Tennessee: alcohol protectionist statute under scrutiny before the US Supreme Court.


lcmm@melchionnalaw.com
Tennessee: alcohol protectionist statute...

Tennessee Wine and Spirits Retailers Association v. Thomas, (SCOTUS Docket No. 18-96), whose US Supreme Court Decision is set to be announced in June 2019, asks the Justices to determine whether Tenn. Code Ann. §§ 57-3-203 and 57-3-204 (“Statute”) is unconstitutional. The statute requires individuals to reside within the state for two years before the Tennessee’s Alcoholic Beverage Commission (“TABC”) can grant them a license to sell alcoholic beverages. Additionally, in order to renew a license, Statute requires an individual to have resided in the state for 10 years. Corporations seeking a license are subject to similar requirements for their officers and shareholders. TABC had not enforced the Statute in the 6 years prior to this case.

While the 21st Amendment gives states authority to regulate the “transportation or importation” of “intoxicating liquors,” its scope was limited by the 2005 decision in Granholm v. Heald (544 U. S. 460 (2005)). The majority opinion in Granholm ruled that states cannot discriminate against out-of-state wineries because doing so would violate the US Constitution’s Commerce Clause.

Nonetheless, the petitioner, Tennessee Wine and Spirits Retailers Association (“the Association”), argues that the 21st Amendment gives Tennessee “virtually complete control” over the sale of alcohol within its borders provided it does not impede interstate commerce (e.g. discriminating against out-of-state products or regulating activities out-of-state). Further, the Association argues the residency requirements are a matter of “legislative judgement,” as Statute “increases the odds that liquor retailers will sell responsibly.”

The respondent, Tennessee Fine Wines and Spirits, LLC (“Fine Wines”), argues that residency requirements serve to protect in-state retailers from competition. They say that the Court has long upheld the position that interstate commerce flow freely and that the petitioner’s arguments to the contrary are “misguided.”

Tennessee’s durational residency requirements fundamentally prohibit the flow of interstate commerce and deny out-of-state retailers market access. The Association’s claim to broad regulatory authority over the sale of alcohol seems not well-defined and to contradicts core principles of the U.S. Constitution. Alternatively, Fine Wines’ argument allows the 21st Amendment to coexist alongside the Constitution’s Commerce and Privileges and Immunities Clauses.

It will be interesting to see if this Supreme Court sustains Granholm or allows Tennessee’s protectionist policies to be confirmed.