The 21st Amendment and the Case of “Be Careful What You Wish For”
As far as I can tell, Wine & Spirits Daily is the only publication to take notice of the fact that the multi-state wholesaler Southern Wine & Spirits has chosen not to appeal a decision in the 8th Circuit Court of appeals that went against them. In that decision, the Court ruled against Southern, which claimed that Missouri’s restrictive residency requirements for wholesalers violated the Dormant Commerce Clause. Notably, Southern relied on the important 2005 Granholm V. Heald Supreme Court decision that determined states may not discriminate against out-of-state wine producers in its direct shipping laws, despite the 21st Amendment giving the states the power to regulate the sale and distribution of wine.
In its coverage of Southern’s decision, Wine & Spirits Daily wrote the following, which deserves comment:
“The reason WSD continues to focus on the situation in Missouri so fervently is because the issues being discussed there are much broader than just one state. Consider this: since the Granholm decision, the 4th Circuit, 2nd Circuit, 5th Circuit and now 8th Circuit courts have all determined that the three-tier system is legitimate and Granholm only applies to suppliers.
“These courts clearly support the view that supplier restrictions fall under the laws of the Dormant Commerce Clause, but retailers and distributors are more within the scope of the 21st Amendment gray area. As such, the benefit of the doubt will go to the state if it has some public policy rationale behind the law – even if those reasons are treating in-state and out-of-state distributors and retailers differently.”
It’s worth pointing out that where the Dormant Commerce Clause and the 21st Amendment are concerned, the Supreme Court has offered no guidance as to how that intersection impacts retailers and wholesalers. They have only, in the Granholm case, commented on how that “grey area” impacts producers.
The fact is this: no one has delivered anything close to a reasonable, let alone convincing, legal, historical or moral argument as to why the same principles that the Supreme Court used to lift discriminatory laws against out-of-state wineries ought not apply to out-of-state retailers and wholesalers.
Rather, more than one Circuit Court, in not extending the Granholm protections to retailers or wholesalers, has noted prominently in their decisions that without guidance on this issue from the high court, they must take the conservative route and not take it upon themselves to extend those anti-discrimination protections to retailers and wholesalers.
This is important not just to Southern’s bid to enter states where there remain on the law books protectionist laws that bar out-of-state wholesalers from entering the market. It is also important to wine retailers and wine consumers as numerous states still bar the shipment of wine from out-of-state retailers while allowing in-state retailers to ship wine to its state’s residents—another example of pure protectionism. The irony of course is that Southern and other wholesalers, previous to this Missouri lawsuit, have consistently argued that the states DO have the right to discriminate against out-of-state retailers (and by extension, out-of-state wholesalers too).
In his dissent in the Granholm case, Justice Clarence Thomas wrote the following:
“The majority’s reliance on the difference between discrimination against manufacturers (and therefore, their products) and discrimination against wholesalers and retailers is difficult to understand. The pre-Twenty-first Amendment “nondiscrimination” principle enshrined in this Court’s negative Commerce Clause cases could not have prohibited discrimination against the producers of out-of-state goods, while permitting discrimination against out-of-state services like wholesaling and retailing.”
He was right. And in this Missouri case, the 8th Circuit Court was wrong. And it’s a shame that Southern Wine and Spirits chose not to appeal the case. But then again, had they, it may have turned out to be a matter of “be careful what you wish for.”