Oral arguments were held yesterday in the important Supreme Court case challenging Tennessee’s durational residency requirement for liquor licenses (for more on how the oral arguments went see here). The case involves the intersection of the U.S. Constitution’s 21st Amendment and the Dormant Commerce Clause, and R Street’s Jarrett Dieterle filmed the following short explainer video about the case for the Federalist Society:
On Wednesday, the Supreme Court heard oral arguments in the important alcohol case challenging Tennessee’s durational residency requirement (previously discussed on DrinksReform.org here). The Tennessee law at issue requires liquor retailers in the state to have had an in-state presence for 2 years before they will be granted a license (and an in-state presence of 10-years in order to be able to renew the license each year). According to the Washington Post, several of the Justices expressed skepticism toward the Tennessee law:
Supreme Court justices indicated Wednesday that they thought Tennessee’s tough residency requirements for those who want to run liquor stores have more to do with protecting in-state economic interests than guarding against the evils of alcohol.
But they also wondered how far they could go, since the Constitution gives states an especially pivotal role in regulating booze…
Several justices, most vocally Sonia Sotomayor and Samuel A. Alito Jr., were skeptical.
Under questioning, [Tennessee Wine attorney] Dvoretzky said neither a 10-year residency requirement nor a hypothetical requirement that an applicant’s grandparents be residents would be a violation of the dormant-commerce clause, nor even a statute that said the restriction was for the “exclusive purpose of protecting in-state retailers.”
Justice Brett M. Kavanaugh said the text of the constitutional amendment gives the states power over the “transportation or importation” of liquor into their states. “Why isn’t that most naturally read to allow states to remain dry . . . but not to otherwise impose discriminatory or, as Justice Alito says, protectionist regulations?” [More here].
As the popular SCOTUSBlog noted, however, it’s still unclear how the case will ultimately come out since several of the Justices were silent and Justice Ruth Bader Ginsburg was absent from the hearing. A final decision from the Court is expected by the summer.
For more on the case and what it entails, check out this explainer video R Street’s Jarrett Dieterle filmed with the Federalist Society.
New Jersey is notorious for its expensive liquor licenses—a result of its quota system that limits the number of licenses available—which unsurprisingly has led many restaurants in the state to allow “BYOB” booze. While BYOB establishments are popular among New Jerseyans, state law forbids restaurants from advertising that they are BYOB. But now a federal judge has struck down this restriction, according to the New Jersey Law Journal:
A federal judge has ruled that New Jersey’s law barring restaurants from advertising “bring your own beer” policies is unconstitutional.
The state ban on advertising policies that allow patrons to bring their own beer and wine to restaurants, known as BYOB, “places a content-based restriction on speech that fails strict scrutiny because it is not supported by a compelling government interest nor is it the least restrictive means of achieving the government’s stated purpose,” U.S. District Judge Joseph Rodriguez of the District of New Jersey ruled in GJJM Enterprises v. City of Atlantic City.
The state Division of Alcoholic Beverage Control “presented no compelling government interest for banning BYOB advertising, while permitting liquor stores and restaurants with liquor licenses to advertise on-site alcohol sales,” Rodriguez said…
Read more here.
VinePair discusses the recent trend in grocery stores offering in-store “pubs” or bars that allow customers to drink in the middle of their shopping experience. As the article notes, the exact format of these bars depends on each state’s alcohol licensing laws:
[C]hains like Wegmans, Whole Foods, Kroger, and California-based Baron’s have rolled out a slew of amenities to get “real” shoppers in the door.
Chief among them is the in-store bar. Shopping drives most of us to drink, it seems; and savvy grocery chains figure they might as well capture those dollars by turning supermarkets into destinations for excellent craft beer and wine…
Different states’ laws dictate how these in-store pubs can work. Depending on the state’s open-carry laws, some allow patrons to sip and shop, while others are partitioned off in specific areas for over-21 shoppers only.
“We have a specific tasting license in five out of seven stores,” Shemirani says. “In our sixth store we pull a one-day event permit, and in our seventh store we have a conditional-use permit. These are all different based on store configurations and the local rules and regulations. The tasting areas must be separated and secured from the rest of the store. Of course, we check all IDs and anyone under 21 is never allowed, including infants.”…
Read the rest here.
New Jersey has long been known for its liquor license quota system, which as we’ve discussed in the past, artificially drives up the price of licenses in the state. Northjersey.com reports on how this is hurting the state’s dining scene and economy:
Peter Loria still recalls with disappointment the time he tried to open a restaurant in the Bergen County village of Ridgewood. He poured a chunk of his retirement savings into what he thought would become a destination for New Jersey food lovers, but he hit a common roadblock.
"I couldn’t get a liquor license," Loria, who owns Café Matisse in Rutherford, said of the 2007 project. "So it never opened. It was heartbreaking."
Loria is one of countless casualties of New Jersey’s notoriously restrictive laws governing who can sell alcohol. Those laws, which date back to the post-Prohibition era, limit municipalities to one liquor license per 3,000 residents. In places where demand is high, licenses can sell for $1 million or more — if they are available at all.
The result is a dining scene that, in the words of Morris Davis, a Rutgers professor who studies the economics of real estate and housing, is “diseased.” And more problematic still, the laws are seen by local officials as holding back efforts to revitalize downtownsand attract new, often younger residents.
New liquor license laws, experts say, could strengthen New Jersey’s economy…
Read more here.
Tennessee law requires owners of retail liquor licenses to have resided in the state for multiple years before being able to obtain a license. A court case challenging this residency requirement has been working its way through the court system for several years, and last week the U.S. Supreme Court agreed to hear the case. Shanken Daily News reports:
The Supreme Court of the United States has agreed to take on the case involving Total Wine & More’s entry into the Tennessee market, which the Tennessee Wine and Spirits Retailers Association (TWSRA) is fighting on the grounds that Total hasn’t fulfilled the state’s residency requirements. Total Wine asserts that Tennessee’s residency requirement is discriminatory against out-of-state residents and therefore in violation of the Constitution’s Dormant Commerce Clause.
Under Tennessee law, corporations and other business entities may not obtain a retail liquor license unless every director, officer, and shareholder of the business has been a Tennessee resident for at least nine years. Total Wine challenged the law successfully on Commerce Clause grounds in both federal district and appeals courts, and noted in its brief to the Supreme Court that Tennessee’s own attorney general “twice opined that this residency statute violated the Dormant Commerce Clause and could not be enforced.” In the meantime, Total was granted a license by the Tennessee Alcoholic Beverage Commission and opened its first store in Knoxville earlier this summer...
Read the rest here.
As covered last week, a recent attempt to yank the liquor license from the Trump Hotel in Washington, D.C. has failed (for now). Although Trump’s opponents will surely be disappointed, R Street’s Jarrett Dieterle and Jonathan Haggerty wrote a piece for the Washington Post discussing why using “good moral character” laws to strip liquor licenses is a bad idea:
What do the president of the United States and an ex-convict from Michigan have in common? They’ve both been involved in legal disputes with the government over their fitness to hold a license.
President Trump — or rather, his hotel, the Trump International Hotel in Washington — holds a license that allows it to legally sell liquor. The Michigan man, Mike Grennan, sought to obtain a license to become a homebuilding contractor. Both situations demonstrate the potentially pernicious effects of so-called “good moral character” clauses in state and local licensing laws.
In June, a group of religious leaders and former judges filed a complaint with D.C.’s Alcoholic Beverage Control Board arguing that Trump — and thus, the Trump Hotel — was unfit to hold a liquor license. Their claim is based on the “good moral character” provision in the District’s licensing law, which requires owners of drinking establishments to be of sound moral character to serve alcoholic beverages…
While Trump’s detractors may be disappointed by the decision, there is good reason to celebrate it. Good-moral-character clauses are notoriously vague, which makes them ripe for abuse by local government officials. The D.C. law does not define “good character,” according to Alcoholic Beverage Control Board spokesman Max Bluestein, and some states, including Michigan, do so using ambiguous terms, such as, “[T]he propensity on the part of the person to serve the public in the licensed area in a fair, honest, and open manner.”
Such open-ended language allows officials to use good-moral-character clauses in improper ways, such as targeting political enemies or, even worse, blocking well-meaning citizens from obtaining employment. This is because licensing boards around the country can, and often do, interpret good-moral-character clauses to mean that anyone with a prior criminal conviction is automatically disqualified from holding a license — regardless of the prior offense’s relation to the nature of the job the applicant is seeking…
Read the whole article here.
Recently, a petition was submitted to the D.C. Alcoholic Beverage Control Board to revoke the liquor license of the Trump Hotel in Washington, D.C. The petition was based on the requirement that license holders must exhibit “good moral character,” a standard which the petitioners argued President Donald Trump had not lived up to. Politico reports that the petition was rejected (for now):
Citing a technicality, a Washington, D.C., board on Wednesday refused to review a liquor license held by Trump International Hotel to determine whether the building's owner, President Donald Trump, meets the "good character" test required to serve alcohol in the city.
The Alcoholic Beverage Control Board questioned the timing of a complaint against the hotel, saying a character review couldn't be conducted until the hotel applies to renew its license in March.
The decision was unanimous, with two members of the seven-member board not in attendance.
A lawyer for the complainants said they would appeal…
Read the rest here.
(The use of good moral character clauses has an interesting and troubling history in the occupational licensing context, as R Street’s Jonathan Haggerty has previously written about).
New Jersey is notorious for its liquor license quota system for restaurants, only allowing one license per 3,000 residents. This arbitrary limitation on supply has inflated the prices of these licenses beyond what many restauranteurs can even afford. In NJ.com, columnist Paul Mulshine discusses recent legislation that has advanced which would reform the state's quota system:
In 1947, the holders of liquor licenses managed to buy enough legislators to attain passage of a law that created an artificial monopoly on liquor sales.
This had the effect of pushing up the value of the licenses to levels that can now exceed $1 million. And that has had the effect of stymieing the growth of the state's restaurant industry.
That may be about to change. For the first time since that iron curtain descended there appeared a rip in it. That occurred last week when an Assembly committee advanced a bill that would finally open up the alcoholic beverage industry to competition...
The key argument that won the day was the role of restaurants as anchors for the sort of economic development so desperately needed now that retail stores are closing because of competition from the internet.
One couple who own a restaurant in Jersey City, and who brought along their baby for emotional impact, noted that New York never adopted New Jersey's practice of limiting liquor licenses. They said they had been living in Brooklyn when a boom in restaurants that serve drinks brought an economic revival.
Another couple who brought along a baby were Robert and Magdalena Pluta. They run Leonardo's restaurant in Lawrenceville just north of Trenton.
"The food costs are going up," Pluta told me. "It's hard to sell meatballs and linguini and make a profit. The mom-and-pop restaurants are struggling."...
Read the whole column here.
States and municipalities often have formulas or limits that determine the number of liquor licenses they grant to local restaurants or stores. But city officials in Royal Oak, Michigan have decided that they can also reject licenses for restaurants that they just don't like. As Jarrett Skorup of the Mackinac Center writes:
A city in Michigan is denying an alcohol license to a restaurant, apparently because government officials don’t like the style of service and type of food offered there.
According to the Detroit Free Press, Royal Oak city officials voted to deny an alcohol license to a Taco Bell Cantina “after police expressed opposition.”
Commissioner Kyle Dubuc said that the Taco Bell Cantina didn't fit with the city's vision for the bistro-style licenses.
"I would say more that when we think of unique concepts that would not include national fast-food chains," DuBuc said. "Think locally managed, local concepts that are bringing a kind of unique flavor and unique identity."
But the Taco Bell Cantina is locally owned — it’s just a franchise of Taco Bell. The “cantina” brand is an intentional effort to give the restaurant more of a local feel, and it has been rolled out in large cities throughout the U.S...
The entire piece is well worth a read.