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Consumers, Winery Take On Arizona Over Wine-Shipping Restrictions

The Institute for Justice has filed a suit in federal court claiming Arizona's ban on interstate wine shipments is discriminatory.

Dana Nigro
Posted: October 9, 2003

Add Arizona to the list of states that are facing lawsuits over their restrictions on direct-to-consumer shipments of wine.

Several Arizona consumers and a small Virginia winery, all represented by the Institute for Justice, based in Washington, D.C., are challenging Arizona's laws in federal court.

Until recently, Arizona had completely banned out-of-state wineries from shipping their products directly to consumers, while allowing local wineries to ship to residents. The plaintiffs argue that such a system is discriminatory and therefore unconstitutional.

"State laws are not supposed to purposefully favor in-state businesses over out-of-state ones," said attorney Clint Bolick, vice president for the Institute of Justice. "Our founders intended for America to be one big free trade zone."

Lawsuits are pending in several other states -- including Michigan, New Jersey, New York and Ohio -- that ban interstate wine shipments, but allow in-state shipments. But there are some unique elements to Arizona's system of regulating alcohol sales.

As of Sept. 18, a new law allows Arizona residents to have wine shipped home to them when they are visiting wineries in other states. Consumers must be physically present at the winery to place their orders, and they are limited to two cases a year per winery. At this time, package carriers such as Federal Expresss, UPS and DHL have not yet begun to ship to the state.

There is one other way consumers can order wines that they can't find in the state. A winery can obtain a special permit from Arizona, but the winery must ship it to a liquor distributor, who must send the wine to a retailer for pickup or delivery to the consumer. This is almost the same as the existing three-tier distribution system, except that a consumer can call a winery directly to initiate this process. "It preserves intact the middleman monopoly," said Bolick.

Meanwhile, according to Arizona's Department of Liquor Licenses and Control, Arizona wineries may ship to residents without limits on quantities and without the on-premises restriction.

Although Arizona does allow some interstate shipments, Bolick said, "To simply boil it down, if a state has two separate sets of rules for direct shipping, one for in-state wineries and one for out-of-state wineries, in our view, it violates the Commerce Clause of the Constitution."

The suit was filed on Oct. 7 in the U.S. District Court for the District of Arizona. The plaintiffs are wine connoisseur John Norton, a former deputy secretary for the U.S. Department of Agriculture who lives in Arizona, and six other consumers who want to order from small, out-of-state producers. They are joined by Lewis Parker, proprietor of Willowcroft Farm Vineyards in Leesburg, Va., who would like to fulfill orders for his wines from consumers in Arizona, but can't unless they visit his winery.

The Institute for Justice is also behind the shipping lawsuits in Virginia and New York and works with the Coalition for Free Trade, a winery-supported nonprofit group that is coordinating many of the shipping lawsuits around the country. Bolick's cocounsels are Indianapolis attorney Robert Epstein and Indiana University law professor Alex Tanford, who have litigated the cases in Florida, Indiana, Michigan and North Carolina, and who recently filed new lawsuits in New Jersey and Ohio.

The attorneys made significant legal process this summer. A federal appeals court overturned Michigan's ban on interstate wine shipments; the case is still pending as the state has requested a rehearing. Another appeals court forced Texas to open up its market to interstate shipments. In response to court rulings, Virginia and North Carolina also recently passed laws allowing limited shipments.

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For a complete overview and past news on the issue of wine shipments, check out our package on The Direct Shipping Battle.

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