Supreme Court Rules on Interstate Wine Sales

[Craig Camp]

The United States Supreme Court, in Washington, has been petitioned to hear two different cases involving interstate shipment of wine, which, if accepted and ruled upon, could dramatically change the way the wine industry does business.

[Miguelito]

I certainly hope the Court decides to hear one or both of these cases, and would heartily toast a victory by the plaintiffs. But one must remember that the Supreme Court accepts only a tiny percentage of the cases it is petitioned to hear. Based strictly on the numbers, it is not likely that the Court will decide either of these cases.

That's not to deny that the Constitutional question is interesting; it is, and it might catch the Court's fancy. (Or, more importantly, the fancy of the Justice's law clerks, who are really the prime movers in deciding what cases the Court will hear.) Playing Devil's advocate, one might argue that if the 21st amendment and the Commerce Clause are in conflict, the Amendment ought to control, as it was enacted later. That might not be so good, as the Amendment seems to grant broad discretion to the States in matters relating to the sale of alcohol. The operative language is that "The transportation or importation into any State ... for delivery or use therein of intoxicating liquors, inviolation of the laws [of the State], is hereby prohibited."

The IFJ has top-flight lawyers working on these cases, and I'm sure they have a creative and persuasive legal argument for why the Commerce Clause controls; I'd love to hear it and I hope it prevails.

[mnebergall]

I think it is likely that the Supreme Court will take both cases. Whenever there is a split in the circuits, as we have here, the Supreme Court typically will resolve the dispute. On an issue such as interstate shipment of alcoholic beverages, it just is not good public policy to have one rule for some states and a different rule for others. When the rulings stand on constitutional grounds, as here, there is no other way to resolve the differences between the circuits than to have the Supremes review it.

[Mayhaw Man]

I believe that the 21st amendment was much weakened at the end of prohibition. The "tied house laws" and a number of other things that were put in place with the repeal of the Volstead act were enacted in order to encourage competition between brewers rather than the domination of a couple of brewers who had managed to stay alive during prohibition by making malted milk, near beer, refrigerators (oddly enough, Anheuser Busch built them ), and soft drinks.

Up until the enactment and enforcement of the Volstead act I believe that states rights pretty much took precedent over federal laws. Wth the Volstead Act and the subsequent use of FBI and ATF agents to enforce the law, the line between states and the federal government was muddied (forever, IMHO).

I sold beer to the Beer of the Month Club (Abita Beer) for years and there was always a question as to whether what they were doing was legal or not. The labels and crowns were often not in compliance with the regulations being enforced in the states where the beer was ultimately shipped and in a number of cases I believe that the beer was shipped to states where we were not registered.

I know that the same questions that I have mentioned above are pretty much the one's that affect the interstate shipment of wine. It would be great if the court would take it up and clear up some of the gray areas that have existed for years.

[bloviatrix]

I believe that the 21st amendment was much weakened at the end of prohibition.

Didn't the 21st Amendment actually end Prohibition? I am a little confused. Beer Man, please clarify that statement and what the Volstead Act was about. I am intrigued.

~Bloviator, spouse of Bloviatrix

[bloviatrix]

I certainly hope the Court decides to hear one or both of these cases, and would heartily toast a victory by the plaintiffs.  But one must remember that the Supreme Court accepts only a tiny percentage of the cases it is petitioned to hear.  Based strictly on the numbers, it is not likely that the Court will decide either of these cases. 

If you base the likelihood of the Supreme Court taking a case strictly on the gross number of appeals to the Supreme Court, the probability is low. But once you add in the split between the Circuit Courts and the apparently competing constitutional provisions, I would lay better than even odds.

This is as ripe for Supreme Court review as a bottle of [fill in the blank].

BTW, I believe the general practice is to consolidate these cases for the purpose of an appeal; in other words, they won't take one without the other.

~Bloviator, sitting in again for Bloviatrix

Edited March 15, 2004 by bloviatrix (log)

[Miguelito]

If you base the likelihood of the Supreme Court taking a case strictly on the gross number of appeals to the Supreme Court, the probability is low.  But once you add in the split between the Circuit Courts and the apparently competing constitutional provisions, I would lay better than even odds.

I'm confident that even with the split and the clashing constitutional arguments, the odds are greatly against the Court taking either or both of these cases. There is empirical research on the point, but who really wants to hear about a regression study?!?

If the Court did take the cases and did outlaw restrictions on direct shipping, I wonder who would benefit more -- producers or consumers? My guess is that prices would not change much, that consumers would benefit from enhanced selection, and that producers would internalize some of the profits that are presently going to the various middlemen.

[mnebergall]

In addition to the split in the circuits and clashing constitutional arguments, in one of the cases, a State is the petitioner. Having a State petition for Cert., enhances the probability that the court will grant the petition for review. Bring on the regression.

[pattimw]

Having just returned from a vacation in Napa, I really hope this is a case that is heard.

For some reason, I thought that they had amended the law last year to allow shipments to all states if you bought when you were physically at the winery. Apparently not. The only winery we visited (of six) that we could ship to Massachusetts was Duckhorn. Must be the way they set up their shipping company.

How are we living in a free market economy if it is illegal to ship goods to certain states? Not opening myself for a torrent here, it just seems so...wrong. I do not know the ins and outs of many of the issues that this deals with - I am just looking at it from the point of a consumer.

[Florida Jim]

Not opening myself for a torrent here, it just seems so...wrong. I do not know the ins and outs  of many of the issues that this deals with - I am just looking at it from the point of a consumer.

Interestingly, most legislative historys indicate that the impetus for enacting laws that restrict movement of alcoholic beverages was temperance (and not just in minors). I doubt that reason continues to be the motivation for enforcement.

Speaking of right and wrong . . .

Best, Jim

Edited March 15, 2004 by Florida Jim (log)

[Miguelito]

In addition to the split in the circuits and clashing constitutional arguments, in one of the cases, a State is the petitioner.  Having a State petition for Cert.,  enhances the probability that the court will grant the petition for review.  Bring on the regression.

One example of a regression study on cert issues is George & Solimine's article in 9 S. Ct. Econ. Rev. (2001).

All of the factors you identify increase the chances of cert being granted, without a doubt.

Other factors, however, cut against cert being granted in these cases. First, the Supremes are far more likely to grant cert on an en banc decision at the Court of Appeals, but both Swedenburg (the NY case) and Heald (the MI case) are panel decisions (petition for reh'g en banc denied in Heald, unclear whether denied or not sought in Swedenburg based on a quick check). Second, the Supremes like to let things percolate before jumping in, but litigation on the direct shipping issue is a relatively new phenomenon.

I do not dispute that these cases are more likely than the average case to be granted cert. But the average case has only about a four percent chance. Even with the plus factors you identify, I still think it more likely than not that cert will be denied.

[mjr_inthegardens]

The SCOTUS has agreed to hear a case regarding state bans of direct consumer purchase of out of state wine.

Any commentary from the egulletensia on the ramifications of easier consumer wine purchasing? See the link below for this story about Supreme Court preparing to hear wine import cases

regards

-mjr

http://www.mlive.com/newsflash/lateststori...40895742980.xml

Edited May 24, 2004 by Craig Camp (log)

[mnebergall]

Perhaps this should be merged with the "Interstate Wine Shipments" thread which has been dormant waiting for the Supreme Court to act on the Cert. petitions.

[mjr_inthegardens]

Perhaps this should be merged with the "Interstate Wine Shipments" thread which has been dormant waiting for the Supreme Court to act on the Cert. petitions.

Here is that thread: http://forums.egullet.org/index.php?showtopic=38922

I missed it as it is languishing on page 9.

-MJR

[mnebergall]

Here is the text of the Supreme Court's order granting the Cert. petitions:

"The petitions for writs of certiorari are granted limited to the following Question: "Does a State's regulatory scheme that permits in-state wineries directly to ship alcohol to consumers but restricts the ability of out-of-state wineries to do so violate the dormant Commerce Clause in light of Sec. 2 of the 21st Amendment?" These cases are consolidated and a total of one hour is allotted for oral argument."

[cdh]

Any predictions, court watchers?

This court has precedents going both ways with regard to the dormant commerce clause... though the way they phrase the issue for decision makes it a competition between an provision of the original text of the constitution and a later amendment to it...

Anybody know any law on this? Hopefully the 14th Amendment is sufficiently distinguishable and different enough not to play any role in this argument, 'cause if the relation between the 14th and original text is the precedent they choose to follow here, then I think the direct shipping cause is sunk.

[mnebergall]

I have not seen the Cert. petitions so I don't have a clue what the technical constitutional arguments will be. However, rather than using an "amendment trumps an provision in the original Constitution" analysis they likely will try to harmonize the two provisions. The central question is, does regulation of interstate commerce that would be banned under the dormant Commerce Clause become permissible under the 21st Amendment because alcohol is involved. Put another way, was the 21st Amendment intended to permit discrimination against out of state goods. Let's see if we can get hold of the Cert. petitions and the briefs on the merits once they are filed.

[Fat Guy]

Amendment XXI states in relevant part:

"Section 2. The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited."

The "dormant commerce clause" refers to a body of judicial theory (derived from the Commerce Clause but not actually in the Constitution) that, as applicable here, prevents states from passing laws that discriminate against interstate commerce as such.

It seems straightforward enough to argue that 1) Amendment XXI says states can fundamentally regulate liquor sales any way they like, but 2) such regulations must be uniformly applicable, in other words they may not discriminate against interstate commerce.

The counter-arguments will be a host of bugbears about how interstate shippers are involved in price fixing, threatening the welfare of our children, blah blah blah. Hopefully the Court will recognize those arguments for the hoaxes they are.

[mjr_inthegardens]

Hopefully the justices are closet drunkard gourmands.

[mnebergall]

The counter-arguments will be a host of bugbears about how interstate shippers are involved in price fixing, threatening the welfare of our children, blah blah blah. Hopefully the Court will recognize those arguments for the hoaxes they are.

Hopefully, there is scant evidence in the record to support these BS arguments. I should go back and look at the District Court and Court of Appeals rulings to see if there are any findings of fact with regard to these arguments.

[liamdc]

NY Times editorial on this topic today

[Rebel Rose]

"In a Supreme Court petition, 36 states argue that they need these laws to prevent drinking by minors and to collect taxes. " -- From the NY Times editorial (which supports shipping)

Some basic math:

One six pack of beer = $4.99 / 72 fl. oz. = $ 0.07 for 6% alcohol = $0.01 penny per buzz

One large bottle of vodka = $15.99 / 1.75 liter (60 oz.) = $0.27 for 40% alcohol = 7/10 of $0.01 penny per buzz

One bottle of premium wine unattainable in your local markets = $20.00 + 7.99 UPS shipping and signature tag + $2.50 wine shipper (no charge for handling) / .750 liter (26 oz.) = $30.50 for 12% alcohol = $2.50 per buzz

So let me get this straight. Interstate wine shipments will corrupt my state's youth. It has the potential to be a widespread problem. My state's youth must have the disposable income to finance a wine buzz. Children with disposable income generally have well-educated, employed parents, so I am probably well educated and employed. However, the above math is junior high level stuff, elementary in good schools, and any average kid can do it. Therefore, my state's youth are rich, illiterate dumbshits. That makes me the parent of an illiterate dumbshit.

And people actually vote for legislators who are insulting them?

[jerkhouse]

Here's a quote from Bacchus Imports v. Dias, the last case (as far as I know) to involve the dormant commerce clause and the 21st amendment. I didn't have the motivation to read the opinion, but its out there for anyone interested.

"The tax exemption is not saved by the Twenty-first Amendment. The exemption violates a central tenet of the Commerce Clause but is not supported by any clear concern of that Amendment in combating the evils of an unrestricted traffic in liquor. The central purpose of the Amendment was not to empower States to favor local liquor industry by erecting barriers to competition."

Unless the Court changes its approach to dormant commerce power cases, it will probably be examining two main issues: (1) is the regulation discriminatory against out of state business, and (2) how burdensome is the regulation on commerce. There seems to be some sort of sliding scale under which the less discriminatory a regulation is, the more burdensome it can be, but there are limits at both ends of the scale. Some precedent indicates that incidental burdens on commerce will be allowed if the regulation is in pursuit of a legitimate state goal. I'm not sure what standard of review the legitimacy of the state goal is reviewed under, but as DoverCanyon pointed out, the justifications given aren't very convincing, so it will be interesting to see how the "legitimate state goal" thing plays out (if it ends up being an issue at all).

Edited June 5, 2004 by jerkhouse (log)

[mark918]

"In a Supreme Court petition, 36 states argue that they need these laws to prevent drinking by minors and to collect taxes. " -- From the NY Times editorial (which supports shipping)

Some basic math:

One six pack of beer  =  $4.99 / 72 fl. oz. = $ 0.07 for 6% alcohol = $0.01 penny per buzz

One large bottle of vodka  =  $15.99 / 1.75 liter (60 oz.)  =  $0.27  for 40% alcohol =  7/10 of $0.01 penny per buzz

One bottle of premium wine unattainable in your local markets = $20.00 + 7.99 UPS shipping and signature tag + $2.50 wine shipper (no charge for handling) / .750 liter (26 oz.) =  $30.50  for 12% alcohol =  $2.50 per buzz

So let me get this straight.  Interstate wine shipments will corrupt my state's youth. It has the potential to be a widespread problem.  My state's youth must have the disposable income to finance a wine buzz.  Children with disposable income generally have well-educated, employed parents, so I am probably well educated and employed.  However, the above math is junior high level stuff, elementary in good schools, and any average kid can do it.  Therefore, my state's youth are rich, illiterate dumbshits.  That makes me the parent of an illiterate dumbshit.

And people actually vote for legislators who are insulting them? 

                                                     

Assuming your Price / % Alcohol figures are correct, here's some more basic math:

Beer (6% Alcohol) - 72 ounces @ $4.99 = 4.32 ounces Alcohol @ $1.16/ounce

Vodka (40% Alcohol) - 59 ounces @ $15.99 = 23.67 ounces Alcohol @ $.68/ounce

Premium Wine (12% Alcohol) - 25 ounces @ $30.50 = 3.04 ounces Alcohol @ $10.02/ounce.

That's 14.8 Times as much as Vodka, and 8.7 times as much as Beer, not 250 times, as you suggest. Depending on what they're having for dinner, that might not seem like such a high premium

I asked my three teenagers (individually) if they knew a place where they could reliably buy beer, wine or liquor as minors. They each said no. Then I asked them if they knew someone who would sell them Marijuana, Cocaine, Ecstacy, or Prescription painkillers like Vicodin or Oxycontin. They each said yes. Hmm. I sure am glad the state is protecting my kids from alcohol.

[Rebel Rose]

Well, that's entirely accurate, since there's no such thing as a "buzz" unit. I just thought it was funny to look at it that way, but then I have a warped sense of reality. (Last night I took our 12-year-old to see Shrek 2, which he enjoyed but he assured me seriously later that there is no such thing as a "spell." May be hereditary. )

And you're right--the whole "protection of minors" argument is ludicrous.