Granholm v. Heald
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What’s New in US Constitutional Law Developments

During the International Wine Association’s 2018 Conference, Marc Sorini presented on the latest law developments, including the Commerce Clause and First Amendment. The topic was made particularly timely by the Supreme Court’s September 27 decision to grant certiorari review of the Byrd v. Tennessee Wine and Spirits Retailers Association decision. View the full presentation.

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US Supreme Court to Review State Residency Requirements

The “final word” may be in sight in a long-running dispute over state residency requirements imposed on applicants for retail alcohol beverage licenses as well as more fundamental questions about state powers under the 21st Amendment. As anticipated last July in the Alcohol Law Advisor blog, a single sentence order of the US Supreme Court issued on September 27 granted a petition for a writ of certiorari filed by the Tennessee Wine and Spirits Retailers Association (Tennessee Retailers) requesting the high court to review lower court decisions that invalidated Tennessee’s two-year residency requirement for retail license applicants. Earlier this year, the US Court of Appeals for the Sixth Circuit reviewed the Tennessee law at issue and held that, “a three-tier system can still function” without the two-year durational residency restriction imposed by Tennessee. The 6th Circuit quoted a 1984 Supreme Court decision: “The central purpose of the [Twenty-first...

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Son of Granholm Inches Closer

Two recent developments reinforce my expectation that the Supreme Court will need to clarify the scope of its 2005 Granholm v. Heald decision within the next few years. Granholm struck down state restrictions on the interstate sale and shipment of wine by wineries, where the state permitted in-state wineries to engage in such direct-to-consumer sales activities but withheld that privilege from out-of-state wineries. According to that decision, such facially-discriminatory laws are virtually per se unconstitutional under the so-called “dormant” Commerce Clause, and are not saved by the additional power that states have over alcohol sales under the 21st Amendment. The Granholm court also referred to the three-tier system as “unquestionably legitimate.” In the years since Granholm, lower federal courts have wrestled with the question of whether or not the Commerce Clause’s non-discrimination principle is limited to state laws imposing different rules on in-state...

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Durational-Residency Requirements for Alcohol Beverage Retail Licensees Held Unconstitutional

On February 21, 2018, the US Court of Appeals for the Sixth Circuit published its opinion in Byrd v. Tennessee Wine and Spirits Retailers Association, No. 17-5552. The decision, which includes a partial dissent, affirms a Middle District of Tennessee decision finding that the “durational-residency” (residency) requirements imposed by Tennessee law for alcohol beverage retail licensees are unconstitutional under the “dormant” Commerce Clause. Tennessee law requires an applicant for a retail license to have been a resident of Tennessee for at least the two-year period immediately preceding the submission of the license application. For corporate license applicants, the two-year requirement applies to any officer, director or stockholder of the corporation. Moreover, to renew such a license the law requires Tennessee residency for at least ten consecutive years. Two prospective retail applicants that did not meet the two-year residency requirement, notably...

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Approaches to Spirits Direct Shipping

Direct-to-consumer (DTC) sales of alcohol beverages have been a hot topic in the alcohol industry for the last two decades. The wine direct-shipping landscape has changed greatly over the past 15 or so years, most dramatically by the US Supreme Court’s decision in Granholm v. Heald. Today nearly evert state—plus the District of Columbia—allows wineries to ship wine across state lines directly to in-state consumers. The same cannot be said for spirits. There are, however, a few avenues distillers may consider to get their products delivered to consumers around the country. Further, an initiative is underway to pursue litigation to secure DTC rights for spirits. Although it is far too early to speculate about the outcome of any such litigation, the current effort suggests the potential for interstate distiller-to-consumer sales in the coming years. Of course, lingering ambivalence toward spirits (as opposed to wine) by the public, lawmakers, and alcohol...

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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...

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US Supreme Court Asked to Clarify the Interaction Between the 21st Amendment and the Commerce Clause

The Texas Package Stores Association has asked the US Supreme Court (via a “Petition of Certiorari”) to hear a case that could clarify the interaction between the 21st Amendment and the non-discrimination between states principle of the “dormant” Commerce Clause. The case arose in Texas, where the Court of Appeals for the Fifth Circuit ultimately held that the Supreme Court’s Granholm v. Heald (2005) decision did not limit the reach of the Commerce Clause in alcohol cases to situations where a state discriminates against producers or products. Decisions by two other federal Court of Appeal’s Circuits (the Second and the Eight) have expressly limited Granholm’s reach to discrimination against producers and products. Thus, the Texas Package Stores Association would like the Supreme Court to reverse the Fifth Circuit and explicitly limit the non-discrimination principle of Granholm to cases involving alcohol products and producers. The Supreme Court hears only a...

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