In support of cert petitioner challenging the Ninth Circuit’s ruling in Day v. Henry, upholding Arizona’s discriminatory wine retailer shipping law, I filed an Amicus Brief.

The cert petition and the amicus take aim at how far afield the circuits have become in adjudicating whether a discriminatory wine retailer shipping law can withstand a Commerce Clause challenge.

In one basket there is the Ninth, Eighth, Fourth, and Third Circuits holding that an in-state physical presence is an essential element of the three-tier system, and thus operates as a per se justification for discrimination.

In the other basket there is the First, Sixth, and Seventh Circuits holding that physical presence is not an essential feature of the three-tier system and requires States to demonstrate, with concrete evidence, that discrimination is justified by legitimate non-protectionist interests such as public health or safety.

The circuit split and particularly the Ninth Circuit’s recent decision is concerning as it entrenches an already existing circuit split and further obscures the proper constitutional standard to apply.

Judges disagree on whether physical presence truly qualifies as an essential feature of the three-tier system that precludes them from performing a rigorous constitutional analysis, or whether a discriminatory law must satisfy the Granholm and Tennessee Wine concrete evidence standard.

The amicus brief takes aim at the Ninth Circuit’s refusal to apply the Granholm and Tennessee Wine concrete evidence standards. The per se physical presence rule has never gained traction in Granholm and Tennessee Wine. And Granholm rejected physical presence as a condition for doing business in a state.

The Supreme Court by not stepping in has led to confusion on the proper methodology to apply to discriminatory liquor laws and allows the law to fluctuate according to geography.

Market impact

The amicus next looked at the real-world impacts of permitting discriminatory wine retailer shipping laws.

The in-state physical presence requirement as a condition for shipping hurts small specialty retailers and represents a benefit for large retailers. If in-state physical presence is a necessary condition for accessing customers via DTC shipping, then the only retailers that can access these markets all over the country are those that can afford a physical presence throughout the country, which are a select few.

The amicus then highlighted and compared the ease of purchasing obscure domestic products v. niche ethic foreign wines.

The limited production strawberry rhubarb wine from Bear Creek Winery in Alaska probably won’t be found at retail in your state. But not to worry, because of Granholm the wine can come right to your door.

In contrast a Jewish consumer in Kentucky that wants a niche Israeli wine for Seder is probably not going to find it in a state with a small Jewish population. Yet, they could find it online from a retailer in New York, a state with a large Jewish population. But unlike the Bear Creek Wine, the Israeli wine cannot be shipped right to their door.

Granholm eliminated the Balkanization of the separate state wine industry and tore down the walls, unfortunately for retailers, these walls still exist and they should not.

Physical presence as an essential feature is misguided

The amicus brief argues that the certain circuits’ finding that physical presence is an essential feature of the three-tier system is misguided.

Under Tennessee Wine the durational residency test was not essential, because the state could operate a three-tier system without it.

Similarly, fourteen jurisdictions operate a three-tier system and still allow interstate wine retailer shipping. The shipping of wine by out-of-state retailers has not caused a major hole to be blown open in the system, and interstate wine retailer shipping and the three-tier system peacefully co-exist.

The Ninth Circuit’s opinion is further flawed because it misidentifies the proper object of regulation. An out-of-state retailer shipping wine into a State should be regulated not based on the location of its brick-and-mortar premises, but based on the wine it ships into the State. Similar to Granholm where the winery was not regulated on its out-of-state physical premises but based on its shipping.

The brief goes it details on the direct comparison with Granholm, which of course Tennessee Wine extended to retailers.

Conclusion

Whether the Court grants cert in this case is unpredictable. I think the reasoning is strong for granting cert, the issue has become so muddled that the legal analysis employed is up to the luck of the geographic draw. Hopefully this time the Court steps in.