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Updates in ABI Litigation against Illinois; Oral Argument on MSJ 6/16

The court issued a ruling today setting oral argument for ABI’s Motion for Summary Judgement for June 16.  It the decision it denied the Wine and Spirits Wholesalers of Illinois attempt to intervene in the lawsuit.  However it agreed to consider the arguments made by WSWI as well as those by the Associated Beer Distributors of Illinois in its Amcius brief as they raised isssues such as jurisdcition and constitutional avoidance that the court must consider.    ABI will have a chance to respond to those arguments by June 8.

ABI has filed their response brief.

The Associated Beer Distributors of Illinois filed their amicus brief and motion to intervene in the ABI litigation.

The state of Illinois has filed their brief opposed to ABI’s motion for summary judgement.  Read it here.

AnheuserBuschInBev filed their motion for summary judgement read it here.

As you recall, the Illinois Liquor Control Commission handed down a declaratory ruling last month that Anheuser-Busch, as a non-resident dealer, cannot own a controlling interest in a distributorship in the state.  It warned that City Beverage could lose its license if it attempts to proceed with this deal with ABI.

ABI was trying to buy the remaining 70% of Soave Enterprises in Illinois. This ruling has been challenged. Read the complaint here. 

The Illinois Wine and Spirit Wholesalers filed a motion to intervene in this matter. Read it here.

There will be much more to come.

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Appellate Briefs have been filed in the 10th Circuit.   Retailers, Mothers Against Drunk Driving, State AGs, US Justice Dept, three of the past  U.S. Solicitor Generals representing corporate interests , the list is long!

Four briefs have been filed in support of the State of New Mexico by:
-American Beverage Licensees , State AGs, Mothers Against Drunk Driving and Wine & Spirits Wholesalers of America

The state of New Mexico appellate brief is here.

The State AGs brief notes that the position of the USAir and appellants that they do not need to follow New Mexico alcohol laws would also support the amazing position that US Air could serve drinks to 11 year olds.

Four briefs have been filed in support of US Airways by:
-Air Transport Association of America, Association of Flight Attendants, Ten Former Secretaries of the DOT, and The United States

(The below was written after the trial stage and before 10th Circuit filings)

If you sell liquor to consumers in New Mexico, you need to be licensed by the state to do so. Period.

United States District Judge M. Christinia Armijo has rejected US Airways claims that federal aviation statutes and regulations (specifically the Airline Deregulation Act and the Federal Aviation Act) preempt New Mexico laws requiring every person selling alcohol to secure a public service license.  In her decision Jude Armijo noted there was no basis to assume Congress intended federal law to regulate alcohol service and that state laws are not preempted.    She noted:

Needless to say, the stakes are pretty high with this case and I personally expect an appeal by the Plaintiff in this case.    New Mexico is in the 10th Circuit.

This case further provides a strong rejection to the attempts to allow revisionist history to claim that the 21st Amendment essentially only allows a state to decide wet or dry issues.  The complaint implied that the 21st Amendment  allows a state “ONLY” to regulate the transportation or importation.  That very limited view of the 21st Amendment will not prevail.

Briefs have been filed in this case.

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Maybe the third time is the charm.  Not satisfied with another 5th Circuit opinion rejecting the myth that alcohol retailers are the same as alcohol producers, the Siesta Village plaintiffs filed a new motion for a rehearing for an en banc hearing for the 5th Circuit.  Click here to read the petition.    Looks like they have trotted out the old “model bill”  myth again.  (See older posts for a discussion on that issue.)

(earlier post)  5th Circuit Rules For Texas. Granholm Means Wineries, Not Retailer

Today the 5th Circuit ruled for the state of Texas and that out of state alcohol retailers do not have the same rights of  in state alcohol retailers.  The opinion can be found here.    Recall a panel of the 5th Circuit ruled for Texas in January (below).   The plaintiffs appealled for a full en banc review.   Instead today the 5th Circuit  denied the en banc review,  withdrew its ruling from January 26, 2010 and substituted today’s opinion.

The court agreed with much of the 2nd Circuit’s reasoning in Arnold’s Wine v. Boyle and noted that the Granholm decision focus was on products or producers, not  all three tiers in a state’s three tier system of alcohol regulation.  It noted the similarilities of  the Texas three tier system to North Dakota’s three tier system which it noted was approved and upheld  in North Dakota v. United States, 495 U.S. 423 (1986).

 I expect an appeal to the U.S. Supreme Court despite the lack of a circuit split.

(from prior posts)          Updated: The state of Texas has filed their opposition to the en banc petition by the Plantiffs. Read their opposition here.

 The Plaintiffs in the Wine Country Gift Baskets/Siesta Village case are trying to get the entire 5th Circuit to hear their case in a petition filed last week.   In a press release, the Specialty Wine Retailers Association stated:  “We are concerned not only that the Fifth Circuit’s recent ruling disregarded opinions of the U.S. Supreme Court, but that it also disregarded precedent from its own cases within the Fifth Circuit,” said Tom Wark, executive director of SWRA .   Personally, I believe that this rehearing petition grossly stretches the two Fifth Circuit decisions as well as the Granholm and I am hopeful that the state will again demonstrate this succinctly to the court.

As you recall, the State of Maryland sought an en banc opinion after it lost the most recent decision at the 4th Circuit.  Similarly, Costco failed to get the entire 9th Circuit to take up its cause after it lost most of its challenge to Washington state laws.    Both requests were denied.  Rehearings en banc are rarely granted.

 A win for the 21st Amendment today in the 5th Circuit.

 Our read of Granholm is that the Twenty-first Amendment still gives each State quite broad discretion to regulate alcoholic beverages. The dormant Commerce Clause applies, but it applies differently than it does to products whose regulation is not authorized by a specific constitutional amendment. Regulating alcoholic beverage retailing is largely a State’s prerogative. “  

“Because of  Granholm and its approval of three-tier systems, we know that Texas may authorize its in-state, permit-holding retailers to make sales and may prohibiti out-of-state retailers from doing the same.” 

The decision gives the state of Texas a clear win on all counts and joins the 2nd Circuit in rejecting the attempts to twist the 2005 Supreme Court decision in Granholm v. Heald  involving wineries into an examination of state distribution and retailing laws.

The Court did caution though that it was limiting its ruling.   “We pull back from any effort to define the reach of a three-tier retailer.”

This case is being closely watched to see how state alcohol tax rates are impacted in the future.   Will there be more challenges to small brewer tax rates?  (FYI- A federal bill changing the tax rates of small brewers is also being considered by Congress.)

(previous post)

Interesting Puerto Rico Beer Tax Case Sent Back to District Court By First Circuit

Part of the 30 year long dispute over the taxation of beer in Puerto Rico has been a lawsuit filed by Coors Brewing Company against Puerto Rico for its tax treatment for small brewers.  It its lawsuit Coors is seeking to eliminate the tax exemption for small brewers in Puerto Rico.

Coors had lost at the district court level.   The First Circuit last week reversed and decided to send the case back to the district court for further instructions.  Complicating this case is the long history of small brewer tax rates and related litigation in Puerto Rico.   The 1st Circuit remanded the case to determine if Coors was barred by previous litigation related to a lawsuit filed by its importer for Puerto Rico or another older litigation filed by the United States Brewers Association in which Coors was a member.

It is worth a read just to learn about fun law school topics such as res judicata, collateral estoppel, the Butler Act, the Federal Relations Act and the litigious history of challenges to Puerto Rico’s treatment of small and large brewers.  Alas there is no substantive discussion of the underlying dormant commerce clause, 21st Amendment or Tax Injunction Act issues in last week’s opinion.  It is a case to monitor for future discussion of the dormant commerce clause.

Here is the complaint in Coors lawsuit against Puerto Rico. Read it here.

In a very strongly worded opinion, a Michigan State Court has upheld the decisions of the Michigan Liquor Control Commission finding that the proposed MillerCoors contract violated several aspects of Michigan alcohol law.   In his opinion, Judge James Giddings noted that “MillerCoors claims for itself authority which it may not properly exercise and rights to which it is not entitled.”     The court upheld all of  the MLCC decision against five areas of the MillerCoors contract.

In very strong language the court chided MillerCoors intrepretation of administrative law and the role of declaratory judgements.

It noted that MillerCoors interpretation of the law would “leave it up to the  ’aggrieved wholesaler’ to institgate litigation to challenge contract provisions which contravene the liquor control statutes.  It’s difficult to conceive of a more wasteful and expensive way to determine the validity of these contract provisions.”

Other states have also pointed out that a standard operating contract has to be adjusted to comply with state law.  It is unknown at this time whether MillerCoors will appeal this further.

The CARE Act aims to clarify congressional intent that states have primary authority to regulate alcohol; prevent the additional erosion of state-based alcohol regulation through the expansion of the Granholm v. Heald decision, but not allow facial discrimination against out-of-state alcohol producers; and clarify that state alcohol laws are presumed to be valid and that plaintiffs should have the burden of proof.

“It’s encouraging that Congress has taken an interest in addressing issues related to alcohol deregulation and the problems resulting from continuing litigation against the states,” said National Beer Wholesalers Association President Craig Purser.

“More than 25 states have faced challenges to their authority to regulate alcohol and their ability to maintain a licensed system of alcohol controls,” Purser continued.  “With the CARE Act, Congress is taking an important step toward preventing the erosion of the states’ ability to regulate alcohol by clarifying its intent that states have the primary authority to regulate alcohol and reaffirming its commitment to effective state-based regulation which promotes responsible consumption and maintains an orderly market.

A link to the bill can be found at  www.thomas.gov by clicking “bill number” and typing H.R. 5034.

A section by section analysis of the actual language of the bill can be found by clicking here.

The 9th Circuit has issued a ruling. The state of Arizona wins, volume caps and face to face purchase requirements are permissible. Read the ruling here.

(OLDER POST)

On September 15th, the 9th Circuit heard oral arguments of a wineries appeal of an Arizona district court’s decision upholding the state’s winery laws.   Click here if you would like  to hear the oral argument while you eat lunch at your desk.   It appears one of the judges is not all with the state, one is silent and one is mixed.  Should be interesting.

 As you may recall the district court ruled on this matter in February 2008.  The decision in Black Star Farms v. Oliver was a favorable ruling for the states.  It had good Granholm flag waiving and more importantly, placed the burden properly on the plaintiffs, not the defendants.    Also, it does not take the plaintiff’s bait of alleging hometown favoritism just because there are more wineries out of state: “The mere fact that more out-of-state wineries than in-state wineries are required to adhere to Arizona’s three-tiered distribution system is not by itself sufficient to establish that Arizona’s statutory scheme is patently discriminatory in effect against interstate commerce.”

Professor Tanford has filed an appeal to the 9th Circuit from his loss in the Arizona winery case, Black Star Farms, L.L.C. v. Oliver, 544 F.Supp.2d 913 (D. Ariz. 2008).  The opinion of the district court (PDF) noted that the challenge by Professor Tanford was trying to extract an unattainable perfection out of a regulatory system that is going to vary state by state; “Nothing in Granholm suggests that the Supreme Court was concerned about equalizing the inherent marketing advantage that accrues to in-state wineries because of their close proximity to a state’s consumers.”

Since the National Conference of State Legislatures (NCSL) continues to have its position on direct shipping interpreted wrongly across the country, they have sought to clarify it.  Recently, they have written to one attorney  asking for clarity to avoid stating that the the full NCSL had endorsed a wine model shipping legislation.  Click here for the letter.

SUPREME COURT NOT INFALLIBLE, GRANHOLM FACT WRONG.

NBWA decided to look under the hood at one of the facts used by alcohol deregulators in the Granholm and related cases.  It seemed very odd to us that the National Conference of State Legislatures (NCSL), a group dedicated to supporting state rights, would have an alleged action of that organization used AGAINST its member states.  Justice Kennedy actually seems to believe that the NCSL developed and passed the model bill drafted by the California wineries. He cited to it two times in the Granholm case.

Because one law firm continues to imply that the NCSL passed a model bill on winery direct shipping, we asked NCSL to clarify their position.  NCSL’s clarification is attached here.  I also wrote to the law firm and asked them to correct the record in other lawsuits and prevent further confusion on the NCSL activity. The letter is here.

The Supreme Court sometimes gets things wrong.  For example, last term they did not recognize an existing death penalty statute when they said there was none for child rape in Kennedy v. Louisiana.   Like that case, the Granholm court just got the facts wrong .  Next time the court takes this up, they will have the correct facts.

NCSL does have one official position that is relevant to this debate.  In its official policy statement on the internet and electronic commerce NCSL has a section on alcohol regulation.   This statement went through the proper rules and was endorsed by the entire NCSL.  It states in relevant part:  ”Nothing in this policy statement is to be construed as limiting or affecting the right of any state to regulate alcohol according to its local norms and standards pursuant to the 21^st Amendment.”   A link to this official NCSL position is here: http://www.ncsl.org/Default.aspx?TabID=773&tabs=855,21,633#633

In full disclosure, the law firm disagrees  and provided this response.  To quote Strother Martin, “What we have here is a failure to communicate.”

The staff of the attorney general actually  spent time reviewing the proposed supplier contracts to state law and were very concerned about the approach by the suppliers.   These contracts that were unilaterally imposed by suppliers on distrtibutors contained a wide variety of impermissible intrsusions into the beer distributors license.

“Licensure is the foundation of California’s regulatoory system of alcoholic beverages. and is fundamental to the State’s  control under Section 2 of the Twenty-First Amendment and Section 22 of Article XX of the California Constitution.”

It further held;  “We consider any attempt to enforce the provisions of these contracts to be an unlawful, prohibited exercise of control by a manufacturer over an independently licensed wholesaler.” 

Several states including Michigan and Georgia have already pointed out how a proposed supplier contract violate state laws.  I expect many more states to utilize the guidance of the California Attorney General in their states in the weeks ahead.

Updated:   This case has been transferred to federal court in Indiana.  It has been assigned to Judge McKinney.

A New Indiana Lawsuit Filed by Retailer Seeking Direct Shipping Rights

Just 24 hours after the United States Supreme Court stated they would not take an out-of-state winery’s unsuccessful challenge to one provision of the Indiana alcohol code, the same unsuccessful plaintiff’s attorney has filed a new lawsuit against Indiana this time on behalf of an Indiana retailer.

A new case has been filed in the Southern District of Indiana, Lebamoff Enterprises Inc. v. Thomas Snow, Chairman of the Indiana Alcohol & Tobacco Commission(PDF). Lebamoff Enterprises dba Cap N’ Cork has filed a challenge under Indiana law, the Equal Protection Clause, the Dormant Commerce Clause and federal preemption of state regulation of  common carriers.  The Cap N’ Cork believes it is unfair that wineries are able to do some sales via common carriers whereas retailers are not.  The ATC has cited Cap N’ Cork  for violations. This will likely be an interesting case to see if wineries and retailers are in fact different as apparently the plaintiff here claims there is no difference between winery sales and retail sales.