Supreme Court decisions are a bit like prophecies: The devil is in the details. Did the highest court in the land make it legal for you to order wine from an out-of-state retailer in their ruling last month?
A majority of justices struck down Tennessee’s law requiring people to live in the state for two years before they could get a license to sell wine in Tennessee Wine & Spirits Retailers Association v. Thomas. The immediate impact was local: Total Wine & More could keep its Knoxville store and Doug and Mary Ketchum were able to stay in business in Memphis.
But what about the rest of the nation? Direct shipping advocates, who believe the laws in 37 states forbidding out-of-state retailers from shipping wine are unconstitutional, have said the decision effectively renders those laws dead. The Wine and Spirits Wholesalers of America issued a statement saying, basically, that nothing has changed.
Here’s what the decision actually means …
What the court did not say
I live in Louisiana. Good news! If I see a wine for sale in a store in another state that I can’t find here in New Orleans, I can order it. My neighbors in Hattiesburg, Miss., or Houston? They’re out of luck. And that’s not changing tomorrow.
Justice Samuel Alito’s opinion in the Tennessee case struck down that state’s durational residency requirement, finding that it unfairly discriminated against out-of-state businesses. Several other states have similar laws, and those are now effectively unenforceable.
But Alito did not say anywhere in the decision that laws preventing retailers from shipping wine across state lines are unconstitutional. He didn’t say they were constitutional either. He focused his ruling on the durational residency requirement.
He also did not get rid of the three-tier system, which most states use to channel wine from producers to wholesalers to retailers. Despite cries from wholesalers and state governments that striking down Tennessee’s law would undermine the three tiers, Alito said nothing that would do so.
What the court did say
While Alito kept his ruling narrow, his reasoning provides a great deal of hope for direct shipping supporters, as well as a road map for their fight. In striking down Tennessee’s law, he constrained the power of the 21st Amendment. Section one of the amendment repealed Prohibition, but section two gave the power to regulate alcohol to state governments. Section two is the reason wineries often tell me doing business in America is like doing business with 50 different countries.
Since the amendment passed, however, the court has steadily constrained its power, ruling that section two does not mean state governments can ignore the rest of the Constitution. States can't dictate who can sell alcohol based on the license applicants' religion or politics, for example.
And then there’s the Commerce Clause. Article I, Section 8, Clause 3 of the U.S. Constitution assigns the power to regulate interstate commerce to Congress. Thanks to the Commerce Clause, states cannot erect trade barriers.
As Alito writes, section two only trumps the Commerce Clause if a state’s law seeks to promote health or public safety. “Where the predominant effect of a law is protectionism, not the protection of public health or safety, it is not shielded by section two.” So if Mississippi bans alcohol sales to promote sobriety, that’s fine. But if Mississippi allows longtime residents to sell wine but prevents recent transplants, that’s not OK.
The court made the same argument in Granholm v. Heald, when it ruled in a 5-4 decision that states could not allow in-state wineries to ship wine to consumers while forbidding out-of-state wineries from doing the same. Tennessee v. Thomas, a 7-2 decision, further strengthens the Commerce Clause at the expense of the 21st Amendment.
What’s next?
Last week, Robert Epstein, a lawyer in the Granholm case, filed four lawsuits challenging retailer direct shipping bans in Indiana, Kentucky, New Jersey and Texas. Epstein already has pending cases in Illinois, Missouri and Florida. With the Tennessee v. Thomas decision in his quiver, Epstein believes now is the time to challenge these laws head on.
So the battle has truly just begun. Courts will have to decide if bans on retailer direct shipping are about protecting the public or protecting local retailers and wholesalers. The argument could end up back before the Supreme Court.
But I do think Justice Alito gave an important hint on how the court would rule in his opinion. “In Granholm, it was argued that the prohibition on the shipment of wine from out-of-state sources was justified because the state could not adequately monitor the activities of nonresident entities. Citing ‘improvements in technology,’ we found that argument insufficient.”
That sounds like a prophesy of victory for those who believe consumers should have the right to order whatever wines they want.
