Tennessee Retailers’ Supreme Court Case Has A New Respondent

The pending Supreme Court case on the Tennessee retail residency law is now on its third named state defendant.  Sorry Clayton Byrd and now Zachary Blair, your name is off the case caption.  Congratulations to Russell F. Thomas who is the new Executor Director of the Tennessee Alcohol Beverage Control and because of that title is the new named Respondent in this case.   A decision on the Tennessee Wine and Spirits Retailers Association v. Thomas case will be made by the Supreme Court by the end of their term in June.

(Previous Post: Oral Arguments Held at the Supreme Court in Tennessee Retailers Case)

Oral arguments were held today at the United States Supreme Court.   A link to the transcript can be found here.  Ironically, today’s oral arguments were held exactly 100 years to the day after ratification of the 18th Amendment.

There were tough questions asked of each side.  An interesting part of the argument was the discussion by  the Justices noting that the legal theory offered by the Respondents opens up a perpetual Pandora’s box of additional litigation against state alcohol regulation.  I will refrain from making a prediction on who won or lost because it is a futile exercise that only the nine justices know the answer.   I urge the reader to make their own conclusions after a review of the transcript.

A decision will be made by the time the court adjourns in June.

(earlier post) Final Briefs Submitted, Argument Time Divided and Supreme Court Oral Argument Set for January 16th in Tennessee Retailers Association Case

 

The Supreme Court has granted the motion of the state of Illinois for ten minutes of the Petitioner’s oral argument time while rejecting the efforts to split the time of the Respondents. The Tennessee Retailers will have twenty minutes, the state of Illinois will have ten minutes and Total Wine will have the full thirty minutes next week while Institute for Justice receives no time.

The Tennessee Retailers filed their reply brief urging the court to reverse the 6^th Circuit. In it, the Petitioners highlight weaknesses in the briefs of respondents and their amici.  One challenge for this reply brief was to identify what targets to shoot at as one of the Respondents and most amici tried to shoehorn issues related to Article 4 Privileges and Immunities and/or 14^th Amendment Privileges or Immunities into this pending Supreme Court review of the dormant Commerce Clause/21st Amendment.  The reply brief notes that these issues are being raised essentially for the first time at the Supreme Court.   Moreover, many of the factual matters raised in the briefs are irrelevant to the two-year residency issue before the court.

Additionally, the reply brief highlighted that while the Respondents and amici discussed the 1789 history of the Commerce Clause, they did not offer any relevant history or explanation for the 1933 history of the 21^st Amendment or relevant federal alcohol laws such as the Webb-Kenyon Act. The reply brief highlighted how prior Supreme Court precedent supported reversal of the 6^th Circuit and that there are a multitude of policy reasons supporting the Tennessee durational residency law.

Briefing is complete and with one petitioner, two respondents, and 22 amici, the Supreme Court clerks will be busy reviewing briefs and history books.

Oral argument will be held January 16, 2019 at 11:00 A.M.

 

(Previous Post:     Supreme Court Briefs Filed by Respondents and Their Amici, Oral Argument Shapes Up in Tennessee Retailers Case)

Assuming there are no delays in the Supreme Court’s Calendar caused by a government shutdown, oral arguments on the Tennessee Retailers matter will take place at 11:00 AM on January 16, 2019.   Presently before the Supreme Court are two requests to allow additional lawyers to argue. On the Respondents’ side, lawyers for Total Wine and Affluere Investments, Inc. have jointly asked to divide their 30 minutes of argument time with Total Wine for 20 minutes and the remaining ten minutes to be argued by the Institute of Justice on behalf of Affluere. The Illinois Attorney General has asked for 10 minutes of the time given to Tennessee Retailers Association. The court has not approved these requests at this time.

The briefs filed by Respondents and their amici covered expected dormant Commerce Clause grounds but spend a disproportionately large time on issues surround the Privileges and Immunities Clause and avoid any historical explanation of the 21^st Amendment or discussion of the public health concerns of alcohol regulation.   All the briefs share a general distaste for attempts by states to regulate whether in alcohol or any other field. Apparently, all answers to all policy questions must reside in the wisdom of Congress.

Total Wine filed its brief and spends the majority of its argument discussing what they view is the proper standard for dormant Commerce Clause. They repeatedly emphasize the previous advisory opinions of the previous Tennessee Attorney General and tie the two year residency law at issue before the court with the 10 year residency law for renewal discussed below. Total Wine seeks to draw a narrow line onto the residency law here and declare it is not attacking the three tier system, but it is hard to see how a victory by them would not be used to further this attack as several of their amici seek and the recent decisions in the 7^th Circuit and a Michigan district court.

The Institute of Justice has taken over representation of the other Respondent Affluere Investments. The Supreme Court brief of the IOJ brings a new issue to this case. While IOJ supports the Total Wine brief on dormant commerce clause, it spends nearly two thirds of its brief seeking to breathe life into the issue of the Privileges and Immunities Clause.   It pounds the P&I point on behalf of its client who now has resided in Tennessee for over two years and is eligible for a Tennessee alcohol retailer license under the existing law. I never thought I’d have to read a case citing to the Dred Scott decision, let alone four times!

The attempts to resurrect and expand the Privileges and Immunities Clause is a long running ivory tower/gun fight that apparently IOJ and other libertarian groups think this case is the appropriate place to make a stand. Since the 6^th Circuit did not rule on this case on P&I grounds it is unclear if the Supreme Court will either but perhaps the Respondents are anticipating a remand and would like to prepare the discussion on this issue.

There were eight amici briefs filed in this matter in support of the Respondents. This blog previously posted about the 14 briefs in support of Tennessee Retailers.

Overall, the eight briefs do a good job of accusing the Appellant’s amici of being inconsistent with Granholm. None of them make any 21st Amendment historical argument. None question why laws imposing durational-residency requirements have been around since the adoption of the 21^st amendment. And none of the briefs counter the public-health brief, and do a poor job countering the previously filed consumer brief.

Law Professor Alan Morrison: This GWU Law Professor filed his amicus brief before the Respondents filed their brief. He uses all his amicus brief to push for an expansive view of the Privileges and Immunities Clause noting his past successes in other litigation.  It is a rather academic overview of the discussion that does not get too far into the weeds on whether the Respondents are eligible for protection from the Privileges and Immunities Clause due to their different business organizational structures.

Brief on behalf of 81 Wine Consumers:   This brief was authored by Mssrs. Tanford and Epstein who have brought nearly a dozen constitutional challenges to state alcohol laws over the past ten years. As such these attorneys are well-versed on the relevant dormant commerce clause issues facing the states but try to present it from a “consumer wins if the online retailer” wins perspective.

This amicus brief attempts to portray the current alcohol marketplace as some sort of dysfunctional backwards Soviet Union type system where consumers are suffering under oppressive and anti-consumer rules.   Perhaps that is why they felt compelled to try to discredit the previously filed amicus brief by Consumer Action which rightly noted how competitive the US alcohol marketplace is and that the United States consumer has access to unrivaled choice, variety and selection at all price points. I am not sure of a citizen’s constitutional right to get any high end allocated wine ever made but maybe that case will come someday soon by these consumers.

Interestingly, this brief was crowd funded so all the donors are listed in the appendix of the brief in order to comply with Supreme Court Rule 37.6.

Law and Economics Scholars: This brief treats alcohol as if it were any other product, and ignore the history of prohibition, the 21^st Amendment, and these durational-residency laws. This brief uses words such as “rent-seeking”, “lobbying”, “protectionist” and other terms as some form of magic talisman to make all their assertions about nefarious intents true despite no evidence. They ignore the reality that in the wake of prohibition, with a demonstrated focus on temperance and no evidence of animus against other states or protection of native industries, the majority of states enacted these types of laws. The brief claims that “increased prices” for alcohol would lead to “harm” to consumers, rather than temperance and public-health benefits that other arms of federal government and public health researchers have noted. They suggest that an “integrated national economy” for alcohol is constitutionally protected, and that each State in the country is limited to the same narrowly tailored approaches that may be more difficult to pass democratically or to afford – such as increased taxes, or stepped-up enforcement – when the point of the 21^st Amendment was to give states a wide variety of options tailored to the needs of a particular community to achieve temperance.

Retail Litigation Center: This brief was filed on behalf of the interests of big-box retailers who note their interest in advocating “against protectionism in all industries.” This brief says nothing of the history and policy concerns that led to the 21^st Amendment. They concede that Tennessee’s law has been on the books for “decades,” and don’t dispute that other similar laws were on the books before then, but apparently believe that those laws were unconstitutional when enacted, contemporaneously with the Twenty-first Amendment. The brief seems to tell the States that there must be alternative methods to achieve these ends because some amici States don’t use residency requirements. But the fact that those States nonetheless support Tennessee underscores that the entire purpose of the Twenty-first Amendment was to give States a diverse variety of options. Achieving temperance is not a one-size-fits-all proposition. And this brief’s assertions about out-of-state ownership are incompatible with the concerns about absentee ownership present in the pre-prohibition era and covered at length in the prior round amici. The employees of tied houses lived in the local communities, but the owners did not; and that was the problem.

Interesting factoid. Arkansas, home of Wal-Mart, has a residency law for alcohol retailing.

Pacific Legal Foundation: While this brief looks at the history of the passage of the Constitution, it is silent about the history of prohibition and repeal. The brief spends a good amount of time working through dormant Commerce Clause case law however it seems to imply that because the internet was invented, state alcohol laws must fall claiming there is no justification left for the three-tier system. Well, that is not true, but it would be irrelevant if it were. If the justification for the Twenty-first Amendment were gone, the right response would be repeal of Section 2. But as long as it is part of the Constitution, Pacific is wrong to suggest that the Court simply ignore it.

The brief also reinforces the Respondent’s briefs pointing out geographical differences in state regulation of Arkansas being closer to Memphis than Nashville.

National Association of Wine Retailers: This brief essentially admits that it is reading all meaning out of the 21st Amendment: “When Prohibition ended, the Twenty-First Amendment simply restored to states the police power they had enjoyed before Prohibition, but no more.”  That may have been section one of the 21^st Amendment, but the U.S. Constitution has a Section 2.

The brief argues that state laws that don’t allow retailers to ship are purposely designed to harm consumers but many of these arguments seem best for a state legislature, not federal court. The political process, not constitutional litigation has solved and will solve these issues in the past. The main point of this brief is an attack on physical presence laws for alcohol. Any law that impeded unmitigated alcohol retailer shipping should be suspect in their view.

A Brief by Law Professors on Privileges or Immunities:  This brief of law professors answering the Brigadoon-like Privileges or Immunities call. They concentrate on this issue only. This brief appears to concede that Total Wine gets no protection from Privileges and Immunities Clause. The brief does not seem to fully understand the record below and notes that they claim that individual family members are being denied the license. But that’s not necessarily true. Affleure Investments is the entity being denied the license.  It is unknown if there are any individuals owning a liquor license due to alcohol liability issues including dram shop laws.

The Cato Institute: This amicus brief repeats many of the same dormant Commerce Clause and P&I themes of the previous briefs.   They seem to claim state power to regulate alcohol being a light switch, not a dimmer. They claim the states have in effect, a light switch where things are either prohibited, or everything must be allowed. Rather what most states do is a dimmer.  Cato’s light switch worldviews ignores the prevailing sentiment, expressed by Toward Liquor Control that prohibition would not work and that states needed to both legalize and heavily regulate.

(Previous Post) Supreme Court Sets Oral Argument in the Tennessee Retailers case for January 16, 2019

January 16, 2019 at 11:00 AM EST the Supreme Court of the United States will hear oral argument on the Tennessee Retailers Association matter.  The Court announced this with their release of the January calendar.

 

(previous post)Fourteen Briefs Filed in Support of Tennessee Wine and Spirits Retailers Association’s Appeal to the Supreme Court

Petitioner side briefing is complete in support of the Tennessee Wine and Spirits Retailers (Tennessee Retailers) Association’s appeal before the Supreme Court of the United States.

The primary brief was filed by the Jones Day law firm on behalf of the Tennessee Retailers. This legal brief highlights the errors made by the 6^th Circuit Court of Appeals and applauds the rationale proffered by dissenting Judge Sutton below. It notes that the 6^th Circuit Court of Appeals’ opinion has wide-ranging negative contexts and is a departure from the Supreme Court’s support for in state alcohol distribution and retail sale. The brief gives a comprehensive history of alcohol laws as well as the history of the 18^th and 21^st Amendment. The brief also discusses the term “core” state powers to regulate alcohol and the Court’s use of that term. Whether core is in or out of favor, the brief notes that challenged law is in fact core and central to the system of alcohol sale in Tennessee. The state of Tennessee has notified the court of its complete support for this brief and adopts the positions taken in it.

Fourteen diverse interests filed amicus briefs in support of overturning the 6^th Circuit’s decision below. These parties both supported the positions of the Tennessee Retailers, and offered other perspectives to paint a more complete story for the Supreme Court’s consideration. The briefs’ discuss the proper levels of deference owed to a state on alcohol policy choices, how alcohol is a product with significant externalities requiring different regulatory models, and the timeless relevance of Toward Liquor Control which was the leading thought piece on how to regulate alcohol post Prohibition. Many of the briefs noted that while this specific Supreme Court case is on the issue of durational residency laws, the 6^th Circuit’s opinion represents a slippery slope that could extend far beyond the residency issue into areas such as physical presence laws. In fact, this argument has already found favor with one district court.

Groups filing in support of the Petitioners include:

Thirty six state attorney generals filed an amicus brief led by the Illinois Attorney General. Illinois is awaiting a decision in another high profile dormant Commerce Clause matter pending before the 7^th Circuit Court of Appeals. In their brief the attorneys general defend residency laws and also note the broader negative implications of the 6^th Circuit decision on other alcohol laws. It concludes; “In light of the distinction between presence requirements and durational-residency requirements, even if this Court finds that durational residency requirements are invalid, it should reaffirm the viability of presence requirements for liquor retailer.”

A coalition of more than 30 national and local public health groups weighed in with a brief to highlight the dangers of a court cavalierly treating alcohol as a regular product in commerce. The brief cautions the Supreme Court to avoid looking at these issues with narrow economic blinders and to take into account the historical nature of alcohol regulation as well as the damage of alcohol misuses and abuse causes in American society.

The Center for Alcohol Policy filed a brief highlighting the importance of the book Toward Liquor Control to the passage of the 21^st Amendment and subsequent alcohol policy. Most of the other amicus briefs have cited to this book written by Fosdick and Scott while the nation was debating repeal of the 18^th Amendment and passage of the 21^st Amendment. The Center notes that the Court utilizes the Federalist Papers to understand the debate about the creation of our Constitution. The 21^st Amendment was not around when the Federalist Papers were written but Toward Liquor Control serves as that type of leading intellectual treatise for the Court to consider as it interprets the meaning of the 21^st Amendment.

Alcohol regulators from the National Alcohol Beverage Control Administration and National Liquor Law Enforcement Association filed a brief noting the importance of laws like residency requirements in the day-to-day administration of state alcohol laws and the worthy goals it helps effectuate in state regulation.

The State and Local Legal Center filed a brief on behalf of the National Conference of State Legislators, National Association of Counties, National League of Cities, U.S. Conference of Mayors, International City/County Management Association, and the International Municipal Lawyers Association. This brief suggests that the Court should not evaluate alcohol laws under a strict dormant commerce standard but consider it more in line with equal protection review. The brief also noted that many other state laws that require residency which could be impacted by this case.

Consumer Action filed a brief highlighting the lack of consumer harm from the Tennessee law. While there may be individuals whose business models are impacted by the Tennessee law, there is nothing in the Court’s record to suggest that Tennessee consumers or competition are suffering because of the regulation. It also highlights the recent U.S. Justice Department review of a beer merger and its understanding of the importance of limits on vertical foreclosure. Additionally, the brief points out that with a product like alcohol, more state regulation protects consumers rather than less regulation.

A brief filed by the Open Markets Institute takes a higher level review of the roles of states and federal government and decries the efforts of the Court to shortchange state experimentation in setting up healthy markets. It urges the Court to protect competition by restoring the most power to the states to regulate alcohol as envisioned by the 21^st Amendment.

The National Beer Wholesalers Association brief walks through the history of the Court’s 21^st Amendment and dormant Commerce Clause cases. This brief dedicates three pages of string cites to the various retailer and wholesaler residency laws across the United States. Approximately half the states have some form of a residency law. The brief also highlights the confusion expressed by good circuit judges from both the left and the right when trying to interpret the text and intent of the 21^st Amendment versus modern court jurisprudence. These respected circuit judges warn against turning the courts into a super legislature to resolve these issues. Rather, as the brief notes, state legislatures are dealing with alcohol policy on a regular basis. There have been 1,700 changes to alcohol laws signed into law the past six years showing that the Constitution is working, states are addressing this issue and the Court is not the proper forum to resolve alcohol policy disputes. The brief used 8,999 of the 9,000 words allowed.

The Wine and Spirits Wholesalers of America brief provides a comprehensive overview of 21^st Amendment case law. It also discusses how previous rulings by the Supreme Court have settled on protection for in-state alcohol distribution and sale but has not supported discrimination against out of state producers. The brief further examines how residency requirements protect state interests with a strong defense of the 8^th Circuit Court of Appeals’ decision upholding residency laws at the wholesale level in Southern Wine & Spirits of Am. Inc. v. Div. of Alcohol and Tobacco Control.

The brief for American Beverage Licensees likewise notes the Granholm decision was properly limited to producer level discrimination. It notes how residency laws are a critical component of establishing an in-state distribution system, but that the 6th Circuit below potentially destroys most meaningful efforts to structure that system despite Supreme Court endorsement of the three-tier system.

Additional amicus briefs were also filed by the Tennessee Wine and Spirits Wholesalers who also have a residency law, the Michigan Beer and Wine Wholesalers Association, a private holding company in Texas and Major Brands from Missouri.

One interesting aside: Many observers including myself have been calling this the “Byrd” case as Clayton Byrd was the primary respondent from the caption of the case below. Well Mr. Byrd has now retired and been replaced by Zachary Blair as the interim Director of the Tennessee Alcohol Beverage Control Agency. So now many are calling it the “Blair” case. However, a new Tennessee governor takes office in January with the option to appoint a new director so a third name could be inserted in January necessitating yet another name change. Perhaps we should just stick to calling it the Tennessee Retailers case since they aren’t going anywhere.

Briefs for and in support of the Respondents in this matter are due in mid to late December. The normal gang of economic libertarians and “alcohol is same as toothpaste” crowd will file briefs including those seeking to expand this decision far beyond the narrow issue of residency.

More details on filings before the court can be found at this link.  Oral arguments in this case will be next year in mid-January or mid-February. A decision from the Supreme Court will be announced by June 2019.

(previous post) Supreme Court Grants Cert in Tennessee Retailers Case

The Supreme Court will hear the appeal of the Tennessee Retailers Association.  On September 27, 2018 the court granted the petition filed earlier this summer.   The question presented to the court is “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.”  Briefing for this case will due later this year with oral arguments most likely next January or February.   This will be the first alcohol case before the 21st Amendment since the Court’s 2005 Granholm v. Heald decision.

A few weeks ago the Tennessee Retailers filed a great reply brief which presumably helped convince four judges to vote to take this case.

This is a huge development in the regulation of alcohol and this website will address this in further posts.

(earlier post)  Supreme Court Briefing Completed By Parties for Tennessee Retailers Association’s Appeal from 6th Circuit

 

In February 2018, the 6th Circuit ruled in a mostly 2-1 decision to uphold a district court’s finding that the alcohol retail residency laws of the state of Tennessee violated the dormant Commerce Clause. The 6th Circuit case is captioned Byrd, et. al v. Tennessee Retailers Association 883 f.3d 608 (6th Cir. 2018).  The Tennessee law required those seeking alcohol retail licenses to be a resident for two years and to renew a license to be a resident for at least ten years.  The effect of these laws was to essentially create a nine year residency law to open a retail liquor store.

The previous state Attorney General issued two separate opinion letters that questioned the constitutionality of the laws and when challenges to license applications manifested itself, the Attorney General’s office brought a declaratory action to resolve the constitutionality of the laws.  The odd posture of the state in not aggressively defending its own laws did not help the defense of the laws but Judge Sutton’s dissent noted that the core powers of the 21st Amendment should mean more than zero and he would have saved much of the state laws.

The Tennessee Retailers Association is taking this case to the Supreme Court and has filed a petition of writ for certiorari.   In its brief the association noted that various federal circuit courts have interpreted the language of the 2005 Granholm v. Heald case differently requiring Supreme Court clarification.  An intervening retailer, Total Wine and More, has filed a brief in opposition to the petition for certiorari.  They argued that there is no conflict and taking this case will not clarify issues below. The State of Tennessee and the other intervening retailer waived the filing of a response to the petition of writ for certiorari.

The Supreme Court is expected to decide whether to take the case, ask the state or federal government to brief the case, or deny taking the case at some point in October when the Supreme Court resumes for the 2018-2019 term.   Statistically, most petitions are rejected.  There were over 8,000 cases filed with the court but the Supreme Court considers less than 100.  There have been articles in recent years noting this trend of few cases.

Since the 2005 Granholm decision, the Supreme Court has passed on other petitions from the 5th and 6th Circuits to revisit issues surrounding the 21st Amendment.