Breaking Down the Legal Landscape for Wine Shipping

I've been following direct shipment litigation now for well over a decade. At first I read briefs and decisions issued in the various cases across the country because clients of mine were helping push the issue forward. Reading not only legal briefs but also decisions and analyses of court decisions means learning another language if you are not a lawyer. And I am decided not a lawyer.

Still, it's actually been something of a great intellectual pleasure for me to slowly learn the language that surrounds the constitutional issues associated with direct shipping.

Later, after beginning working with the Specialty Wine Retailers Association, it became essential that I grasp the intricacies of Direct Shipping law since SWRA was involved in litigation. What I discovered is that it is a very small group of people around the country who actually care about this litigation and even fewer who follow the litigation closely and understanding the legal theories that underpin the legal landscape of direct shipment law.

One of those people is Corbin Houchins.

Corbin, a lawyer, has released an analysis of the recently decided 2nd Circuit Court of Appeals decision in Arnold v. Boyle in which a panel of three judges determined that the State of New York may discriminate against out-of-state wine retailers by prohibiting them from shipping to consumers in the state while allowing NY retailers to do so. Their reasoning boiled down to two important notions. ). The Granholm Supreme Court decision only determined that "products", not commerce, was protected by the commerce clause of the Constitution and could not be discriminated against, and 2) that out-of-state retailers really aren't discriminated against because they, like NY retailers, need only get a license in New York to ship wine to New Yorkers.

On the face of it, these two notions, both wholly inadequate interpretations of the law in my opinion, seem pretty straight forward. But as Corbin makes clear in a deliciously argued analysis of the case, it isn't all so simple.

You can find Corbin's analysis of Arnold v. Boyle at the ShipCompliant blog where he publishes periodic notes on direct shipment of wine. You can see SWRA's take on the decision here.

This is where this post is going to lose a few readers if it hasn't already: If you have any interest in the theory and practicalities and minutiae of direct shipping law, then you MUST read Corbin's notes on this case.

Now that four readers have stayed with me, let me say this: You don't often see a set of judges take a radical departure from Supreme Court directives. You saw it in this case. The 2nd Circuit rendered what can only  be described as a radically conservative reading of the Supreme Court's decision and directives in Granholm v. Heald. Some have argued that this happened in part because one of the judges on the panel was also the judge who's decision was overturned in one of the cases that led up to the Granholm v. Heald Supreme Court case. I'm not so sure of that.

So, readers 1, 2, 3, and 4…..Go take a look at Corbin's analysis of this case. It's very good reading.

7 Responses

  1. Pinger12 - July 9, 2009

    After reading Corbin’s analysis the words “narrow reading of Granholm” ring incredibly true. A major component of interstate commerce has always been the ability to provide in-state consumers with a breadth of products that are not produced within their state.
    So: “New York’s law “treats in-state and out-of-state liquor evenhandedly” once it is in the state’s three-tier system, and “thus complies with Granholm’s nondiscrimination principle.” Equal treatment of products by allowing them all, regardless of original site of manufacture, to pass through the three-tier system, satisfies Commerce Clause requirements, even if the law prohibits interstate sellers to reach the same consumers as local sellers.”
    They key here is the “once it is in” statement. More and more producers are unable to place their wines at wholesale as consolidation among wholesalers, bullying from the biggest suppliers, and wholesaler inventory reduction and delisting continues.
    Isn’t the main reason a New York consumer would buy from an out of state retailer or direct from a winery the fact that he or she cannot find the product at retail in New York? This is, and always has been, an access issue.

  2. Greg - July 9, 2009

    Reading the decision now, will read the analysis after. Thanks for posting about this.

  3. Thomas Pellechia - July 9, 2009

    I’ll say this once more: until repeal of that section in the 21st Amendment that gives states complete control over alcohol commerce, this issue will be a soccer ball that will be kicked around and kicked around and kicked around some more.
    In the narrow and incomplete Granholm, et al, decision the Supremes did nothing short of creating income for lawyers and cover for ongoing corruption.

  4. Chris PA - July 10, 2009

    Supreme Court decisions should always be narrow, to avoid unintended consequences. The 21st amendment, as Thomas points out, is very clear. Until it is changed, the law of the land remains pretty clear. Does the state treat in and out of state entities the same? If they do, no matter how draconian or distasteful to you personally, it will be upheld. Attempting to stuff everything into the Commerce Clause has led to some of the worst decisions in the history of the Court.

  5. Tom Wark - July 10, 2009

    Not being a lawyer, it’s hard for me to comment on the use of the commerce clause in constitutional jurisprudence. That said, where wine shipping and the 21st amendment is concerned, there is no question there is tention between the CC and the 21A.
    As for “narrow readings”, the kind of narrow reading used in this most recent case would, if equally narrow approaches were taken, demand that the principles in Brown v Board of Education only be applied to African American females under the age of 14.

  6. Thomas Pellechia - July 10, 2009

    If you look into Justice Kennedy’s comments that accompanied the Granholm decision you find very clearly that the Supreme Court views alcohol as a distinct and special product; as such, the court has said that it should receive special treatment and that the 21st A provides the states the means to give it the treatment without having subverted the intent of the Dormant Commerce Clause.
    The industry should be lobbying the Congress to create a new amendment that removes the custodial status of the states when it comes to alcohol commerce. Other than that, the fight will continue and the monopolistic lobbyists, state corrupted coffers, and lawyers will win.

  7. Chris PA - July 12, 2009

    Good post. Just because consumers want direct shipping and it seems to make sense, there is just no legal basis to demand it. States have and always will have the right to deny shipping until the 21st is changed.
    Brown was a class action suit with at least another 5 cases from other states attached. It happened to have broad application because there was segregation all over the country. Granholm would have broad application if all state shipping laws were the same.

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