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Is the retail to consumer shipping battle headed to the Supreme Court?

The issue of direct shipments by retailers to consumers has become a very hot topic of late. As of today, retailers can ship to less than half of the number of states to which producing wineries can ship. The Specialty Wine Retailers Association is fighting hard with both legislative efforts and litigation to open more states for retail to consumer shipments. The heated battle in Illinois, where out-of-state retailers recently lost the ability to ship to consumers under HB 429, raised national awareness to this issue.

The fundamental question is whether the decision in Granholm v. Heald that said states must treat in-state and out-of-state wineries evenhandedly should also apply to in-state and out-of-state retailers. R. Corbin Houchins recently made two posts (September 18th and October 5th) that do an excellent job of highlighting the legal questions that come into play when attempting to extend Granholm to retailers. In his October 5th post, Mr. Houchins indicates his disagreement with the reasoning of the recent and important Arnold’s Wines v. Boyle opinion, which upheld discrimination against out-of-state retailers in New York.

There is a very interesting recent article, with substantial background materials for lawyers who do not practice in the subject area, on FindLaw.com titled “The Fight Over State Laws Favoring In-State Alcohol Purveyors: Do Such Laws Violate the Dormant Commerce Clause?” that also examines the important ruling in Arnold’s Wines. This article is definitely worth reading.

The Court has had to examine the intersection between the dormant Commerce Clause idea and the Twenty-First Amendment a number of times. Two years ago, in the seminal case of Granholm v. Heald, the Court appeared to send a message that while the Twenty-First Amendment may indeed empower states in some ways, it does not trump the anti-discrimination, anti-balkanization norm of the Commerce Clause.

The federal district judge in the recent Arnold case in New York properly acknowledged the importance of Granholm. Nevertheless, the judge held that Granholm’s ban on state discrimination against out-of-staters applied only to state laws regulating producers of alcohol, not laws (such as the one at issue in the recent New York case) that regulated wholesalers or retailers.

The New York judge’s interpretation of Granholm is, I believe, in error.

The Arnold’s Wines case will likely impact current (Texas, California) and future (Illinois?) cases in the battle over retail to consumer shipments and could possibly end up in the Supreme Court, where a favorable decision could potentially open the legislative floodgates for retailers as Granholm did for wineries in 2005.

2 Comments

  1. With all the supposed wisdom of the 2005 Supreme Court ruling I find it hard to believe that the Court’s intent was to punish e-tailers and other distribution methods for the wineries. By not allowing these winery distribution outlets the ability to ship to all legally appropriate states is to actually hurt the consumer (the intended beneficiary). The wineries depend on these alternate forms of distribution to fulfill their customer needs. To not include e-tailers is to hurt the wineries which in turn limits the choices for consumers. Regretably we live within a system where wholesalers are doing their best to keep the competition out….. and in too many cases succeeding. The best thing the Court could do is to set the rules fairly for all parties recognizing that we are no longer in the days of prohibition.

  2. Brent, Corbin, Jeff and Mr. Amar are all correct in their assessment of the Retailer to consumer shipping issue. The Judiciary will also come to this conclusion eventually. The notion that the principles in Granholm only apply to producers is no where stated in Granholm. This is probably why the judge in the Arnold case didn’t cite any reference to Granholm when he made that claim. He couldn’t.

    Without speculating on the cause for the recent NY decision, it’s enough to say that it will be nice to have an appellate court overturning the judge’s reasoning. This kind of appellate decision will go a long way.

    What should be remembered, however, is that there are politics involved in this issue that speak directly to self interest. That’s always the way it is. Retailers are quite clear that their interest in opening up shipping derives from their desire to serve a consumer market. Consumers clear interest in seeing free trade derives from their own self interest: they want to drink good wine. Then there are wholesalers. They don’t touch the consumers. It should be no surprise that their positions are entirely anti-consumer…in every respect.

    Nice post!

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