Having trouble finding a certain bottle of wine at your local retailer? Soon the U.S. Supreme Court could decide whether you will be allowed to order that wine directly from the winery and have it shipped to your home.
Lawyers involved in wine-shipping lawsuits in New York and Michigan have asked the country's highest court to hear their cases. On top of that, 36 state attorneys general have jointly petitioned the court to provide guidance on states' rights to regulate interstate shipments from wineries to consumers. The Supreme Court has not yet decided to accept either of the cases, but since recent appeals court rulings conflict with each other, the likelihood is higher than ever that the justices will address the issue of direct shipping.
In the New York case, wine consumers were dealt a setback: The U.S. 2nd Circuit Court of Appeals ruled in February that the Constitution's 21st Amendment gives states complete control over alcohol sales within their borders. The decision overturned a lower court's 2002 opinion that New York's laws—which ban out-of-state producers from shipping wine directly to consumers, but allow in-state wineries to ship—were unconstitutional because they interfered with interstate commerce and amounted to economic protectionism.
On March 8, the Institute for Justice, the Washington, D.C.-based law firm that represents the three New York consumers and two out-of-state wineries that filed the suit, petitioned the Supreme Court to review the 2nd Circuit decision. "This case presents a clash between economic protectionism and consumer freedom," said Clint Bolick, lead counsel and vice president of the Institute for Justice.
Meanwhile, the Institute for Justice has decided to suspend a recently filed lawsuit challenging Arizona's shipping ban. "It doesn't make sense to litigate the Arizona case given the high probability that the Supreme Court will resolve the issue in the relatively near future," Bolick said.
In the Michigan case, wine lovers were claiming victory: The 6th Circuit Court of Appeals ruled in August 2003 that the state's ban on direct-to-consumer wine shipments is unconstitutional. But on Jan. 30, the Michigan attorney general filed a petition asking the Supreme Court to overturn that decision. "This case is not about the free flow of commerce, but about the free flow of alcohol across state lines," said Michael Lashbrook, president of the Michigan Beer & Wine Wholesalers Association, which filed a petition supporting the state. The National Alcohol Beverage Control Association and the National Conference of State Liquor Administrators have also filed petitions on Michigan's behalf.
The legal battle has been brewing for some time. Over the past several years, wine lovers and small wineries—backed by a winery industry group called the Coalition for Free Trade—have filed lawsuits around the country to challenge state bans on direct shipping. They argue that such bans violate the Commerce Clause of the Constitution, which guarantees the right to free trade among the states. Between new legislation and court rulings, half the states in the country now allow direct shipments.
Putting up fierce opposition, state governments and wholesalers have tried to preserve existing alcohol-distribution systems, saying that the restrictions are needed to prevent sales to minors and ensure that taxes are collected. They argue that the 21st Amendment, which gives states control over alcohol sales within their borders, trumps the Commerce Clause.
So far federal appeals courts have issued conflicting decisions. The 7th Circuit upheld Indiana's shipping ban, and the Supreme Court declined to hear that case in 2001. Since then, the 5th U.S. Circuit Court of Appeals struck down Texas' interstate shipping ban, and the 4th Circuit ruled that it was unconstitutional for North Carolina to allow in-state wineries to ship, but not out-of-state wineries—either everyone had to be allowed to ship or no one could ship. Cases are pending in several other states.
Such legal discrepancies prompted 36 state attorneys general to file a petition earlier this month asking the Supreme Court to take up the Michigan case. Many of the 36 states currently ban interstate direct shipments of alcohol and are concerned that recent court rulings could strip them of their regulatory power. But some of the states have recently passed legislation to allow wine shipments and others are considering similar bills.
The petition says the states would like clear guidance on how far they can go in regulating home delivery of alcohol. "This Court has not addressed the States' authority to regulate interstate shipments of alcohol since the advent and growth of the Internet and electronic commerce tools, that have dramatically increased such shipments," the petition says.
Somewhat suprisingly, the Coalition for Free Trade opposes taking a case to the Supreme Court right now, although that has long been the group's goal. Since several states have recently decided to issue direct-shipping permits, the group wants to wait until the wine industry can establish a track record for complying with the states' provisions for collecting taxes and preventing sales to minors. With this evidence, CFT believes, wineries and wine consumers stand a better chance of winning their case in court. The group is filing an opposition to the Michigan petition early next month.
For a complete overview and past news on the issue of wine shipments, check out our package on The Direct Shipping Battle.