H.R. 5034, “The Comprehensive Alcohol Regulatory Effectiveness Act of 2010” or “CARE Act,” was introduced in the U.S. House of Representatives by Rep. Bill Delahunt (D-MA), Rep. Howard Coble (R-NC), Rep. Mike Quigley (D-IL) and Rep. Jason Chaffetz (R-UT).

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 “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.

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.

The National Alcohol Beverage Control Administration (NABCA) holds a continuing legal education (CLE) conference every year. Last year, National Beer Wholesalers Association Senior Vice President and General Counsel Paul Pisano moderated a panel with state and federal regulators and public health officials which discussed global issues and crisis facing food and toy safety;  problems with alcohol overseas; and how the state-based system of alcohol regulation helps keep the American consumer safe.  The PowerPoint from the panel discussion can be seen here.