Iowa has recently joined the ranks of states having a federal court determining the future of its state alcohol laws.  Indiana University Professor James Tanford has filed another Dormant Commerce Clause lawsuit this one challenging provisions in the Iowa alcohol code dealing with reciprocity for direct shipping.  A copy of this lawsuit can be found here.   By my rusty calculations this is state number 27 to be have its alcohol laws challenged in federal court in the past five years.

Posted January 21, 2010 by admin under 21st Amendment, Alcohol Review, Dormant Commerce Clause

The First Circuit dealt a blow to state alcohol regulation today ruling against Massachusett’s 30,000 gallon volume cap for wineries.   In its opinion, the 1st Circuit determined that the MA law, helped by statements in the legislative record, was discriminatory in both purpose and effects and violated the Dormant Commerce Clause.  This is a different conclusion that federal district courts in Kentucky (Cherry Hill) and Arizona (Blackstar) (See below).  The 9th Circuit is currently examining Arizona’s volume cap.     Since distinctions based on size are throughout nearly every state alcohol code at some level,  this case could have huge implications.

Posted January 14, 2010 by admin under 21st Amendment, Dormant Commerce Clause, Supreme Court

Well the sordid ten year history of the TFWS case is over.  There will be no appeal to the United States Supreme Court.   In order to save the state money from attorneys fees, the state will not appeal in exchange for not having to pay attorney fees.  In a fee settlement agreement filed with the court the state will save its money and donate some of the fees to an alcohol rehabilitation center.

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.

Posted January 13, 2010 by admin under 21st Amendment, Alcohol Regulation, Alcohol Review, Supreme Court

While I was at the Center for Alcohol Policy’s annual legal symposium, the Supreme Court denied certiorari in  Virginia v. Harris.    This was a petition seeking review of a 4-3 Virginia Supreme Court decision that held that an anonymous tip of a suspected drunk driver was not sufficicent for a police officer to pull over the driver.  A police officer needs indpendent corroboration first before she can pull over a drunk driver.

In a strongly worded dissent from the denial of certiorari that was joined by Justice Scalia, Chief Justice Roberts expressed his concern over the failure to review this case.  He noted in very strong terms the deadly problems associated with drunk driving and cited to NHTSA data showing 13,000 deaths per year, or one every 40 minutes, resulting from drunk drivers.   He closed  his dissent with his opinion that the “police should have every legitimate tool at their disposal for getting drunk drivers off the road.”    I agree.  And I also believe the state legislatures and alcohol regulators should have every tool at their disposal for getting drunk drivers off the road; regulating the alcohol industry; and protecting the public.      It will be interesting to see if someone reminds  Justices Scalia and Roberts of their opinion the next time a 21st Amendment related case is before the Supreme Court!

Posted October 21, 2009 by admin under Alcohol Review

UPDATE:  The Supreme Court has denied certiorari in this 6th Circuit matter.  Cert denial can be found here.

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.

Posted October 5, 2009 by admin under 21st Amendment, Alcohol Regulation, Alcohol Review, Dormant Commerce Clause, Supreme Court

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

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