Battle at the US Supreme Court—No, I’m not writing about the recent US Judiciary Committee battle to confirm Judge Kavanaugh to the US Supreme Court but, for the craft brew industry, the upcoming Supreme Court battle regarding residency requirements resulting in business discrimination might be just as important, at the very least to your pocketbook.
You may recall, a few months ago, I wrote about Tennessee residency requirements applicable to receiving licenses/permits to sell alcoholic beverages in Tennessee. This residency-based license restriction/requirement is used to benefit local companies, including sellers of craft beer among other alcoholic beverages, by excluding non-resident companies from selling alcoholic beverages in Tennessee. I mentioned in my earlier article that this residency requirement seemed to violate the “Dormant Commerce Clause” of the US Constitution.
It looks like this Tennessee matter has bubbled its way up to the US Supreme Court and the Court granted a request to hear the matter. Craft brewers should follow this case closely through news outlets. It may seem benign now, but the outcome will be applicable to the entire US as the new law of the land.
The Case
So that you can periodically check the status of this case online, below is the official entry in the US Supreme Court “docket” for this case: “18-96 TENNESSEE WINE & SPIRITS RETAILERS ASSOCIATION V. BYRD DECISION 883 F.3d 608 CERT. GRANTED 9/27/2018 LOWER COURT CASE NUMBER: 17-5552”
The Issue to be Determined by the US Supreme Court
The US Supreme Court granted a petition filed by the Tennessee Wine and Spirits Retailers Association to try to resolve conflicting court decisions, including the Tennessee decision which invalidated Tennessee’s two-year residency requirement for retail license applicants.
The issue to be determine by the US Supreme court is whether the non-discrimination principle of the “Dormant” Commerce Clause applies not only to producers and products but to state laws regulating wholesale and retail sales of alcoholic beverages.
That is, can an out-of-state retailer sell alcoholic beverages direct to consumers avoiding state residency requirements or, as the Court “docket” indicates, “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.”
Context
For context, you may recall from my earlier article that the “Dormant” Commerce clause of the US Constitution prohibits discrimination against out of state companies selling goods and services in a different state. This prohibition against discrimination includes all related state directives and statutes from licensing through the sale of goods and services in a state. This is a Constitutional mandate under the “Dormant” Commerce Clause of the 21st Amendment.
As I mentioned in my earlier article, out of state alcoholic beverage companies cannot be discriminated against by a state alcohol beverage commission or board, a state legislature, or any other authoritative body creating state law which affects commerce. In and out of state commerce must be treated equally. Recent US federal case law, particularly Byrd v Tennessee Wine and Spirits Retailers Association, backs up this interpretation of the 21st Amendment.
Residency Period
In Byrd, it was noted that a license from the Tennessee Alcoholic Beverage Commission (TABC) is required to sell alcoholic spirituous beverages, including beer and malt beverages in Tennessee. This is the same requirement that most states use to help control the sale of alcohol. However, to obtain a license from the TABC, an individual or company had to be a bona fide resident of Tennessee during the two-year period immediately preceding the date upon which application for such a license was made to the TABC. This was a TABC state residency requirement. The statute also imposed a 10-year residency requirement to renew the license to sell alcoholic beverages in Tennessee.
The Effect of a Supreme Court Ruling
Justices of the US Supreme Court decide which cases they will hear. They hear about 80 cases each year and another 50 cases absent oral argument—a decision made on the pleadings submitted by attorneys representing parties before the Court. To put the acceptance of the Byrd case in perspective, the Court is asked to address about 7000 cases per session (per year), Byrd being one of those cases to be decided by the Court this session. Most cases chosen by the Court address constitutional issues or issues regarding the validity or interpretation of federal law. Because the Commerce Clause of the US Constitution is at issue, the Byrd case was chosen based on a US Constitutional issue.
History “Sort Of” Repeats Itself
Think back to your high school or college days when you probably first heard about the case of Marbury v. Madison. This case has a direct effect on the Court’s ability to uphold or reverse the residency requirements mentioned in the Byrd case above. In Marbury, the Chief Justice of the US Supreme Court asserted that the Court’s responsibility to overturn unconstitutional legislation (as will be argued before the Court now in Byrd) was a necessary consequence of its sworn duty to uphold the Constitution. It was argued that the oath could not be fulfilled any other way. “It is emphatically the province of the judicial department to say what the law is,” as argued in Marbury.
History has a way of circling back for practical, present effect—without Marbury which was decided in 1803, you may not be able to sell craft beer in certain states without first satisfying draconian residency requirements circa 2018, over 200 years ago.
Dan has lectured to the World Trade Association, has taught law for UCLA, Santa Clara University Law School and their MBA program, and has lectured to the NPMA at Stanford University. Dan has lectured to various National and regional attorney associations about Government contract and international law matters. Dan has provided input to the US Government regarding the structure of regulations. He has been interviewed by reporters for the Washington Post and other newspapers.