In a blow to those retailers looking to sell alcohol direct to online purchasers sending it into states where out-of-state alcohol shipping to in-state liquor consumers is forbidden, the Mississippi Supreme Court has ruled against a group of wine merchants that sold wine into Mississippi. You can read our previous articles on this case here, and here. You can read the Court’s opinion about personal jurisdiction over liquor shippers here.

Basically, in looking to circumvent shipping restrictions, a group of wine and spirit retailers set up online ordering to take orders and ship alcohol, sometimes to the residents states other than where the alcohol retailers were located. As part of the online ordering process, liquor purchasers placing orders agreed in contract that the location of the sale was the location of the retailer and that the retailer was the purchaser’s agent for purposes of packaging and contracting a third-party carrier to ship and deliver the purchaser’s alcohol to the purchaser.

Mississippi brought suit over the practice and without having to get into the thicket on issues of contractual interpretation, the merchants won dismissal of the case at the state court level based on an argument that the Mississippi state courts lacked personal jurisdiction over them because they had not availed themselves of the forum and the transactions took place in other states.

The trial court had made the relevant determination and ruled that:

This case is about the Uniform Commercial Code . . . . The [c]ourt finds in this particular case that title to all these goods passed outside the state of Mississippi. . . [U]nder these transactions, the buyers took full responsibility for the shipment of the alcohol unto themselves from the point of sale in New York and California…

Now, yes, [the Defendants] probably did it in contravention of Mississippi state law, and they’re probably responsible for it, but the buyer is solely responsible for the shipment of wine under these contracts.

The state appealed that decision and the Mississippi Supreme Court heard oral argument and has now rendered its opinion overturning the lower court decision and remanding the case for further proceedings.

In its decision, the State Supreme Court noted the facts it found relevant to its decision, which read like a classic statement of the type of issues courts grappling with personal jurisdiction issues in online retail cases face:

According to the record, from December 2014 to January 2018, Gold Medal had transacted with 225 Mississippi residents approximately 2,556 times, making approximately $181,821 in sales. From the year 2015 to 2017, Wine Express transacted with 69 Mississippi residents approximately 189 times, for approximately $39,580 in sales. And from December 2014 to October 2017, Bottle Deals transacted with 46 Mississippi residents approximately 51 times, for approximately $7,229 in sales.

While none of the Defendants maintained a physical presence in Mississippi at any point, they nonetheless conducted business in Mississippi by means of their respective websites, which gave them a virtual presence in Mississippi. Based on our review of the record, each Defendant operated a virtual store in Mississippi, and they are subject to personal jurisdiction in this state under Mississippi’s long-arm statute. 

The Court then went on to address the arguments that the parties had made and explain what it did, and did not, find persuasive about this battle over online liquor sales, noting and finding:

The Defendants, of course, disagree that this is the case because the sales are made F.O.B. at the Defendants’ respective places of business in California and New York, so title passes from sellers to the buyers at the moment of delivery to the carrier. Thus, according to the Defendants, the buyer is responsible for the shipment of alcoholic-beverage products into Mississippi and whatever illegalities that result, not the seller.

We do not see it that way. The Defendants attempt an end run around Mississippi law and the purposeful-availment due-process requirement by employing F.O.B. terms that customarily govern the shipper’s costs or loss from destruction or breakage during delivery. Were it that simple to defeat jurisdiction, almost no entity that engages in the interstate sale of goods and products would be amenable to suit outside of that entity’s principle state of business—regardless of their purposeful contact(s) with the other state. 

As we see it, regardless of the F.O.B. contract terms used here by the Defendants in their sales contracts, the Defendants “stood ready and willing to do business” with Mississippi residents, and “knowingly did do business” with Mississippi residents. Hemi Group, 662 F.3d at 758. And they did so frequently. Had the Defendants wanted to avoid being sued in Mississippi, they simply could have chosen—like the other Internet wine-and-spirit retailers—not to sell their alcoholic-beverage products to residents in Mississippi. See Zippo, 952 F. Supp. at 1126-27 (“If Dot Com had not wanted to be amenable to jurisdiction in Pennsylvania, the solution would have been simple—it could have chosen not to sell its services to Pennsylvania.”). 

And with that, the Court found in favor of the state and has remanded the case for further proceedings which means we will potentially get to see how it treats contractual issues such as potential terms of sale, forum selection, choice of law selection, and other agency issues. Not to mention potential arguments like entrapment and fraud against the state for seeking out the sales it is suing over and agreeing to terms and conditions containing binding representations and authorizations which, if given credence and effect, seem to negate the ability to assert that the wine retailers shipped the alcohol into the state at all. This will definitely be worth watching as many online shops selling, wine, craft beer, and spirits utilize similar UCC terms of sale to support their decision and sale of alcohol into states where they are not licensed to ship alcohol direct to consumers.

The post Online wine sellers face suit in Mississippi as State Supreme Court rules out-of-state alcohol retailers selling to in-state purchasers are subject to personal jurisdiction. Now the real case starts (if they don’t settle). appeared first on Libation Law Blog.