New York Retailer Charged with Illegally Shipping Wine to Out-of-State Consumers

Albany’s Empire Wine fires back with lawsuit against New York State Liquor Authority
Sep 23, 2014

The New York State Liquor Authority (NYSLA) has charged Albany wine retailer Empire Wine with 16 counts of improperly shipping wine to out-of-state customers, a source at the store has confirmed. In a document obtained by Wine Spectator, the NYSLA accuses Empire Wine of improper conduct for shipping wine to customers in 16 states, including California, Illinois, Louisiana, Massachusetts, Ohio, Pennsylvania and Virginia.

In response, Empire Wine announced it will file a lawsuit in state court on Sept. 23, alleging that the NYSLA has no jurisdiction over out-of-state wine sales, its charges against Empire Wine violate the U.S. Constitution’s Commerce Clause and that the NYSLA rule that Empire is purported to have violated is "unconstitutionally vague."

The Commerce Clause bars states from restricting interstate trade, and was cited in the U.S. Supreme Court’s landmark Granholm decision that declared it illegal for states to discriminate between in-state and out-of-state wineries when it came to direct-to-consumer wine sales.

Retailer direct shipping proponents have long argued that the Granholm decision should apply to retailers as well, but most states, including New York, still operate under a system that permits in-state retailer-to-consumer wine shipping but forbids out-of-state retailers from doing same.

Sources close to the case confirmed that Empire Wine rejected a no-contest plea agreement offered by the NYSLA that would have included a $100,000 fine and an agreement to no longer sell wine to out-of-state customers. Created after Prohibition to regulate alcohol sales, the NYSLA is an independent agency that can enact new regulations, provided they don't conflict with state laws. Commissioners are appointed by the governor.

“The SLA’s statutory and constitutional authority is limited to the regulation of alcoholic beverages within New York; only the federal government has the ability to regulate commerce between states,” said Empire Wine's owners, in a statement dated Sept. 23. “Despite this fact, the SLA has made a bizarre and unprecedented attempt to penalize Empire for having allegedly shipped its products, including many New York wines, to customers in other states.”

“It’s very difficult to make the case that New York is ‘open for business’ when state agencies like the SLA are going after local businesses and threatening their livelihoods simply because they have customers nationwide,” said Brad Junco, owner of Empire Wine, in the statement. “Not only is this blatant overreaching by the SLA, but it is also one of the most anti-business enforcement actions that the state of New York has ever taken.”

Of the 16 states Empire is charged with shipping wine to, only residents of Louisiana and Virginia may legally purchase wine from New York retailers who have obtained the proper permit; it is illegal for a New York retailer to ship wine to consumers in the other 14 states listed on the NYSLA’s notice. Junco said that Empire never received a cease-and-desist letter from any of the 16 states.

"We received the charges on Aug. 1," said William Nolan, partner at Whiteman, Osterman & Hanna and counsel for Empire Wine. "We were frankly surprised, because there is no New York statute alleged to have been violated. We looked at the state regulation that was alleged to have been broken by Empire, which says nothing about selling out of state. It's a rule that purports to give SLA the discretion to decide what they think is 'improper conduct.' They think that they can enforce out-of-state laws or laws that don't exist in New York, so we've decided that the only way to go at this is to file a lawsuit."

Across the country, state and federal authorities have for the most part turned a blind eye to interstate wine sales in the past. While legislators, wholesalers, wineries, retailers and consumers have battled fiercely over the legality of interstate direct wine sales in the courts and legislatures, actual enforcement of these laws has until recently been relatively nonexistent, begetting a laissez-faire wine-shipping economy in which, with a metaphorical wink and nod, consumers in many states have been able to source almost any wine they want regardless of whether it’s carried by one of their state’s distributors and whether or not direct-to-consumer wine sales are legal where they live.

While there is presently no national agency which tracks the sale of wine from retailers to out-of-state consumers, based on the number and caliber of its wine retailers, New York is one of the four largest states by volume for such sales, along with California, Illinois and New Jersey, according to Tom Wark, executive director of the National Association of Wine Retailers. The improper conduct charges filed against Empire Wine may spell the end of New York wine sales for wine lovers in the 40 states that don’t permit their residents to purchase wine from New York retailers.

"I'm sure the people of New York feel relieved and safer knowing that [the NYSLA] is so enthusiastically working on their behalf to hamper legitimate commerce, hinder New York businesses and prevent out-of-state wine lovers from obtaining the wines they desire," said Wark.

The NYSLA, under chairman Dennis Rosen since 2009, has spearheaded the first multi-state effort to rein in illegal interstate shipping. In July 2013, the NYSLA revoked the license of Brooklyn retailer Liquors Galore for shipping thousands of cases of liquor across the U.S., in violation of the laws of at least 17 states.

The next month, the NYSLA issued a cease-and-desist letter to Wine Library, a New Jersey-based wine retailer, instructing the retailer to stop shipping wine to New Yorkers. (Being outside the NYSLA’s jurisdiction, according to Rosen, Wine Library continued selling wine to New Yorkers until common carriers like UPS and FedEx began refusing to accept their New York-bound packages.)

Before learning of the lawsuit filed yesterday by Empire Wine, Rosen, who was recently appointed to a second term as chairman by Gov. Andrew Cuomo, advised unhappy wine sellers and consumers to take it up with the legislature. “If someone thinks we’re wrong, the proper route is to comply with the law and mobilize to seek legislation to change it, and that hasn’t happened in New York.”

"[Empire Wine] has been calling politicians and trying to exert political influence on this office,” said Rosen, who worked for the New York attorney general’s office for 27 years, “and that won’t work with me. I didn’t come here to do anything less than the right thing.”

Retailers' ability to sell wine in other states—and consumers' ability to buy their favorite wines—may now rest with the court's decision.

New York City Direct Shipping Legal and Legislative Issues United States New York News

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