Archive for May 29th, 2006
“Domestic farm winery” bill passes Arizona legislature
May 29th, 2006
Senate Bill 1276 passed the Arizona state House last week and now awaits Governor Janet Napolitano’s signature. SB 1276 would continue to allow for the direct shipment of orders where “the wine was purchased while the purchaser was physically present at the winery”. The bill would also allow for off-site orders, but with serious restrictions. Only “limited production wineries” would be allowed to ship off-site orders, where a limited production winery is defined by SB 1276 to mean:
A licensed domestic farm winery that produces not more than twenty thousand gallons of wine in a calendar year may make sales and deliveries of wine that the licensed domestic farm winery produces to consumers off of the licensed premises and that is ordered by telephone, mail, fax or catalogue, through the Internet or by other means.
20,000 gallons equates to roughly 8,400 cases, which means that a significant number of U.S. wineries would be excluded from shipping off-site orders to Arizona.
The good folks at Free the Grapes are encouraging Arizona residents to ask Governor Napolitano to veto this bill. From their action alert:
SB 1276 is not an incremental step in the right direction; it is a big step backwards for Arizona consumers. And if it becomes law, wholesalers who oppose direct shipping will surely promote it as a workable model for other states to adopt. This will threaten years of diligent, successful work by winemakers, legislators and regulators to enact reasonable laws that allow limited, regulated direct shipments.
If passed, this bill will almost certainly be challenged in the courts. Just when it seemed like the Granholm dust was beginning to settle, states began introducing these bills with discriminatory capacity caps. New rounds of court cases challenging these caps will mean many more changes to come in the world of wine direct shipping.
Preliminary injunction in Texas is a temporary truce
May 29th, 2006
The recent preliminary injunction entered by agreement in Wine Country Gift Baskets.com v. Steen is only a temporary truce. Both sides are reportedly preparing for a contest over the final judgment, while the delivery companies and potential retailer-shippers attempt to figure out what the requirement that shipments be by �a carrier permitted by Texas Alc. Bev. Code Ch. 43� means in context.
Wine Country demonstrates that we are still struggling to understand the implications of Granholm. Much of the difficulty arises from what appears on superficial reading as an inconsistency in the majority position. The result in the case, like most of the text of the majority opinion, is decidedly hostile to location requirements. Nevertheless, the majority quotes from the Scalia opinion in the no-majority (4-4-1) case, North Dakota v. U.S., which refers to a 21st Amendment right to require all wine to pass through an �in-state wholesaler.�
North Dakota may have replaced Young�s Market as the repository of sacred text for adherents of old-time 21st Amendment theory. The subject quotation, however, is merely obiter dicta in Granholm and therefore not part of the case as a binding precedent. Mr. Justice Thomas excoriates the majority for what he takes as their obtuse failure to see the contradiction between that dictum and the actual holding of the case, which clearly finds the 21st Amendment inadequate as a basis for imposing in-state location requirements on wineries shipping to consumers. Nonetheless, careful reading of the majority opinion strongly suggests that North Dakota stands only for the right to require a three-tier system, and not a right to refuse distribution licenses to out-of-state wholesalers.
Costco has already resulted in a statutory change, granting out-of-state domestic manufacturers essentially the same rights as wholesalers within Washington. A similar suit is reportedly in preparation for Oregon, possibly couched broadly enough to include non-manufacturing suppliers, and another Texas suit, with a multi-state wholesaler plaintiff, is rumored.
Under Granholm, a successful plaintiff can only hope to level the playing field. The Costco court leveled down, on the theory that opening the state�s borders would be more disruptive to the entire regulatory system than would ending the local producers� self-distribution privilege -a ruling that would have put many local wineries in a serious bind had the legislature not leveled up before it became effective. A similarly inclined court could solve the Granholm problem in Wine Country by invalidating delivery rights of local retailers, leaving a legislative fix dependent on state politics. It would, however, be difficult to imagine a decree invalidating the right of local wholesalers to distribute, an activity that lies at the heart of nearly all regulatory schemes in the country. Thus, a win in court by an out-of-state wholesaler plaintiff could create a national market in supplying the retail trade and leave little room for legislatures to level down.
