State Judge Restores Indiana Wineries' Ability to Ship Locally

Wineries were told they could not ship due to the U.S. Supreme Court decision, and sales were slowing with holidays approaching

Eric Arnold
Posted: November 23, 2005

With the Indiana government and local wineries battling over the producers' ability to do business with consumers via the Internet, phone or mail, an Indiana state judge ruled today that Indiana wineries may ship wine directly to residents within the state.

After the U.S. Supreme Court ruled in May that states couldn't treat shipments from in-state and out-of-state wineries differently, the chairman of Indiana's Alcohol and Tobacco Commission, David Heath, wrote an enforcement bulletin on May 20 telling Indiana wineries that they could no longer ship legally. The move was made in an effort to prevent the state from having to lift its ban on shipments from out-of-state producers.

Nine Indiana wineries filed a lawsuit on Nov. 15, arguing that they have shipped directly to state residents for about 30 years. Indiana has never had a law on the books either preventing or banning the practice by local wineries.

Their attorney, Robert Epstein, an Indianapolis-based lawyer who has represented wineries and consumers on the direct-shipping issue in several states, argued in court yesterday that the enforcement bulletin violated an Indiana law that requires certain procedures to be undertaken before any government ruling or interpretation of the law can be enacted. A similar set of circumstances arose in Pennsylvania as well, and the wineries there won a favorable ruling last week.

Today's ruling by Marion Superior Court Judge Thomas Carroll could give a boost to a federal case--also being overseen by Epstein--challenging Indiana's interstate shipping laws. Now that Epstein has won a ruling determining that Indiana wineries can ship, he can show that the state is discriminating against out-of-state wineries by not allowing them to ship. That lawsuit will likely get its day in court in January, Epstein predicted.

The decision also comes at a pivotal time for Indiana wineries, which claim that most of their direct-shipping sales come during the holiday season. "These people want to be able to advertise and take Christmas orders--that's the whole point of this," said Epstein.

One Indiana winery owner, Charles Thomas of Chateau Thomas in Plainfield, said that he did about 10 percent of his business through direct shipping prior to the enforcement bulletin. He had also started a wine club, which in only a few months built a membership of about 300. "Then this ruling came along, and in two weeks we were down to 92 members," said Thomas. "I think our wine club would probably double or triple if we could ship to the rest of the state." He added that he has been able to rebuild the membership slightly, but only with consumers who live close enough to the winery to pick up their allocation four times a year.

Thomas, who testified at the court hearing, said, "My own take on it was that I thought that our arguments were a lot more reasonable, and we had a lot more evidence to support our arguments than they did. One blow to the attorney general's case was a 1979 letter from the state to the Indiana Winegrowers Guild that included a shipping arrangement worked out with UPS. "Although initially they tried very hard to keep that document out of evidence, on cross-examination one of their witnesses admitted that when they got wind of this document in the Winegrowers Guild's possession, they went back and started looking. And sure enough they found it on the books the whole time, giving us permission to ship," said Thomas.

The ATC claimed at one point that it never knew Indiana wineries were shipping, "which is not true for sure," Thomas said. "Because I personally testified at a hearing about the shipping bill that was proposed in 1998. Since then, there have been two other times that we've testified in public that we do ship."