Blog By: Phillip Burress
Seeing a white warehouse perched atop a hill amidst Kentucky's countryside is familiar to many locals. Against the backdrop of lush greenery, the stark white structure with streaks of black can evoke a picturesque charm in the sweltering summer heat. Yet, what many Kentuckians do not know is the name behind those black streaks: Baudoinia Compniacensis, commonly referred to as Whiskey Fungus.[i]
These black streaks of mold creeping up the sides of the warehouse thrive on the alcohol vapor being diffused in the warehouse.[ii] This vapor, otherwise known as the “angels share” of distilled ethanol, causes this Whiskey Fungus to grow, not only on the warehouses but also spreads to nearby trees, street signs, and buildings.[iii] As a result, homeowners in the vicinity have filed lawsuits in both federal and state court against companies such as Jack Daniels, Brown Foreman, and Heaven Hill.[iv] While the issue has remained somewhat limited thus far, it poses looming consequences for distillers, especially those in cities like Louisville and Lexington who continue to expand further and further out into the countryside.
For example, in 2012, Louisville area homeowners initiated a class action lawsuit against the companies who owned these warehouses in federal court.[v] The class argued that the vapor causing whiskey fungus to grow cannot be healthy for the surrounding citizens and, therefore distilling companies should install filtration systems to keep the toxic vapor from releasing from the warehouses.[vi]
In defense of these claims, companies such as Diageo, Brown Foreman, and Heaven Hill have argued that the Federal Clean Air Act does not require filtration of vapor from distilled ethanol and therefore, they have no responsibility to install filtration systems.[vii] While the federal courts have generally agreed with the distillers on these claims, the courts have warned that a lack of regulation in the Clean Air Act does not protect distillers from state law nuisance claims.[viii]
Most recently, in June of 2023, the Kentucky Court of Appeals unanimously voted to reverse a lower court decision dismissing a case brought by homeowners against Brown Forman Corporation and Heaven Hill Distilleries over nuisance claims.[ix] Nuisance claims are a concept of property law centered around the idea that one should not use their land to harm others.[x] Because of a nuisance’s effect on property owners, most state legislatures have enacted statutes codifying this right against them.[xi] This use of the land can be sourced from both sound and air pollution that could be caused by anything from drifting tree pollen to the large HVAC systems necessary to run apartment complexes.[xii]
Regarding Whiskey Fungus, some homeowners are spending close to $10,000 a year power washing their homes with water and Clorox mixtures to prevent the fungus from growing on their homes and property.[xiii] The constant upkeep for power washing poses problems of its own, as the siding of most modern homes are not built to withstand consistent pressure washings.[xiv] As a result, such upkeep leads to a necessity for these homeowners to replace the siding earlier than what would otherwise be necessary.
Brown Forman and Heaven Hill have indicated they are exploring their options, including a possible appeal to the Kentucky Supreme Court.[xv] As it stands, these distillers could be held accountable for nuisance claims filed by homeowners living near their warehouses.[xvi] This threat becomes more pronounced as cities like Lexington projected to grow beyond 350,000 by 2030, and Louisville projected to grow beyond 800,000 by 2035.[xvii] Consequently, the threat of these lawsuits loom in the state courts as the counties surrounding these cities grow along with them.[xviii]
While federal rulings have determined that distillers are not obligated to filter the vapor from their warehouses, investing in filtration systems could be the most prudent course of action.[xix] Faced with the potential legal costs of defending against these suits, distillers may be compelled to either relocate their storage facilities or implement filtration measures to prevent future fungal outbreaks. Regardless of what they choose, it is evident that distillers are coming face to face with a crisis that could prove costly if they do not quickly find a solution.
[i] What is 'whiskey fungus'? Where Baudoinia compniacensis comes from, if it's dangerous, and how to get rid of it, Business Insider (Mar. 2, 2023), https://www.businessinsider.com/what-is-whiskey-fungus-baudoinia-compniacensis-effects-how-remove-2023-2 [https://perma.cc/43LM-HPLR].
[ii] Id.
[iii] Id.
[iv] Federal whiskey fungus lawsuit is dismissed, WDRB (June 7, 2023), https://www.wdrb.com/news/federal-whiskey-fungus-lawsuit-is-dismissed/article_8d9ed01c-b79a-5a68-a9e2-59d028608cb8.html [https://perma.cc/E7GB-HUU2].
[v] Id.
[vi] Merrick v. Diageo Americas Supply, Inc., 5 F. Supp. 3d 865, 867-68 (W.D. Ky. 2014).
[vii] Id at 870.
[viii] Id at 877-78.
[ix] Whiskey fungus lawsuit back on track, WDRB (June 7, 2023), https://www.wdrb.com/news/whiskey-fungus-lawsuit-back-on-track/article_2f8bc097-8447-5948-9000-a1e7cf9fbae7.html [https://perma.cc/AWJ6-4D3S].
[x] See Nuisance, The Law Dictionary, https://dictionary.law.com/Default.aspx?selected=1358 (last visited Apr. 7, 2024) [https://perma.cc/H3SW-XGHB].
[xi] Ky. Rev. Stat. Ann. § 411.530; Tenn. Code Ann. § 13-6-106.
[xii] See Nuisance, The Free Dictionary, https://legal-dictionary.thefreedictionary.com/nuisance (last visited Apr. 7, 2024) [https://perma.cc/V3GW-SNBW].
[xiii] Supra note 1.
[xiv] Id.
[xv] Supra note 4.
[xvi] Id.
[xvii] Population and Household Projections: 2020-2050, Ky State Data Center, Univ. of Louisville (Aug. 2022), https://louisville.app.box.com/s/ndp7uvqbi6xtsv1sd2ylntvaer02kklq [https://perma.cc/NPM9-W9GK].
[xviii] Id.
[xix] Supra note 6.