Uniform Law Commission and its Questionable Constitutional Mandates
The Uniform Law Commission will meet in Philadelphia from July 8, to July 14, 2022 to consider adopting proposals including one named, Alcohol Direct-Shipping Compliance Act Draft (ACT), which of course deals with adopting a model law for states to consider when dealing with alcohol shipping. Ironically, Philadelphia is the same location where the Constitutional Convention of 1787 occurred. And that is where the similarities end. The ACT strives to violate the Constitution’s jurisdictional principles and even goes as far as allowing state commissions to judge a licensee for violations under another state’s laws. Permitting a state to take action against a licensee based on violating another state’s laws is a concept that should worry everyone concerned with principles of jurisdiction and fairness.
The ACT’s first troubling avenue is the desire to license fulfillment houses and require them to submit to jurisdiction. This is done under the guise that licensing fulfillment houses will aid the states in tracking unlicensed shippers of product. Problematically, the ACT believes this overarching goal trumps constitutional standards of jurisdiction.
In order to assert jurisdiction over an entity, that entity must have minimum contacts with the forum state. Jurisdiction can be a tricky gambit and a court’s interpretation of minimum contacts differs depending on the ruling. But what is undeniable is an entity can only establish minimum contacts if it targets the state and earns income in the state.
A fulfillment house works on behalf of client wineries and provides services, mainly storage and packing services. A winery sends its product to a fulfillment house for storage, and when a customer places an order, the winery requests that the fulfillment house take a bottle out of storage, pack it in a box, and prepare the package for common carrier pickup.
The fulfillment house is paid by the winery for its services and does not derive any funds from the customer who ordered the product in another state. The fulfillment house is only doing business at its location and typically does not do business in any other state.
In discussions over the draft language, one of the committee members indicated that fulfillment jurisdiction was justified based on a 7th Circuit case, where jurisdiction was established over an out-of-state cigarette seller with no physical presence and a small amount of sales. Illinois v. Hemi Group, LLC 622 F.3d 754 (7th Cir. 2010).
However, this is not an apples-to-apples comparison to the fulfilment house, as the cigarette seller targeted the market and made sales to the state’s residents. A fulfillment house does not make sales and merely provides a service out-of-state to an entity with in-state sales. The entity that sells the wine to the in-state resident is the one the state has jurisdictions over and not the fulfillment house.
Ignoring constitutional principles of jurisdiction in order to achieve one’s goals is very concerning and should alarm anyone believing Constitutional fidelity is important.
Although the fulfillment house provision is terrible itself, it is not the most alarming provision in the ACT.
Under Section 9 of the ACT, a state commission can suspend, revoke, or not renew a license if the state commission rules that its in-state entity unlawfully shipped product into another state. The Commission is required to hold a hearing where it determines whether the in-state entity shipped in violation of another state’s shipping laws, and it judges based on that other state’s laws.
Yes, that is correct, a state holds a hearing to determine if you violated the laws of another state according to that state’s law and takes action against you for not violating the laws in the state which you are licensed but based on another state’s law. A judge trained under the laws of one state, all the sudden is deemed to pass judgment on laws of a state in which he or she may not be admitted.
To illustrate the absurdity, if you got a DUI in Indiana and you are a resident of California, would you expect California to judge you according to the laws in Indiana, or would you expect an Indiana forum to judge you? The obvious answer is you would expect to be in the Indiana forum.
Clearly, the provision makes no sense, but we must ask what is behind this, what is the method to the madness? Again, this is motivated by jurisdictional issues. If State A deems a shipment does not meet its legal standards, but the shipper’s business activity is not enough to establish jurisdiction in State A, the ACT envisions a work around for the lack of jurisdiction by inventing a dubious legal concept, which allows an extra jurisdictional sanction against the business entity.
But I think we should be careful of creating a slippery slope where a state forum decides based on the laws of another state to punish someone. We are trained as lawyers and admitted to practice in a specific jurisdiction. This is especially so of people judging the legality of issues before them. Under the ACT’s provision, this concept of how the legal world operates would become withered away based on achieving the ACT’s policy goals.
As I look at the ACT, I see excessively troubling provisions. The Uniform Law Commission, which will vote on whether to adopt the ACT in its current form, would do a great disservice to the legal system and the Constitution if it approved the ACT. This ACT should not be used as a model by the states for regulating direct shipping, but should be voted down and thrashed as not being aligned with the Constitution.
When the founding fathers met In Philadelphia, they imposed certain restrictions on government powers and the Supreme Court affirmed these restrictions, as the Uniform Law Commission meets in Philadelphia 235 years later, it proposes to the states a way to ignore the Constitution and the Supreme Court’s mandates limiting government overreach.
Let’s hope the Uniform Law Commission considers the ACT in light of Constitutional history and makes the right decision and rejects this Act.