You’ll recall our coverage of the cogent dissent that Judge Wilkinson penned in B-21 Wines, Inc. v. Bauer earlier this year. A quick refresher, this case involves another in the line of Dormant Commerce Clause challenges to out-of-state retailer shipping prohibitions (North Carolina’s in this instance) asserting that the discriminatory state practice of allowing in-state liquor and wine retailers to ship to in-state residents but not granting the same privileges to out-of-state alcohol retailers violates the Dormant Commerce Clause in the particular instance of discriminating against out-of-state interests in favor of in-state interests.
To be clear, this is a search for legal relief in place of current efforts to change state laws through legislative action pressed over the past few years by great groups like DISCUS and the Brewer’s Association to educate and expand DTC rights for alcohol. The methods, legislative and legal, to accomplish reform are not mutually exclusive, but apart from Granholm and Tennessee Wine, the Dormant Commerce Clause and alcohol related matters have not garnered much attention from the Supreme Court. This is despite the bevvy of wine shipping cases and recent Twenty-First Amendment Enforcement Act matters pressed in response to shifting societal and consumer attitudes towards alcohol and the convenience of modern delivery logistics.
That might change with B-21. Following the Wilkinson dissent, the plaintiffs unsuccessfully requested an en banc hearing from the 4th Circuit which paved the way for this petition for certiorari (link to full petition). The petition takes aim at a lauded tactic for achieving review – identifying a split between the Circuits that SCOTUS needs to resolve to achieve national cohesion. Here’s how the request for review to achieve greater freedom in alcohol shipping summarized the issue:
Four courts of appeals have considered whether discriminatory state restrictions on interstate wine shipping by retailers should be subject to the close scrutiny required by the nondiscrimination principle. They have produced six opinions. At one extreme are Lebamoff Enterpr., Inc. v. Rauner, 909 F.3d at 853-55 and the dissent in this case, which held that laws banning direct shipping by out-of-state wine retailers are fully subject to the nondiscrimination principle and can be upheld only if the State produces concrete evidence that discrimination is necessary to protect public health and safety At the other extreme are Sarasota Wine Mkt., LLC v. Schmitt, 987 F.3d 1171 (8th Cir. 2021), the lead opinion in Lebamoff Enterpr., Inc. v. Whitmer, 956 F.3d 863 (6th Cir. 2021), and the majority opinion in this case, which said that discriminatory retail-shipping laws are immune from Commerce Clause scrutiny, fall within the states’ Twenty-first Amendment authority to regulate its three-tier system, and do not require the state to show that the discrimination is necessary to protect public health and safety. In the middle is the concurring opinion by two judges in Lebamoff Enterpr., Inc. v. Whitmer, who said that the state was required to present evidence justifying discrimination, but the burden was lower for retailer shipping than winery shipping. Accord Byrd v. Tenn. Wine & Spirits Retailers Ass’n, 883 F.3d 608, 617-18 (6th Cir. 2018); Cooper v. Tex. A.B.C., 820 F.3d 730, 743 (2016) (nondiscrimination principle applies but to a lesser extent when the regulations concern the retailer tier)/
The circuit split identified by the brief relies on the 7th Circuit’s remand in the now dismissed Lebamoff matter and makes note of the presently pending cases (including another 7th Circuit case, Chicago Wine Co. v. Holcomb which will likely either upend the proposed Circuit split or solidify it any day now) in other jurisdictions.
The issue is the application of the “necessary to protect public health and safety” exception to the Dormant Commerce Clause’s bar on discrimination between in-state and out-of-state interests that SCOTUS put forth in Tennessee Wine.
Make no mistake, the fight here is about getting beyond a motion to dismiss and to a trial as it is highly unlikely that any State can justify the discriminatory practice with evidence given that the laws delineating who can ship within a state are passed on the basis of lobbying efforts and not on the basis of careful scientific study of the impacts of in-state and out-of-state alcohol shipping on health and safety. If a court allows a case to proceed, it is nearly certain (provided the plaintiffs have the right experts) that no public health or safety justification will save the statutory scheme; if for no other reason that the prevalence and ease of shipping in states that already allow it which have not succumbed to health or safety crises. Also, consumer trends don’t change. Cheaper prices, ease of access and breadth of selection will still drive nearly all consumers to local stores and funnel the alcohol through the three-tiered system. The online ordering of an out-of-state and unavailable product is a costly extravagance for well-heeled enthusiasts – even if the United States Postal Service is allowed to ship alcohol.
Barring a request for extension or a statement that no response will be filed, a response from the State of North Carolina is due October 27. The rest of the petition is well worth the read.
As an aside, a sincere bottleneck on 21st Century rights for shipping wine, beer, and spirits, has occurred in comparison to other consumer commodities as a result of a lack of resolution from the Court requiring all state alcohol laws be subject to Dormant Commerce Clause analysis as tempered by the 21st Amendment. But health and safety is not the way to win if SCOTUS allows for review. The better argument for those in favor of DCC limitations are market competitiveness and consumer access and the honestly amazing monopoly and tied-house hindering effects of the three-tiered system. Not the original temperance tied-house justification, but the anti-exclusive-outlet tied-house impact that provides consumers with greater choice, access for small craft producers to the same outlets as large manufacturers, and lets retailers choose products without fear of marketplace reprisal and coercion. Justice O’Connor made a point in the oral argument regarding beer label 1st Amendment issues in Rubin v. Coors – following up on a point made by Justice Kennedy, she noted that a government interest for a statute can change over time (see p.38). It is time to move away from the temperance based health and safety argument about alcohol (society doesn’t condone three-martini lunches anymore and MADD has won the messaging campaign over drunk-driving). The lack of consideration for health and safety in emplacing restrictions on alcohol commerce and the reality of those emplacements to satisfy state lobbying interests means that the justification will not stick with a court and that advocates of the restrictions should be turning away from the health and safety arguments now, while there is still time, and advancing more compelling arguments about the three-tiered system so that those arguments can be presented and considered when SCOTUS finally takes up one of these cases.
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