Granholm, the Sequel

October 1st, 2008

By R. Corbin Houchins, Beverage Industry Counsel

On September 30, 2008, a federal district court ordered Michigan to give out-of-state retailers access to Michigan consumers to whom local retailers could sell wine. The reasoning in Siesta Village Market LLC v. Granholm closely parallels that of the landmark Supreme Court decision, Granholm v. Heald, in effect rendering Governor Jennifer Granholm a serial violator of the dormant Commerce Clause.

Judge Hood found laws requiring differential treatment of local and interstate commerce to be discriminatory on their face, thereby assuring their invalidity in the absence of showing by the state that there was no less discriminatory way to pursue its legitimate regulatory objectives. She further found that, as in the original Granholm case, the state had not met its evidentiary burden.

The “Granholm II” order enjoins the governor and other state officials from prohibiting selling, delivering and shipping wine through interstate commerce directly to consumers by out-of-state wine retailers, but allows the state to collect taxes on wine sales and to require licenses and permits for direct interstate sales and deliveries, so long they do not discriminate against out-of-state wine retailers. The state and its wholesaler allies are expected to move for a stay pending appeal, though the forcefulness of the court’s opinion puts the result of a motion in doubt. However, the licensing and tax-collecting provisions of the injunction provide opportunities for delays in compliance without a formal stay.

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This entry was posted on Wednesday, October 1st, 2008 at 7:32 pm and is filed under Direct Shipping, Litigation, Michigan. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Comments to “Granholm, the Sequel”

R. Corbin Houchins says:

October 2, 2008 at 9:35 am

In case anyone is examining the ruling in detail: There is a typo in the slip opinion, referring to the Michigan licensing statute, section 436.1537 as “436.1547,” which does not exist. No doubt the order will be promptly corrected, as the mistake is in designation of a state law declared to be unconstitutional.

Nancy Bentley says:

October 2, 2008 at 12:50 pm

Has anyone checked to see how much money the Governor has received in campaign contributions from the beer and wine wholesalers?

Doug Caskey says:

October 2, 2008 at 1:24 pm

Whatever happened to States’ rights to regulated alcohol under the 21st Amendment which was fully upheld by Granholm?

What is the avenue for the State of Michigan to go after California retailers that fail to pay their Michigan taxes? Will California assist in revoking the license of tax evaders in other states? Since retailers have no federal license, the mechanism under the original Granholm decision of enforcing tax collection from wineries in other states by having the feds pull a winery license is not available in the case of retailers.

Wine Without Borders » Blog Archive » Michigan Federal Court Ruling on Wine Shipping Draws Attention says:

October 3, 2008 at 11:47 am

[...] Houchins covered the ruling for ShipCompliant in THIS blog [...]

Joel Goldberg says:

October 4, 2008 at 1:27 pm

Doug, states have every right to regulate alcohol. They just don’t have the right to violate other Constitutional provisions, like the Commerce Clause, when they do it. That’s the message of the Granholm decision.

When this eventually shakes out, we’ll have retailers licensed in each state they ship to, as are wineries. There will always be a few scofflaws around — but there’s no reason for collective punishment against consumers and legitimate retailers nationwide because of a small number of bad actors.

Ed Butt says:

October 7, 2008 at 9:12 am

The Governor is the defendant becasue the executive branch enforces the unconstitutional law, which was passed by the legislature beholden to the distributors.

I live in Michigan. Since Granholm 1, I have had little problem getting wine from most small vineyards. The distributors really care about blocking direct shipments to Spartan Foods, Costco, Sam’s Club, etc.

J Thomas says:

October 9, 2008 at 7:39 am

Nancy – The Michigan Beer and Wine Wholesalers Association is the most active campaign contributor in the state. To all parties, including Granholm. It has been the subject of numerous indepth pieces in the Detroit Free Press and Detroit News. Her support of these restrictive policies (and hiding behind the totally ficticious ‘protect the children’ arguments) is appalling, and shows how absolutely two-faced she is when she claims to be a Democratic Governor representing ‘the people’. Without a doubt allowing out-state retailers to ship in state would tremendously benefit the citizens of the state, who would be able to obtain a much greater selection of wine at much lower prices.

Unfortunately, I expect the governor, along with the entire state legislature, will respond to the decision by crafting a scheme that either eliminates all shipments (from instate retailers or out), or makes the application for licenses and payment of taxes so burdensome as to be unprofitable. Sad that in a state where people are fleeing in droves, jobs are disappearing, entire industries are collapsing and massive deficits exist, that preventing citizens from buying wine is such a priority for the Governor.

R. Corbin Houchins says:

October 12, 2008 at 5:28 pm

On October 2, 2008, the judgment was stayed by agreement of the parties, to give the state time to appeal and, if the appeal is taken, to leave the current law in force for the duration of the appellate process. It seems almost certain that the defendants will appeal.

That means the law in Michigan has not yet changed and, depending on the outcome on appeal, may not change as contemplated by the district court opinion. Reports that Wine.com will begin shipping in reliance on the original judgment appear premature.

Hope Rests in Senate as Michigan House Passes Ban on Retail to Consumer Direct Shipments - ShipCompliant says:

December 11, 2008 at 3:25 pm

[...] than three months ago, Michigan Federal District Court Judge Denise Hood ruled unconstitutional a Michigan law that allowed in-state retailers to direct ship to consumers while denying [...]