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Monday, April 19, 2010

Law - More on: New Michigan law permits vintners inside and outside the state to ship their products directly to consumers

That was the heading to this ILB entry from Dec. 16, 2005. A quote from an AP story at the time:

With out-of-state wineries allowed to sell directly to Michigan residents for the first time, Michigan wineries will get the same access to buyers in other states, said Coe, managing partner of Black Star Farms in Suttons Bay.
On April 13, 2010, the 9th Circuit decided the case of Black Hill Farms v. Jerry Oliver, in his official capacity as Director of the State of Arizona Department of Liquor License and Control. (The ILB has posted a copy here. Note: James A. Tanford, Indiana University School of Law, Bloomington, Indiana, for the plaintiffs-appellants.)

From the 18-page opinion:

This case involves a Michigan winery’s claim that certain provisions of Arizona’s statutory scheme regulating the direct shipment of wine from wineries — whether located in-state or out-of-state — to Arizona consumers violate the dormant Commerce Clause. The Plaintiffs-Appellants (collectively “Black Star Farms”) claim that those provisions, in practical effect, unlawfully discriminate against out-of-state wineries.

Arizona generally requires all alcoholic beverages sold to consumers in the state to pass through a three-tier distribution system comprised of producers, wholesalers, and retailers. However, Arizona has carved out two exceptions to its system that allow wineries under specified circumstances to bypass the three-tier distribution system. First, all wineries that produce less than 20,000 gallons of wine per year — whether located in-state or out-of-state — are allowed to ship an unlimited amount of wine directly to consumers, regardless of how the order is placed, and to sell directly to retailers. Second, all wineries — whether located in-state or out-of-state — are allowed to ship two cases of wine per year directly to consumers who purchase wine while they are physically present at the winery. Relying on Granholm v. Heald, 544 U.S. 460 (2005), which held that States may mandate a three-tier distribution scheme regulating the sale of wine so long as the scheme does not unlawfully discriminate against out-of-state wineries, Black Star Farms contends that these challenged exceptions to the three-tier system violate the dormant Commerce Clause.

We conclude that Arizona’s statutory exceptions to its three-tier distribution system, which treat similarly situated in-state and out-of-state wineries the same and impose no new impermissible burdens on out-of-state wineries, do not have the practical effect of “favor[ing] in-state economic interests over out-of-state interests.” Id. at 487. Therefore, we affirm the district court’s order granting summary judgment in favor of the State.

Beginning on p. 16, the opinion discusses the "in-person" exception, concluding:
In addition, Black Star Farms adduced no evidence that the in-person exception causes wine produced by Arizona wineries to constitute a larger share of the total sales in the market. “[T]he mere fact that a statutory regime has a discriminatory potential is not enough to trigger strict scrutiny under the dormant commerce clause.” Id. at 37. A de minimis benefit to instate wineries is also insufficient to trigger strict scrutiny. See id. at 38-39; Brown & Williamson Tobacco Corp. v. Pataki, 320 F.3d 200, 216 (2d Cir. 2003); see also Baude v. Heath, 538 F.3d 608, 612 (7th Cir. 2008), cert. denied, 129 S. Ct. 2382 (2009) (upholding an Indiana statute that required consumers who wanted to receive direct shipments of wine from a winery — whether located in state or out of state — to visit the winery and supply proof of age). We must affirm the district court’s order granting summary judgment to the defendants. But see Cherry Hill Vineyards, LLC v. Lilly, 553 F.3d 423, 432-33 (6th Cir. 2008) (holding that Kentucky’s inperson purchase requirement for direct shipment of wine discriminated against interstate commerce because the plaintiffs presented evidence that the requirement favored in-state wineries and burdened out-of-state wineries).
A circuit split. Finally, the opinion concludes:
Black Star Farms attempts to raise a new argument on appeal. Black Star Farms contends the Arizona statutes are unconstitutional because they directly regulate interstate commerce. See NCAA v. Miller, 10 F.3d 633, 638-39 (9th Cir. 1993) (holding unconstitutional a Nevada statute that had the effect of directly regulating interstate commerce). Because Black Star Farms did not raise this issue before the district court, we decline to address it here. See AlohaCare v. Hawaii Dep’t of Human Servs., 572 F.3d 740, 744 (9th Cir. 2009).
Here is a list of earlier ILB entries on wine shipping.

Posted by Marcia Oddi on April 19, 2010 09:28 AM
Posted to General Law Related