The Supreme Court may prefer Wine to Walmart
Many liquor experts try to read the tea leaves and determine how the U.S. Supreme Court denying cert in Wal-Mart Stores, Inc. v. TABC will impact the Court’s action pertaining to the Lebamoff case.
Wal-Mart involves a Commerce Clause challenge to a Texas law, which prohibited publicly owned corporations from selling liquor in Texas stores. Lebamoff involves a Commerce Clause challenge to a Michigan law that prohibits out-of-state retailers from shipping wine into Michigan, while allowing in-state Michigan retailers to exercise this privilege.
The debate rages in liquor circles on what the Court passing on Wal-Mart means. To some it means that the U.S. Supreme Court is not apt to take another Commerce Clause case, so soon after Tennessee Wine. To others the Court passing on Wal-Mart means there is a better chance the Court will grant cert in Lebamoff. This reasoning is based on the proposition that the Supreme Court would not take two liquor cases together.
But I think there is a more logical explanation on judging the odds of whether the U.S. Supreme Court will grant cert in Lebamoff, or whether Lebamoff faces better odds than Wal-Mart.
First, trying to predict whether four out of nine justices will choose to grant cert is very difficult. What we do know is getting a case heard at the Supreme Court faces tough odds. Less than 3% of cert petitions are granted a Supreme Court hearing. However, Lebamoff’s odds for granting cert increased when the Supreme Court requested the other side response to Lebamoff’s petition for writ of certitiorai and its amicus briefs. Although the odds are still below 50/50 for granting cert, Lebamoff’s odds went from 3% to exponentially higher.
So what does this all mean, why would the Supreme Court take the Lebamoff Commerce Clause challenge v. the Wal-Mart Commerce Clause challenge? And doesn’t conventional wisdom tell us that it does not make sense that the Court would reject one Commerce Clause challenge and take the other?
The important distinction between Wal-Mart and Lebamoff
Although Wal-Mart and Lebamoff are Commerce Clause challenges, they are significantly distinct from each other. And this distinction determines why one faces better odds than the other at the Supreme Court.
Wal-Mart is a “discrimination in effect” Commerce Clause challenge, whereas Lebamoff is a facial discrimination Commerce Clause challenge.
In Wal-Mart a Texas law, which did not allow a public corporation to sell liquor at retail, was challenged on Commerce Clause grounds. Wal-Mart’s position was that the law’s effect was discriminatory, because it resulted in 98% of retailers selling liquor in Texas being Texas businesses. The effect of the law was to shield Texas retailers from out-of-state competition.
The law on its face did not discriminate against out-of-state retailers, as the ban on public corporations selling liquor at retail, applied to Texas and out-of-state public corporations equally.
Generally, the discriminatory effect cases are a lot messier than the facial discrimination cases.
Personally, I can’t ever remember the Supreme Court taking a discriminatory in effect liquor case.
In fact, the important discriminatory effect liquor cases have settled in at the Circuit Court levels and never made it to the Supreme Court. These cases include, Family Winemakers of California v. Jenkins, which challenged Massachusetts’ caps on wine production as discriminatory in effect, even though the Massachusetts law was facially neutral.  Black Star Farms LLC v. Oliver, challenging Arizona’s wine production caps, even though the Arizona law was facially neutral.
In Baude v Heaththe Seventh Circuit overturned an Indiana law requiring wineries that wanted to sell direct to consumer to abide by an Indiana law that if a winery wanted to sell to retailers, it was required to go through the three-tier system. But, the Seventh Circuit upheld an Indiana law which required a physical visit to a winery before a buyer could ship the wine home. Since the law applied equally to an Indiana and out-of-state winery it was deemed constitutional, even though the provision had the potential effect of making it harder for interstate shipments make it to Indiana residents, while making in-state shipments easier. The Seventh Circuit’s position on the latter point was appealed to the Supreme Court, based on the law maintaining a discriminatory effect. The Supreme Court denied cert on the discriminatory effect issue, leaving it to stand as sound legal principle.
In totality, the Supreme Court does not delve into discriminatory in effect/liquor cases, the most discriminatory effect cases ended up being decided by the circuits, so it is no surprise to me that cert was denied in Wal-Mart.
Why the Supreme Court may prefer wine!
The Lebamoff case is a facial discrimination case, where Michigan’s wine retailer shipping law allows Michigan retailers to ship wine to Michigan consumers, but denies this privilege to out-of-state retailers.
Unlike the discriminatory effect cases where the U.S. Supreme Court shows no appetite for jumping in, the Court’s history shows it will weigh in on facial discrimination cases.
However, let’s put some perspective around this, yes the Supreme Court shows a willingness to hear liquor/facial discrimination cases, but they don’t hear them at a regular interval. There was a fourteen-year gap between Granholm and Tennessee Wine, and in that time the Court did not grant cert even when a circuit split existed.
So, what has changed?
So what has changed, and why may the Court take a case two years after taking their latest case.
In Wal-Mart the petitioners challenged based on their belief that the 5th Circuit misapplied the principles of Exxon. Exxon is a case where the U.S. Supreme upheld a Maryland law from a discriminatory effect challenge. Exxon involved a Maryland law that prohibited a producer or refiner of petroleum products from operating retail service stations within Maryland.
The petitioner stated the statute’s effect was protecting in-state independent dealers/gas distributors who did not produce or refine petroleum from out-of-state competition. The Court found for Maryland and the discriminatory effect test was not satisfied.
The meaning of how Exxon should be applied has never been really controversial. And the Fifth Circuit’s interpretation of Exxon was not considered way off base by the Court, and hence not worthy of granting cert.
Lebamoff on the other hand, contains numerous ripe issues for the Court to consider. The issue of discriminatory wine shipping laws has been brewing for numerous years. For years the main issue was whether the nondiscrimination principle in Granholm applied to retailers. That issue was fought over a fourteen-year period, where circuit splits emerged. Tennessee Wine answered this question emphatically and indicated the Commerce Clause’s nondiscrimination principle extends to retailers.
Yet, even in spite of this clarity, the first circuit court decision after Tennessee Wine comes along, and deems a law which facially discriminates against out-of-state retailers as constitutional.
If the Court were to allow discrimination to stand, then it creates confusion two years after providing a clear precedent in Tennessee Wine.
The applicability of Granholm and the correct meaning of Tennessee Wine are at stake in Lebamoff.
In Wal-Mart the issues are not as pressing to the Court as they are in Lebamoff.
Although Wal-Mart and Lebamoff are Commerce Clause cases, they are very different. Wal-Mart pertains to an area of the Commerce Clause, discriminatory effect, where the Supreme Court generally does not get involved, especially with liquor related cases.
Lebamoff represents a facial challenge to a discriminatory state law, an area where the Supreme Court often times wades it to clarify the law, especially with liquor related cases.
Further, the Wal-Mart case has not presented an issue the Supreme Court deems controversial or contested. Whereas the Lebamoff case represents an area of the law, which has been contested for years, discriminatory wine shipping laws.
We don’t know which way the Court will go on granting cert, but I think I do know that the Court prefers wine to Wal-Mart.
 Full disclosure, I am the Counsel of Record for National Association of Wine Retailers Supreme Court Brief.
 Family Winemakers of California v. Jenkins, 592 F.3d 1 (1st Cir. 2010)
 Black Star Farms LLC v. Oliver, 600 F.3d 225 (9th Cir. 2010)
 Baude v Heath, 538 F.3d 608 (7th Cir. 2008)
 Bacchus Imports, Ltd. V. Dias, 468 U.S. 263 (1984)
 Brown-Forman Distillers Corporation, v. New York State Liquor Authority, 476 U.S. 573 (1986)
 Healy v. Beer Institute, Inc., 491 U.S. 324 324 (1989)
 Granholm v. Heald, 544 U.S. 460 (2005)
 Tennessee Wine and Spirits Retailers Association v. Thomas, 139 S. Ct. 2449 (2019)
 Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978),