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Wealth of Options — Case Petitioning Supreme Court Could Loosen Sales of Alcohol Across State Lines — Good Beer Hunting

The lawsuit asserts in its petition to the Supreme Court that current Michigan law violates the nondiscrimination principle of the Constitution’s Dormant Commerce Clause because it unfairly advantages in-state retailers. (Under the Dormant Commerce Clause, states cannot discriminate against nor unduly burden interstate commerce.) The state of Michigan counters that the 21st Amendment—which repealed Prohibition and entrenched America’s three-tier system—gives a state the right to regulate alcohol sales within its borders. 

In April, The U.S. Court of Appeals for the Sixth Circuit ruled in favor of the state of Michigan; Lebamoff is asking the Supreme Court to review the Sixth Circuit’s decision. Typically, the Supreme Court will only take up cases already decided by a lower court if it feels they have national significance or the possibility to set new precedent; the highest court accepts about 2% of cases it’s asked to review each year.

WHY IT MATTERS

Consumers and retailers stand to benefit should the Supreme Court rule in Lebamoff’s favor. In that scenario, if a beer drinker in Illinois wanted to buy Pliny the Younger from a bottle shop in California, there would be nothing to legally prohibit the transaction. That California shop would just need to obtain a license to do business in Illinois. (In most states, this is a straightforward process of filing paperwork and paying a fee.)

But the state of Michigan and its alcohol wholesalers oppose this. Michigan distributors stand to lose a portion of their sales should customers be able to buy any form of alcohol from retailers in other states, though lawyers representing the wholesalers haven’t been able to quantify how much money is at stake. 

Legal experts reading these opposing arguments say it’s impossible to determine whether the Supreme Court will even take up the case. “Getting the Supreme Court to take a case is like throwing a football through the eye of a needle from 100 yards,” Troutman says. Still, there’s reason to think the court might have an interest in this one.

Troutman says the fact that the court ordered the state of Michigan to respond to the petitioner’s briefs indicates at least one of the justices is watching the case. 

“We’ve got someone’s attention,” Troutman says. “And if the court takes the case, it’s very likely that they will find in our favor.”

Additionally, the lead attorney for Lebamoff Enterprises tells Wine-Searcher the Supreme Court’s decision on Nov. 23 not to hear a different wine-related case, Walmart Stores, Inc. v. Texas Alcoholic Beverage Commission, makes him more bullish on the court taking up his case. There are seven similar wine shipping cases pending in lower courts, and the Supreme Court may want to clarify the issue once and for all.

According to Brennen Gorman, an attorney with Brower Vander Veen, PLC in Muskegon, Michigan who specializes in the alcohol industry, the court could apply logic from previous decisions to rule in favor of Lebamoff. The Supreme Court ruled in Granholm v. Heald in 2004 and in Tennessee Wine and Spirits Retailers Association v. Thomas in 2019 that states can’t use the 21st Amendment to disadvantage out-of-state alcohol producers unless they demonstrate a “legitimate local purpose.” (Economic protectionism—basically, giving the upper hand to in-state producers—was determined to be an insufficient purpose.) 

But he raises a major caveat.

“If we’re trying to use Granholm as the bellwether, that was 15 years ago—now the court is so different,” Gorman says. He notes that conservative Justice Antonin Scalia joined with liberal Justice Ruth Bader Ginsburg to author the majority opinion in Granholm; both justices have since died. “That was such a unique majority makeup. It makes it difficult to predict [how the current Supreme Court would rule].” 

In its response to Lebamoff’s petition, the state of Michigan (named as Gov. Gretchen Whitmer in this case) is joined by the Michigan Beer & Wine Wholesalers Association, which has filed a brief in support of the state’s position. Lawyers for the state of Michigan argue that the state has the legal right to distinguish between in-state and out-of-state retailers because that distinction “serves numerous health and safety goals closely related to the powers reserved by the Twenty-first Amendment.”

The “health and safety” argument is critical because it’s a unique, non-economic argument Michigan must use to justify distinction between in-state and out-of-state retailers. In making this argument, Michigan’s lawyers say the requirement that alcohol be sold to a Michigan wholesaler before it reaches store shelves—or a store’s online shop—means the state can monitor and audit such stores to protect consumers. The state cannot do so for out-of-state retailers.

Retailers and wholesalers nationwide are certainly watching whether the Sixth Circuit court’s ruling will stand, but consumers also have a stake in its outcome.

Gorman poses a hypothetical: If you’re a drinker who can suddenly buy alcohol from any state, could you potentially choose to order from the one with the lowest prices? (“Don’t think for a second Amazon wouldn’t want to get their hands into alcohol,” Troutman concurs.) If you could buy several cases of a beer—and benefit from free shipping—wouldn’t it make economic sense to order from those states, even if the specific brand of beer was available where you live?

Whether it’s buying coveted beers they can’t find in-state or simply finding a better deal, Gorman says the bottom line is that if the Supreme Court ruled for Lebamoff, consumers would have more purchasing options than ever before. And each day the pandemic continues to put a premium on online shopping, the issue gains more gravity.

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