Washington Liquor Control Board filed its notice of appeal to the 9th Circuit on the issue of paying nearly all of the attorney fees to Costco despite winning 7/9 of  the litigation.  Their notice is here.   Also, the Washington Beer & Wine Wholesalers Association filed their notice of appeal as well.  Their appeal is here.

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.

Posted September 17, 2009 by admin under 21st Amendment, Alcohol Regulation, Alcohol Review

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.”

It is unknown when the 9th Circuit will issue a ruling but we’ll post it here as soon as we get it.

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.”

Posted September 17, 2009 by admin under 21st Amendment, Alcohol Regulation, Alcohol Review, Dormant Commerce Clause

There is a new Illinois lawsuit seeking to stop the recently enacted increases in beer, wine and spirits taxes.   There are several arguments advanced in the complaint.  Of interest to me is its discussion of beer taxes vs. wine/liquor taxes.  In a new twist on the long running equilization debate, the plaintiff claims it is unfair underIllinois law that higher alcohol products are taxed at a higher rate than lower alcohol products.   A copy of this lawsuit is available for your review.

Posted September 1, 2009 by admin under Alcohol Regulation, Alcohol Review

Very disappointing but not surprising decision from 4th Circuit today ruling against the state on the Maryland laws on price posting , price holdand quantity discount ban.   This decision seemed to be a certainty when an entire new panel of 4th Circuit judges came out for oral argument.   Personally, I think the court just wanted to be rid of this tenyear old case.

The “Law of the Case doctrine” was cited as the primary reason why they could not grant the state’s relief.   So the structure of the case prevents them for making this case consistent with the Costco case in the 9th Circuit.  Next up, the entire 4th panel and/or the U.S. Supreme Court.

Oral Argument Held in 4th Circuit on TFWS anti-trust case…AGAIN!

The never-ending Sherman anti-trust challenges to Maryland’s liquor regulations on price posting, price hold and bans on volume discounts had developments today.   The latest (and fourth) trip to the 4th Circuit is obstensibly related to the most recent district court opinion (memorandum opinion).  In my humble opinion, the oral argument in December 2008 seemed to suggest the 4th Circuit was grappling with how to reconcile some older, and in my view, incorrect rulings within this case, with the recent 9th Circuit Costco case and also remove themselves from the unwieldy posture of this case.  However, in February, the 4th Circuit issued an order calling for new oral arguments.   No new guidance or limitation was provided. 

What did that mean?  Well perhaps the answer was provided today when the lawyers for the two parties walked into the court to see an entirely new panel of judges on the 4th Circuit hearing this case.   The ten years of investment of the plaintiff, defendant and taxpayers in getting the other court panel up to speed on the huge record and details about the intersection of  laws related to anti-trust, alcohol and public health had to start anew with a new panel.  I do not know why the panels were switched.

And from the questions today, this new panel does not seem to favor the state’s position and seem to have taken the more narrow view of  “why the heck should we overturn the district judge?” as opposed to a more general debate about whether the laws were hybrid or unilateral restraints.  As a result, the state was on defense and TFWS on offense for this hearing.    Instead of picking up where they left on in December, the state was in a position of showing that Judge Quarles was clearly erroneous in his ruling on tax differentials between Maryland and Delaware while at the same time responding to arguments from the panel and TFWS attorney asking why the state didn’t just raise taxes if it is interested in higher prices to raise the price of alcohol.  It was repeatedly noted by the lawyer for TFWS that Maryland has the lowest tax on liquor and if it was really interested in temperance and orderly markets it would raise the liquor tax.   He repeatedly pointed out that the state and wholesalers fought any tax increase.   Judge Duncan also asked a question on this theme.  Essentially, TFWS is saying if you argue against a tax hike you can not  seriously justify a volume discount ban (and by implication credit prohibition, minimum mark up laws, etc.) or other state laws that may impact temperance and orderly markets.

Obviously, this hearing today could pose a serious setback in the state’s ability to regulate alcohol.  It looks like  Judge Pechman’s thinking that raising taxes is the  only way a state can influence alcohol policy and pricing may have another life if my observations today are correct.   An adverse ruling in the 4th Circuit may trigger a full en banc request to get the 4th Circuit to clean out this mess, lay all issues out before it, and end the procedural games that have hampered the full appeal of this case.   However, this is rank speculation on my part.

Most importantly, the 4th Circuit and the 9th Circuit could be split on this issue and we may be looking at a U.S. Supreme Court showdown as early as late 2009.

A transcript of the most recent 4th Circuit oral argument will be posted once obtained.

NBWA along with WSWA submitted an amicus brief  in support of the state of Maryland.   The state’s brief was submitted before the 9th Circuit ruled for the state of Washington and against Costco on most counts.

Tags: 4th Circuit, Costco, liquor regulations, Maryland, NBWA, oral arguments, Sherman Anti trust
Posted July 15, 2009 by admin under 21st Amendment, Alcohol Regulation, Alcohol Review, Supreme Court

I am not sure how long this order-of-dismissal will stand but apparently a judge in South Carolina decided that  the laws against minor’s possesion of alcohol or consuming alcohol  are unconsititutional.    This will go to a higher court for a second opinion.  Here is an article about this decision.

Posted July 15, 2009 by admin under Alcohol Regulation

A very impressive win for New York today as the Second Circuit rejected a challenge by an out-of-state retailer seeking to sell to NY consumer.   In a strong opinion by Circuit Judge Wesley and a very informational concurrence by Circuit Judge Calabresi, the Second Circuit rejected the claims of the plaintiff.   The decision notes that the NY ABC laws are; “instituting a three-tier system for the regulation of alcoholic beverages, do not discriminate against out-of-state producers in violation of the Commerce Clause of the United States Constitution, Article 1, Section 8, Clause 3, and are thus a valid exercise of the state’s rights under the Twenty-first Amendment. “  The Second Circuit opinion in Arnold’s Wine v. Boyle can be found here: buyrite-v-boyle.

Circuit Judge Calabresi noted in his concurrence the challenge of lower courts and state legislatures trying to harmonize and implement the Supreme Court jurisprudence on the 21st Amendment.  (”It can leave state legislatures and lower federal courts with no firm understanding of what the law actually is.”) Moreover, he cautioned against judges putting their own spin on history saying “But judges are not historians with fancy robes and life tenure.”

 I would have added a section to this concurrence noting that the beauty of the 21st Amendment is if there is a perceived alcohol related policy problem, people can fix it in their state legislature or at the ballot box. For example, you want the county to be “dry” or “wet” or you want to limit licenses; vote on it.  Don’t have the federal court set alcohol policy.

Posted July 1, 2009 by admin under 21st Amendment, Alcohol Regulation, Alcohol Review, Dormant Commerce Clause, Supreme Court

Today the U.S. Supreme Court held its final session.  Traditionally the tougher cases on its docket are decided the last few days of the court term and today was no exception.  In a close 5-4 decision, the Supreme Court upheld the rights of the states to enforce state laws against discrimination in mortgage lending against national banks and rejected attempts by the federal government and big banks to preempt the state attorneys general from enforceing laws against national banks.  The case Cuomo v. The Clearing House Ass’n, L.L.C. (08-453) can be found at this linked opinion.   This represents a strong win for state powers who have seen their enforcement powers curbed in several cases in recent terms.

What does this mean for alcohol regulation? As always, it depends.  One of the 5 votes is now officially retired (Souter) so this may be a temporary win for state rights to regulate.  Moreover, this case had a most interesting breakdown of Justice Scalia voting with the more liberal wing of the court.  Would that breakdown replicate in an alcohol related matter?   How would a new Justice vote?

Nevertheless it is a important break for the states, specifically state attorneys general, seeking to enforce state laws against national corporate players.  Hiding behind federal regulations to preempt state laws so companies can avoid dealing with state laws they deem “bothersome” may not be so easy next time.

Posted June 29, 2009 by admin under Alcohol Regulation, Supreme Court

The U.S. Supreme Court decided Granholm v. Heald, a case concerning the direct shipping of wine shipping in 2005. The Court ruled that a state could not prohibit out-of-state wineries from shipping directly to citizens while allowing in-state wineries to do so. The Supreme Court then denied cert on the Brooks v. Vassar case in 2007.  However, the issues may be aligning for the Court to take up the issue of state-based alcohol regulation again in 2009.  As you can see from the following cert petition, Professor James Tanford has filed a writ of certiorari  to the U.S. Supreme Court arguing that the 7th Circuit was wrong to rule for Indiana in Baude v. Heath. Click here for more information on the U.S. Supreme Court appeal for Baude v. Heath.

Update: The Indiana Winegrowers Guild has filed an amicus supporting the cert petition.  They argue the “face-to-face” provision burdens Indiana wineries.

Update: The State of Indiana has filed its brief in opposition to Professor Tanford’s cert petition.   Besides noting there is no definitive conflict between the federal circuits, the state of Indiana reminds the Supreme Court of its prior holdings that the burden of proof is on the winery to show that the face to face law favor Indiana wineries at the expense of out-of -state wineries.  The Indiana brief also reminds of the previous Supreme Court precedent holding that states do not have to guarantee that out -of -state producers have the same economic chances to reach their residents as in-state producers.  After all, natural geography imposes costs and burdens of itself and a state legislature is not required to “correct” this advantage an in-state producer may have.

Unless there are any amicus briefs being filed on the state’s behalf, the U.S. Supreme Court will hopefully meet to consider this cert petition and decide to hear this matter before they recess in June.   If they do take this case, it would most likely be part of the next term that starts in October 2009.

Update: Today the U.S. Supreme Court denied cert in Baude v. Heath. This means Indiana’s law requiring alcohol to be purchased in person the first time for remote sales stands. NBWA’s statement on this decision can be reached here.

Tags: 21st Amendment, law, NBWA
Posted May 18, 2009 by admin under 21st Amendment

Interesting New Jersey Case about Dram Shop Liability was released yesterday.�
In the case of Bauer v. Nesbitt the NJ Supreme Court reversed a lower appeals court
ruling that held a drinking establishment guilty under the Dram Shop law despite the fact
that it did not provide any alcohol to the under aged, intoxicated person. �
The NJ Supreme Court reined back the expansive view of the lower court and said
the legislative intent of this legislation was not as broad as the lower court inferred.
 Much was made of the fact that the patron was not served alcohol and did not appear
intoxicated.  The case is attached for your consideration.

Posted April 13, 2009 by admin under Alcohol Review

Last week in New Orleans the 5th Circuit held oral arguments on the case Siesta Village v.  Perry.  Recall this is one of the three challenges to state laws that require sales to consumers go through licensed in-state retailers.

The 2nd Circuit held oral arguments in the similar New York case in January and there is discussion about whether the 6th Circuit case will be appealed given the legislative changes to Michigan’s challenged codes.

It is always hard to predict who won and who lost during oral arguments so judge for yourself: 

Amicus briefs filed by state AGs and NBWA  and others in support of Texas are attached for your review.

Posted April 7, 2009 by admin under Alcohol Review