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District Court Decision Rejects Commerce Clause Challenge to Missouri’s Retailer Wine Shipping Laws

On Friday, March 29, the US District Court for the Eastern District of Missouri handed down its decision in Sarasota Wine Market v. Parson, No. 4:17CV2792. The decision upholds Missouri’s laws permitting in-state retailers to sell and deliver directly to consumers’ homes, but withholding that same privilege to out-of-state retailers. Plaintiffs had challenged the Missouri statutes under both the so-called “dormant” Commerce Clause and the Privileges and Immunities Clause of the Federal Constitution.

The decision is not surprising, as Missouri lies within the jurisdiction of the US Court of Appeals for the Eighth Circuit. The Eighth Circuit, in a challenge to a residency requirement in a case entitled Southern Wine & Spirits v. Division of Alc. & Tobacco Control (2013), previously held that state laws regulating retailers and wholesalers are immune from dormant Commerce Clause scrutiny under the 21st Amendment. The Sarasota Wine Market decision relies heavily on Southern Wine & Spirits in rejecting the plaintiffs’ dormant Commerce Clause challenge. And, the court reasoned that because the right to engage in the wine trade is subject to the limitations of the 21st Amendment, the Privileges and Immunities Clause is not implicated.

Whether the 21st Amendment insulates state laws regulating retailers and wholesalers from dormant Commerce Clause scrutiny is currently pending before the Supreme Court in the Tennessee Wine & Spirits Retailers Association v. Blair (f/n/a Byrd) case. Thus, the Sarasota Wine Market opinion faces almost-certain reversal or affirmance, depending on how the Supreme Court rules in Blair. In the meantime, the decision serves to underscore the stakes of the question currently pending before the Supreme Court.




The Future of Direct Shipping

In September 2018, the U.S. Supreme Court granted a petition for a writ of certiorari brought before the Court by the Tennessee Retailers in Tennessee Wine and Spirits Retailers Association v. Byrd. The petition requested that the Court review the lower court’s decision upholding a finding that Tennessee’s two-year residency requirement for retail license applicants is unconstitutional. Specifically, the question Tennessee retailers posed to the Court is whether the 21st Amendment of the U.S. Constitution gives states the authority to, consistent with the so-called “Dormant” Commerce Clause of the Constitution, regulate sales of alcohol beverages by imposing residency requirements on retail (or wholesale) license applicants. The court heard oral arguments on January 16, 2019.

In an article published by The New Brewer, Marc Sorini and Bethany Hatef discussed the Sixth Circuit’s opinion in the Byrd case, the circuit split it created and the potential impacts of the pending SCOTUS decision.

Read the full article.

Originally published in The New Brewer, March/April 2019.




A New Supreme Court Case May Impact the Future of Spirits Direct Shipping

In late September 2018, the U.S. Supreme Court granted a petition for a writ of certiorari (i.e. the Court agreed to hear a case) brought before the Court by the Tennessee Wine and Spirits Retailers Association (Tennessee Retailers) in Tennessee Wine and Spirits Retailers Association v. Byrd. The petition requested that the Court review the lower court’s decision upholding a finding that Tennessee’s two-year residency requirement for retail license applicants is unconstitutional. Specifically, the question Tennessee Retailers posed to the Court is whether the 21st Amendment of the U.S. Constitution gives states that authority to, consistent with the so-called “dormant” Commerce Clause of the Constitution, regulate sales of alcohol beverages by imposing residency requirements on retail (or wholesale) license applicants.

In this article, Mar Sorini and Bethany Hatef discuss the legal background of the dormant Commerce Clause, as well as the Byrd case. Particularly, they examined the Sixth Circuit’s opinion in February 2018 which affirmed the district court decision that invalidated Tennessee’s residency requirements, held that “a three-tier system can still function” without the two-year durational residency restriction imposed by the state. This article examines the potential impacts of Byrd, and how the Supreme Court’s review will address the constitutional validity of the Tennessee law imposing residency requirements on retail alcohol beverage license applicants.

Access the full article.

Originally published in Artisan Spirit: Winter 2018.




The Uncertain Legal Future of Wine Direct Shipping by the Retail Tier

The Supreme Court of the United States’ 2005 decision in Granholm v. Heald, which required states allowing their own wineries to direct-ship to consumers to also grant such privileges to out-of-state wineries, marked the beginning of a new era of wine direct-shipping. With the relaxation of wine shipping laws around the country following Granholm—nearly every state now allows wineries to ship wine directly to in-state consumers—the wine direct-shipping landscape has changed greatly over the past decade. Indeed, wine shipments in 2016 saw double-digit growth in both volume and sales.

At the same time, growth in recent years in the online shopping industry has led to new innovations in the wine retail space: the existence of a multitude of internet wine retailers, wine-of-the-month clubs and mobile wine delivery apps offers consumers greater access to wine. Many states—and courts—though, are now grappling with the legalities surrounding direct shipping of wine by retailers, as well as the role of unlicensed third parties in such transactions. Some states prohibit retailers from directly shipping wine to consumers altogether, while many others give in-state retailers the right to ship wine directly to consumers while withholding the privilege from out-of-state retailers.

Most recently, in January 2017 Michigan enacted legislation allowing in-state retailers to ship wine to in-state consumers, but prohibiting out-of-state retailers from making such shipments. The new legislation, which amends Michigan’s existing statute addressing wine shipments, authorizes a retailer located in Michigan to obtain a “specially designated merchant license” in order to ship wine to in-state consumers. The specially designated merchant license is only available to in-state retailers, so retailers located outside Michigan remain prohibited from directly shipping wine to consumers in the state.

Unsurprisingly, given the requirements of Granholm (which, incidentally, concerned in part a Michigan law), the new legislation retains the right of both in-state and out-of-state wineries to ship wine directly to Michigan consumers upon obtaining a direct shipper license. In fact, the new statute even reduces the burden on wineries shipping to consumers; under the new law wineries will no longer be required to include their direct shipper license number and the order number on each shipping container, or the brand registration approval number for each shipped wine on the accompanying invoice (although label registration requirements will still apply).

The legislation does not go into effect until March 29, 2017, but already litigation involving the new law has commenced. In late January 2017, an Indiana retailer and several Michigan consumers sued Michigan’s governor and attorney general and the head of the Michigan Liquor Control Commission in federal court, alleging the statute violates the US Constitution’s Commerce Clause and Privileges and Immunities Clause. Similar lawsuits are pending in Illinois and Missouri.

Some courts have already interpreted the constitutionality of similar laws that treat in-state and out-of-state wine retailers differently. While the US Courts of Appeals for the Second and Eighth Circuits have interpreted Granholm to apply only to differential treatment of producers and products (and not to wholesalers and retailers), the Fifth Circuit [...]

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