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Shot of Bourbon? This Big Law Partner's Got You Covered

24 April 2017
Law.com

Lawyers are used to filing paperwork in a pinch. But Mayer Brown partner Russell Nance was motivated like never before when armed state police raided his bourbon business, alleging he and his partners were running an illegal moonshine operation and committing a felony. Police gave them until the end of the week to secure a permit.

They completed the papers to make their new still legal in a couple of hours, recalled Nance, who said the group had just received the still and were beginning to assemble it when the police showed up.

With that initial drama behind them, Nance and his partners—Alex Toomy and Chris Sarpy—earlier this month celebrated the grand opening of their company, Ragged Branch Bourbon, a craft distillery located near Charlottesville, Virginia.

Making bourbon in the mountains of Virginia has given Nance, who practices tax law in Mayer Brown’s New York office, a new perspective on caring for his clients, a new avenue for creative writing and a new pride in crafting something he can drink and enjoy.

“The law is an interesting beast, because you are creating and making things, but they are intangible things. This is something where we are creating a thing: I can pull it out of the case, hold it in my hand and sip it. That creation and creative process has been rewarding, fulfilling, fun and terrifying all at the same time,” he said. “We feel really good about what we are doing here.”

Nance and Toomy were childhood friends who grew up about 25 miles away from Ragged Branch’s 92-acre ranch. Toomy came up with the idea of starting a bourbon business in 2009 and brought Nance and Sarpy, a New Orleans real estate attorney, in as partners. It took nearly eight years to open for business.

They were dedicated to “old school” techniques of growing their own corn, partnering with a nearby farm to grow and buy wheat and rye, distilling their bourbon, and aging it in barrels for at least two years before bottling and selling it. They also keep and harvest cattle that eat the mash, or spent grains, from the bourbon-making process.

Bourbon whiskey is made from corn mixed with rye, wheat or malted barley. Distilleries can only call a spirit “straight bourbon” if it comprises at least 51 percent corn and it’s aged at least two years in new, white-oak barrels that are charred inside. The char gives bourbon its unique color and taste.

“I prefer drinking it neat—straight without ice—but I also enjoy it on the rocks. A few drops of water really unlocks the flavor of the rye bourbon,” Nance said.

In Ragged Branch’s tasting room, guests can order such cocktails as the “old school” bourbon—fruit and bitters—or the “ragged mule” bourbon—ginger beer, lime and mint. Or they can choose to drink their bourbon in mixers such as Coke or club soda.

The 500-gallon still at Ragged Branch operates seven days a week. They cut the alcohol with water from the farm and then age it in barrels stored in their rickhouse, or aging warehouse. They’re making about one 53-gallon barrel every day, and the 90-proof bourbon for sale this year—13,000 bottles at $48 each—was aged for two years. Future vintages will be aged for four years. Production will double next year, and double again in 2019, Nance said.

Back in New York, Nance’s tax practice focuses on federal income tax matters related to structured finance transactions, financial products and mergers and acquisitions. Before joining Mayer Brown, he worked at both Cadwalader Wickersham & Taft, and Skadden, Arps, Slate, Meagher & Flom.

“If there is a tie-in between the work, it’s that my expertise in dealing with statutory law and regulatory and administrative law has been beneficial for helping to navigate the various restrictions and laws we have to deal with in the alcohol business,” Nance said. “I knew alcohol was heavily regulated, but just didn’t understand the extent.”

Bourbon has seen a resurgence in recent years, according to the Distilled Spirits Council of the United States, an alcohol industry trade group. In the past 10 years, the number of 9-liter cases of bourbon sold in the United States skyrocketed. In 2006, there were only 14.7 million cases sold. The number jumped to 21.8 million in 2016—worth $3.1 billion for distillers.

The entire craft distilling industry has seen rapid growth in the past 10 to 15 years, said Mark Shilling, president of the American Craft Spirits Association, a member-owned and member-run nonprofit of craft distillers. Shilling, co-founder of Revolution Spirits in Austin, said that when he went into the distilling business 10 years ago, there were only 350 craft distilleries across the country. Today, there are 1,300.

“Craft distilling has been closely tracking the trends of both the wine and craft beer industries. We’re sort of following in the same trajectory. I think there’s still a lot of room for growth,” said Shilling. “Despite the growth, the amount of spirits available, produced by craft distilleries, is still infinitesimally small compared to the volume large producers are putting out.”

Craft distilleries produce 4.9 million cases of spirits annually, which is about 2 percent of the total U.S. market, Shilling said.

Nance and his wife, Chrissy, are big financial investors in Ragged Branch. Nance declined to say how much money they invested, but noted it was “a significant sum.” He said the three partners, who each own one-third of the company, have been the only investors in the business. They also have a mortgage on the farm, and lines of credit for their cattle and equipment.

Launching the company was a long process. It took a huge capital investment in the beginning, and because of the aging, no revenue comes in for years. Many distillers start out with gin or vodka, which require no aging, to get to market sooner. Other distillers purchase bourbon from another distillery, and remarket it as their own, Nance said. Ragged Branch was committed to taking the long road, while using environmentally sustainable practices, he said.

Nance also helped with Ragged Branch’s strategic planning, and handled the branding, marketing, writing and editing for the bottle labels and website. While Nance visited the farm about four times a year, he completed most of his work remotely. The extra work outside of his legal practice was sparse and far between in the early years of the company, but it’s grown more intense as Ragged Branch ramped up for its opening.

“It’s a lot of nights and weekends, basically. It has certainly been a significant additional demand on my time, and an additional source of both stress and inspiration,” he said. “Between all the things that I do remotely and the time I’m here working on it, it’s probably I would guess 200 to 300 hours per year.”

Being in the bourbon business has given Nance a new perspective for his legal practice. Because he’s now a small business owner—and a client himself to other service providers—he has better insight into his clients’ requests and what’s important to them.

“It really comes down to being more responsive emotionally, which is a surprisingly important part of the practice: being able to empathize with the clients’ needs and understanding where they are coming from,” he said.

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Reprinted with permission from the April 24, 2017 edition of Law.com © 2017 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

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