WASHINGTON – A majority of U.S. Supreme Court justices on Tuesday appeared sharply critical of states that prohibit consumers from buying wine directly from out-of-state wineries as the court considered a case that could radically alter how alcohol is sold nationwide.
“The very activity you don’t want them to engage in … your in-state wineries are engaging in,” Justice David Souter told Michigan Solicitor General Thomas Casey. Michigan, whose law is being challenged along with New York’s, allows its wineries to ship directly to consumers, leading to charges of discrimination and protectionism from out-of-state vintners.
Justice Anthony Kennedy seemed sympathetic to oral arguments by attorneys for a handful of small wineries and consumers that the prohibitions in 24 states are unconstitutional, but he expressed concern that such a ruling would have a disruptive impact on the complex regulatory system for sales of beer and hard liquor that’s been in place for more than 70 years.
“All you’re asking is for a rationale that is sweeping,” Kennedy told Stanford University law professor Kathleen Sullivan, one of the attorneys challenging the laws, after she suggested that the court could make a limited ruling affecting only wine.
The case centers on a complex legal issue – the true intent of the 21st Amendment, which repealed Prohibition in 1933. But it has 21st century implications for consumers who want to purchase wine over the Internet.
Two powerful forces are fiercely fighting over the question: the fast-growing wine industry, particularly in California, which salivates at unfettered access to customers in every state, versus alcoholic-beverage wholesalers, who fear the elimination of their role as profit-making middlemen in a three-tiered regulation system set up after Prohibition ended.
Bans on out-of-state wine shipments stem from the 21st Amendment, which outlawed the “transportation or importation” of “intoxicating liquors” into any state in violation of its laws.
Attorneys for New York and Michigan rested their arguments largely on the text of the amendment, making an argument that could resonate with “textualists” on the court, such as Justice Antonin Scalia, who interpret the Constitution from its exact wording, not the intent behind specific sections.
The New York and Michigan attorneys rationalized the different treatment of in-state wineries – both states allow them to ship directly to consumers – by saying it would be difficult if not impossible to ensure that out-of-state wineries paid taxes and were not selling to minors.
“The suggestion we would send inspectors to California or some other place to count bottles or look at books is unfeasible,” said New York Solicitor General Caitlin Halligan.
The problem for the court is that the so-called “commerce clause” in Article I of the Constitution grants Congress, not the states, the right to regulate economic activity between the states.
That appears to be at odds with the 21st Amendment in the case, which is why two appellate courts reached different decisions on the issue: The Sixth Circuit Court of Appeals ruled last year that Michigan’s ban on out-of-state wine shipments violated the commerce clause, while the Second Circuit Court of Appeals ruled in February that New York’s laws were allowed by the 21st Amendment.
Justice Sandra Day O’Connor said the high court’s decision in a 1984 case, when it struck down a tax that Hawaii placed on out-of-state wines, created problems for New York and Michigan.
Kennedy said the court’s 5-3 ruling in the Hawaii case makes alcohol just like any other interstate commodity, “like milk,” that states are prohibited from regulating.
And Souter wondered if states could force out-of-state wineries to post their records on secure Web sites so that other states could access them with a password and review them.
Scalia indicated that the states banning out-of-state wine shipments have a difficult case to make based on court precedents.
“When you have facial discrimination of out-of-state products, I think the bar is high,” he said.
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