United States Supreme Court Upholds 6th Circuit and Strikes Tennessee’s Retail Residency Case

Reinforcing the law school adage of “bad facts make bad law,” the U.S. Supreme Court upheld the 6^th Circuit decision that struck down Tennessee state law that imposes a durational residency requirement for establishing and renewing a retail liquor license. Justice Alito wrote the majority opinion in the 7-2 decision, while Justice Gorsuch authored the dissent. A link to the amicus briefs and previous commentary can be accessed here.

The majority opinion included Justice Alito’s view on the history and purpose of the 21^st Amendment and stated that section 2 “gives each State leeway in choosing the alcohol-related public health and safety measures that its citizens find desirable. §2 is not a license to impose all manner of protectionist restrictions on commerce in alcoholic beverages. Because Tennessee’s 2-year residency requirement for retail license applicants blatantly favors the State’s residents and has little relationship to public health and safety, it is unconstitutional.”

The word “protectionist” was used at least a dozen times in the Court’s decision. And the opinion was seemingly influenced by two other provisions included in the Tennessee residency law, a 10-year renewal provision and specific corporate ownership restrictions, neither of which were actually on appeal or being reviewed by the Court, but both provisions were viewed as a barrier to qualifying for and keeping a liquor retailer license in Tennessee as as such, strongly colored the justices view of the law they were being asked to evaluate.

Justice Gorsuch’s dissenting opinion, joined by Justice Thomas, stated, “As judges, we may be sorely tempted to ’rationalize’ the law and impose our own free-trade rules for all goods and services in interstate commerce. Certainly, that temptation seems to have proven nearly irresistible for this Court when it comes to alcohol.”   He noted that the 21st Amendment “embodied a classically federal compromise: Nationwide prohibition ended, but States gained broad discretion to calibrate alcohol regulations to local preferences.”  Additionally, the dissenting opinion noted that “…under the terms of this compromise, Tennessee’s law imposing a two-year residency requirement on those who seek to sell liquor within its jurisdiction would seem perfectly permissible.” It is worth noting that a vast number of states have had these laws prior to Prohibition and passed additional ones after its repeal. 

So what next? More litigation is likely. Recall, Granholm v. Heald was decided in 2005 and it spawned dozens of lawsuits testing the boundaries of the holding before a return to the Supreme Court in 2019.  A similar fate awaits state alcohol laws in response to this case. During oral arguments of the Tennessee case, several Justices voiced their distaste for the Tennessee residency laws scheme and in Justice Alito’s majority opinion, Tennessee’s complicated residency law was dismissed for an over protectionist rationale as was the previous state AG’s opinions against its constitutionality. Forthcoming litigation will be hard pressed to find the same fact pattern and interconnected law as the Tennessee case.

Moreover, the next challenge will be for lower courts looking for a clear standard from this decision, and Justice Gorsuch criticizes the majority for the lack of standard to serve as a guideline for future litigation. “The Court offers lower courts no more guidance than to proclaim delphically that ’each variation must be judged based on its own features.’”   He is referencing language from Justice Alito that notes, “Because we agree with the dissent that, under §2, States ’remai[n]free to pursue’ their legitimate interests in regulating the health and safety risks posed by the alcohol trade, post, at 12, each variation must be judged based on its own features.”   With this lack of standard, litigation from district courts and circuit courts will eventually create another conflict requiring Supreme Court certiorari.   The question is whether it will be 14 years from now as courts struggle to understand the parameters of today’s decision.