Litigation

The Supreme Court Just Struck a Blow for Alcohol Freedom

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The Supreme Court finally released its long-awaited decision in Tennessee Wine v. Thomas this week. The case involved a challenge to Tennessee’s “durational residency requirement” law, which said that in order to operate a retail alcohol store in Tennessee, the store owner must have been a resident of the state for 2 years. And in order to renew the license, which was required annually, the owner needed to be a resident of the state for 10 years. The law even required that all officers and directors of companies that ran alcohol retail stores—as well as 100% of all stockholders—to be state residents.

The Court, in a 7-2 decision, struck down the Tennessee law for violating the U.S. Constitution’s so-called Dormant Commerce Clause. To put it simply, this doctrine holds that states cannot discriminate against out-of-state economic interests while favoring in-state economic interests. The Tennessee residency requirement obviously favored in-staters over out-of-staters, but the law’s defenders argued that the 21st Amendment to the U.S. Constitution (which repealed Prohibition but granted broad powers to state governments to regulate alcohol) immunized laws like Tennessee’s from constitutional scrutiny. While the Court emphatically rejected that argument, its holding also could have broader implications:

Before Americans can enjoy a nationally cohesive alcohol shipping marketplace, however, much work remains. Many states still discriminate against out-of-state retailers interested in shipping alcohol—laws which will almost certainly be challenged in light of the Court’s decision. And nearly every state still labors under a three-tier system of alcohol distribution, which mandates a role for wholesalers when it comes to most alcohol sales. Furthermore, the U.S. Post Office forbids the shipment of alcohol entirely (although some private carriers permit it).

Therefore, governments around the country will have to take proactive steps to liberalize their alcohol shipping laws and streamline them in a way that makes interstate alcohol shipping more achievable. But for now, the Supreme Court’s decision in Tennessee Wine can be seen as an early step toward a more robust interstate shipping market for booze.

DrinksReform.org will have more coverage of the Tennessee Wine case and its aftermath in the weeks ahead!

SCOTUS Hears Oral Arguments In Tennessee Wine v. Blair

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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.

More Litigation Involving Texas' Three-Tiered System

A state Court of Appeals decision recently upheld a Texas law concerning the sale of a brewery's distribution rights under the state's three-tiered system. The Institute for Justice, which is representing the breweries challenging the law, plans to appeal to the state Supreme Court:

"Three Texas brewers are going back to battle with the state after an appeals court reversed a decision that would have allowed them to sell their distribution rights for monetary compensation.

In 2014, Peticolas Brewing Co. (Dallas), Revolver Brewing (Granbury) and Live Oak Brewing Co. (Austin) sued the Texas Alcohol and Beverage Commission, saying a newly passed law related to who could sell a brewery's distribution rights was unconstitutional. The mandate, which passed in 2013 with a bundle of other beer regulation reforms, said breweries may not accept payment for contracting with a distributor, but that a distributor could get a payout if it sold those same territorial rights to another distribution company.

Last year, a judge served victory to the breweries. But on Dec. 15, the Texas Third Court of Appeals reversed that decision. It stated, in part, the law does not prevent the brewers from successfully operating their businesses and that it also upholds the industry's three-tier system, which aims to avoid conflicts of interest between alcohol manufacturers, distributors and retailers.

The decision will be appealed to the Texas Supreme Court, according to a statement from Institute for Justice, which is representing the breweries..."

Read more here. This case isn't the only litigation challenging Texas' three-tiered system in recent years.