Well here we go. The 1st Circuit will get another chance to address alcohol litigation.  Coors has filed a notice of appeal to the 1st Circuit on their attempt to strike down the small brewer tax rate in Puerto Rico.  Their notice of appeal is here.

(Previous post)

District Judge Rules Against Coors

District Judge Daniel Dominguez has ruled against Coors in a comprehensive opinion.   Applying a recent Supreme Court decision that overturned the 2009 1st Circuit case in this litigation, the court approved the magistrate’s decision.   The opinion can be found here.

(Previous Post)

Coors Files Objections to the Magistrate Judge’s Report and Recommendation

Coors has filed objections to the Magistrate Judge’s report and recommendations.  Most of the objections concentrate on the position of Coors that the Magistrate Judge got the dorman Commerce Clause language wrong.  The long-standing procedural history of this case is also addressed.   A copy of Coors filing can be found here.

(Earlier Post) Magistrate Rules for Puerto Rico and Against Coors

Chief United States Magistrate Judge Justo Arenas has sided with Puerto Rico and is seeking to dismiss the action brought by Coors against the Puerto Rico tax rate for small brewers.   This vein of litigation actually goes back over 30 years but the present matter started in 2006.  In a wide-ranging opinion covering many subjects the Magistrate sided with the arguments of Puerto Rico.   He dismissed the claims of Coors that the case violated the dormant commerce clause finding that there was no facial or intentional discrimination. His opinion can be found here.   Coors has until the 17th to file objections with the Magistrate.

(Earlier Post) Puerto Rico Seeks to Dismiss Coors Lawsuit Challenging Small Brewer Tax Rate

In a new filing, the government of Puerto Rico has sought to dismiss the Coors lawsuit against Puerto Rico.   In its lawsuit Coors Brewing seeks to eliminate the lower tax rate on small brewers.   Coors claims that it does not seek to lower the taxes Coors pays, just  eliminate the tax break small brewers have under Puerto Rico law.   However, a recent decision by the United States Supreme Court in Levin v. Commerce Energy has made it clearer that deference to state courts on state taxation matters is important even where someone (like Coors) claims they are not trying to lower their own taxes.   The Levin decision can be found here.  The filing by Puerto Rico notes that the 1st Circuit returned this case to Puerto Rico district court  by relying on a line of reasoning now discredited by the Levin decision.  As such, Puerto Rico’s brief argues that this matter should be dismissed in its entirety.

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.

Posted April 6, 2011 by admin under 21st Amendment, Alcohol Regulation, Alcohol Review, Dormant Commerce Clause

As readers of this blog note, there are many forms of alcohol litigation across the country.    To address one vein of the litigation, Congress has introduced H.R. 1161 the Community Alcohol Regulatory Effectiveness  (CARE) Act.    This legislation is similar to a manager’s amendment  to last year’s bill offered toward the end of the 111th Congress.

H.R. 1161 was introduced on March 17, 2011. The bill can be read here.   It was introduced with 9 bi-partisan co-sponsors from across the country.   It has been referred to the Judiciary Commmittee chaired by Congressman Lamar Smith (R-TX) who co-sponsored last year’s version.   Last year’s Judiciary Committee Chairman John Conyers (D-MI) has already signed onto H.R. 1161.  Information on co-sponsors or action on the legislation can be found at this link.  

Although there are many attempts to attack state alcohol laws, this legislation is limited to addressing the issues raised by the dormant Commerce Clause.  (Last year’s bill would have addressed more forms of litigation against the states.)    HR 1161 is modeled after laws that have already passed while capturing the Granholm v. Heald holding.  For example, Congress has clarified the dormant Commerce Clause as recently as 2005 in the Reaffirmation of Resident and Non Resident Hunting Act of 2005 PL 109-13, section 6036; 119 Stat. 231,289-290 as well as the long-standing McCarron-Ferguson Act which regulates insurance.

Here is a link to more comprehensive information on the bill.  A section by section analysis can be found here. 

Highlights of the new CARE Act:

• Clarifies the dormant Commerce Clause for alcohol regulation.
• Makes clear that states cannot discriminate  against producers on its face (e.g. saying in text of the law “in state can do ABC, but out of staters cannot do ABC) or intentionally (e.g. laws constructed that seek to intentionally discriminate against out of state producers.
• Clarifies the Wilson Act to ensure a future court will interpret the CARE Act as intended.
• Notes alcohol is a different product and that the states should continue to regulate it.

   The bill is quite limited and it is semi-amusing to see the hyperbole and falsehoods being lodged against it.   Please read the bill for yourself.

Posted March 31, 2011 by admin under Alcohol Review

Distributors were able to win on summary judgement in Ohio regarding the application of the Ohio Franchise law to the MillerCoors Joint Venture.   In a federal court opinion from the Southern District of Ohio, Judge Michael Watson weighed the totality of evidence to conclude that the company did not qualify as a successor under Ohio law and therefore is not able to terminate the distributors.  The opinion can be found here.

Posted March 22, 2011 by admin under Alcohol Review

 An Ohio judge ruled for distributors and against Pabst in its effort to terminate distributors.   Pabst Brewing Co. stock was sold to Pabst Holding Co and Pabst Holding claimed to be a successor manufacturer.  They terminated existing distributors under OH Franchise Act and the distributors brought this matter to court.   The court stated that interpretation of Franchise Act unnecessary because the legal issue turns on the provisions of the distributor agreements.  The distributor agreements in question require sixty day notice before termination.  Pabst did not provide notice within sixty days.  As such the court held that  Pabst breached the distributor agreements by failing to give sixty day notice prior to termination.  Pabst’s attempted termination was ineffective and the distributor agreements continue to bind Pabst.

This judge also has other supplier termination cases before him.    His opinion in the Pabst case can be found here. 

Thanks to Dave Raber for the heads up.

Posted March 15, 2011 by admin under Alcohol Regulation, Alcohol Review, Guest Columns

Today the United States Supreme Court issued a long list of orders.  On this list was the denial of certiorari in the Wine Country Gift Baskets v. Steen case out of the 5th Circuit.   The orders can be found here.

The Supreme Court decision leaves in place the ruling of the 5th circuit upholding the Texas ruling that the alcohol licensing scheme by Texas is consistent with the 21st Amendment and previous ruling by the Supreme Court. The rejected petition challenged the Supreme Court’s statement that the three-tier system is unquestionably legitimate but could not cite to a circuit split as the 2nd circuit also ruled similar to the 5th.

This is the fourth denial of cert by the Supreme Court since the 2005 Granholm decision. (4th,6th, 7th and now 5th)

This probably means a new lawsuit in another state by plaintiffs trying to get back to the Supreme Court. Perhaps the 8th or 11th circuits will join the rest of the circuits as they are the only circuit courts spared alcohol litigation in the past five years.

Although the Supreme Court passed on this one, the next petitions could be coming later this year out of the 3rd Circuit case in New Jersey. (see below postings)

(Earlier Post) Another Monday, another day of no decision from last Friday’s conference with the Supreme Court.   This is the second consecutitve week where the Supreme Court had this case listed, but no order announced the following Monday.  Not sure whether I should read more into this (dissentin ranks?)  or just the volume of cases before the Supreme Court means they just haven’t gotten to this case yet.   Here is the list of today’s orders.   If they update the docket for this case it will be listed here.

(Earlier Post) Supreme Court to Decide Whether to Grant Cert on February 25

Looks like we will know next Monday whether the Supreme Court will hear this case despite the lack of a circuit split.   Here is the docket for the case.

(EARLIER POST)  Reply Brief In, Wine Country Matter in the Hands of the Supreme Court

The Supreme Court orders can be found here.

Well the briefing is all done.  Click here for the reply brief by petitioners in Wine Country.  Nothing new rather than repeat of their claim that their expansive view of Granholm is not being followed by the courts.  I must note that there still is no circuit split to back up their expansive view of Granholm.    The matter now is in the hands of the justices who will decide at some point in late February whether to grant cert, deny cert or ask for Texas to file a response.

(Earlier Post)  State Waives Filing, Respondents File In Opposition to Cert

The State of Texas waived a filing in response to the cert petition.     However, the respondents filed opposition to the cert petition.   Their brief can be found here.   The respondent’s brief concentrates on the basic and points out what the petitioners don’t like to acknowledge; 1) there is nothing close to a circuit split here warranting SCOTUS intervention and 2)  the courts below have followed Supreme Court direction in their opinions.    Expect more trees to be killed by the petitioners to try to keep their hopes alive.

(Earlier Post )-   Two Amicus Briefs Filed In Support of Cert. Petition In Wine Country/Siesta Village Matter

Happy New Year!    Sorry for the delay but two amicus briefs were filed in support of the plaintiffs seeking to reverse the 5th Circuit’s ruling for Texas.   One brief I’ll classify as the Nostalgic FTC Alumni Association was paid for by the Family Winemakers Association of California.  You will recall from the below note on the 1st Circuit case, the Family Winemakers Association of California is represented by Kirkland and Ellis, the same law firm who filed this pending cert petition.  In this brief which you can read for yourself here, former FTC staffers seek to highlight their various “research”  (that is often rolled out as not official FTC work) and imply that all state alcohol regulations are the product of big bad special interest wholesaler lobbying at the state level so state laws should be struck if it gets in the way of new business models.   I oversimplify of course but you can read for yourself.

The other brief was paid for by the Specialty Wine Retailers Association whose members include the plaintiff Wine Country.  It claims the 5th Circuit really messed things up and threaten to unravel the entire free world, again I may be overstating things but some of the rhetoric approaches those claims.   It was written by Bruce Hay, a former law clerk to Justice Scalia which probably explains all the repeated references to concurring opinions by Justice Scalia in their brief.  I guess they are trying to keep him on their side.   Also it is interesting to note that Mr. Hay and Einer Elhauge work for the same company Legal Economics, Inc. (http://www.legal-economics.com/) when they are not teaching Harvard law students.  In fact, just a few months ago, Mr. Elhauge testified before the House Judiciary Committee on behalf of the Beer Institute and noted that there was no real conflict in this area of law and suggested that fears of litigation in the retail shipping case were overblown:

“Challenges have also been brought against state laws that make direct sales to consumers illegal for out-of-state retailers but legal for in-state retailers. However, even though these state laws are facially discriminatory, they have actually been upheld by all three appellate federal circuits to consider the question, on the ground that favoring in-state retailers is inherent to the states’ Twenty-first Amendment authority to define who constitutes a retailer within the three tier system—a system whose legal validity has been unquestioned in the courts. True, one district court reached the opposite conclusion based on the law’s facial discrimination, but that district court did not consider the connection between the state law and the three-tier system and the appeal was mooted when the legislature amended the statute. There thus does not appear to be any final judgment that prohibits such statutes and little risk they would be invalidated, and in any event any nominal conflict in case law appears to have been decisively resolved in favor of the three circuits that sustained such laws.” (emphasis mine)

So what is next?   The Supreme Court has a cert and two amicus to consider.  The parties kill acres of trees trying to argue why the case should be heard and making crystal clear water muddy.  However, as Professor Elhauge has noted, there is no conflict in the courts that needs Supreme Court clarification.   For next steps, the State and intervenors could not file a response, or  they could file a response, or they can wait for the Supreme Court to tell them to respond.  A response at the end of the month is possible or one in February.   If so the earliest the Supreme Court could give the thumbs up to hear or deny this case is probably February.  If cert granted it probably would not be heard before the end of the Supreme Court term in June.  However, I am sure there is more to this saga and we’ll report it when it does.

(Earlier Post)  Plaintiffs File SCOTUS Petition in Wine

Country/Siesta Village Lawsuit Against Texas

The answer to the question of whether there would be an appeal was given today in the form of a Petition for a writ of certiorari filed in the Supreme Court of the United States.   The Supreme Court’s website shows that the petition was filed on the last possible day for the plaintiffs.   A link can be found here.        The state has until December 22 to file a response.

Here is a copy of the petition.   Once again they try to blur the lines and claim that retailers and wineries are the same entity.  They forgot to mention that the federal government doesn’t agree with that.  For example, the wineries need to be licensed at the federal level. Retailers do not.

What are the chances of the Supreme Court taking this?   Who knows.   They should not. There is no circuit split.  The 5th Circuit opinion is well reasoned.   However, this is the last play the plaintiffs have and perhaps the Hail Mary pass will work.   Will be an interesting start to 2011.

(EARLIER POST)

Judge Fitzwater has entered the final judgment for the state of Texas in the Siesta Village matter.  What will the folks that maintain wineries = retailers do next?

(earlier post)

5th Circuit Rejects Rehearing; Texas Wins; Supreme Court Next?

The 5th Circuit has wasted little time rejecting this third bite at the apple.  In the order, no judge on the 5th Circuit asked to hear and review this case.   Like the 2nd Circuit case, the 5th Circuit noted that Granholm dealt with wineries, not retailers.  The Granholm court’s holding that the three tier system is unquestionably legitimate remains powerful and was repeatedly used by the 5th Circuit.     Now the question is, will the plaintiffs attempt to seek the Hail Mary pass of the U.S. Supreme Court?

(PREVIOUS POST)

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.”

Posted February 22, 2011 by admin under 21st Amendment, Alcohol Regulation, Dormant Commerce Clause, Supreme Court

United States District Court Judge Garaufis in Brooklyn has ruled that New York’s beer franchise statute protects distributors from arbitrary termination. The Court ruled that an importer is a “successor brewer” under the current law and as such is not allowed to terminate its wholesaler without showing good cause.  The importer had attempted to terminate its contract with the wholesaler by arguing that because it acquired its license from the brewer rather than a private importer that it was not legally defined as a “successor brewer.”  The court noted, “When a brewer interposes an intermediary in an existing supply relationship with a wholesaler, statutorily imposing the brewer’s obligations on the intermediary shields the wholesaler from arbitrary termination.”    Separate counts relating to New Jersey and Connecticut franchise law were postponed with the court asking for additional briefing. 

Read the ruling here.

Posted February 8, 2011 by admin under Alcohol Regulation

The New Jersey Attorney General office filed a petition for panel and en banc rehearing in the Third Circuit case.  A copy of their petition is attached here.  New Jersey alleges that the panel that heard the 3rd Circuit did not interpret Granholm correctly,  that they entertained new arguments without giving New Jersey a chance to respond, they incorrectly expanding standing in this case to wine connoisseurs and that the court got the remedy wrong.   New Jersey believes the state legislature not the court should determine the remedy here.

(EARLIER POST)

3rd Circuit Rules for New Jersey In a Mixed Decision

Third Circuit upheld New Jersey’s ban on direct shipping but ruled other parts of the NJ ABC Code violated the dormant commerce clause. The court struck down the in-state winery room sales/tasting provisions. Much of the opinion discussed the legality of standing for the plaintiffs. The 3rd Circuit has bounced back to the district court a determination of proper remedy in this matter. The opinion can be found here.

(EARLIER POST)

3rd Circuit opinion in New Jersey direct shipping case expected soon

Any day now the 3rd Circuit will issue an opinion in Freeman v. Fischer.  In Freeman, the NJ District court mostly found for the state of New Jersey’s wine shipping laws but had some concerns about fees and regulations of out of state wineries.  The state’s brief to the 3rd Circuit can be found here.

Posted January 20, 2011 by davetate under Alcohol Review

For once we are not talking about the Commerce Clause (positive or dormant) as part of alcohol litigation.   After losing  for some time in the state legislature, it appears some Kentucky retail interests have run to federal court to challenge the state’s laws regulating who can sell what type of alcoholic beverages and under what terms.   The four count complaint challenges a Kentucky law and administrative regulation under the  equal protection clauses of both the United States and Kentucky constitutions.

I would expect Kentucky to have a strong defense of this matter since equal protection challenges only require the state to rationally relate their statute to its state interest.  Many facts to support the state here.

This case is another attempt by special interests to have the federal court system create alcohol law instead of letting state legislatures using their 21st Amendment authority to create the law for a state.

Posted January 12, 2011 by admin under 21st Amendment, Alcohol Review

Update:

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.”

Posted January 2, 2011 by admin under 21st Amendment, Alcohol Regulation, Dormant Commerce Clause, Supreme Court

It appears that Costco Corporation’s third bite at the apple in their attempt to deregulate the alcohol market in Washington State has reached the same conclusion as its first two attempts. Following failed attempts in the courtroom and the legislature in recent years, this year Costco spent millions of dollars to get an initiative on the ballot that would have privatized liquor sales in the state while also stripping the state of virtually all pricing and chain of custody laws pertaining to alcohol.

While the final margins are still being determined, the Associate Press and multiple news outlets across Washington State have reported that Initiative 1100 has been rejected by the voters in Washington. As of Wednesday evening, roughly 52.5% of the voters rejected the initiative compared to 47.5% who supported it (http://vote.wa.gov/Elections/WEI/ResultsByCounty.aspx?ElectionID=37&RaceID=103961&CountyCode=%20&JurisdictionTypeID=-2&RaceTypeCode=M&ViewMode=Results).  Additionally, a related ballot initiative which would have also privatized the state system but kept three tier related laws, I-1105, was defeated by an even greater margin, with more than 63% of voters rejecting it.

A wide-ranging coalition of organizations did a fantastic job of orchestrating the No Campaign against I-1000 and I-1105. Nurses, firefighters, law enforcement, substance abuse and public health professionals, organized labor, beer and wine distributors, craft distillers, large and small brewers and wineries and religious leaders are just some of the many groups who joined together to achieve this important victory for Washington state citizens.

Congratulations to all of those who helped run this important campaign. Hopefully this resounding rejection of tearing down an established, effective system that has served producers, retailers,  and consumers well will give pause to others seeking to deregulate alcohol through privatization or other creative measures.

Posted November 4, 2010 by davetate under Alcohol Review