The district court has approved the final consent order in the 21st Amendment Enforcement Act lawsuit brought by the state of Ohio against various wine sellers. As explained in the joint motion requesting approval of the consent order filed by Ohio and defendant Wine.com, the defendant has agreed to open to comply with Ohio law including creating a physical presence in the state. The joint motion notes:
“The Ohio Revised Code establishes a Division of Liquor Control and a system of permits to ensure that all persons profiting from the sale of liquor to Ohioans do so in compliance with the law, including various health and safety considerations embodied in the Ohio Revised Code and Ohio Administrative Code. See generally Ohio Rev. Code Chapters 4301 and 4303. Each unlawful shipment of wine into Ohio also potentially deprives the State and its residents of public revenue in the form of unpaid sales and excise taxes. The proposed Consent Decree will help to ensure the proper collection of these taxes on the sale of wine. The fair assessment of taxes and collection of public revenue is always in the public interest.“
A flaw in the underlying federal legislation is its failure to authorize monetary damages for a state utilizing the law to achieve compliance, but further violations of this new consent order will make securing financial penalties for Ohio much easier. Moreover, the state’s interest in securing compliance with alcohol regulations and tax collection are made clear in this action.
As the first state to take this law for a test drive, Ohio is able to point to several demonstrable wins for oversight, leveling the regulatory playing field, accountability, and jurisdiction. I believe more states will consider following the leadership of Ohio. (Michigan’s similar lawsuit is pending.
(previous post) Ohio Settles with One Defendant in 21st Amendment Enforcement Action, Possibly More On the Way.
The Ohio Attorney General has settled with one of the seven defendants from its groundbreaking 21st Amendment Enforcement Act lawsuit it filed in federal court. Ohio and AWS Hopkins, LLC dba Ace Spirits have jointly agreed to a consent order that mirrors most of the concerns outlined by Ohio’s complaint.
In the Consent Decree and Final Judgment, Ace Spirits does not have to pay any fines at present but will be subject to $150 per future violation for any wine or liquor shipped into Ohio. Ace Spirits agreed to cease shipping wine and liquor into Ohio, conduct extra training of its staff, and make prominent disclosure warning potential consumers in advertisements and their website about their inability to ship alcohol to Ohio. Ace Spirits also agreed to provide records upon reasonable request from Ohio to examine shipments and this provision is active for the next five years.
This action is further proof of the state’s interest in policing illegal sales of alcohol within the state. It is a tool more states may consider using to stamp out one level of illegal alcohol sales.
The case will proceed against the other six defendants. Two defendants, Wine.com and Winc have filed for extensions and these documents reference settlement discussions with the state so maybe more will choose the path of Ace Spirits.
(previous post) Ohio Attorney General Files Groundbreaking Lawsuit Utilizing the 21st Amendment Enforcement Act for the First Time
Ohio Attorney General Dave Yost has filed a Complaint and Motion for Preliminary Injunction against several out of state alcohol retailers for illegally shipping alcohol into the state of Ohio. A press release was also issued by his office.
The lawsuit against Wine.Com, Inc., U.S. Beverage Advertising Corp., Pacific Wine & Spirits, LLC, ShakeStir, LLC, Winc, Inc., Houdini, Inc., & AWS Hopkins, LLC results from stings conducted by the state alleging these companies shipped wine and liquor into the state in violation of Ohio law.
The lawsuit was the first one filed under the 21st Amendment Enforcement Act (27 USC 122a) which was passed in 2000 as an amendment to the Webb-Kenyon Act. Although, the 21st Amendment Enforcement Act was passed twenty years ago with the advocacy of state regulators, NBWA and others, it has not been taken for a test drive possibly due to amendments to the legislation as it worked its way through Congress that weakened the ability of a state to secure relief besides an injunction.
This matter will be litigated in the Southern District of Ohio and summons have been issued to the parties.
To refresh your memory on what the Twenty-First Amendment Enforcement Act says, I’ve pasted the law below.
SEC. 2004. TWENTY-FIRST AMENDMENT ENFORCEMENT.
(a) SHIPMENT OF INTOXICATING LIQUOR IN VIOLATION OF STATE LAW.—The Act entitled ‘‘An Act divesting intoxicating liquors of their interstate character in certain cases”, approved March 1, 1913 (commonly known as the ‘‘Webb-Kenyon Act”) (27 U.S.C. 122) is amended by adding at the end the following:
‘‘SEC. 2. INJUNCTIVE RELIEF IN FEDERAL DISTRICT COURT.
‘‘(a) DEFINITIONS.—In this section—
‘‘(1) the term ‘attorney general’ means the attorney general or other chief law enforcement officer of a State or the designee thereof;
‘‘(2) the term ‘intoxicating liquor’ means any spirituous, vinous, malted, fermented, or other intoxicating liquor of any kind;
‘‘(3) the term ‘person’ means any individual and any partnership, corporation, company, firm, society, association, joint stock company, trust, or other entity capable of holding a legal or beneficial interest in property, but does not include a State or agency thereof; and
‘‘(4) the term ‘State’ means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or possession of the United States.
‘‘(b) ACTION BY STATE ATTORNEY GENERAL.—If the attorney general has reasonable cause to believe that a person is engaged in, or has engaged in, any act that would constitute a violation of a State law regulating the importation or transportation of any intoxicating liquor, the attorney general may bring a civil action in accordance with this section for injunctive relief (including a preliminary or permanent injunction) against the person, as the attorney general determines to be necessary to—
‘‘(1) restrain the person from engaging, or continuing to engage, in the violation; and
‘‘(2) enforce compliance with the State law.
‘‘(c) FEDERAL JURISDICTION.—
‘‘(1) IN GENERAL.—The district courts of the United States shall have jurisdiction over any action brought under this section by an attorney general against any person, except one licensed or otherwise authorized to produce, sell, or store intoxicating liquor in such State.
‘‘(2) VENUE.—An action under this section may be brought only in accordance with section 1391 of title 28, United States Code, or in the district in which the recipient of the intoxicating liquor resides or is found.
‘‘(3) FORM OF RELIEF.—An action under this section is limited to actions seeking injunctive relief (a preliminary and/ or permanent injunction).
‘‘(4) NO RIGHT TO JURY TRIAL.—An action under this section shall be tried before the court.
‘‘(d) REQUIREMENTS FOR INJUNCTIONS AND ORDERS.—
‘‘(1) IN GENERAL.—In any action brought under this section, upon a proper showing by the attorney general of the State, the court may issue a preliminary or permanent injunction to restrain a violation of this section. A proper showing under this paragraph shall require that a State prove by a preponderance of the evidence that a violation of State law as described in subsection (b) has taken place or is taking place.
‘‘(2) ADDITIONAL SHOWING FOR PRELIMINARY INJUNCTION.— No preliminary injunction may be granted except upon—
‘‘(A) evidence demonstrating the probability of irreparable injury if injunctive relief is not granted; and
‘‘(B) evidence supporting the probability of success on the merits.
‘‘(3) NOTICE.—No preliminary or permanent injunction may be issued under paragraph (1) without notice to the adverse party and an opportunity for a hearing.
‘‘(4) FORM AND SCOPE OF ORDER.—Any preliminary or permanent injunction entered in an action brought under this section shall—
‘‘(A) set forth the reasons for the issuance of the order;
‘‘(B) be specific in terms;
‘‘(C) describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained; and
‘‘(D) be binding upon—
‘‘(i) the parties to the action and the officers, agents, employees, and attorneys of those parties; and
‘‘(ii) persons in active concert or participation with the parties to the action who receive actual notice of the order by personal service or otherwise.
‘‘(5) ADMISSIBILITY OF EVIDENCE.—In a hearing on an application for a permanent injunction, any evidence previously received on an application for a preliminary injunction in connection with the same civil action and that would otherwise be admissible, may be made a part of the record of the hearing on the permanent injunction.
‘‘(e) RULES OF CONSTRUCTION.—This section shall be construed only to extend the jurisdiction of Federal courts in connection with State law that is a valid exercise of power vested in the States—
‘‘(1) under the twenty-first article of amendment to the Constitution of the United States as such article of amendment is interpreted by the Supreme Court of the United States including interpretations in conjunction with other provisions of the Constitution of the United States; and
‘‘(2) under the first section herein as such section is interpreted by the Supreme Court of the United States; but shall not be construed to grant to States any additional power.
‘‘(f ) ADDITIONAL REMEDIES.—
‘‘(1) IN GENERAL.—A remedy under this section is in addition to any other remedies provided by law.
‘‘(2) STATE COURT PROCEEDINGS.—Nothing in this section may be construed to prohibit an authorized State official from proceeding in State court on the basis of an alleged violation of any State law.
‘‘SEC. 3. GENERAL PROVISIONS.
‘‘(a) EFFECT ON INTERNET TAX FREEDOM ACT.—Nothing in this section may be construed to modify or supersede the operation of the Internet Tax Freedom Act (47 U.S.C. 151 note).
‘‘(b) INAPPLICABILITY TO SERVICE PROVIDERS.—Nothing in this section may be construed to—
‘‘(1) authorize any injunction against an interactive computer service (as defined in section 230(f ) of the Communications Act of 1934 (47 U.S.C. 230(f )) used by another person to engage in any activity that is subject to this Act;
‘‘(2) authorize any injunction against an electronic communication service (as defined in section 2510(15) of title 18, United States Code) used by another person to engage in any activity that is subject to this Act; or
‘‘(3) authorize an injunction prohibiting the advertising or marketing of any intoxicating liquor by any person in any case in which such advertising or marketing is lawful in the jurisdiction from which the importation, transportation or other conduct to which this Act applies originates.”.
(b) EFFECTIVE DATE.—This section and the amendments made by this section shall become effective 90 days after the date of the enactment of this Act.
(c) STUDY.—The Attorney General shall carry out the study to determine the impact of this section and shall submit the results of such study not later than 180 days after the enactment of this Act.
It’s about time something other than the dormant commerce clause was used to test these cases.
Wine.com’s Retail Pricing of most wines is below the State Minimum Retail required by Ohio law. Also, Ohio law requires that all retailers purchase their wines from authorized in-state distributors.
Do we believe they are going to comply with those laws?