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Thursday, November 17, 2005

Law - Wineries sue over in-state shipments in Indiana, related matters

"Wineries sue over in-state shipments" is the headline to an AP story posted this morning on the Indianapolis Star website. Some quotes:

MADISON, Ind. -- Nine Indiana wineries are asking a court to stop the state from enforcing a directive that says shipping wine directly to consumers is illegal.

The Indiana Alcohol and Tobacco Commission sent a letter May 20 to Indiana's 31 wineries warning them that in-state shipment of wine is a misdemeanor.

The letter followed a May 16 U.S. Supreme Court Ruling that overturned laws in Michigan and New York that prohibited out-of-state wineries from shipping wine to customers in those states.

In the lawsuit filed Tuesday in Jefferson Circuit Court in Madison, the wineries are asking for an injunction to prevent the state from enforcing the rule in time to save their holiday season. A hearing is scheduled for Monday.

"It's caused havoc among Indiana wineries and may even put some out of business," said attorney Bob Epstein, who is representing the wineries. Epstein last week won a similar injunction in Pennsylvania.

After the Supreme Court ruling, Indiana wine enthusiasts thought it meant they would soon be able to have out-of-state wine shipped to them the same way they had been enjoying in-state shipment for 30 years. Then Indiana Alcohol and Tobacco Commission Chairman David Heath's bulletin appeared, banning all shipments in-state.

Epstein said there is no state law that says Indiana wineries cannot ship wine to consumers. In Indiana, it is a felony for an out-of-state winery to ship to anyone in the state who is not a licensed wholesaler.

Epstein included with the lawsuit correspondence dating to the 1970s showing in-state wine shipments are allowed by the state. * * * "As it currently stands, the record is pretty clear it's been done 30 years," Epstein said.

Here is what looks to be the basis for the above, a story today in the Fort Wayne Journal Gazette by Dan and Krista Stockman. In this story Epstein is quoted as saying re Heath's memo:
“It’s an attempt to negate Granholm (v. Heald),” Epstein said.

The only problem, Epstein said, is there is no law in Indiana that says Hoosier wineries can’t ship wine to consumers. Not only that, but there are laws on the books that say they can.

Epstein included with the lawsuit correspondence dating to the 1970s showing in-state wine shipments are allowed by the state. A Dec. 29, 1978, letter from what was then the Alcoholic Beverage Commission to United Parcel Service details the shipping arrangements agreed to and the application forms for UPS’ permit.

More from the story:
Steve Thomas, of Thomas Family Winery in Madison, said the lawsuit had to be filed.

“It was an absolutely illegal situation. They didn’t follow the sunshine law; they didn’t have public hearings; they changed 30 years of history,” he said. “It’s very unfortunate it had to come to this, but the state would not listen to anything we had to say. They left us with no choice.”

Thomas said he doesn’t know yet how much money the winery has lost because of the ban. He said in addition to what the loss he can calculate is the loss he can’t – how much people would have ordered but never bothered to ask about because of the decree. * * *

Fighting for the right to ship wine is not new to Thomas. He was involved in lawsuits in Ohio, Florida and Pennsylvania, and won all three. Now, he wants to be able to ship wine again in his home state.

“All we’re asking is that it be returned to the way it was before (the) ruling and then go from there,” he said.

Thomas said the wineries recognize that the Alcohol and Tobacco Commission has the authority to regulate the handling of alcohol in the state, but the way the change was made in May was wrong because there was no notice and no public hearings on the change.

Epstein is also the attorney handling a federal lawsuit against the state seeking to overturn the ban on out-of-state wineries from shipping wine to Indiana homes. That suit, filed on behalf of five Indiana residents and Chateau Grand Traverse winery in Michigan and White Owl Winery in Illinois, was filed in Indianapolis federal court May 18 on the basis of the U.S. Supreme Court ruling two days before.

The state is fighting the federal case, saying it does have a level playing field: Because it bans in-state shipments it can also ban out-of-state shipments. Epstein said the Jefferson County case will prove Indiana does not ban in-state shipments.

All of this could be solved by the General Assembly. The legislature and the alcoholic beverage wholesalers industry and Indiana wineries have drafted competing bills to address the issue.

Here is a good report via Law.com on the Pennsylvania case, from earlier this week. It begins:
A federal judge has struck down a Pennsylvania law that prohibits out-of-state wineries from making direct sales to Pennsylvania consumers, hotels and restaurants after rejecting an argument that the law's constitutional defect could be cured by extending the prohibition to in-state wineries.

In his six-page opinion in Cutner v. Newman, Senior U.S. District Judge John P. Fullam concluded that a recent regulation passed by the Pennsylvania Liquor Control Board was not enough to fix a discriminatory law.

"I decline the defendants' invitation to resolve the constitutional dilemma by purporting to impose upon in-state wineries the same restrictions which the challenged statutes now impose on out-of-state wineries. That is a matter for the Legislature to address," Fullam wrote.

Fullam's ruling is the fourth such decision handed down in the wake of the U.S. Supreme Court's May ruling in Granholm v. Heald that struck down similar laws in New York and Michigan.

Applying Granholm, federal judges have struck down laws in Massachusetts, Florida and Ohio.

Two states -- Connecticut and California -- voluntarily repealed their laws. But court challenges are currently pending over similar laws in Arkansas, Indiana, Kentucky, Maine and New Jersey.

Many of the documents in the above cases may be found on the website of Bloomington Law Prof. James A. Tanford, counsel of record in Granholm v. Heald, the recent Supreme Court case that struck down state laws restricting such shipments., although it looks to be somewhat out-of-date.

But here, for instance, are the early filings in the federal case of Baude v. Heath, described in the Fort Wayne Journal Gazette story.

Via the USDC ED Pa., here is the Nov. 9, 2005 ruling in Cutner v. Newman.

Posted by Marcia Oddi on November 17, 2005 10:08 AM
Posted to Indiana Law