On September 28, the U.S. Supreme Court announced it would hear the case Tennessee Wine & Spirits v. Byrd Clayton in its next session. This case will decide whether state legislatures can require wine and spirits retailers to establish residency for a designated length of time before obtaining a state license. A win for the defendants would mean a more efficient national marketplace, where “wine and spirits can be sent to places there’s a demand for them,” says Tom Wark, executive director of the National Association of Wine Retailers (NAWR). “It would also be a victory for free trade.”
NAWR will be in touch with Total Wine & More, the retail giant denied a license by the state of Tennessee in 2016. The denial was the event that led to Total’s lawsuit. “We’ll retain counsel and file an amicus brief in Tennessee Wine & Spirits. [We’ll make] the case that the Constitution requires states to follow the nondiscrimination principles of the Dormant Commerce Clause where retailers are concerned,” he says, referring to a doctrine, developed from court rulings and the U.S. Constitution, that prohibits states from using their own laws to discriminate against interstate commerce. (Amicus briefs are legal documents filed by entities that aren’t parties to the case but want to advise the Court of important information, including arguments for their positions.)
Most states are unfair playing fields
Currently, 36 states have residency requirements that negatively affect out-of-state retailers. One of those states, Michigan, saw its restriction struck down on September 28. The U.S. District Court Eastern District of Michigan ruled in Lebamoff Enterprises v. Snyder that the state’s legislature must create a permit for out-of-state retailers that’s similar to the permit for in-state retailers.
John Hinman, a founding partner of Hinman & Carmichael, LLP, a San Francisco-based alcohol beverage law firm, says a win for large retailers—“the Walmarts and Krogers”—doesn’t mean smaller retailers would “lose out.”
He explains, “In-state retailers and wholesalers do well in states that are completely open, such as California. Local retailers and wholesalers can compete by focusing more on hard-to-get goods and customer service.” Hinman adds that his firm may assist parties with composing amicus briefs for Tennessee Wine & Spirits.
The Court will likely require the parties to submit briefs in December 2018. Non-litigants are expected to file amicus briefs at this time as well. If the timing goes as expected, the Court would hear oral arguments in January 2019. A final ruling can be expected sometime in spring 2019. If the Court rules in favor of out-of-state retailers, a few states might change their laws regarding permitting processes in 2019. Many more states would change their laws in 2020.
“By the time the Court makes its ruling, many state legislatures may no longer be in session,” explains Wark, “meaning most of the states would change their laws [if necessary] the following year.”
Revisiting the issue
Hinman says it’s a mystery why the Court agreed to hear the case: “There’s thousands of certiorari petitions [a petition that a losing party files with the U.S. Supreme Court to review the decision of a lower court] filed every year. Obviously, this is an issue on somebody’s plate. But whose?”
Only three Justices who ruled in a similar, related case, Granholm v. Heald (2005), remain on the Court. In Granholm, Justices Breyer and Ginsburg voted to strike down state restrictions, while Justice Thomas voted to let states uphold them. There’s no indication as to how the six other Justices on the Court might rule.
“Ultimately, Tennessee Wine & Spirits pits the 21st Amendment against the Dormant Commerce Clause and the Commerce Clause,” says Hinman. “The 21st Amendment, which repealed Prohibition, gave states the right to control the importation of alcohol into their borders.” The Commerce Clause authorizes Congress to regulate different aspects of interstate commerce.
“Following Granholm, many states enacted laws to restrict out-of-state retailers [of alcohol beverages]. The Supreme Court likely agreed to hear Tennessee Wine & Spirits because there needs to be clarification [on the issue of discrimination against non-resident vendors],” says Wark.