Raich: Oral Argument Report
Would you like a Little wine with your Commerce?

Part 1. Procedural history and facts

Interstate Wine Shipment Cases

SUBJECT: Dormant Commerce Clause; Twenty-first Amendment; Interstate Wine Shipment

CASES UNDER REVIEW: Swedenburg v. Kelly, 358 F.3d 223 (2nd Cir. 2004), cert. granted in part 124 S.Ct. 2391 (U.S. May 24, 2004) (No. 03-1274); Granholm v. Heald, 342 F.3d 517 (6th Cir. 2003), cert. granted in part, 124 S.Ct. 2389 (U.S. May 24, 2004) (No. 03-1116); Michigan Beer and Wine Wholesalers Association v. Heald, 342 F.3d 517 (6th Cir. 2003), cert. granted in part, 124 S.Ct. 2389 (U.S. May 24, 2004) (No. 03-1120).

DOCKET NUMBERS: Swedenburg v. Kelly, No. 03-1274; Granholm v. Heald, No. 03-1116, and Michigan Beer and Wine Wholesalers Association v. Heald, No. 03-1120.

ORAL ARGUMENT DATE: Tuesday, December 7, 2004.

ISSUE: 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?

FACTS: New York and Michigan impose significant regulatory barriers on wine sales.  Under their laws, all out-of-state liquor must pass through multiple tiers of regulation before it reaches the consumer.  This scheme, used by many states, is known as the three-tier system.

A wine producer may not sell directly to consumers, but must sell its wine to a distributor or wholesaler.  A distributor then sells the wine to a retailer.  Finally, the retailer sells the wine to the consumer.  Moreover, there are strict separation requirements.  The same person can not be licensed to engage in more than one“tier” of the regulatory scheme.   Thus, wine is subject to a three tier regulatory scheme: manufacture, distribution, and retail sales.

However, Michigan and New York allow in-state wine producers, subject to certain qualifications, to sell directly to the consumer.  An out-of-state wine producer may not take avail themselves to these exceptions and thus may not direct-sell to the consumer: Rather, an out-of-state wine producer, even a small one, must go through an in-state distributor.  Thus, all out-of-state wine, before it may reach a consumer, must pass through an in-state business. 

Two separate groups of plaintiffs, consisting of wine producers and connoisseurs, attacked the laws, arguing that the State restrictions, by allowing in-state wine but not out-of-state wine to pass directly to the consumer discriminated against out-of-state wine producers.  This, they argued, violated the dormant Commerce Clause.  [Ed's note: The plaintiffs sued under 42 U.S.C. §1983, since “one of the ‘rights, privileges immunities’ protected by § 1983 [is] the right to be free from state action that violates the dormant Commerce Clause.”  National Private Truck Council, Inc. v. Oklahoma, 515 U.S. 582, 585-86 (1995) (citing Dennis v. Higgins, 498 U.S. 439 (1991))].

Both litigations attracted private intervenors who defended the constitutionality of their state laws: In Michigan, the Beer & Wine Wholesalers Association; In New York, the private wine interests retained Miguel Estrada.  That private parties are seeking to defend a state law tells illustrates the economic protectionism of the direct-shipment ban.

The Sixth Circuit struck down Michigan’s law under the dormant Commerce Clause.  The Second Circuit upheld New York’s law, holding that under section 2 of the Twenty-first Amendment, states enjoy near plenary power over intoxicating liquors, including wine: Section 2 trumped the dormant Commerce Clause.