A Battle Well-Picked and Well-Fought

David does best when he can choose the right Goliath.

The Massachusetts volume cap on direct shipment, invalidated last week in Family Winemakers of Calif. v. Jenkins, was a good choice to challenge for at least three reasons. First, there was gold in the legislative record: a sponsor described the bill as “giving an inherent advantage indirectly to the local wineries,” and the cap was openly and carefully calibrated to fall just above anticipated production of the state’s largest winery. Second, the structure of the statutes permitted excising the cap without damaging the state’s basic regulatory system. Third, the statute had the additional feature of requiring wineries to choose between direct shipment and use of local wholesalers, permitting the suit to take a swipe at another dubious restriction deployed by three-tier defenders, with or without a volume cap.

Judge Zobel’s opinion proceeds from her observation that Granholm forbids both direct and indirect ways of subjecting out-of-state wineries, but not local ones, to mandatory use of a local middle tier. Granholm, however, follows precedent in drawing a distinction between state laws that openly (or “facially”) discriminate against interstate commerce and those that pursue some legitimate purpose with only an incidental disproportionate burden on interstate commerce. Courts apply a more stringent test of nearly automatic invalidity to the former, but for the latter give a state more latitude to balance its own objectives against the federal interest in free interstate trade.

Most of the court’s analysis is devoted to showing how the state law came about, which boiled down to a compromise between direct shipment proponents, who wanted a “straight” winery shipment law without a cap, and the wholesalers, who wanted no direct shipment. The middle ground was direct shipment for wineries defined as small, wherever located. If there were no more to it than that, the law could be regarded as facially neutral and therefore vulnerable only if its incidental adverse effect on interstate commerce outweighed whatever benefit the state sought in enacting the statute.

There was a great deal more to it, because the legislative history revealed an intent to set the cap so that no Massachusetts winery would fail to be categorized as small, leaving the producers of most wine sold in interstate commerce deemed large. Judicial principles governing the choice between the strict test , which applies to facially discriminatory statutes, and the more state-friendly balancing test applicable to incidentally discriminatory statutes, contain the interesting wrinkle that a statute whose purpose is shown to be protectionist is treated as facially discriminatory, even if its bare text does not reveal the discrimination. Thus, the intention revealed in legislative history put the Massachusetts statutes in the strict scrutiny category, which would require the state to prove that an important public policy objective could not have been met in any reasonable non-discriminatory way.

According to the state, its objective was to bring the blessings of direct shipment to small producers throughout the nation. Judge Zobel could not see how cutting out the larger wineries served that objective at all, and therefore flunked the statute under both the strict test for facial discrimination and the easier balancing test for upholding incidental discriminatory effects.

Invalidating the statute without requiring a finding of facial discrimination makes the case far more important in other states, where plaintiffs may not be so lucky as to find evidence of discriminatory intent leaping from the legislative record. It also makes the decision itself more robust on appeal, when the state and wholesalers argue that the sponsor’s statements quoted in the opinion were taken out of the context of a true benign intent.

Family Winemakers is also useful to pro-trade advocates in two less direct ways. (1) It explicitly rejects the defendants’ argument that the large wineries were not shut out of direct shipment because wineries of any size that had not sold wine to a wholesaler for six months could ship directly to consumers. While it might seem self-evident that forcing wineries of substantial size to abandon use of wholesalers as a precondition to using direct shipment is, in effect, denying them direct shipment privileges, in future litigation it’s much better to be able to point to a judge’s saying so. (2) In gauging effect on interstate commerce, it put the focus on the large volume of wine excluded or burdened by the statute, rather than (as the state urged) on the small number of producers who are responsible for it. That follows logically from judicial precedent, but again it’s advantageous to have it spelled out in a reported case.

Judge Zobel’s opinion is clear and impressively supported by citations to precedent, aided on both counts by the remarkably well-researched and well-argued case presented by the plaintiffs, but the suit is, of course, not yet over. The state and wholesalers will presumably move for reconsideration, which, in view of the forcefulness of the opinion, represents a dim hope for defendants. Other skirmishes may be more substantial.

What we have so far is an order granting judgment to the plaintiffs and identifying the statutes whose enforcement will be affected by the permanent injunction to be entered. The defendants will surely have much to say about how the injunction should be worded and whether it will be effective during the almost inevitable appeal.

It is important to note that the opinion of the court recognizes, as it must, that the state has the right simply to take the direct shipment statute containing the volume cap (§ 19F) off the books altogether, with the result of shutting down direct shipment for all wineries –i.e., level down. In their original complaint, plaintiffs had asked for a declaration that challenged statutes, including § 19F, were unconstitutional and an injunction against their enforcement. That left some uncertainty whether, in case the court agreed on unconstitutionality, it might grant the wish by invalidating § 19F altogether, leaving no winery with direct shipment, because of the general ban in §§ 2 and 18 on importation or transportation without specific dispensation.

In the summary judgment motion just granted, plaintiffs asked the court to enjoin enforcement of §§ 2, 18 and 19F “against any out-of-state winery engaged in direct shipping to consumers, regardless of the winery’s total annual production or affiliation with a Massachusetts wholesaler.” The court included all three statutes in its memorandum order, a clear indication that the final judgment and permanent injunction will level up by keeping the permissive and licensing parts of 19F in force and enjoining only denial of direct shipment privileges to larger wineries (including those that sell to Massachusetts wholesalers).

Less certain is the issue of a stay on appeal, which the court has discretion to grant or deny. The tenor of the opinion suggests that Judge Zobel will be reluctant to delay the effect of allowing larger wineries to use both wholesalers and direct shipment, though we can expect arguments from defendants that it will ruinously disrupt the orderly regulation of beverage alcohol in the Commonwealth. Moreover, denial of a stay in the district court does not mean the appellants would fail to obtain a stay from the Court of Appeals, which could take a couple of years to decide the case. Ultimately, the legislature can always take another cut at protecting wholesaler interests while appeals are going on, potentially rendering the ruling moot.

Even with questions about when it will become effective and the inability to predict with certainty what an appellate court or legislative assembly will do, Family Winemakers will ripple through all litigation dealing with indirect discrimination against interstate commerce. For pro-trade advocates, that’s cause to celebrate.

Family Winemakers Court Win is Big for the Industry

On November 19th, 2008, Judge Rya W. Zobel, in the case of Family Winemakers of California v. Jenkins, allowed the plaintiffs’ motion for summary judgment, concluding that Massachusetts General Laws chapter 138, section 19F:

… has a discriminatory effect on interstate commerce because as a practical matter it prevents the direct shipment of 98% of out-of-state wine to consumers but permits all wineries in Massachusetts to sell directly to consumers, retailers and wholesalers.

Therefore, the Massachusetts statute in practice prevents direct shipment of approximately 98% of out-of-state wine while allowing 100% of Massachusetts wineries to sell direct. This clearly confers disproportionate benefits on both Massachusetts wineries and wholesalers.

In the decision, Judge Zobel provided a fascinating account of the history of what became Massachusetts House Bill No. 4498. She details the original lobbying from wholesalers, pleas from in-state wineries, negotiation in the Massachusetts House and Senate, passage of the bill on November 17th, 2005, veto by then-Governor Mitt Romney, and finally an override by the Legislature on February 15th, 2006. The detailed account sheds light on a fact that we known all along – that the 30,000 gallon capacity cap was set conveniently above the production capacity of the largest winery in Massachusetts (24,000 gallons). This cap was designed to allow the Massachusetts wineries to ship directly to consumers, while simultaneously protecting Massachusetts wholesalers by prohibiting out-of-state medium and large wineries from doing the same.

The wine distribution system is shaped like an hourglass, in that there are a large number of producers (the top) and a large number of consumers (the bottom), but significantly fewer wholesalers (the middle). This structure has the effect of giving wholesalers greater bargaining power with both wineries and retailers in states where it is mandatory to have a wholesaler. Generally wholesalers prefer to carry a larger volume of a particular wine, rather than an equivalent volume of several wines, because it is more profitable for a wholesaler to warehouse, manage and sell a single
wine. Many wineries produce both specialty wines in small quantities and higher volume wines. It is rare for a winery producing approximately 30,000 gallons per year to have all of its wines represented by a wholesaler.

Family Winemakers of California put out a press release immediately yesterday, hailing the decision as a win for the industry. Paul Kronenberg, president of Family Winemakers of California, was quoted as saying “State laws that protect and perpetuate wholesaler monopolies at the expense of wineries seeking market opportunities and consumers seeking a wider choice in wine, run counter to the concept of free trade within the nation”. Tracy Genesen, lead attorney on the case from Kirkland & Ellis, said “The decision tracks Granholm, since ‘allowing States to discriminate against out-of-state wine invites a multiplication of preferential trade areas destructive of the very purpose of the Commerce Clause.” Kenneth Starr of Kirkland & Ellis explained that “Freedom to conduct commerce across state boundaries without undue restrictions was a fundamental principle of the framers of the Constitution”.

Free the Grapes! also published a press release yesterday, highlighting the case as a big loss for efforts by wholesalers to ban “legal, regulated wine shipping”. “Today’s ruling in Family Winemakers v. Jenkins strikes a blow to the wholesalers’ campaign by declaring that Massachusetts’ restrictions on winery-to-consumer shipments are unconstitutional”.

This is a big win for the industry. We applaud Family Winemakers of California, Coalition for Free Trade, Kirkland & Ellis, and everyone else involved for all of their hard work in fighting this long battle. The ruling will certainly have ripple effects not only in Massachusetts, but also Ohio, Arizona, and many other states as current and future examples of such non-facial discrimination will be questioned, challenged, and overturned.

We’ll keep you posted as this story develops. The immediate effects in Massachusetts are unknown at this time (see our post “Why Can’t I Have a Boston Wine Party?” from June, 2007). Common carrier restrictions will need to be clarified before any out-of-state shipping can commence. Stay tuned for more information and analysis…

Family Winemakers of California Making Headway in Massachusetts

Family Winemakers of CaliforniaOn May 29, 2008, Family Winemakers of California filed a motion for summary judgment in Family Winemakers of California v. Jenkins, now before the federal district court for Massachusetts. The suit alleges that section 19F, the Massachusetts law that permits direct-to-consumer wine shipping, is unconstitutional because it “unequivocally discriminates against interstate commerce in both purpose and effect” by limiting direct shipment privileges to wineries annually producing no more than 30,000 gallons. The motion asks the court to declare that discrimination unconstitutional and requests that the court allow section 19F to remain in force, but enjoin Commonwealth of Massachusetts officials from applying the volume cap.

Section 19F was modified to replace a prior Massachusetts local-only direct shipping law, which was found facially discriminatory and invalidated in Stonington Vineyards, Inc. v. Jenkins. The current motion argues that the new text in section 19F was simply a more subtle means to accomplish the same protectionist ends. The bill that amended 19F was vetoed by Governor Romney, who declared that the measure would not cure the previous law’s deficiencies. The Massachusetts legislature, however, overrode his veto and signed the bill into law, setting the stage for judicial determination of which side was right.

Section 19F as amended creates a two-classification system based on the size of the winery’s annual production and wholesaler relationship. Section 19F(a) presents a choice for wineries producing more than 30,000 gallons annually –in effect, they can ship directly to consumers or have wholesaler representation. Wineries producing no more than 30,000 gallons annually can ship directly to consumers while also maintaining a relationship with a wholesaler.

Family Winemakers of California’s summary judgment motion alleges that the “large” wineries are primarily out-of-state and that section 19F, though facially neutral on location, is in intent and effect protectionist and discriminatory. Moreover, the law specifically dictates that fruit wine does not count toward the gallonage cap; the motion argues that a much larger portion of wine produced in Massachusetts is fruit wine than wine produced elsewhere, enhancing the discriminatory effect.

Unsurprisingly, Massachusetts has filed a cross-motion for summary judgment in response, arguing that section 19F is facially-neutral, not discriminatory, and less restrictive than similar laws in other states that have been upheld. The Commonwealth’s motion requests that the court join the courts in Maine, Kentucky, and Arizona which have left production caps in effect in their respective states. An amicus brief filed by the Wine & Spirits Wholesalers of Massachusetts also supports the 30,000-gallon production cap. A key problem with challenges in other states has been the lack of economic evidence supporting discriminatory effects; the current motion attempts to bypass that requirement, in part on the grounds that the previous flat ban on out-of-state direct shipment prevented compilation of economic evidence, excusing the plaintiff from a burden of proof it could not meet because of the defendants’ unlawful conduct.

Oral argument is scheduled for July 29, 2008. If the court determines that a genuine issue of material fact does not exist as outlined in either of the individual motions, the court will grant the motion of the party whose legal argument It finds persuasive. However, the court could deny both motions and rule that evidence is required to resolve issues of fact.

If the court grants the plaintiff’s motion, the resulting injunction enjoining Massachusetts from enforcing the capacity cap and the wholesaler relationship restriction of 19F would, in theory, open the state to shipments from out-of-state wineries. However, obstacles to direct shipments into the state might persist. For example, the decision would not directly affect current carrier policies; FedEx and UPS could continue to refuse to ship to Massachusetts. In addition, an injunction might not resolve issues apart from the volume cap, such as how individual importation limits would be enforced by state officials.

Whatever its outcome, Family Winemakers of California v. Jenkins will serve as an important precedent on the constitutionality of capacity caps. In particular, a plaintiff’s victory on summary judgment would significantly lower the evidentiary bar for challenges to thinly-veiled protectionist measures presented as facially neutral.

Caps Off to Dolan's Intentions

In October of last year, wineries began shipping directly to Ohio residents under a new direct shipping permit law. When the provisions of the law in Ohio were first announced, one of the major subjects of controversy was the capacity cap, which only allows wineries that produce less than 150,000 gallons annually to obtain a permit. Capacity caps continue to be a subject of controversy in all the states that use them (currently Arizona, Massachusetts, Indiana Kentucky and Ohio; Florida could adopt a 250,000 gallon cap if SB1096 or HB1293 is passed).

Continuing the controversy, Ohio Representative Matthew J. Dolan is looking to increase the capacity cap for wineries from 150,000 to 250,000. Though the increase in production volume may be a “little step” in the right direction, it certainly seems like a very little step, allowing only 17 more California wine labels to be shipped to Ohio residents. According to The Plain Dealer, Dolan originally vowed to eliminate the cap altogether, but got a lot of pushback from the Ohio Department of Commerce and from Ohio Distributors (as Uncorked points out, “no surprise”).

Just next door, Indiana also prevents wineries producing over a certain amount of wine per year from shipping directly to its residents. Indiana’s original capacity cap was 500,000, but will increase on July 1, 2008 to 1,000,000 gallons since SB0107 was signed on March 13th by governor Daniels. Though this is the highest volume cap of the four states that have said restrictions,

Many will agree that any permit system that discriminates against a winery for the amount of wine produced is not an ideal permit system. Furthermore, the constitutionality of these caps is being challenged through litigation (see Family Winemakers of California vs. Jenkins). State legislators may adopt a capacity cap restriction for any number of reasons, but none of them seem very fair. The state may claim that it is trying to protect its own wineries by establishing the volume cap just above that of the highest producing in-state winery, but who else is being protected while the consumer’s interests fall by the wayside?

Update: In our original post, we mistakenly stated that that Indiana has a capacity cap that is similar to OH, KY, MA, and AZ. The 500,000 gallon “cap” in Indiana that will increase to 1,000,000 gallons on July 1st, 2008 only applies to wineries in that the applicant must not sell more than this amount of wine per year IN Indiana, excluding wine shipped to an out-of-state address.

Caps Off to Dolan’s Intentions

In October of last year, wineries began shipping directly to Ohio residents under a new direct shipping permit law. When the provisions of the law in Ohio were first announced, one of the major subjects of controversy was the capacity cap, which only allows wineries that produce less than 150,000 gallons annually to obtain a permit. Capacity caps continue to be a subject of controversy in all the states that use them (currently Arizona, Massachusetts, Indiana Kentucky and Ohio; Florida could adopt a 250,000 gallon cap if SB1096 or HB1293 is passed).

Continuing the controversy, Ohio Representative Matthew J. Dolan is looking to increase the capacity cap for wineries from 150,000 to 250,000. Though the increase in production volume may be a “little step” in the right direction, it certainly seems like a very little step, allowing only 17 more California wine labels to be shipped to Ohio residents. According to The Plain Dealer, Dolan originally vowed to eliminate the cap altogether, but got a lot of pushback from the Ohio Department of Commerce and from Ohio Distributors (as Uncorked points out, “no surprise”).

Just next door, Indiana also prevents wineries producing over a certain amount of wine per year from shipping directly to its residents. Indiana’s original capacity cap was 500,000, but will increase on July 1, 2008 to 1,000,000 gallons since SB0107 was signed on March 13th by governor Daniels. Though this is the highest volume cap of the four states that have said restrictions,

Many will agree that any permit system that discriminates against a winery for the amount of wine produced is not an ideal permit system. Furthermore, the constitutionality of these caps is being challenged through litigation (see Family Winemakers of California vs. Jenkins). State legislators may adopt a capacity cap restriction for any number of reasons, but none of them seem very fair. The state may claim that it is trying to protect its own wineries by establishing the volume cap just above that of the highest producing in-state winery, but who else is being protected while the consumer’s interests fall by the wayside?

Update: In our original post, we mistakenly stated that that Indiana has a capacity cap that is similar to OH, KY, MA, and AZ. The 500,000 gallon “cap” in Indiana that will increase to 1,000,000 gallons on July 1st, 2008 only applies to wineries in that the applicant must not sell more than this amount of wine per year IN Indiana, excluding wine shipped to an out-of-state address.

Free the Grapes! Legislation and Litigation Update

From Jeremy Benson at Free the Grapes! :

Free the Grapes! Media Update
August 2007

Now that we’re at the end of most state legislative sessions, we thought it timely to provide an update on direct-to-consumer (DTC) wine direct shipping as of month-end July 2007. Here are some highlights, followed by a more detailed description.

Highlights:

o DTC legislation was considered in 23 states;
o Two states transitioned from reciprocal to a DTC permit system (MO, WV) with additional states pending (OR, IL).
o The legal direct shipping states for wineries represent 78% of wine consumption in the U.S., although retailers can reach far fewer states.

Wins:

  • Florida: the third largest state for wine enjoyment, remains a legal state for winery shipments after a fierce defense of the court order that allowed shipping;
  • Hawaii: a concerted effort to reduce quantity limits failed;
  • Missouri: transitioned from reciprocal to permit status (no fee);
  • North Dakota: increased shipping quantity limits;
  • Virginia: now allows Internet retailers without a physical presence to direct ship;
  • West Virginia: replaced reciprocal status with permit bill.

Losses:

  • Arkansas: DTC permit bill failed in committee;
  • New Mexico: reciprocal transition bill failed due largely to opposition by wholesalers and the beer lobby;
  • Georgia: effort to replace cumbersome law with permit bill failed;
  • Texas: passed a law limiting DTC shipping from in-state retailers outside their particular county;
  • Ohio: passed potentially unworkable permit system for DTC shipments, including capacity cap of 150,000 gallons;
  • Legal rulings supported the on-site sale requirement in ME, and opposed a challenge to TN’s shipping prohibition.

LEGISLATIVE UPDATE
Wine Institute provided significant input to the following summary of state activity this year.

States with Legislation Under Consideration

Wisconsin – For 20 years, Wisconsin has been a reciprocal state, allowing its consumers to purchase wine directly from wineries as well as in-state wine retailers. But consumers will lose these privileges if the Budget Bill passes as it is currently written. Anti-consumer provisions were slipped into the Senate version of the 384-page, $66 billion, two-year Budget Bill in mid-July. The conference committee will now reconcile differences in the Senate and Assembly versions of the budget bill.

Illinois – House Bill 429 passed both House and Senate and is before the governor for signature. It creates a winery-only DTC shipping permit that replaces the existing reciprocity law. The Specialty Wine Retailers Association was unsuccessful in securing an amendment continuing shipments from out-of-state retailers, although in-state retailers were successful at maintaining their in-state shipping privilege.

Additional States

Alaska –House Bill 34 (Ledoux) would specifically allow in-state wineries to make DTC shipments to AK consumers, with a 5-gallon per shipment limit. Status: passed House and Senate, and was signed by the Governor on 5/31/07.

Arkansas – Senate Bill 592 (Whitaker), a positive bill that would have created a DTC shippers permit for wineries, died in House Rules Committee March 30.

Connecticut — Senate Bill 1204 was passed into law and changes the time period specified in the DTC shipping statute from 60 days to 2 months for the 5 gallon limit.

Florida – Shipping into FL is continues to be legal after competing bills—with and without discriminatory capacity caps—were considered but ultimately died in committees.

Georgia – House Bill 159 (Willard) and its companion Senate Bill 56 (Untermann) would have replaced the state’s convoluted shipping law with a DTC shipping license for all wineries (and retailers in SB56). The bills died in committee. Wholesaler-supported House Bill 393 (Stephens) sought to create new “domestic farm winery” and national “farm winery” categories with discriminatory capacity caps. The bill died in committee.

Hawaii – House Bill 1093 (Say) and Senate Bill 1019 (Taniguchi) sought to reduce consumer choice by limiting shipments under the existing DTC shipping permit from six cases per winery per consumer per year, to six cases per household per year. Both bills died in committee.

Idaho – House Bill 11 would have modified the permit legislation passed in 2006 to allow wholesalers and retailers in Idaho and other states to ship wine directly to consumers. Bill died in committee.

Maine – Senate Bill 54 (Bromley) would have created a DTC shippers permit for wine & beer. The bill passed the Senate on 6/12/07, but was killed in the house later that week.

Missouri — The Governor of Missouri signed SB 299 transitioning Missouri from a reciprocal state to a permit state effective August 28, 2007. The new permit law requires all wineries to obtain a direct shipping permit (no fee), limit shipments to two cases per consumer per month, submit an annual report by January 31, and pay excise taxes. The direct shipping permit application and instructions are available on the Wine Institute website at www.wineinstitute.org/programs/shipwine.

Nebraska – L441 (Mcdonald) will allocate funds raised by the existing $500 DTC shipper license fee paid by all wineries to be deposited to the NE Winery and Grape Producers Promotional Fund. The bill was signed by the Governor on May 30, 2007.

New Mexico – House Bill 1018 (Silva) passed the House, but was killed in the Senate after intense pressure from wholesalers and the beer lobby. It would have replaced reciprocity with a DTC shipping permit for wineries and retailers.

North Dakota – Senate Bill 2135 was signed into law and makes favorable changes to existing DTC shipping provisions, including: increased quantity limit from one to three cases per month, removed “reciprocal” provision passed in 2005 but never implemented, and removed vague language.

Ohio – During closing stages of budget process an amendment was adopted that will create a potentially unworkable permit system for DTC shipments into Ohio. The law has a capacity cap of 150,000 gallons, along with “per family household” aggregate limit that may prevent wineries from being able to ship even if they qualify for the permit. The bill was signed by the Governor on June 30 and becomes effective October 1, 2007.

Oklahoma – Several bills in the House and Senate were introduced, including a voter referendum to allow OK consumers to receive DTC shipments from out-of-state wineries, but a permit system has not been outlined. All bills died in committee.

Oregon – House Bill 2171 (Minnis) would transition state from a reciprocal DTC to a permit system for wineries and retailers. Status: The bill passed the House & Senate, and was sent to the Governor for signature in June.

Pennsylvania – House Bill 255 (Godshall) and Senate Bill 293 (Ferlo) are positive DTC shipping permit bills with a $100 registration fee, two cases per month to any individual. Taxes collected. Status: Both bills remain in Committee.

Tennessee – House Bill 1850 (Todd) creates a DTC shipping permit for 2 cases annually. Provisions: $100 fee, annual reports, annual excise and sales tax payments (companion bill was SB 1977, Stanley). Both bills died in Committee.

Texas – Senate Bill 1229 (Gallegos) was signed by the governor May 5, and limits the ability of TX retailers to use common carriers for DTC delivery outside their particular county. The bill was aimed at pending litigation spearheaded by the Specialty Wine Retailers Association seeking statewide sales via common carrier.

Virginia – House Bill 1784 (Cosgrove) and Senate Bill 1289 (Watkins) augmented current direct shipper permit to clarify that those shipments are by common carrier only, and created separate allowance for any legal shipper to make deliveries of up to 4 cases of wine to a consumer in their own vehicle. Additionally, Senate Bill 984 (Edwards) also became law, creating an “internet wine retailer license” to allow sales by a retailer having no physical premise.

West Virginia – Senate Bill 712 (Kessler) was signed by the governor and, among many other provisions, replaced reciprocity with a DTC permit bill for wineries, wholesalers and retailers.

LITIGATION UPDATE

Maine – As previously reported elsewhere, on March 5, U.S. District Court Judge Carter adopted the magistrate’s report and recommendation issued three months ago in the Cherry Hill (Tanford/Epstein) suit. This ruling supports an on-site sale requirement for any sales to consumers, contrary to an opinion rendered in December 2006 in KY ruling that on-site provisions were unconstitutional.

Tennessee – As previously reported elsewhere, the U.S. District Court in Tennessee ruled in favor of the state regarding what most thought was an ill-advised lawsuit (Jelovsek v. Bresden). The plaintiffs alleged that consumers faced a greater burden in traveling to another state to purchase wine in person at a winery than they faced in buying wine directly from a TN winery tasting room. The judge was not convinced, and the wholesalers have promoted their “victory” to bolster arguments for the preeminence of the 3-tier system in all matters.

Texas – All summary judgment motions have been filed. Oral arguments are scheduled for September 21 in Dallas. Wholesalers claim that passage of Senate Bill 1229 moots this lawsuit (see Texas paragraph under legislation, above).

Massachusetts — Motions for summary judgment are expected this winter in the case that seeks to overturn the 30,000 gallon production cap in the DTC law. Family Winemakers of California is the lead plaintiff.