The ongoing dispute in Mississippi between the state’s Attorney General and several companies that take orders from Mississippi residents and ship wine to them is off to the races on its appeal. News outlets have reported about this case. The Mississippi legislature has even introduced a bill looking to finally allow shipping (even in-state retailers can’t ship to Mississippi residents under their current alcohol regulatory framework).
While the initial case was about Mississippi enforcing alcohol laws regarding shipping wine (craft beer and liquor retailers do this too, but they weren’t the target of Mississippi officials), after the ruling of the trial court holding that it did not have jurisdiction over the out of state online retailers, the case became a different one in the internet alcohol shipping age.
The case on appeal involves a jurisdictional issue as to whether a state can enforce a violation of its regulations regarding alcohol shipping against the violator when the violator entered into a private contract governing its conduct with a citizen in the state that addresses and designates another state’s laws as those governing their agreement and as the forum for their relationship under the Uniform Commercial Code. (We’ve got the briefs below.)
Back at the trial court level, the argument from the briefs filed by wine retailers (again, a theory used by some direct to consumer craft beer and spirits companies in running programs shipping beer into states as well) is simple, if perhaps misguided on current constitutional jurisprudence regarding jurisdiction and taxation in the internet age.
Under the argument of the online retailers selling alcoholic beverages the state does not have jurisdiction over the retailer because as between the two contracting parties to the contract, they agreed that the place of the sale was the location of the retailer, not the purchaser. The two parties were in different states, the purchaser was in the state looking to enforce its laws against the retailer. They, agreed by contract that the retailer’s location, taxes, laws all applied by virtue of designating by contract the location for the sale of their alcohol. They claimed in the contract that title to the wine, craft beer, spirits, transferred to the purchaser upon sale in the retailer’s state. The purchaser then, by contract, appointed the retailer as the purchaser’s “agent” and directed the agent to hire a third-party shipper for the purchaser to send the purchaser the purchaser’s wine/craft beer/spirits. So, the retailer argues, it did nothing wrong because the state citizen already owned the alcohol and the retailer just acted as its agent when shipping the citizen his/her own alcohol. So the retailer did nothing in the suing state and it is the citizen that, if anyone, violated the laws.
The trial court agreed with this argument and dismissed the case against the online retailers for lack of jurisdiction.
I really want the retailers to prevail here. But I’m concerned the state has the better case and the trial court got this wrong.
You can start to see the issues with this even apart from current constitutional personal jurisdiction case law. For starters, under the recent Wayfair decision, this would allow online retailers to set up in tax favorable or tax-free states and ship any items, not just alcohol, into other states and avoid collecting taxes in those states all together. This was the opposite holding of Wayfair which found that corporations availing themselves of states’ benefits (shipping and selling to those states’ citizens) bear the related sales tax burdens those states impose.
The other issue here may be one that was overlooked on the briefs thus far about principal and agent liability as the shipper here was still the internet retailer even though they claim to be acting “for” the citizen.
Here’s a problem with that. In both civil and criminal law, the agent is just as guilty and liable as the principal. Agency law only matters in that it brings another, the principal, into the locus of liability as well. It doesn’t absolve the agent from breaking a law.
The state’s brief is persuasive and compellingly argues from current authority and I think, sadly, they’ve probably got this. Hopefully the legislature gets a bill allowing shipping passed. Three amici also filed proposed briefs, the National Beer Wholesalers Association and Wine and Spirits Wholesalers of America, Inc. filed a combined brief, and the National Alcohol Beverage Control Association.
- You can read the opening brief from the Mississippi Attorney General here.
- You can read the proposed Amicus Brief from the National Beer Wholesalers Association and Wine and Spirits Wholesalers of America, Inc., here.
- You can read the other proposed Amicus Brief from the National Alcohol Beverage Control Association here.