In an unsurprising decision the Eastern District of Missouri ruled that a challenge to Missouri’s ban on out-of-state wine retailers shipping to customers within the state, failed to state a claim on which relief could be granted and dismissed the challenge. Sarasota Wine Market v. Parson, Case No. 4:17CV2792 HEA (Eastern District of Missouri, March 29, 2019)

Takeaways
1. Sarasota Wine breaks legal ground

The Eastern District’s decision was bound by the 8th Circuit’s precedent in the Southern Wine (Southern Wine & Spirits v. Alcohol & Tobacco Control, 731 F.3d 799 (2013)) case and held that the 8th Circuit drew a bright line test that Granholm was limited to the producer tier. Southern Wine dealt with a residency issue pertaining to wholesalers and did not factually address how retailers were affected. Nevertheless, the Court held that the 8th Circuit’s decision expanded beyond the wholesaler tier to the retailer tier.

Specifically, Sarasota Wine is the first case where a Court held that Southern Wine’s precedent allows for a wine shipping ban and that Granholm is limited solely to producers.

 

2. Sarasota Wine v. Lebamoff conflict

Unlike the Michigan Lebamoff case (Lebamoff Enterprises Inc. v. Snyder, 2:17-cv-10191, 9-28-18) which was bound by the 6th Circuit’s decision in Byrd LLC v. Tennessee Wine and Spirits Retailers Association, 883 F.3d 608 (6th Cir. 2018), Sarasota Wine did not rule that allowing in-state shipping challenged the integrity of the three-tier system.

In Lebamoff the Michigan district court ruled that allowing in-state retailers to ship breaks the hermetically sealed three-tier system and hence compromises its integrity. Although Sarasota Wine mentioned a fourth tier, they did not rule that this fourth tier compromised the integrity of the three-tier system.

In addition to making decisions bound by different precedents, these two courts interpreted the integrity of the three-tier system in radically different ways.

In totality, these decisions nicely demonstrate the conflict between the 6th and 8th circuits. If the Tennessee Wine case does not take care of the Granholm issue properly, these cases will bubble to the surface and create the circuit split necessary for the Supreme Court to grant cert.

However, there is a chance that Sarasota Wine could be overturned by the 8th, since they are making a new argument. In Lebamoff, the Court is following the legal principles of Byrd without embarking on new legal ground. Its decision (If not affected by Tennessee Wine) is relatively safe!

 

The Court uses another Circuit to justify their position

In an interesting twist, the Court utilizes a decision from the 2nd Circuit, Arnold’s Wines, as evidence that Southern Wine drew a bright line test that limited the Granholm decision to out-of-state products and producers. How another Circuit interpreting the 8th stands up as a legitimate basis for a decision remains to be seen.

Facts

As with the run of the mill wine-shipping cases, the facts are the same. An out-of-state retailer that wants to ship into Missouri, an in-state retailer that can’t ship out-of-state because states will not allow them to ship based on Missouri’s ban (lack of reciprocity basis), an in-state customer that wants to order from out-of-state retailers, and an out-of-state wine consultant that wants to work with residents in Missouri to locate fine wines throughout the country.

Procedure

The state tried to dismiss Sarasota Wine’s claim on two grounds: 1) there was a lack of standing; and 2) failure to state a claim upon which relief could be granted

Standing

The Court determined that the plaintiffs must have “1) suffered an injury in fact, 2) that is fairly traceable to the challenged conduct of the defendant, and 3) that is likely to be redressed by a favorable judicial decision.”

The Court stated that the plaintiffs could show that they suffered from losing sales and that the injury could be traced to the law prohibiting the sale of wine from out-of-state retailers.

Based on satisfying the test, standing was established by the plaintiffs in this case.

Failure to state a claim

The State of Missouri claimed that the Plaintiffs failed to state a claim upon which relief could be granted and filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).  The Plaintiffs (Termed Sarasota Wine collectively) stated that the constitutionality of the Missouri law as applied to out-of-state retailers, can’t be decided on a Rule 12(b)(6) motion.

The District Court disagreed and held that the precedents established in Granholm and in Southern Wine barred Sarasota Wine’s claims for relief.

Commerce Clause

The Court determined the appropriate relationship between the 21st Amendment and the Commerce Clause by relying on Southern Wine’s interpretation of Granholm.

Under this analysis, the Court interpreted Granholm as limited to producers and at the same time upholding the tiered liquor distribution system. Therefore, under their view “the Supreme Court limited the prohibition on interstate discrimination to the first tier of the liquor distribution system: producers and products.”

In the Court’s view “State policies are protected by the 21st Amendment when they treat liquor produced out of state the same as its domestic equivalent.” The Court interpreted Southern Wine as mandating policies defining the structure of the distribution system while giving equal treatment to in-state and out-of-state liquor products and producers.  

Sarasota Wine’s counter

Sarasota Wine argued that dismissing its claim is improper because the 8th Circuit would need to decide on the facts whether Southern Wine extends to retailers. As the 8th was silent on the issue, dismissing the claim would not take into account their view. The Court claimed that the 8th Circuit expressly rejected this argument in Southern Wine. The Court cited a paragraph from the Arnold’s Wine case from the 2nd Circuit as their main argument that Southern Wine already decided this issue:

“Southern Wine contends that even after Granholm, the constitutionality of residency requirements in the wholesale tier depends on a case-specific balancing of interests under the Commerce Clause and the Twenty-first Amendment. Insofar as Granholm imported a balancing approach to regulations of the three-tier system, however, it drew a bright line between the producer tier and the rest of the system. The more natural reading of Granholm is the Second Circuit’s: “Because New York’s three-tier system treats in-state and out-of-state liquor the same, and does not discriminate against out-of-state products or producers, we need not analyze the regulation further under Commerce Clause principles.” Arnold’s Wines, 571 F.3d at 191. 731 F.3d at 810.”

The Court determined that Sarasota Wine cannot show nor did they allege that the Missouri Law provided differential treatment to in-state and out-of-state products and producers. Since Sarasota Wine’s claim relate only to the retailer tier, it is foreclosed by the “bright line” between the producer tier and the rest of the system described in Southern Wine.

Sarasota Wine further argued that the 8th Circuit’s statement about the bright line test is dictum.

The Court fervently disagreed with this interpretation and stated that the 8th Circuit provided copious commentary distinguishing discrimination against producers and products from discrimination in other tiers of the liquor distribution system. In their view, the statute was constitutional because it does not discriminate against producers or products and it legitimately exercises the state’s power under the 21st Amendment.

Privileges and Immunities Argument

The Court essentially stated that because the Plaintiffs rights are subject to limitations imposed by the 21st Amendment, their rights are not protected under the Privileges and Immunities Clause.