21st Amendment Litigation: NY Wine Retailer Sues NYSLA

Nine years ago, the U.S. Supreme Court held that a New York law that discriminated against out of state wineries violated the Commerce Clause, and rejected arguments that the 21st Amendment protected such laws from constitutional scrutiny.

New York now finds itself at the center of yet another Commerce Clause/ 21st Amendment controversy pitting Empire Wine & Spirits LLC, a New York-based alcohol beverage retailer, against the New York State Liquor Authority (SLA).

The dispute began in August, when the SLA commenced disciplinary proceedings against Empire under 9 NYCRR 53.1(n), a code provision that gives the SLA the ability to suspend, cancel or revoke a license for “improper conduct by the licensee or permittee….”  The SLA has previously used its authority under Sec. 53.1(n)  in cases where the owners, officers, or directors of a licensee were charged with either a drug-related felony (Miracle Pub v. New York State Liquor Auth.,210 A.D.2d 229 (N.Y. App. Div. 2d Dep’t 1994); see also Edto Foods, Ltd. v. New York State Liquor Authority,113 A.D.2d 787 (N.Y. App. Div. 2d Dep’t 1985)) or serious misdemeanors, such as reckless endangerment and obstruction (See Order of Suspension of New Rat LLC).  Here, however, the alleged “improper conduct” is Empire’s shipment of wine to consumers in the following states:  Alabama, Arizona, Arkansas, California, Delaware, Georgia, Illinois, Maine, Massachusetts, Mississippi, Ohio, Louisiana, Pennsylvania, Vermont, Virginia, and Washington.  Some of those states prohibit out of state retailers from ship to in-state consumers; others allow such shipments so long as the retailer obtains a permit; and others have “reciprocal” privileges (i.e., if retailer’s home state allows direct to consumer shipping from state x, then state x will allow such shipments).

On September 23, Empire filed suit in state court in Albany County.  In its complaint, Empire notes that there is no New York statute or regulation that expressly prohibits a licensed retailer from shipping wine to customers in other states.  The SLA apparently concedes this point, as it failed to cite 9 NYCRR 53.1(a) in its Notice of Pleading.  53.1(a) gives the SLA the ability to cancel, revoke, or suspend a licensee when the licensee has violated any provision of the New York State Alcoholic Beverage Control Law or of any SLA rule or regulation.

Empire seeks a court order declaring that the SLA’s disciplinary action attempts to regulate the sale and distribution of alcohol beyond New York’s borders, violates the 21st Amendment, and constitutes an impermissible interference with interstate commerce in violation of the Commerce Clause.  Empire further claims that the SLA does not have the statutory authority to regulate such shipments since, under ABC Law Sec. 2, SLA’s sole function is “to regulate and control the manufacture, sale and distribution within the state of alcoholic beverages for the purpose of fostering and promoting temperance in their consumption and respect for and obedience to law” (emphasis added). Finally, Empire claims that 9 NYCRR 53.1(n) is unconstitutionally vague, as it fails to provide licensees with any warning that out of state shipments could be deemed “improper conduct” such as to warrant suspension, cancellation, or revocation of their alcoholic beverage license.

The case is Empire Wine & Spirits LLC v. New York State Liquor Authority (Case No 004915/2014).  Click on the link below for a PDF of the complaint.

Empire Wine v NYSLA 2014 Complaint

For more information related to direct to consumer shipping laws, please contact John Trinidad at [email protected]