The Million-Dollar Question for Wine Shipping

There is a great buzz going around about the U.S. Supreme Court’s Tennessee Wine case and whether this case will decide if Granholm extends to retailer, and hence deems laws banning wine retailer shipping as unconstitutional.

Even if the Supreme Court remains silent on the specific issue, many lower federal courts and even state courts may resolve this issue piecemeal.

We are all aware of the wine shipping cases residing in the lower federal courts. (Tennessee Wine has been classified by some as a case that wasn’t a wine shipping case that was turned into a wine shipping case. Nevertheless, it is not factually a wine shipping case). The Lebamoff cases are running through the 6th and 7th Circuits, while the Sarasota Wine case is making its way through the 8th.

There is no doubt that eventually these will get resolved in time and we may discover how federal courts answer the question on wine retailers shipping across state lines.

However, there is another wave of legal principles developing that could change the legal landscape and heavily influence legal issues surrounding wine retailer shipping.

 

What is the million-dollar question on wine shipping?

A recent Mississippi legal decision created the potentially million-dollar question for wine shipping: where does the sale of wine occur? In Jim Hood v. Wine Express a Mississippi court tackled this important issue and provide an answer that may change the legal landscape. Jim Hood, ex rel, the State of Mississippi v. Wine Express, Inc. Et al. Rankin County Chancery Court Cause #17-2064 (August 23, 2018)

 

Facts

The State of Mississippi utilized agents to perform a sting on out of state wine retailers and induced them to ship into Mississippi. The agents ordered wine on-line from wine retailers in New York and California, the buyer agents agreed to the terms of the sales and once the orders were perfected, directed delivery to the themselves in Mississippi.

Under Mississippi law, shipping wine into Mississippi is illegal.

 

Procedural History

Mississippi’s Attorney General Jim Hood decided to sue four retailers in Mississippi Chancery Court. Interesting enough, the sting included 63 companies, yet only 4 were dragged into court. The 4 retailers that were dragged into court, shipped into dry counties.

Mississippi utilized its long-arm statute to legally justify imposing jurisdiction over the defendants. Miss. Code Ann. Section 13-3-57

The defendants filed a motion to dismiss that the Judge granted and dismissed the action with prejudice for lack of personal jurisdiction.

Mississippi is currently appealing the case.

 

Ruling

The issue for this case resolved around whether jurisdiction was established and in what state did the sale occur.

 

Jurisdiction

The judge first addressed the issue of whether the State had jurisdiction under Mississippi’s Long-Arm Statute to impose jurisdiction over the sellers.

Often times in jurisdiction cases, the major question is did the seller avail itself of the state marketplace in which it sold its product? In this case, the judge implied that the sellers did not avail itself to the marketplace.

The judge deemed the sellers as passive sellers in the State of Mississippi with a nonexistent presence in the state. He noted that there were no advertisements for their products directed at Mississippi customers, the sellers don’t have Mississippi agents for service of process or business permits in Mississippi. The only activity for each seller is a website to purchase wine, which does not seem directed at Mississippi customers.

The long-arm statute requires that the businesses acts be deemed doing business in the state. As the judge ruled, the acts of the 4 sellers did not rise to the level of doing business, and hence the sanctions of the long- arm statute did not apply.

 

Where did the sale occur?

The agents of the state made purchases of wine to be shipped to addresses in Mississippi dry counties. The major question is whether the sale occurred in Mississippi (destination) or at the location of the business in New York and California (point of origin)?

The judge deemed the sale to occur outside of Mississippi.

Although he admitted that they probably delivered the wine in contravention of Mississippi law, he indicated that title to the product passed outside of Mississippi. Specifically, he stated “there’s no question they passed outside the state of Mississippi, and the buyers assumed the risk of bringing that alcohol into the state.”

He made this judgement by focusing on the terms of the contract. And stated that “if the contract requires or authorizes a seller to send the goods to the buyer, but does not require him to deliver them to a destination, title passes to the buyer at the time and place of shipment.”

He further noted that if a bottle breaks in transit that it’s the buyer and not the seller that bears responsibility.

The Judge addressed the issue of the sale occurring outside of Mississippi, even though the wine is being shipped into the state.

In his opinion the sellers attracted agents for the buyers to transport these goods, as a matter of convenience and a stimulant for sales. He noted that these were legitimate business dealings and legitimate contracts and that there was nothing which indicated a sham or a straw man purchase.

Finally, the Judge indicated that Mississippi follows the specific terms of the UCC and it is state law and the Court that requires him to rule this specific way.

 

Why this decision matters

Cases like this could change the whole game for wine shipping. Many cases have been litigated on whether wine shipping is allowed. These litigated cases hinge on whether statutes banning wine retailer shipping into a state are constitutional.

But before we even answer this question, we may need to answer a prerequisite question. Can the state even impose its ban on wine shipments?

If a sale is deemed by the UCC to take place outside the state, and the state follows the UCC, then the issue of a wine shipping ban may become irrelevant. Procedure will rule over substance!

Word on the street is the Mississippi Attorney General is in no hurry to litigate this case and has asked for an extension of time. We will see the end result. The case could be reversed on appeal and we are back to the status quo, or the case is upheld and we have a new legal principle that may cause more litigation and muddy the waters even further.

So even if Tennessee Wine gives us a clean answer or doesn’t answer the question, another line of legal attacks is coming!

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