PREVIOUS POST
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.

PREVIOUS POST

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.

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 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.

Because of this settlement, there remains a circuit conflict between 4th and 9th Circuit on issue of volume discount ban. 

Clock ticking in Maryland… Cert petition due Jan 8,2010

UPDATE: Looks like folks will be busy working over the end of the year holiday season. Maryland has until January 8 to file a cert petition in the TFWS matter. http://origin.www.supremecourtus.gov/docket/09a400.htm

The possibility of Supreme Court review of the intersection betweeen state action, 21st Amendment and the Sherman Antitrust Act increased with Maryland seeking more time to file a writ of certiorari in the TFWS case.

Maryland has sought an extension until December 9 to file its Writ.  If granted and fully briefed by the other side the earliest the court could decide to accept this case would most likely be February.   It is unclear if that would be enough time for the court to consider this case before the end of its term in June.

Obviously there is much more to be written in the TFWS saga.  Stay tuned here.   Click here for a copy of Maryland’s petition.

UPDATE:    That was quick.  The 4th Circuit said “No Thank You” to the state’s request for a rehearing en banc. According to the order no judge asked to keep this 10 year old case going.

Next step:  Maryland decides whether to appeal to the U.S. Supreme Court.

Yesterday the state of Maryland filed a petition for rehearing en banc for the 4th Circuit.   Recall this was a challenge to Maryland alcohol regulations on volume discount ban, price posting and price holding for wine and liquor.  This is an important development as it is an opportunity for the tortured 10 year old history of this case to be reviewed.   To me, certain aspects of this case were caught in a continuous cycle/rut of deference to previous rulings on narrow issues that failed to permit the judges the opportunity to comprehensively look at the entire case from start to finish.    It would be nice for the 4th Circuit to look at the entire case, not just one issue.

The Maryland Attorney General’s brief highlighted four main issues for appeal: 1) The unfair heightened scrutiny facing state alcohol regulations duly authorized by the 21st Amendment; 2) the court’s failure to sever aspects of this case and do a “minimum-damage” approach to state regulation review; 3) the court’s error in calling the Maryland system a hybrid restraint and 4) the court’s failure to properly balance the state and federal interests in regulating alcohol with other federal interests.

This briefing will continue through the summer.  It is unknown when this court will rule on this petition.   Adding to the drama is the unsettled nature of the 4th Circuit with 1/3 of the judge positions open.

Update:  TN brief below.   Supreme Court to decide whether to take this the week of September 29, 2009.

A pairing of lawyer and wine connoisseur has lead to the U.S. Supreme Court  being asked whether limitations imposed by Tennessee on the transportation or possession of untaxed alcoholic beverages violate the Commerce Clause. The question arises within the context of a larger challenge concerning Tennessee’s laws governing the wine industry. The U.S. Court of Appeals for the Sixth Circuit upheld Tennessee’s ban on the direct shipment of alcohol to consumers, but concluded that certain other challenged laws were discriminatory on their face and remanded the issues to the District Court for further proceedings.  Tennessee has subsequently amended its laws in response to the 6th Circuit.  Plaintiff Jelovsek is pressing this appeal despite the legislature’s action. In her appeal she suggestions the following questions presented:

I. Whether discriminatory and protectionist laws in Tennessee’s three-tier alcohol distribution system are immune from challenge on Commerce Clause grounds, contrary to the law of this Court and other circuits?

II. Whether the Sixth Circuit erred in failing to strike down the following provisions of state laws in violation of the Petitioner’s right of equal access to the interstate wine market as protected by theCommerce Clause:

A. The laws that require in-state residency and presence to obtain a Tennessee wholesale or retail alcohol license, which laws restrict the Petitioner’s access to a wide variety of wines offered by out-of-state vendors.

B. The law that prohibits direct shipment of wine to the Petitioner from out-of-state retailers, when the State allows him to purchase as much wine as he wants from in-state retailers.

C. The law that criminalizes the Petitioner’s possession of wines purchased from out-of state retail vendors upon which Tennessee taxes have not been paid, when there is no mechanism to pay such taxes ?
?
The State of Tennessee has filed its motion in opposition to this petition.   The state’s brief is attached here.  It notes this is a bad case to take up for several reasons including the recent changes to TN law.   Sorry for the PDF of a copy as I had a hard time finding this one.

The chilling effect of Judge Pechman’s ruling on a whole host of often litigated issues from housing, environmental, labor and safety concerns is staggering.   Hopefully the 9th Circuit will correct Judge Pechman. Again.    A briefing schedule will be issued soon and this matter will drag throughout 2010.

Costco Wins for Losing

In one final shot at the State of Washington and the Washington Wine and Beer Wholesalers Association, federal judge Marsha Pechman has awarded Costco Corporation, $1.9 million in legal fees for their efforts to overturn Washington state alcohol laws.   In her opinion she suggested Costco was the prevailing party despite only winning on two of nine matters.  As you may recall, Judge Pechman ruled for Costco repeatedly at the trial level and the 9th Circuit unamiously overturned most of her rulings.   It is now up to the state and the wholesaler association to determine if they will appeal this decision to give a Fortune 50 company $1.9 million for losing its case.

A Seattle Times article discusses this ruling pointing out that Costco made roughly $210 million in profit last quarter.