In a forcefully rendered decision that could affect court cases around the country, a federal judge has overturned a Texas law that banned consumers from ordering alcoholic beverages from out-of-state sources. The ruling came as a result of a lawsuit filed in U.S. District Court in Houston last April by three Texas residents who wanted to have wine shipped to their homes.
In her 43-page opinion, U.S. District Judge Melinda Harmon agreed with the consumers' argument that the Texas law violates their right to free trade under the commerce clause of the U.S. Constitution. This same argument is the basis of direct-shipping lawsuits recently filed by consumer groups in New York, Virginia and Florida.
Harmon wrote: "The court finds that there is no temperance goal served by the statute since Texas residents can become as drunk on local wines or on wines of large out-of-state suppliers able to pass into the state through its distribution system, and available in unrestricted quantities, as those that, because of their cellar's size or Texas wholesalers' or retailers' constraints, are in practical effect kept out of state by the statute."
The judge is expected to issue an injunction preventing the state from enforcing its law. The state then has 30 days to file an appeal and ask for a stay of motion, allowing the government to enforce its regulations until the appeals court reaches a decision. Alternatively, the Texas legislature could opt to pass a new bill creating a system of controlled direct shipping.
The existing Texas law prohibits residents from importing alcoholic beverages unless they personally accompany the bottles as they enter the state. (Even then, residents are only allowed to bring in up to three gallons of wine per month.) Instead, most sales must go the "three-tier system" -- from the producer to a licensed wholesaler to the retailers who sell to the consumers. However, Texas retailers and wineries are allowed to make home deliveries to residents.
Currently, 30 states prohibit interstate direct shipments of alcoholic beverages; in seven of those states, violation of the law is a felony.
Harmon's decision adds support to a growing body of case law indicating that such interstate shipping bans discriminate against out-of-state businesses. In a similar case in Indiana, which is being appealed, U.S. District Judge Allen Sharp overturned that state's law last year, ruling that the purpose of the 21st Amendment -- which repealed Prohibition and gave states the right to control the importation of alcoholic beverages across their borders -- is temperance and not economic protection for the local alcoholic-beverage industry.
"Judge Harmon has written by far the most scholarly and in-depth opinion by the federal courts on this issue and should make quite a difference in the ongoing legal fight against protectionism directed at small out-of-state wineries," said Houston attorney Mark Harwell, who handled the case along with Fort Worth attorney Sterling Steves.
"The court's opinion represents a great leap forward on the direct-shipping controversy," said William Kinzler, general counsel for the San Francisco-based Coalition for Free Trade, a nonprofit group that supports consumer lawsuits to change state direct-shipping laws. However, he warned that this ruling doesn't ensure success in other arenas.
Many wholesalers around the country -- whose businesses may be threatened by direct sales via the Internet, phone or mail -- have been lobbying state and federal officials for bans on direct shipments, citing concerns such as collection of state taxes and the availability of alcohol to minors. "As a result of this decision, we expect the wholesalers to really turn up the heat in the Virginia, New York and Florida cases," said Kinzler. "The battle is about to become tougher."
"We believe that neither [the Texas] decision nor the ruling in Indiana will withstand an appeal if one is pursued, said Juanita Duggan, CEO of the Wine & Spirits Wholesalers of America, an association that has lobbied for restrictions on direct shipping. "A state's right to control alcohol beverage sales go far beyond promoting temperance and clearly include laws to ensure orderly market conditions and to raise revenue."
Read past news on Texas' direct shipping laws:
Read recent news on direct-shipping legislation: