The Supreme Court Must Rule on Wine Retailer Shipping
Since 2005 when the U.S Supreme Court ruled on the constitutionality of New York and Michigan’s discriminatory and protectionist bans on wine shipments from out-of-state wineries in Granholm v Heald, a certain legal and regulatory confusion ensued. The upcoming Supreme Court case being dubbed “Granholm II” is going to resolve that confusion. The new Supreme Court Case, Byrd v. Tennessee Wine and Spirits Retailers Association, will do this by clarifying exactly what is “unquestionably legitimate” when it comes to the three-tier system.
On its face, Byrd v Tennessee appears to demand an answer to a very narrow question: Does the state of Tennessee violate the dormant Commerce Clause and unconstitutionally interfere with interstate commerce when it requires out-of-state retailers (Total Wine) to become a resident of the state for a duration of two years before it can obtain a Tennessee wine retailer permit?
One party to the case, the Tennessee Wine & Spirit Retailers Association, argues that Tennessee’s “durational residency” requirement is constitutional. The other party to the case, Total Wine”, argues that it is unconstitutional. Tennessee Retailers, in their petition for certiorari, argue that the Granholm decision emphasizes the “unquestionably legitimate” nature of the three-tier system even while noting that the power granted to the states under the 21st Amendment does not authorize discriminatory treatment of out-of-state products and producers. In other words, Tennessee Retailers believe that Granholm authorizes a state to discriminate against out-of-state retailers and wholesalers because they are inherent parts of the “unquestionably legitimate” three-tier system and therefore may demand Total Wine’s owners become residents of the state of Tennessee for two years before obtaining a Tennessee wine retailer permit.
Total Wine, on the other hand, will argue that in the Granholm decision, the Supreme Court was clear that the non-discrimination principles of the dormant Commerce Clause prohibiting states from enacting protectionist laws that interfere with interstate commerce clearly apply to out-of-state retailers and wholesalers as much as it does to out-of-state producers and products. In support of this argument, they quote the Granholm decision that clearly states, “States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.” Based on this, Total Wine asks the Supreme Court to invalidate Tennessee’s durational residency law that burden’s it’s attempt to engage in interstate commerce by obtaining a Tennessee license to open a retail store in the state.
Despite what this case looks like on its face, it has far broader consequences for wine consumers, for wine retailers that sell across state lines and for the alcohol industry as a whole. If, as the Tennessee Retailers claim, the 21st Amendment allows a state to discriminate against out-of-state retailers despite the non-discrimination principles of the dormant commerce clause, then a state may enact laws that ban out-of-state retailers from shipping wine into the state—as many currently do. However, if the Supreme Court decides for Total Wine and rules that a state may not interfere with interstate commerce by discriminating against out-of-state retailers, then the many state laws that ban shipments from out-of-state retailers are unconstitutional and must fall.
Why the Supreme Court Must Answer the Wine Retailer Shipping Question
Some commentators have noted that that the Supreme Court does not have to answer the question of wine retailer shipping as it rules on the question of durational residency laws that are squarely at issue in this case. I just don’t think this is a possibility. Not only would leaving this question unanswered maintain a large degree of confusion among lower courts, it would also ignore pleas from lower courts for the higher court to clarify what it meant to say in the Granholm decision concerning the fate of retailers and wholesalers under the non-discrimination principles laid out in the Granholm decision. In short, not answering this question would be irresponsible.
What makes it equally unlikely that the Supreme Court would leave the question of interstate wine retailer shipping unanswered, is the fact that the Tennessee Retailers, as well as various other entities likely to deliver Friend of the Court Briefs in the case, will argue that if states are prohibited from passing laws that discriminate against out-of-state retailers and wholesalers then the three-tier system has no meaning and is not, as the Court suggested in Granholm, “unquestionably legitimate”.
Despite this argument being altogether incorrect and having been answered that way very clearly in Granholm, it is at the heart of Byrd v Tennessee case and must, again, be addressed by the court.
A collection of court opinions, oral arguments, case briefs and media coverage of the Byrd v Tennessee case is available at the National Association of Wine Retailers’ website.
Tom Wark serves as the Executive Director of the National Association of Wine Retailers, which has a significant interest in the outcome of Byrd v. Tennessee.