Int'l, Inc. v. NRC, 628 F.3d 568, 576 (D.C. Cir. 2010)). When evaluating a motion to dismiss, “the Court must treat the complaint's factual allegations as true and afford the plaintiff the benefit of all inferences that can be derived from the facts alleged.” Indian River Cty., 254 F.Supp.3d at 18 (internal quotation marks omitted). “But because the Court has an ‘affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority, '” id. (quoting Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C 2001)), the ‘[p]laintiff[s'] factual allegations in the complaint . . . will bear closer scrutiny in resolving a 12(b)(1) motion than in resolving a 12(b)(6) motion [for failure to state a claim], '” id. (quoting Delta Air Lines, Inc. v. Export-Import Bank of United States, 85 F.Supp.3d 250, 259 (D.D.C. 2015)). In addition, the Court “may consider materials outside the pleadings in deciding whether to grant a motion to dismiss for lack of jurisdiction.” Id. (internal quotation marks omitted).

         III. Analysis

         The government contends that the case has been mooted by the restoration of appropriations and the processing of Atlas's labels. Atlas responds, first, that the case has not been mooted and, second, that, even if it has been, the underlying dispute is capable of repetition yet will evade judicial review, meaning that the Court should still resolve it. The Court takes these issues in turn.

         A. Mootness

         “Federal courts lack jurisdiction to decide moot cases because their constitutional authority extends only to actual cases or controversies.” Iron Arrow Honor Soc'y v. Heckler, 464 U.S. 67, 70 (1983). The Constitution's case or controversy requirement “means that, throughout the litigation, the plaintiff must have suffered, or be threatened with, an actual injury traceable to the defendant and likely to be redressed by a favorable judicial decision.” Spencer v. Kemna, 523 U.S. 1, 7 (1998) (internal citations and quotation marks omitted). “A case becomes moot-and therefore no longer a ‘Case' or ‘Controversy' for purposes of Article III-‘when the issues presented are no longer ‘live' or the parties lack a legally cognizable interest in the outcome.'” Already, LLC v. Nike, Inc., 568 U.S. 85, 91 (2013) (quoting Murphy v. Hunt, 455 U.S. 478, 481 (1982) (per curiam)). “An intervening event ...

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