Twenty-first Amendment

Granholm v. Heald; Swedenburg v. Kelly; Michigan Beer & Wine Wholesalers Ass'n v. Heald

 

In the Granholm, Swedenburg, and Michigan Beer cases, the Court must consider how much power the Twenty-First Amendment grants states to regulate the importation of alcoholic beverages. The cases deal with states that bar out-of-state companies from shipping alcohol directly to in-state customers. Such states generally require liquor distribution through licensed in-state wholesalers. The Twenty-First Amendment, which explicitly declares that transporting liquor into a state "in violation of the laws thereof, is hereby prohibited," would seem to grant states wide leeway to regulate the importation of alcohol. However, the Commerce Clause specifically grants Congress, not the states, the power to "regulate commerce with foreign nations, and among the several States." Historically, courts have read the Commerce Clause as preventing states from interfering with interstate commerce. The states claim that they are simply trying to regulate the liquor market, collect all applicable taxes and make sure alcohol stays out of minors' hands, but the plaintiffs, who include liquor interests and consumers, accuse the states of protecting their local industries, in violation of the Commerce Clause.

Questions as Framed for the Court by the Parties

Does Michigan's regulation of the importation of beverage alcohol under the Twenty-first Amendment facially violate the Commerce Clause when it permits in-state licensed wineries to directly ship alcohol to consumers, but requires out-of-state wineries to import its products through licensed in-state wholesalers and to sell its products through licensed retailers or request permission of the Liquor Control Commission to bypass this distribution system and ship directly to consumers?
 
Michigan Beer
 
Whether the Sixth Circuit erred in ruling (in conflict with a Seventh Circuit decision upholding a similar Indiana statute against the same challenge) that the Twenty-first Amendment and the Webb-Kenyon Act do not authorize Michigan to enact statutes that prohibit the importation of alcoholic beverages by unlicensed persons, and that the Commerce Clause bars such statutes.
Whether the Sixth Circuit erred in ruling (in conflict with a Fourth Circuit decision with respect to a similar North Carolina statute) that the proper remedy for the alleged discrimination was to invalidate the state's control over importation of alcoholic beverages rather than merely strike the offending exception for in-state wineries.
Swedenburg
 
Does New York's discriminatory and protectionist prohibition against direct interstate shipment of wine to consumers by out-of-state wineries while permitting in-state licensed wineries to ship directly to consumers violate the Commerce Clause of the U.S. Constitution; and if so, is it "saved" by the Twenty-first Amendment?
Does New York's discriminatory and protectionist prohibition against direct interstate shipment of wine to consumers by out-of-state wineries while permitting in-state licensed wineries to ship directly to consumers violate the Privileges and Immunities Clause of the U.S. Constitution?
Like many states, Michigan and New York regulate alcohol sales via "three-tier systems". Only licensed manufacturers may sell to licensed wholesalers, who in turn may only sell to licensed retailers, who can then sell to consumers. Heald v. Engler, 342 F.3d 517, 520 (6th Cir. 2003). Both states allow wineries within their borders to ship wine directly to resident consumers, but out-of-state wineries are prevented from shipping wine directly to consumers, subject to narrow exceptions.
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Tennessee Wine and Spirits Retailers Ass’n v. Blair

Issues

Does the Twenty-first Amendment permit states to require that alcohol retail license applicants reside in-state for a specified length of time prior to obtaining a license?

This case asks the Supreme Court to determine the scope of power granted to the States under the Twenty-first Amendment and to explain when exercises of that power infringe upon the dormant Commerce Clause. Tennessee requires that a person must be a Tennessee resident for two years before they may receive a retail or wholesale liquor license and for ten years before they may re-apply for a retail or liquor license. Clayton Byrd, Tennessee Fine Wines and Spirits, LLC, and Affluere Investments, Inc. argue that Tennessee’s requirements amount to discrimination against out-of-state economic interests in violation of the dormant Commerce Clause. Tennessee Wine and Spirits Retailers Association counters that the Twenty-first Amendment grants the States broad power to regulate the in-state distribution of alcohol, and that a state does not violate the dormant Commerce Clause if the state treats alcohol produced out-of-state the same as alcohol produced in-state. The outcome of this case will help determine how the power to regulate the sale, use, and distribution of alcohol is divided between the federal government and the States.

Questions as Framed for the Court by the Parties

Whether the Twenty-first Amendment empowers states, consistent with the dormant Commerce Clause, to regulate liquor sales by granting retail or wholesale licenses only to individuals or entities that have resided in-state for a specified time.

In order to sell alcoholic beverages in Tennessee, a retailer must obtain a license from the Tennessee Alcoholic Beverage Commission (“the TABC”). Byrd v. Tennessee Wine and Retailers Association at 2. To obtain a license, applicants must meet the durational-residency requirements set forth in the Tennessee Code.

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