Last year I provided an update on alcohol litigation against the states. Like last year, there continues to be a significant narrowing in the types of active litigation but a stubborn volume of specific challenges under one remaining theory: the dormant Commerce Clause.
For the most part, these lawsuits are attempts by out-of-state retailers to sell to in-state consumers. The lawsuits claim that because local, in-state retailers can sell and deliver to local consumers, that state alcohol laws that prevent out-of-state retailers from doing the same violate the dormant Commerce Clause. Moreover, the plaintiffs have shifted to blur the lines between wineries and retailers to claim that because states allow wineries to ship wine, they must allow retailers to do the same.
The states note a host of problems in the lawsuits, mainly those out-of-state entities do not comply with in-state three-tier requirements and that wineries and retailers are licensed completely differently at both state and federal levels. I am obviously biased in favor of the states’ positions for various reasons.
The Supreme Court has passed on several attempts to revisit these state alcohol laws since the 2019 Tennessee Wine and Spirits Retailers Association case. In 2021, the Supreme Court passed on two Dormant Commerce Clause challenges —one to a Missouri law out of the 8th Circuit and another to a Michigan law in the 6th Circuit.
So where are we now? We are waiting for decisions on retail dormant Commerce Clause case challenges by out-of-state retailers to an Indiana law in the 7th Circuit and to a North Carolina law in the 4th Circuit. The 7th Circuit held oral arguments in December 2021. The 4th Circuit held oral arguments in March 2022. A decision on either of these cases could be made any day now.
The judges at both the 4th and 7th Circuit oral arguments presented some tough questions to both challengers and the states. These circuits are also aware of the rationale utilized by the other circuits in upholding state alcohol laws. The reasoning of Judge Sutton’s decision in the 6th Circuit was highly influential in the 8th Circuit decision and I predict will be very important for the 4th and 7th Circuits as they draft their opinions.
After the 4th and 7th Circuit cases, the pipeline for additional challenges also seems to be filling. There are active cases in Arizona, Illinois, New Jersey, Ohio and Rhode Island with rumors of several more cases being prepared for filing by out-of-state retailers seeking to avoid in-state three-tier requirements.
Not only will 2022 remain busy, but apparently there is motivation to continue litigation in the future. As one of the primary plaintiff’s lawyers made clear in a recent webinar, he intends to keep bringing lawsuits against states until the Supreme Court takes one of these retailer dormant Commerce Clause cases, so this website will remain busy.
I call this legal theory the multiple nuclear warhead approach. Fire two dozen missiles and see what happens. The states on the other hand must engage in precise missile defense. They must shoot down all the missiles to protect their citizens/laws. Just one errant missile sneaking through can cause serious damage and create a potential for very bad things for the state alcohol regulatory structure and the harms the states are trying to prevent.
There are other lawsuits I’ll be watching in 2022 related to state alcohol regulation such as those relating to antirust, First Amendment challenges to label approvals, disputes between suppliers over intellectual property rights, supplier and wholesaler litigation over application of contracts and state law. But the predominate fight to watch at the federal judicial level given the stated plaintiff interest in a Supreme Court decision is on the dormant Commerce Cause. The efforts to undermine/ narrow/ modify the Supreme Court’s previous statements that the “three-tier system is unquestionably legitimate” will invariably get a workout in 2022 and beyond.
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