7th Circuit Reverses and Remands Illinois Retail Shipping Matter

The 7th Circuit finally ruled on the retailer direct shipping case it has had before it for a year.  The 7th Circuit reversed the district court’s grant of the state’s motion to dismiss and remanded this case back to district court for additional fact-finding on the Plaintiff’s Equal Protection and dormant Commerce Clause challenges.

I attended the oral argument in February and this decision is not a surprise given Chief Judge Wood’s aggressive questioning of the state and assumptions she made as part of the oral argument stating at one point:

And I guess one of the reasons that I get worried about this case, particularly the shipping dimension, is that this is the world at this point. I know people who never step inside a bricks-and-mortar store. They get all their groceries on, you know, Amazon. They go through Whole Foods now at this point. They get their liquor shipped directly. They literally do not walk into stores. So what Illinois is trying to do is put a huge damper on modern commerce.”

Judge Wood disagreed with rulings from the 2nd, 5th and 8th Circuits and does not believe the Granholm language saves any state law from dormant Commerce Clause challenge.  The 7th Circuit opinion contains multiple references to the pending United States Supreme Court case due to be argued in January 2019 and assumes that clarity from that residency matter will bleed into this retail manner.    Judge Wood closes her opinion noting “We therefore reverse, but with the caveat that there are other aspects of the Illinois law—not before us at present—that will be difficult for plaintiffs to surmount if Tennessee Wine does not come out in their favor.”

Thus, the stakes in the pending Supreme Court case grow higher.

(previous post– Federal Court Upholds Illinois Law Banning Out of State Retailer Shipping)

Judge Samuel Der-Yeghiayan sitting in the Northern District of Illinois rejected the complaints of an Indiana retailer and Illinois resident claiming Illinois law requiring customers receive their wine through Illinois retailers violated the Dormant Commerce Clause and the Privileges and Immunities clause of the Constitution.

In a crisp 9 page opinion, the court noted that the claims of Plaintiff “fail at the most basic starting point.” The court outlined how the plaintiff failed to allege a preferential in versus out of state treatment.  Moreover, the court noted, “Plaintiff’s constitutional claim related to unfair treatment is an attempt to circumvent the Illinois statutory schemed designed to protect Illinois citizens.”   Moreover,  the court noted that “Out of State Plaintiff’s constitutional interests in conducting commerce in Illinois does not provide them with unfettered access to Illinois markets to prey on Illinois consumers and reap profits without regard to the health and welfare of the Illinois pubic without complying with Illinois regulations and laws that are applicable to all.”

Presumably, the plaintiffs will bring another appeal to the 7th Circuit.  We will see.

(previous post) Indiana Retailer Challenges Illinois Law Banning Out of State Retailer Shipping

Professor Alex Tanford has returned to the alcohol litigation wars.  This time he and others are representing an Indiana retailer, owner and Illinois resident challenging laws in Illinois that permit Illinois residents to ship to consumers but prohibit out of state retailers.  In the Complaint, the plaintiffs seek to invalidate the Illinois laws on dormant Commerce Clause and Privileges & Immunities grounds.

Similar lawsuits seeking the same relief have failed in the 2nd Circuit (Arnold v. Buy Rite)  and the 5th Circuit (Siesta Village v. Steen).   Missouri also has successfully defended wholesaler level regulation in the Southern Wine case at the 8th Circuit.

Illinois has had high profile investigations into unauthorized sales of alcohol by Indiana businesses. Illinois estimates losing million in tax revenues due to illegal sales.

Previously, the same plaintiff team unsuccessfully filed a lawsuit against Indiana laws relating to winery sales and the 7th Circuit  ruled for Indiana in an opinion by Judge Posner that highlighted strong 21st Amendment rationales.

 

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