What Federal Circuit will influence the future of liquor law?

 

With so many Federal Circuit Courts (Circuit or Circuits) hearing cases on liquor issues, one may wonder which Circuit will become the predominant oracle on liquor issues. Looking for a concise answer to this question becomes murkier when you consider that numerous Circuits will make decisions that are similar if not identical to decisions in other Circuits. So how does one differentiate itself from others and how does one Circuit gain predominate influences over others?

The 8th will be great

So, who becomes the great influencer over the future of liquor law and the impact of the 21st Amendment going forward?

In my opinion, the greatest power to influence belongs to the 8th.

Wine shipping cases

There are three main wine shipping cases that have been or will be at the Circuit Court for a decision.

The Lebamoff case in Illinois[1], the Lebamoff case in Michigan[2], and the Sarasota Wine[3] case in Missouri. The other wine shipping cases are newly filed and will most likely be influenced by these cases.

The Lebamoff cases went for the plaintiffs at the 7th Circuit (Illinois case)[4] and the Federal District Court (Michigan case). In these cases, I believe it is a foregone conclusion that the plaintiffs will ultimately prevail and overturn the states’ laws. As these cases will go with the prevailing trend, I think they will have very little influential value.

In the Sarasota Wine case, the Missouri Federal District Court ruled against the plaintiffs and in favor of the state. They based their decision on their own precedent in the Southern Wine and Spirits[5] case. In this case, the 8th Circuit ruled that a Missouri residency requirement for wholesalers was constitutional. Applying this precedent to the Sarasota Wine case, the 8th Circuit found that the residency requirement in Southern Wine and Spirts deemed the retailer residency requirement for wine shipping constitutional.

The Sarasota Wine case will provide a glimpse into how wine shipping cases are decided and how broadly the Supreme Court’s Tennessee Wine case will be applied in federal courts.

In Tennessee Wine[6], the Supreme Court held that Granholm was not limited to producers and that Granholm prohibits “state discrimination against all “out-of-state economic interest””.

The big question is how broadly will the 8th Circuit apply the Tennessee Wine decision? Will it find that the residency requirements in the Southern Wine and Spirits case no longer apply and that any residency requirement is discriminatory?

If so then the 8th Circuit has overturned its own precedent in light of Tennessee Wine and determined that a wholesaler residency requirement is unconstitutional. The 8th could become the 1st Court to determine that Tennessee Wine specifically applies to wholesalers and deal a major blow for residency requirements.

Conventional wisdom among many industry members is that Tennessee Wine may provide the 8th Circuit little choice on these matters. However, does the 8th walk around this issue and still maintain their precedent in Southern Wine and Spirits, or does the 8th find a state interest strong enough for upholding the out-of-state wine shipping ban?

But one thing is for sure, if the 8th Circuit finds the wine shipping ban unconstitutional, then the likelihood of these laws being upheld in other circuits is very small.

The future of the 21st Amendment itself

The Missouri Broadcasters Association v. Taylor[7] case, out of the Federal Western District of Missouri, ruled without considering the 21st Amendment and ruled that the three-tier system is riddled with so many inconsistencies that it is hard to justify maintaining its integrity as a justification for a law restricting free speech.

The decision was appealed to the 8th Circuit.

In this case the state justified a law which prohibited manufactures or wholesalers from providing certain financial aid to retailers including through advertising, as necessary to maintain an orderly marketplace and maintain the integrity of the three-tier system.

The Federal District Court held that the state could not advance a substantial interest in maintaining an orderly marketplace because “the State’s interest in maintaining an orderly marketplace through a three-tier system has certainly been blurred, if not eliminated.”

The Court opined that because the state allows manufacturers to retail and retailers to manufacture that the state’s own laws allow the blurring if not the elimination of the rules separating tiers.

How the 8th could affect the future of the 21st Amendment?

If the 8th Circuit upholds the lower court’s decision in Missouri Broadcasters, there are some potential groundbreaking events occurring. The 8th Circuit would affirm the principle that a state liquor statute or regulation could be overturned without a 21st Amendment analysis. If Courts begin to follow this precedent and rule in cases without considering the 21st Amendment, then a state’s position becomes weaker.

In previous cases, courts ruled that tied-house concerns overruled 1st Amendment considerations because commercial speech was not protected when it violated tied house rules. Retail Digital Network, LLC v. Prieto, No 13-56069 (9th Cir. 2017). In RDN the 9th Circuit held that California had a substantial interest in upholding the three-tier system and the restrictions of free speech worked towards this these substantial interests.

In this case mentioned above, Missouri Broadcasters Association, the Court considered the three-tier system a less than solid concept and the substantial interest for upholding the system was negated, when the state allowed the strict separation of the tiers to be violated in certain circumstances. Hence, the California’s justification in RDN for limiting commercial speech was not a valid justification in this case.

Since there are basically exceptions to every state three-tier system, will Courts adopt the standard from Missouri Broadcasters Association?  If so, Courts will begin to espouse the principle that the three-tier system lacks solidity and protecting the system is no longer in the state’s substantial interest. If this is the case, then the 21st Amendment could become less irrelevant.

Second, if Missouri Broadcasters Association becomes precedent, states everywhere would need to reevaluate tied-house statutes or regulations to determine if their statutes or regulations are too restrictive. This could lead to the rewriting of legal authority everywhere. Which begs the question, if the 8th Circuit upholds Missouri Broadcasters Association, and the states do not rewrite statutes or regulations, do we begin to see many challenges to state tied-house rules?

So goes the 8th, so goes the country

The 8th Circuit is in a position to influence the future of the 21st Amendment more than any other Circuit.

By overturning Sarasota Wine it could deal a blow to state residency requirements and specifically opine that Tennessee Wine applies to wholesalers.

Further, in the Missouri Broadcaster Association case, it could weaken state laws to 1st Amendment challenges and call into question state laws used to justify restrictions based on maintaining the integrity of the three-tier system.

Or the 8th Circuit could pass on making these bold statements and strongly defend the 21st Amendment powers of the state. Which of course could put it on collusion course with other circuits.

It remains to be seen what will happen in all these future cases, but what is clear is that the 8th Circuit has the opportunity to make the boldest statements!

 

 

 

[1] No. 17-2495 (7th Cir. 2018)

[2] No. 2:2017cv10191 (E.D. Mich. 2018)

[3] No 4:17CV2792 (E.D. Missouri 2019)

[4] The federal district ruled in favor of the state and the case was appealed to the 7th Circuit where the case was reversed and remanded to the District Court

[5] No. 12-2502 (8th Cir. 2013)

[6] No. 18-96 (U.S. Supreme Court 2019)

[7] 2:13-CV-2792 (W.D. Missouri 2018)

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