Wine Retailer Interstate Shipping and the Courts: An Update

Sovos
September 22, 2021

By Tom Wark, Executive Director, National Association of Wine Retailers

The effort to open more states for interstate wine retailer-to-consumer shipments is multi-pronged. One prong—perhaps the most important—is the effort to overturn discriminatory state laws by using the federal courts to challenge state laws that violate the U.S. Constitution’s dormant commerce clause as well as the teachings of the 2005 Granholm v. Heald and the 2019 Tennessee Wine v. Thomas Supreme Court decisions.

Currently, there are eight states where lawsuits have been filed in federal court with another state’s laws set to be challenged in the near future. In each of these cases, the arguments being made are similar.

The Granholm v. Heald Supreme Court case made clear that a state’s alcohol laws may not pursue legitimate state interests through discrimination against out-of-state economic interests without demonstrating with concrete evidence that no alternative, non-discriminatory options exist. The Tennessee Wine v. Thomas decision confirmed that this principle applies to retailers in addition to producers. 

In nearly every instance when these lawsuits are filed in federal court, the state’s wholesalers petition the court to “intervene” in the case, making them defendants along with the state. This means those challenging the law find themselves up against the state and the state’s wholesalers. 

Both the state and the wholesalers argue that:

  1. there is no discrimination since out-of-state retailers may obtain an in-state retailers license and set up shop in the state just like in-state retailers have, and
  2. that the three-tier system is, according to the Supreme Court, “unquestionably legitimate” and the retailer lawsuits must fail because they challenge that court-determined legitimacy. 

The current state of wine retailer shipping

Wineries, beginning more than two decades ago, went through a very similar set of arguments in lawsuits challenging identical discriminatory laws aimed at out-of-state wineries. They prevailed in the Granholm v. Heald case. When states began to change their laws to accommodate the ruling, those laws were written to exclude and discriminate against out-of-state retailers. It was argued that Granholm only applied to producers, not to retailers. The Court answered this question in Tennessee Wine v. Thomas when it directly discredited that view. 

The eight lawsuits working their way through various federal courts are aimed at overturning the discriminatory laws that keep consumers in a number of states from accessing wines they want by having them shipped from out-of-state retailers. It should be pointed out that in no state is it illegal for a consumer to purchase wine from an out-of-state retailer, but rather it is illegal for the consumer to have the wine they legally purchased be shipped to them. This is an important distinction as the state and wholesalers often argue that states’ three-tier system requires wine to only be sold by retailers that obtained their inventory from an in-state wholesaler. However, purchases from out-of-state retailers don’t implicate a state’s three-tier system since one state’s three-tier system does not govern another state’s licensees. 

Below is a list of the various lawsuits that are currently working their way through the courts.

ARIZONA (9th Circuit)

TheWineToBuy.com v. Cocca

Status: Awaiting a response from the state to the suit filed by plaintiffs including an out-of-state retailer and Arizona consumers.

INDIANA (7th Circuit)

Chicago Wine Company v. Holcomb

Status: The case, brought by Illinois retailer Chicago Wine Company and Indiana consumers, was dismissed on summary judgment by the District Court and has been appealed to the 7th Circuit Court of Appeals.

KENTUCKY (6th Circuit)

Tannins v. Cameron

Status: Amended Complaint filed with District Court.

MISSOURI (8th Circuit)

Sarasota Wine Market v. Schmitt

Status: Appealed to the U.S. Supreme Court via a Petition for Certiorari after the case was dismissed by 8th Circuit Court of Appeals. Decision expected in October 2021.

NEW JERSEY (3rd Circuit)

Weg v. Graziano

Status: District Court briefing due by November 1. Decision expected in late Spring 2022.

NORTH CAROLINA (4th Circuit)

B-21 Wines v. Stein

Status: Dismissed by the District Court; currently on appeal to the 4th Circuit Court of Appeals.

OHIO (6th Circuit)

Block v. Canepa

Status: Discovery and summary judgment briefs due this fall. Decision expected in Spring 2022.

RHODE ISLAND (1st Circuit)

Anvar v. Tanner

Status: District Court considering a motion to add additional consumer plaintiffs.

It is generally agreed that in most cases, the U.S. Supreme Court waits to see different decisions on a single issue from two circuit courts before it takes a case. This was the strategy that brought Granholm to the Supreme Court, as well as the Tennessee Wine decision. It is the strategy being employed in the retailer shipping cases. This explains why retailer shipping suits have been filed in states belonging to seven different circuit courts of appeal.

Expect to continue to hear a great deal about these lawsuits going forward since their outcome is likely to have a significant impact on the structure of the alcohol beverage industry.

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Author

Sovos

Sovos is a leading global provider of software that safeguards businesses from the burden and risk of modern transactional taxes. As VAT and sales and use tax go digital, businesses face increased risks, costs and complexity. The Sovos Intelligent Compliance Cloud is the first complete solution for modern tax, giving businesses a global solution for tax determination, e-invoicing compliance and tax reporting. Sovos supports more than 7,000 customers, including half of the Fortune 500, and integrates with a wide variety of business applications. The company has offices throughout North America, Latin America and Europe. Sovos is owned by London-based Hg. For more information visit www.sovos.com and follow us on LinkedIn and Twitter.
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