Missouri’s discriminatory wine retailer shipping law upheld by the 8th Circuit
The Eight Circuit announced today that Missouri’s wine retailer shipping law, which allows in-state retailers to ship to Missouri residents, but denies this same privilege to out-of-state retailers is constitutional. Sarasota Wine Markets, LLC v. Schmitt, 19-1948 (8th Circuit) Sarasota Markets decision
The original decision in the district court was largely based of the 8th Circuit’s Southern Wine and Spirits case, which held that because Granholm was limited to producers, the state could discriminate against a retailer or wholesaler based on residency. Obviously, with the Supreme Court in Tennessee Wine holding that Granholm’s nondiscrimination principle extended beyond producers, the 8th Circuit was required to look at things in a different way.
The 8th Circuit acknowledged that Tennessee Wine did overrule one major ground of Southern Wine and Spirits when the Supreme Court ruled that Granholm’s nondiscrimination principle applied to all tiers. However, the 8th Circuit held that the Supreme Court did not overrule Southern Wine and Spirit’s second major grounds for imposing a residency requirement, “because it serves valid health, safety, and regulatory interests.”
The 8th Circuit started its analysis by stating that the Supreme Court has recognized that the three-tier system is unquestionably legitimate, but that the way the state implements its three-tier system is not immune from dormant Commerce Clause scrutiny.
Distinguishing from Tennessee Wines
In deciding how to navigate these conflicting and aforementioned principles, the Court looked at how the facts in this case compared to Tennessee Wine.
The Judge first looked at Tennessee Wine and discussed the Supreme Court’s view that the Tennessee two-year durational residency requirement was protectionist and “ill-suited to promote responsible sales and consumption practices” and “there are obvious alternatives that better serve that goal without discriminating against nonresidents.”
Distinguishing Sarasota Wine Markets from Tennessee Wine, the Judge concluded that Tennessee Wine would not resolve the Commerce Clause issue in the case at hand. He opined that Sarasota Wine Markets (Sarasota) did not challenge a durational residency requirement, but challenged whether a licensed retailer is required to be a Missouri resident and whether that resident is required to purchase product from an in-state wholesaler.
The Judge indicated that Sarasota challenged a part of the system which allowed the state to determine how products would be funneled through a three-tier system. In the Court’s view, the state’s right to determine how product would be funneled through a three-tier system, is unquestionably legitimate and was deemed so by Courts Pre and Post-Granholm.
The Judge believed that if Sarasota’s view was adopted, Missouri would be compelled to allow a retailer that lived under a different regulatory scheme to access its markets and ship product. He utilized the example of “if Florida allowed Sarasota Wine to be acquired or controlled by one or more wine producers, Missouri would be compelled to permit alcohol sales and deliveries into Missouri by a twenty-first century version of the tied house.”
The 8th Circuit agreed with the Sixth Circuit that Tennessee Wine does not require the 8th Circuit to reverse and remand, because Tennessee Wine invalidated a durational residency requirement, which is “not an essential feature of a three-tiered scheme.” “By contrast, Sarasota without question attacks core provisions of Missouri’s three-tiered system that the Court again described as “unquestionably legitimate”.
Further, the 8th Circuit opined that the Missouri licensing requirements and restrictions “have been consistently upheld, before and after Granholm and Tennessee Wine, as essential to a three-tiered system that is “unquestionably legitimate.”
The Eight Circuit based its decision on Tennessee Wine being narrowly applied to a specific fact pattern instead of applying broadly. The Judge distinguishes between challenges to an essential part of the three-tier system versus challenges to a non-essential part of the three-tier system.
Most interestingly, the Judge heavily relies on the three-tier system being unquestionably legitimate as the reason why Missouri has the Constitutional right to discriminate against out-of-state actors.
The Tennessee Wine decision never utilized the term “unquestionably legitimate” in its decision and bypassed any perceived importance of the term. Which makes sense because in Granholm it was mentioned in dicta and was pretty much an afterthought. In North Dakota, the case in which the unquestionably legitimate doctrine originated, this case did not pertain to a Commerce Clause discrimination challenge.
Tennessee Wine set forth the principle that discrimination against all actors and not just producers was unconstitutional. The Tennessee Wine decision, similar to Granholm, widened the Commerce Clause’s power over the 21st Amendment and set a higher barrier for discrimination.
The 8th Circuit now comes along and indicates that somehow Tennessee Wine is limited in its application, and if you can fit into the unquestionably legitimate argument, then a state has carte blanche power to discriminate.
Never in Supreme Court jurisprudence has the Supreme Court held that the unquestionably legitimate doctrine provides a state the power to violate the Commerce Clause.
According to the Judge’s opinion the Supreme Court took Tennessee Wine in order to make a narrow ruling, which of course the Supreme Court never stated, and that the Supreme Court meant for a doctrine which was so important that it never even mentioned in Tennessee Wine, to be the most important factor in determining whether the state has a right to discriminate and violate the Commerce Clause.
Add in the fact that like Lebamoff v. Whitmer, the 8th Circuit did not apply a strict scrutiny test, nor applied a nondiscriminatory reasonable alternative test, and we are left with a situation where the Judge instead applies a test where once something is deemed unquestionably legitimate, the state law becomes immune from Commerce Clause scrutiny. What results is we are left with another decision where judges are varying away from Tennessee Wine’s legal standards and making their own up on the fly.
I guess truth is stranger than fiction!