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Judge's Ruling Opens Michigan to Direct Shipping

Michigan residents are legally permitted to order wine, pending new legislation establishing limits and procedures

Eric Arnold

Posted: Thursday, November 03, 2005

In Michigan, where the political battle over direct shipment of wine has been particularly fierce, U.S. District Judge Bernard Friedman ruled from the bench on Nov. 1 that the state must open its borders to allow consumers to order directly from wineries in other states. Friedman is expected to sign the order in the next few days, according to an attorney involved with the case.

Michigan's current law, which allows only Michigan wineries to ship directly to the state's residents, was declared unconstitutional by the Supreme Court in May. The justices ruled that state laws must be equitable and either allow direct shipments from all wineries or ban shipments altogether.

Soon after, a battle erupted over the issue in the Michigan legislature and media. The Michigan Beer and Wine Wholesalers sought to stop local wineries from shipping, while in-state and out-of-state wineries and consumer groups pushed for the state to open up the market. At the end of August, the Michigan House of Representatives passed Bill 4959, which would allow direct shipping, but limit each winery to selling a maximum of 500 cases to Michigan consumers per year. At the same time, state Sen. Michelle McManus (R) was pushing a separate package of bills that would have set the limits on consumers at 24 cases a year per person, in line with the restrictions in several other states. All parties have since been trying to come to a compromise on the details.

The lawsuit, filed in 2000 by Michigan residents Eleanor and Ray Heald and California winery Domaine Alfred, was originally heard by Friedman, who in 2001 upheld Michigan's shipping ban. A federal appeals court later overruled that decision. After the Supreme Court issued its judgment, the case went back to Friedman in the U.S. District Court for Eastern Michigan for a remedy.

"The judge was very sympathetic to the remedy situation proposed by the plaintiffs," said Indianapolis-based attorney Robert Epstein, who represents the Healds, as well as consumers in direct-shipping cases in several other states. Friedman chose to treat all wineries equally by "leveling up," rather than "leveling down," the solution proposed by the state and the wholesalers, Epstein explained. "The remedy that the judge will adopt says basically that direct shipments shall be permitted from out-of-state to consumers in Michigan on the same terms as direct shipment in the state. As soon as this order goes into effect, the wine can flow."

However, wineries and package carriers such as FedEx and UPS may be hesitant to accept orders until the state passes legislation and establishes regulatory procedures.

McManus, who has several wineries in her district, lauded the judge's decision. "We're excited about what has happened," she said. "But it doesn't complete the discussion. There'll be other things that the wineries and wholesalers will need to discuss." The issues that remain unsettled involve case limits and Michigan wineries' ability to sell directly to retailers and restaurants.

The wholesalers are interested in working toward a compromise on the bill's final form, according to Michael Lashbrook, president of the Michigan Beer and Wine Wholesalers Association. "There seems to be very much the intent to move swiftly on this issue now and get it behind us, and get the proper regulations in place to allow some limited shipment to consumers," he said.

In the meantime, the Michigan Liquor Control Commission posted a response to the ruling on its Web site, stating: "Michigan residents may not immediately begin ordering wine to be shipped from an out-of-state seller to their homes." The commission is instituting a 25-day holding period while it and its legal staff review the matter.

But Epstein claims that the commission cannot block shipments once the judge signs the order. "There's no 25-day hold in the order," he said. "If one of my Michigan clients is held up on a shipment of wine from California or Oregon within that 25-day period, I think the spirit of the order would prevent the Liquor Control Commission from confiscating that wine. In fact, we even discussed that with the attorney general, that we were concerned that they would try to do that, and we were assured that there would be no interference once the order was signed."

Until the legislature does act, national consumer advocacy groups such as Free the Grapes! will continue to push Michigan to enact a direct-shipping law that is less restrictive than the current provisions of Bill 4959. "The ruling from the bench really doesn't change our action in Michigan at this point, which includes a really aggressive consumer letter campaign," said Jeremy Benson, executive director of the organization. "For us, the ruling just underscores the kind of action that the legislature will hopefully take, which is to level up."

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