Federal Court Rules in Favor of Wine Retailer DTC Shipments

Wine retailers received a double dose of good news last week.

As we reported earlier, on Thursday, the U.S. Supreme Court agreed to hear an appeal by the Tennessee Wine and Spirits Retailer Association in a case challenging Tennessee’s state residency requirement for persons or entities that hold a state alcohol beverage retail license.  Tennessee Wine & Spirits Retailers Ass’n v. Byrd, No. 18-96 (6th Cir., 883 F. 3d 608; cert. granted Sept. 27, 2018).  In determining the constitutionality of the state’s residency requirement, the Court may also weigh in on a key question that could have a big impact on direct-to-consumer shipping by wine retailers:  does the Supreme Court’s 2005 decision in Granholm v. Heald, which prohibited state from discriminate against out of state wine producers, also prohibit state laws that discriminate against out-of-state retailers.

On Friday, a federal district court in Michigan answered that very question in favor of retailers, and concluded that if the state permits in-state wine retailers to ship direct to consumers, it must also grant the same privilege to out-of-state retailers.  Lebamoff Enterprises v. Snyder, Case No. 17-10191, (E.D. Mich. Sept. 28, 2018).  The Michigan law in question allowed in-state wine retailers that held a “specially designated merchant license” to ship to Michigan consumers, but prohibited out-of-state retailers from so doing.  The court held that the law was not protected by the the 21st Amendment and unconstitutional in light of the Supreme Court’s holding in Granholm.  In granting plaintiff retailer’s motion for summary judgment, the court concluded:

“Michigan is … operating an unjustifiable protectionist regime in its consumer wine market, a privilege unsanctioned by the Twenty-first Amendment and forbidden by the dormant Commerce Clause.”

As a remedy, the court opted not to nullify the offending law, but instead extended its shipping privileges to out-of-state retailers.   Unless the state legislature repeals the law, then out-of-state wine retailers will be allowed to either apply for the state’s specially designated merchant license or a comparable out-of-state license.

New California Direct-to-Consumer Wine License Available January 1, 2012

Governor Jerry Brown signed AB 623 (Williams) to create a limited direct-to-consumer wine license in California.  The bill creates a new limited off-sale retail wine license which becomes effective on January 1, 2012 under Section 23393.5 of the California Business and Professions Code.
The limited off-sale retail wine license authorizes the sale of wine by the licensee if all of the following conditions are met:
  1. Sales are restricted to those solicited and accepted via direct mail, telephone, or the Internet;
  2. Sales are not conducted from a retail premises open to the public;
  3. The licensee takes possession of and title to all alcoholic beverages sold by the licensee; and
  4. All alcoholic beverages sold by the licensee are delivered to the purchaser from the licensee’s licensed premises or from a Type 14 licensed public warehouse.

Current type 17/20 licensees who must make sales to a licensed retailer (under Type 17 license) every 45 days could transition to the new license and conduct consumer-only sales.

For more information or assistance on California ABC matters contact Dickenson, Peatman & Fogarty at [email protected].

Copyright Dickenson Peatman & Fogarty at www.lexvini.com

Bill Opening Up Direct Shipping of Wine Introduced in Maryland

In January, Maryland’s General Assembly introduced legislation to legalize the direct shipment of wine to consumers from out-of-state wineries and retailers.  Maryland is just one of just 13 states that prohibit winery-to-consumer direct shipping and one of 36 states that prohibit direct shipments by out-of-state retailers (including internet retailers).  Although the bill seems to have the initial support of many members of the state legislature, the future of direct shipping in Maryland remains uncertain, especially considering the fact that similar legislation introduced in each of the past three legislative sessions failed, largely as a result of strong lobbying efforts on the part of wholesalers who desire to keep the strict three-tier system in tact. 
However, a recent report by Maryland Comptroller Peter Franchot, which supports allowing in-state and out-of-state wineries (although not out of state retailers) to ship wine directly to buyers, may just be the push that out-of-state wineries are hoping for. The study concluded that one of the primary concerns with direct shipping, underage access, has not been an issue in states that already allow direct shipping and therefore should not be a problem in Maryland. The study also concluded that the direct shipping prohibition negatively affects Maryland wineries. Under current Maryland law, a direct shipment of wine in or out of the state is a felony.
For more information or assistance on direct shipping issues, contact Bahaneh Hobel at [email protected]
Copyright Dickenson Peatman & Fogarty at www.lexvini.com

New Jersey Wineries Seek to Intervene in Federal Case Addressing New Jersey’s Direct Shipping Laws

On December 17, 2010, the United States Court of Appeals for the Third Circuit, in the case  of Freeman vs. Corzine,  held that New Jersey state provisions which allow an in-state winery, but not an out-of-state winery, to sell directly to consumers from their winery premises or at six salesrooms apart from their premises, and to sell directly to retailers, violate the dormant Commerce Clause and unjustifiably discriminate against out-of-state wineries that are not permitted to exercise these privileges. 

However, the court also held that New Jersey’s ban on direct shipping, which applies equally to both in state and out of state wineries, is constitutional.  The Court of Appeals sent the case back to the federal district court for the court to determine the proper remedy.  The District Court was therefore given the choice between permitting both in-state and out-of-state wineries to sell directly to retailers and consumers from winery premises within the state, or to prevent all wineries from exercising such privileges. 

New Jersey wineries, which are predominantly small wineries that do not have access to traditional wholesaler distribution channels and who depend heavily on the ability to sell directly to consumers and retailers, have now elected to intervene in the litigation to help protect the rights of in-state wineries.  While the details of the New Jersey winery position remains to be seen, they will likely argue for the allowance of direct shipment by both in-state and out-of-state wineries.  If agreed to by the District Court, such a decision could result in the opening up of New Jersey to direct shipping in the very near future.

For more information on direct shipping issues contact Bahaneh Hobel at [email protected]

Copyright Dickenson Peatman & Fogarty at www.lexvini.com

Interstate wine shipping possibly on its way back to Supreme Court

In the next few weeks it is expected that the Supreme Court will decide whether to grant certiorari to hear the appeal of the case of Siesta Village Market, LLC v. Steen, 595 F.3d 239 (5th Cir. 2010)The Siesta Village case was decided earlier this year by the U.S. Fifth Circuit Court of Appeal which held that a Texas law which allows Texas retailers to ship wine directly to Texas consumers, but forbids out-of-state retailers from doing so, is constitutional and not a violation of the Commerce Clause of the U.S. Constitution.  The plaintiff in the case, which represents the interests of a nationwide coalition of wine retailers, has argued that in the wake of the 2005 Supreme Court decision in Granholm v. Heald which held that states states may not favor in-state wineries in allowing their direct shipment of wine to consumers while forbidding direct shipment of wine to such same consumers by out-of-state wineries, similar laws favoring in-state wine retailers over out-of-state wine retailers should also be struck down.  The issue of direct shipment by retailers presents certain distinct legal nuances when compared with direct shipment by wineries, so it is possible the Supreme Court may decide to revisit the issue in this context.  This could be especially interesting in light of the change in composition of the Court since 2005.

Stay tuned ….

Copyright Dickenson Peatman & Fogarty at www.lexvini.com