Categories

Data

Find Me

Media

Restaurants & Bars

Retail

Archives

Supremes Decide Not Much Will Change

The Supreme Court has declined to hear an appeal in Wine Country Gift Baskets vs. Steen, a follow-on case to Granholm vs. Heald, this time deciding whether states can bar out-of-state retailers from delivering in a state, while allowing in-state retailers to continue their delivery services. The Fifth Circuit Court of Appeals had previously ruled that the 21st Amendment gave states the power to require retailers to operate from within a state; the Gift Basket folk argued that retailers should be treated similarly under a state’s laws regardless of where they are located.

The Supremes declined to intervene, so the case law on this tiny gray area is now clear. The world will continue to operate as it has been operating since the repeal of Prohibition.

I wrote about the case here. In a freakish occurrence not likely to be soon repeated, my prediction of the outcome of this case was correct: proponents of striking down the Texas law in question did “get creamed,” at least in the sense that the Supremes tossed them out without listening to what they had to say. (Which is too bad. I hear that Justice Clarence Thomas had a lot of questions he wanted to ask.) I’m not used to being right. It has never happened before and I have no idea how to act.

The comments on that posting are a better encapsulation of the issues at hand than the posting itself. Wine industry mouthpiece Tom Wark and I square-off in a death match, he articulating his belief that allowing discrimination of this sort is the greatest injustice ever and me saying it’s really no big deal. That seems to be the recurring argument between Mr. Wark and me — he sees big implications, I don’t.

I enjoy our little arguments even if it seems, at times, as if he doesn’t understand why a loving God would inflict upon him a rank amateur who compensates for his ignorance by being tenacious and long-winded.

Of course, a loving God wouldn’t do that. The problem is, I wasn’t dispatched by the forgiving, New Testament God. I’m a tool of the vengeful, Old Testament God, my very presence evidence that Wark must have done something really, really bad earlier in his life. If he hadn’t, I’d be blogging about knitting or something.

Anyway, Wark’s blog doesn’t have anything up yet on this decision, but you know he’s tap-tap-tapping at his keyboard, crafting his response. I’ll link to it when it comes out. I’m sure it will be interesting.

UPDATE: The Specialty Wine Retailers Association has issued a statement. They vow to fight on.

“Congress has never in its more than 220 years stripped American wine retailers of their Commerce Clause protection against state-based discrimination and we plan to continue to make this case,” said Tom Wark, executive director of SWRA. “Unfortunately special interests looking for state-sanctioned protection from competition continue to press the idea that courts should assist in that effort to deny the reach of the U.S. Constitution.

“The real victims of this kind of law are the citizens of Texas who are denied access to the products they desire to purchase and denied the critical tax revenue that a well-regulated wine shipping market would generate. As long as consumers and business continue to be discriminated against, this issue will remain a critical one and likely to be reviewed again since the Supreme Court did not rule on the merits of the case.”

 


25 Comments

  • Wally

    This is not a “Clash of the Titans.” You are channeling an annoying mosquito. Wark does not care about you. You are not a client who writes checks to his consultant business.

  • Wine Curmudgeon

    Here’s what even more odd. You and I were both right. Will the heavens open so your vengeful Old Testament God can dispatch this wicked planet?

  • Tom Johnson

    I would never describe any argument in which I was involved as a “clash of the titans,” as I am a little-known wine blogger in Kentucky. Which is not, I think, all that titanic.

  • Tom Wark

    Wally,

    On the contrary, Wark cares deeply about Tom Johnson.

  • Wally

    T. Wark,
    Nice.
    For someone who ends up getting paid to promote/represent much of what I dislike about our industry, I think you’d be pretty fun to hang out with and drink some wine. If you are ever in Iowa representin’, look me up. Wine’s on me.

  • Tom Johnson

    Tom has been nice to me since I was a little baby blogger, and it makes me feel bad every time I disagree with him — but not so mad that I start being polite.

    That said, Wally, it’s nice you tried to make up with him, because reading down the comments I was about to lay into you for being a snot. But now I can’t so I won’t.

    That said, I do look forward to what Mr. Wark has to say about the impact of this decision — if he has anything to say at all. It is, after all, a little peripheral to Wark’s area of concern, which is direct shipping from wineries to consumers.

    As to Mr. Wark caring deeply for me: I’m touched. And if there’s wine drinking to be done, I’m all for people inviting me as well. Wally’s buying.

  • Tom Wark

    Tom,

    You do know that I’ve been the executive director of the Specialty Wine Retailers Association (those that brought the suit in question) since 2007, right?

    However, even before that I was pretty vocal about both winery and retailer rights to ship.

    Wally,
    I’ve had drink after drink with folks I’ve never represented…including distributors. So, I might take you up on your offer.

    Tom…

  • Tom Johnson

    Uh, oops. Yes, I knew that. No, I wasn’t careful in my response. So, I look like an idiot.

    Look, I agree with you on shipping. Allowing free commerce is better policy, and the people who oppose are, generally, operating with other priorities than the public good.

    But the 21st Amendment is pretty well defined. The best policy to overturn state bans is action at the state level.

  • Tom Wark

    Who knows, perhaps one day we’ll know whether the Supreme Court agrees that the 21st Amendment strips all wine retailers in America of their commerce clause protections. We know they don’t agree that he 21st Amendment doesn’t give states free reign as to alcohol laws.

    I’m hopeful they will one day take the opportunity to weigh in on the issue of retailers rights vis a vis the 21st Amendment.

    tom…

  • Tom Johnson

    Clearly, the Supreme Court agrees that the 21st Amendment gives the power to regulate alcohol distribution and sales to the states, which means that alcohol sales don’t have Commerce Clause protection — at least not in those matters that meaningfully affect the goals of the 21st Amendment, which is the promotion of temperance, an orderly market, etc. If the Court had issues with that, the Court would have heard the case.

    This is not a vast injustice. It is, instead, how the system was designed to work. Had those who repealed Prohibition tried to remove from the states all ability to regulate alcohol, Prohibition would likely never have been repealed.

    This was a weak case made weaker by changes in Texas law after the case was filed. While I understand the strategic purpose of Granholm, which is to create political leverage by aligning the interests of highly sympathetic local agriculture with those of national wine producers, I’m mystified what the strategic purpose of this lawsuit was.

    If the court had overturned the Texas law, is there a single state that would have ceded jurisdiction over alcohol distribution and sales for the sake of preserving home delivery? More likely, those few states who allow home delivery would have ended the practice, which I suppose might create some support for liberalizing shipping laws but — it seems to me — not much. The local stores would survive, and would not be likely to lobby for out-of-state competition in order to restore their delivery services.

    There are a lot of things I don’t know, of course, and I wasn’t privy to the thought process behind this suit. But if I’d been in the meeting I probably would have voted against going forward.

    Perhaps it was a matter of right and wrong. Perhaps the unfairness of allowing some retailers to deliver and others not is sufficiently offensive on a purely moral basis to justify the time and expense. Sometimes, it’s worth going down to noble defeat. Sometimes, the way you win in the long term is by losing in the short.

    But I’m old and cynical and have accepted that politics and the law don’t have all that much to do with right and wrong. I think they have to do with possible and impossible, and that sometimes its best to leave the brass ring for later, opting instead for the hard work of incremental change. I continue to believe that the only way alcohol regulations are going to change is by grassroots lobbying at the state level.

  • Tom Wark

    Tom,
    A Supreme Court denial of Cert does not and never has implied anything about the Court’s view on the legal matter in the case. The most one can say about a denial of cert is that the Court denied Cert.

    As to the power of the states to regulate alcohol sales, let me pose a question. Can a state make it illegal for a woman to own a distributorship?

    Tom…

  • Tom Johnson

    The court has routinely overruled liquor regulations that run afoul of other Constitutional protections if they do not pertain directly to the regulatory goals of the 21st Amendment. To deny distribution ownership to a woman, the state would have to demonstrate that the ban had a meaningful impact on the promotion of temperance, an orderly market, etc — that is, those things that have always been the test of whether the 21st Amendment or some other Constitutional protection took precedence.

    It’s difficult for me to imagine that the court would find excluding women from liquor distribution somehow promoted the goals of the 21st Amendment. I would certainly be interested in the arguments you might make in that direction. They would be, I’m sure, entertaining. I don’t think they would be convincing.

    That’s the heart of the problem with this case: it sought to remove from the states the power to meaningfully control the sale and distribution of alcoholic beverages within a state. That control is not peripheral to the 21st Amendment — as would be, for example, the gender of the person selling the liquor. It is, in fact, entirely the purpose of the 21st Amendment, and thus can not be overruled by the Commerce Clause. (The 21st Amendment was passed after the Commerce Clause, and is presumed to amend the workings of, among other things, the Commerce Clause itself.) Had this lawsuit succeeded, it would for all practical purposes have overturned the 21st Amendment. I do not believe that it is possible for the Supreme Court to rule the Constitution unconstitutional.

  • Tom Wark

    Tom,

    The date of the passage of an amendment does not mean the new part of the constitution overrides all other parts of the constitution. As the court has said numerous times, one part of the constitution must be read in light of other parts of the constitution.

    The question with retailer shipping is, can the state find a means to achieve its goals without discriminating? That is the basic commerce clause analysis that the SCOTUS has said must be done when a state law comes in conflict with the Commerce clause. The 5th Circuit never even did a commerce clause analysis as directed by the court.

    Tom…

  • Wally

    “Section 2. The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.”

    Seems pretty clear. If State A requires a purveyor to have a license, a place of business within the state, etc, a business in State B must fulfill all the requirements in State A if they want to sell there. The crux is “in violation of the laws thereof.”

    Rather than the specious “female distributor” argument, let us consider a state, call it “Randsas”, that has voted to be dry. No alcohol sales at all. It can not be construed that shipment into Randsas is legal in any case. There exists no structure under which shipment is not “in violation of the laws thereof.” Next year Randsas votes to allow sales of wine and sets up the distributor and retailer licensing parts of the three tier system, making it requisite that retailers are licensed and only purchase from licensed distributors. So far, most of us are ok with this. Joe Schmoe doesn’t just get to set up shop on the corner and start selling Roshambo and 200ml’s of Hennessey. Bringing/shipping and/ or selling anything alcoholic in to the state without meeting Randsas’s requirements is plainly illegal. We don’t like it, but there it is. Ah, “the Commerce Clause”, you say in the way Apple says, “There’s an app for that.” Congress has the power to regulate commerce between the States so we can invoke Congress Clause to let me ship wine in without jumping through local hoops.
    I’m assuming that the argument is that it is onerous to require a seller to meet all the petty requirements of each State they want to ship into. If it were bolts or widgets you would be right but even the Constitution recognizes our unique love/hate schizoid relationship with alcohol.
    I have been googling my fingers to the bone and I can’t find the law that Congress passed under the aegis of the Commerce clause specifically requiring states to abrogate their rights concerning alcohol distribution. Consequently there is a very easy mechanism for a supplier or retailer in StateX to sell wine in Randsas. Just follow their goddamned, ridiculous, draconian, prudish laws. We would wish it otherwise but Constitutionally, we don’t have a leg to stand on.

    On a side note- The big money that stands to profit most if shipping goes wide-open is only temporarily in allignment with small producers seeking access to wider markets. Big money’s goal is to eventually strangle these producers in the same way they want to strangle small local distributors and retailers. This is all okay, it’s the way the world warks (sic) but we should be aware of the motives behind the pressure.

    By sheer luck, the post-prohibition laws that were bought and paid for by the likes of Al Capone and the nascent House of Seagram’s have come to favor the little guy. History shows us that that’s gotta change. There just hasn’t been enough money dumped on Congress to do the trick yet. Big money was hoping the “little guy is suffering” argument would work. They will be marshaling their forces for the next step and calling it deregulation. Cuz, deregulation has worked so well. See: Utilities, Airlines, Enron, etc

  • Wally

    Discrimination implies that the out of state party is not allowed under any circumstances to sell wine in the state. On the contrary, they are not excluded by virtue of their class from applying for and receiving a license to sell wine in any state. All they have to do is meet the requirements that a “native” retailer must meet. No one is required to change their race, sex or creed, only pony up the bones that the locals had to in order to sell wine. This is why reciprocity is asked/offered when states agree to allowing shipping. It opens markets to their licensees.

  • Tom Wark

    Wally,

    In this case, discrimination does not just imply, but rather insists that out of state parties may not ship wine to Texas residents.

    There is no question of discrimination in this case. It exists. The state of Texas and all parties agree.

    Also, the Supreme Court stated pretty clearly that reciprocity agreements are unconstitutional.

    Tom…

  • Tom Wark

    Wally, while section two of the 21st amendment seems clear, it really is important that you review both the Wilson Act and the Webb-Kenyon act, as well as Supreme Court jurisprudence on this matter. If you do, you’ll find that the framers of the 21st Amendment were perfectly clear that they did not intend the 21st Amendment to trump the Federal government’s right to regulate inter-state commerce.

    Finally, the only “Big Money” in this issue is distributor money. Still, in the wake of direct shipping opening up, distributors have flourished.

    Finally, the laws concerning wine sales hardly favor the big guy. As long as most state prohibit self distribution, which would be a boon for the little guy, the distributors state-sanctioned protection from competition will keep them flush.

    Tom…

  • Tom Wark

    Wally,

    As a primer on this issue, this is a good piece to read. Download from the link at the top of the page called “One Click Download”

    Wine Wars: The 21st Amendment and Discriminatory Bans to Direct Shipment of Wine

  • Wally

    Thanks Tom. Zywicki’s credentials would certainly seem impressive. I will finish working through his paper today. I only caution again that teh google can be very helpful. Zywicki’s analyses of many issues all grind inexorably to similar conclusions except where his political bent puts him on the other side of an issue. I am afraid that his analysis will be similar to those of the “experts” at WSJ who recommended buying even after the last crash had begun. I try to carefully discern the difference between rational analysis and clever arguments for a strongly held viewpoint. I’ll read it with an open mind and report back.
    Lastly, I didn’t quite follow your reasoning on the big guy vs little guy issue. I maintain that though big guys influenced post prohibition laws, the vestiges of those laws actually benefit the little guy. Self- distribution undoubtably favors a liquor barn model, not the corner wine shop.
    So, you say that the current set-up hardly favors the big guy but go on to state that it will keep distributors flush, the classic example being Southern, the Godzilla of big guys in the industry. Can you clarify?

  • Wally

    Please bear with me, I’m way better at snark than rational discourse so it may take me a while to get the hang of it.

  • Wally

    Given Zywicki’s resume I expected a scholarly examination of the issue. I wasn’t prepared for the opinionated screed he attempts to pawn off as analysis by giving it a gravitas-laden cover sheet. The fact that you found someone with Bush-era wonk cred who agrees with the position you are paid to promote doesn’t help me towards a clearer understanding of the issue. This is especially disconcerting as I agree with the idea that wine shipping should be legal. I just can’t find the statute based argument that says we can impose our views on the states that choose otherwise.
    Roberts, Alito, et al seem to agree that “It’s All Been Said Before.” “Where Do I Go From Here?” you ask? “Time Changes Things”, and eventually the “blue” laws that surround the alcohol biz will fade away and we will be able to order Kistler in the same way we order more ram for our mobo’s. But until then you, the Z-man and many others are missing the special distinction that the Constitution gives to alcohol in regards to State’s rights. Zywicki’s “arguments are all based on the idea that de-reg would be a good thing. We know this. Despite the fact that it’s “All I Want,” it’s the legality of the issue that stands in the way.
    Whew! I feel better. That rational thing was killin’ me.

  • Tom Wark

    Wally,

    Which part of Z’s analysis of 21st Amendment jurisprudence do you disagree with or think he get’s wrong? The analysis of the meaning of the 21st Amendment? The Webb-Kenyon analysis? The Wilson Act Analysis?

    I see that you think he has written a “screed” but I don’t see exactly where you note where he over or under analyzed the legal issues surrounding 21st Amendment jurisprudence.

  • Wally

    Tom,
    I will not ask if you actually buy this dreck because your position as hired gun obligates you to defend the turf chosen by your employers. So I’m going to proceed as if you do. You being the “suit in question,” I’m assuming that executive director of the Specialty Wine Retailers Association is a paid position. Since the Supreme Court refused to hear the case on either it’s merits or procedural issues we are not privy to their line of reasoning. We only know that they dismissed both your arguments and Zywicki’s out of hand. So my interpretation has as much validity here as Z’s, perhaps more since it has not yet been officially rejected by the Supremes.
    Let’s begin with the 21st, shall we.
    Zywicki points out that a plain language reading supports State’s Rights. He then sets up Straw Men assigning them ACLU buzzwords like Jewish, slavery, loyalty oath and racial discrimination. Fail! These groups are not discriminated against. They are not prohibited by their “class” from fulfilling the obligations to the law required to do business in a state. Yes, it is expensive. Yes, it’s a pain in the ass. But yes, the locals are required to jump through the same hoops. Discrimination, as my good friend Inego Montoya said, “You keep using that word. I don’t think it means what you think it means.” So we have not had a test yet of discrimination in the courts regarding out of state shipping. If and when that occurs it is my belief the Court will uphold the Feds right to impose on the State to bring them into line. How ’bout solely “commercial provisions?” Again, this is not”economic warfare against the products of other states.” There exists an unbiased protocol by which alcoholic beverages can be brought into the state for sale. The 21st gives the States the right to set up the hoops as long as they are equally applied to all. (This by the way was the poison pill in Holmgren, “You can ship in but you have to pay to the State the same as the locals pay)
    “Whatever the 21st Amendment does, therefore, there is no evidence that it was intended to
    overturn one of the fundamental purposes of the Constitution, which was to eliminate internal
    trade barriers that plagued the country under the Articles of Confederation.”
    Fail! You want this to be true so badly that you are willing to look at the plain language of the 21st and maintain that they never meant to mean what it plainly says. Perhaps if you stamped your feet, thrust out your lower lip and pounded your fists on the floor while you shouted NO!NO!NO!, it might be more convincing. Maybe Sotomayor would buy it, she’s compassionate. Read the damn 21st again. IT CAN NOT BE CLEARER. And it says exactly the opposite of what you want.
    Well, right now I have to go sell some wine here at the store we’ve licensed. Wine that I bought from a distributor also licensed by the state. I would have preferred to buy direct from the Barretts or Chris Bilbro but the State says no and the 21st gives the State the right to call the shots. If K & L would like to sell wine to the guy that’s standing here waiting for me to finish typing they have to play by the same rules I do. The Supremes agree. Tomorrow or later- We examine the relevance of Webb-Kenyon and The Wilson Act. Stay tuned.

    Back.
    I’m a wine merchant, been in the biz since 1982. I do not have a law degree (sadly, not even a bachelors)nor a special expertise on the Constitution. I represent no one so I don’t get a cool title like Executive Director of Lobbying for Things That Will Make Life Better For The People Who Pay My Salary. But I can read and I reject the idea that throwing enough lawyers at a plainly written sentence can change it’s meaning to what I desire.
    You have to understand Tom, that I want unrestricted shipping. I want to send wine to Louisville. I have a strong enough relationship with my clientele that if they can get Sea Smoke from K & L I’ll even come over and help them drink it. So convince me. Not by invoking the possibility of a Kristalnacht of Kosher wine or an army of slaves unloading Budweiser. Convince me simply and in plain language how I am discriminated against because the guy in Louisville has to bust his ass and shell out cash to do business in Kentucky and I can’t just Fedex a case of Roshambo to the Louisville Juice penthouse suite headquarters without paying a dime or filling out a form.

  • Tom Wark

    Wally,

    Funny that you keep mentioning Roshmabo. I thought they went out of business. And it’s a shame because I loved their wines.

    First, it should be noted that the Supreme Court has said on numerous occasions that their refusal to hear a case is in no way a commentary on the merits of the case and should not be taken as such. They have also said that a refusal to hear a case has no precedential value. That means that a Supreme Court’ refusal to hear a case will carry no weight in a legal argument that relies on this refusal to make one’s case.

    So, we know that the Supreme Court’s refusal to hear this case does not mean, as you wrote, “they dismissed both your arguments and Zywicki’s out of hand.”

    Wally, if you want to argue against Zywicky and say that the 21st gave the states the right to discriminate against out of state retailers and wineries where shipping is concerned, then you have to demonstrate that the 21st overturned the Commerce Clause, which gives the Feds the right to regulate interstate commerce.

    In the Granholm case, the court was clear that this was not the case, writing:

    “We hold that the laws in both States discriminate against interstate commerce in violation of the Commerce Clause, Art. I, §8, cl. 3, and that the discrimination is neither authorized nor permitted by the Twenty-first Amendment.”

    They also wrote in Granholm, “The instant cases, in contrast, involve straightforward attempts to discriminate in favor of local producers. The discrimination is contrary to the Commerce Clause and is not saved by the Twenty-first Amendment.”

    When Zywicki writes, ““Whatever the 21st Amendment does, therefore, there is no evidence that it was intended to
    overturn one of the fundamental purposes of the Constitution, which was to eliminate internal
    trade barriers that plagued the country under the Articles of Confederation,” he is referring to the Commerce Clause that gives the feds the right to regulate interstate commerce, such as shipping wine across state wines. And clearly, as noted above, the Supreme Court agrees.

    It would also be interesting to note that the very lawmakers that WROTE the 21st amendment did not mean it to overrule the commerce clause or allow discrimination and they stated clearly that the 21st amendment did not remove the Federal governments ability to regulate interstate commerce issues.

    So, Wally, your contention seems to be that Zywicki fails to make his case that the 21st Amendment did not give the states the right to regulate alcohol anyway they want based on the clear reading of the second section of the 21st Amendment. But clearly the Supreme Court agrees with Zywicki on this point.

    So, if the supreme court says that states may not ban out of state wineries from shipping if they allow their in-state wineries to do the same, where do we find it in the 21st Amendment or in Granholm or in any other legal document that says this same kind of discrimination is allowed against retailers?

    Finally, I don’t completely understand what you mean with regard to Zywicki referring to “buzzwords like Jewish, slavery, loyalty oath and racial discrimination”

    I think you are commenting on his argument that the 21st Amendment no more repeals the meaning of the Commerce Clause as it relates to alcohol than it repeals the 14th Amendment as it relates to alcohol. I think you are referring to this statement by Zywicki:

    “The rationale for limiting the text of §2 is evident. Otherwise, a state could pass a law that
    prohibited the importation of kosher or sacramental wine. Or could permit the importation or transportation of alcohol to white people or to those who sign a pledge not to criticize the
    government. Indeed, if the expansive interpretation of the plain language is adopted, it seems that the state government could enslave members of the population and make them drive beer trucks. Given the absurd consequences that would flow from an expansive interpretation of the 21st Amendment, it is reasonable to assume that contrary to the interpretation imposed in Young’s Mkt., the framers of the 21st Amendment did not intend to eliminate all constitutional limits on the states’ regulatory authority.”

    Zywicki makes a very rational and coherent argument here. There is nothing in the language or legislative history of the 21st amendment that would suggest that states are no longer compelled to adhere to the principles of the Commerce Clause. And if you do believe such a thing, you could use the same rationale to say that no OTHER part of the constitution imposes on the states any limits of what they can do where alcohol regulation is concerned. This would mean that the 21st amendment allows a state to “a state could pass a law that prohibited the importation of kosher or sacramental wine. Or could permit the importation or transportation of alcohol to white people or to those who sign a pledge not to criticize the government.”

    No one believes this is what the 21st Amendment allows. Yet while the 21st amendment says nowhere that the 14th amendment is repealed where alcohol is concerned, neither does it say that the Commerce Clause is repealed where state alcohol regulations are concerned.

    With respect, you really do have to do a more intensive job of analyzing and critiquing Zywicki’s argument and taking into account the details and specifics of his argument in order to make any kind of a case to support your contention that it is “dreck”.

    Best,
    Tom….

  • Tom Wark

    Wally,

    “Convince me simply and in plain language how I am discriminated against because the guy in Louisville has to bust his ass and shell out cash to do business in Kentucky and I can’t just Fedex a case of Roshambo to the Louisville Juice penthouse suite headquarters without paying a dime or filling out a form.”

    You are not discriminated against since a KY retailer may not ship wine to a KY resident. And neither may you.