Important takeaway

Judge Forrest writes a very forceful and clear dissent, where she crystalizes how the majority and other circuits have taken the Granholm and Tennessee Wine standards which require a showing of concrete evidence standard, and the employing of reasonable nondiscriminatory alternatives, and replaced it with the three-tier system being a per se rule of validity.

Her analysis that the majority and other circuit courts deviate from the Supreme Court standard to create their own standard is poignant.

Also, the majority opinion acknowledges that there is a split in the circuits around whether the three-tier system constitutes a per se rule of validity.

Will this be the issue which carries these cases to the U.S. Supreme Court?

Summary

In the newly issued 9th Circuit opinion in Day v. Henry, Judge Milan Smith invalidates his previously poorly reasoned opinion to write anew and tries to stave off an en banc hearing in the 9th Circuit. Day v. Henry, challenges Arizona’s discriminatory wine retailer shipping law. In the previous opinion Judge Smith found the out-of-state retailer shipping ban was not discriminatory because a state could mandate a physical presence requirement. Further, he concluded that Granholm’s precedent in opposition was limited in scope.

In the newly issued decision, Judge Smith decides to sidestep the discrimination issue altogether and go straight to the second part of the test, whether a discriminatory law could be justified as a public health or safety measure or on some other legitimate nonprotectionist ground.

He found that even if the law is discriminatory, the in-state physical presence requirement is an “essential feature” of the three-tier system and supports a legitimate, nonprotectionist state interests that the Twenty-first Amendment was intended to promote.

In his analysis Judge Smith admits that there is a circuit split on the issue of whether physical presence requirements can be upheld as an essential feature of the three-tier system with the 3rd, 4th, and 8th Circuits invoking the essential feature test, while the 1st and 6th requiring concrete evidence to justify discrimination.

Judge Smith holds that the physical presence requirement is an essential feature of the three-tier system and that removing it “ would effectively be hacking off two of the three legs that constitute Arizona’s three-tiered system.” In his opinion without the in-state physical presence requirement the system falls apart and the in-state benefits such as on-site inspections would not be available.

Powerful dissent

In a powerful dissent Judge Danielle Forrest takes the position that in order to discriminate a state must present concrete evidence that its discriminatory law advances public, health, safety, or some other legitimate non-protectionist interest that could not be served by nondiscriminatory measures.

Judge Forrest becomes puzzled when she considers that some of her sister circuits sidestep the evidentiary burden of Tennessee Wine and replace it with a physical presence requirement being per se legitimate.

As she stated, “If Tennessee Wine meant to create a carveout to its usual rule that states must produce concrete evidence that discriminatory regulations serve legitimate interests, it picked an exceedingly odd way to do so.”

Next the judge critiqued the majority and sister circuit’s two step analysis for determining the permissibility of discriminatory shipping laws. First, they decide whether the law is discriminatory, then we decide if it is an essential element of the three-tier system, if the answer is yes to the former and no to the latter, the third part of the inquiry is reached whether the “concrete evidence shows that the regulation advances legitimate health or safety interests.”

Judge Forrest states that the three-tier system should not be a per se reason to legitimize discrimination and that the Tennessee Wine inquiry is based on whether there is concrete evidence that justify discrimination.

Finally Judge Forrest admonished the majority for downplaying the nondiscriminatory alternatives test. The majority believes the test only was applied in Tennessee Wine when the law was deemed discriminatory and there was no essential feature involved and there was no concrete evidence supporting the state. In the majority’s view, since the essential feature of the three-tier system is protected, the nondiscriminatory alternative test is not necessary.

Although choosing not to wade into whether there were nondiscriminatory alternatives available to the state, Judge Forrest held that she would remand to the lower court to judge whether concrete evidence supports Arizona’s view, and to determine whether in-state stores with in-state managers “advances the state’s legitimate health and safety goals, and that nondiscriminatory regulations would be an inadequate substitute.”