Supreme Court Has Chance to Decide if States Can Discriminate Against Wine Retailer Shipping?

Are there any circumstances under which the dormant commerce clause of the U.S. Constitution protects retailers and wholesalers from discriminatory state liquor laws?

This is the underlying question the Supreme Court will be forced to answer if it accepts a Petition For A Writ Of Certiorari in the case of Tennessee Wine and Spirits Retailers Association v. Clayton Byrd (Tenn. v. Byrd).  Filed with the Supreme Court on July 20th, this is only the second case seeking an answer to the above question since the Granholm v. Heald decision in 2005. Certiorari was not granted in the first case. This one is different, however.

Tenn. v. Byrd is a case concerning residency requirements. Total Wine wanted to open a wine retail outlet in Tennessee. In response, local retailers pointed to the Tennessee law that required retail licensees to be residents of the state for a two year period prior to being granted a retail license. Clayton Byrd, Executive Director of the Tennessee Alcoholic Beverage Commission, responded by asking the courts to render a decision on the constitutionality of the two-year residency requirement. The case got kicked to the federal courts. Eventually, the Sixth Circuit last February affirmed a lower District Court ruling that the residency requirement did violate the dormant commerce clause and as such the law was unconstitutional.

In the course of its ruling, the Sixth Circuit acknowledged that there was uncertainty as to whether the dormant commerce clause protection against economic discrimination applies only to producers or if it applies to retailers and wholesalers and that this uncertainty has caused a split in opinion among the various circuits.

While residency restrictions are important, it’s notable that if the Supreme Court takes this case it will almost certainly be required to answer the question, may state laws allow in-state retailers to ship wine directly to its residents while banning out of state retailers from shipping wine.

It has been 13 years since the Granholm decision was handed down. That case dealt specifically with producers of wine who wanted to ship wine into states where they were banned from doing so. As a result, that important decision has phrases such as states may not “discriminate in favor of local producers,” with supporters of state shipping bans on retailers keying in on the use of the term “producer” and thereby suggesting that the Supreme Court meant to imply that bans on out of state retailer shipments were just fine.

The petitioners in Tenn. v. Byrd (the Tennessee retailers who don’t want Total Wine in their state and want the residency requirement upheld) understand the implications of this case and use those implications in their brief to the court to help persuade the Supreme Court to take up the case:

“There are many more state laws that—like those at issue in the Second and Fourth Circuit decisions— impose other forms of residency-related restrictions on retailers or wholesalers. See, e.g., 235 Ill. Comp. Stat. 5/6-29.1(b) (prohibiting out-of-state retailers, but not in-state retailers, from shipping wine directly to Illinois consumers); N.Y. Alco. Bev. Cont. Law §§ 100(1), 102(1)(a)–(b) (prohibiting out-of-state retailers, but not in-state retailers, from shipping wine directly to New York consumers); Va. Code § 4.1–310(E) (creating an exception to personal-import ban that favors in-state retailers); Cal. Bus. & Prof. Code § 23366.2 (prohibiting out-of-state wholesalers, but not in-state wholesalers, from selling liquor directly to in-state retailers). The constitutionality of these laws, too, turns on the interplay between the Twenty-first Amendment and the dormant Commerce Clause when it comes to state regulation of alcohol retailers and wholesalers.”

The confusion sewed as a result of the Supreme Court not using the Granholm decision to issue a comprehensive explanation of where the power of the dormant commerce clause begins and ends has been noted by legal scholars, alcohol industry attorneys, alcohol industry trade associations, and judges. The result has been contradictory decisions among federal circuit and district courts on questions of residency requirement as well as retailer direct shipping cases.

Total Wine has until August 20th to issue a reply to the Tennessee retailers brief asking the Supreme Court to resolve this matter. They will argue the Sixth Circuit got the case right. Still, if the Justices of the Supreme Court believe that the confusion resulting from their last ruling on the interplay of the Commerce Clause and the 21st Amendment needs to be resolved, then they will take this case. And if they take this case you can bet that players across the retail space, the alcohol beverage industry and within other industries will recognize its importance and make every effort to influence the outcome.