[wine] Cab Blends at Erte, Wine Trade Laws

Greetings, An update, and some info on the supreme court's review of rulings on direct shipment of wines. Executive summary of that. The court does not appear to be buying into the state(MI and NY)'s assertion that the 21st ammendmant allows them to regulate wine/beer/alcohol as they see fit. Rather, they are suggesting that the state's case is mere protectionism, in violation of the "free trade clause" of the constitution. States shall not put goods from other states at a disavantage. Big stakes here, as nearly half of all states prohibit direct wine shipments. Also, ruling will most likely spill over onto some of the "3 tier distribution" laws. ----- Forwarded message from "Jim L. Ellingson" <jellings(a)me.umn.edu> ----- Greetings, Bluegrass-Bob did some dialing, and has come up w/ the following for us. This week (12/9), Cabernet Sauv. based blends at Erte. Bob has made a reservation for 6:30 p.m. for eight people. Erte Restaurant. 329 13 Ave NE, Mpls 55413 612-623-4211 Who's coming (mostly guesses)? Bob Ruth/Warren Nicolai Jim/Louise Karin Roger Fred/Kim Next week (12/16): Red or White Burgundy at 510 Groveland. Not sure who's coming but.... Bob Betsy B-Dave Jim/Louise Warren/Ruth Russ/Sue Lori Janet Roger Nicolai Fred/Kim Cheers, Jim December 8, 2004 Justices Pick Apart Ban on Wine Sales From State to State By LINDA GREENHOUSE WASHINGTON, Dec. 7 - If the Supreme Court argument Tuesday on interstate wine sales proves to be a reliable roadmap to the eventual decision, consumers who want to order wine directly from out-of-state wineries will soon be able to do so with the court's blessing. The justices appeared notably unmoved by the arguments offered by New York and Michigan in defense of laws that prohibit the direct shipment of wine from other states while permitting in-state wineries to ship their products to their customers' homes. The 50 states are divided almost in half on a question that has grown increasingly contentious in the age of Internet advertising and sales. Twenty-six states permit direct shipment from out-of-state wineries; 24 ban it. The federal appeals courts are divided, too; one court upheld New York while another, almost simultaneously, declared Michigan's law unconstitutional. The states' central argument, presented by Solicitor General Thomas L. Casey of Michigan and Solicitor General Caitlin J. Halligan of New York, was that the 21st Amendment gave states such blanket authority over the "importation" of alcohol as to trump the constitutional principle that applies everywhere else in the national marketplace: that states cannot discriminate in favor of their own products. "Mere protectionism is permitted" by the amendment that repealed Prohibition, Mr. Casey said. "This case goes to the very core of the 21st Amendment," Ms. Halligan added in her turn. "It also goes to the very core of the Commerce Clause," Justice Anthony M. Kennedy responded. That clause, which empowers Congress to regulate interstate commerce, has been interpreted since early in the country's history to include the implication that states may not, on their own minus Congressional authorization, discriminate against one another. Justice Stephen G. Breyer said that in the 21st Amendment he found "not a word in any brief that I saw of any intent to get rid of the antidiscrimination principle." Nor did the justices demonstrate more patience with the fallback, that if the 21st Amendment did not simply obliterate the Commerce Clause, the laws could nonetheless be justified by the twin goals of preventing minors' access to alcohol and ensuring that the states could collect taxes from out-of-state shippers. Kathleen Sullivan, arguing for the 13 consumers who successfully challenged the Michigan law in the United States Court of Appeals for the Sixth Circuit, pointed out that Michigan permits its 40 in-state wineries and 7,500 liquor retailers to make home deliveries. That showed "a pattern of exceptions that belies any implication" that the state's real goal was to protect minors, she said. Ms. Sullivan, a professor and former dean at the Stanford Law School, said several states that permit direct shipments from out-of-state wineries tracked the taxes owed by requiring the wineries to obtain permits and report monthly. Her points made an impact, and Justice David H. Souter observed to Mr. Casey, Michigan's lawyer: "Your opponents argue that there are no clear countervailing interests here, so by process of elimination you get down to nothing but protectionism. What's your answer?" The law really does enable the state to protect minors, Mr. Casey replied. "You say that, but how?" Justice Souter persisted. Mr. Casey's response that state regulators could punish a state-licensed business left Justice Souter clearly unsatisfied. The two state laws under review in Granholm v. Heald, No. 03-1116, the Michigan case, and Swedenburg v. Kelly, No. 03-1274, the New York case, are not identical. While Michigan flatly prohibits direct shipment by out-of-state wineries, New York theoretically permits it, as long as the winery maintains a physical presence in the state, including a warehouse to store its wines before sale. No out-of-state winery has qualified for this exception, and although the law has been on the books since 1970, the state has not issued the regulations necessary to make the exception operative. Clint Bolick, arguing for the plaintiffs in the New York case - small wineries in Virginia and California, along with three New York wine drinkers - said small wineries could not afford to set up offices around the country as the price of reaching customers in other states. "Our clients cannot compete with liquor distributors," Mr. Bolick said. "They can compete in the market. The Commerce Clause protects a level playing field." He noted that of 3,000 wineries in the country, 600 sell their products in New York's retail liquor stores. Mr. Bolick is strategic litigation counsel of the Institute for Justice, a public-interest law firm with libertarian leanings that began a campaign against the state laws several years ago. His lawsuit in New York succeeded in Federal District Court, but that ruling was overturned by the United States Court of Appeals for the Second Circuit, which took an expansive view of the 21st Amendment. Mr. Bolick said the amendment should be understood to permit states to regulate alcohol "by one set of rules, not two." He added that New York was engaged "not in legitimate regulation, but in economic protectionism." The Supreme Court's own view of the 21st Amendment has shifted over the years from one that was much like the states' position to one that has increasingly taken account of the Commerce Clause. In a 1984 case from Hawaii, Bacchus Imports Ltd. v. Dias, the court invalidated an exemption from a 20 percent excise tax the state gave to its local liquor industry. "It is by now clear that the amendment did not entirely remove state regulation of alcoholic beverages from the ambit of the Commerce Clause," Justice Byron R. White said in his majority opinion, which concluded: "We are convinced that Hawaii's discriminatory tax cannot stand." The Bacchus case was much discussed during the argument. The three dissenters in that case, Justices John Paul Stevens and Sandra Day O'Connor, along with Chief Justice William H. Rehnquist, are still on the court, while no member of the majority is. Nonetheless, there was no indication from Justices Stevens or O'Connor - Chief Justice Rehnquist was not in court because of his treatment for cancer - that they did not accept the Bacchus precedent as binding. "If you can't grant a tax exemption," Justice Stevens said to Ms. Halligan, the New York lawyer, "it seems to me a fortiori that you can't prohibit importation." When Mr. Casey, Michigan's lawyer, said the Bacchus decision was wrongly decided and should be overruled, Justice O'Connor responded: "It's a little hard to plan on overruling it, so why don't you address how to distinguish it, because it has a lot of language that cuts against you." In addition to the states, the wineries and the wine drinkers, the wholesale liquor industry is acutely interested in the outcome. States regulate alcohol distribution by what is known as a three-tier system: producer to licensed wholesaler to licensed retailer. For the wholesalers, the stakes in this dispute are enormous. If consumers are enabled to buy directly from out-of-state producers, so, theoretically, might retailers be. "Under the same rationale, the in-state licensing system has to fall," Justice Kennedy observed at one point. -- ------------------------------ * * Dr. James Lee Ellingson, Adjunct Professor jellings(a)me.umn.edu * * University of Minnesota, tel: 651/645-0753 fax 651 XXX XXXX * * Great Lakes Brewing News, 1569 Laurel Ave., St. Paul, MN 55104 *