A New Wine Legal Battle Erupts in California

Two small wineries and some prominent lawyers have launched a new front in the wine direct shipping wars, and this one is targeting a law in America’s biggest wine state. They’re asking, should alcohol producers outside of California be able to sell directly to Golden State businesses?

Under current law, California is one of many states that allows out-of-state wineries to ship directly to individual consumers. It is also one of 12 states where consumers can receive shipments from out-of-state retailers (though, in California’s case, only from states that also accept shipments from out-of-state retailers).

What’s less common is that licensed California wineries can ship wines directly to California retailers and restaurants without working through a wholesaler or distributor. This avoids additional logistic costs for wineries and helps them keep prices lower for consumers.

This past November, two wine producers—Dwinell Country Wines (aka Dwinell Country Ales) in Washington state and Buckel Family Wine in Colorado—filed a lawsuit challenging California’s law banning out-of-state producers from selling wines directly to retailers and restaurants. The suit was filed with the U.S. District Court for the Central District of California (Western Division), and, combined with similar cases across the country, it could make significant waves in the wine industry.

“Since most of these cases are still pending, it is hard to predict what their ultimate significance will be—how much any laws will actually change,” Alex Koral, regulatory general counsel for shipping compliance company Sovos ShipCompliant, told Wine Spectator via email. “But they certainly have the potential to dramatically reform how alcohol is sold in the U.S.”

A Constitutional Question

The plaintiffs claim California’s law violates the Constitution’s Dormant Commerce Clause, which prohibits states from discriminating against interstate commerce. (This is an argument used regularly in wine distribution and shipping cases.)

“From a legal perspective, these state laws permitting in-state producers’ certain rights while denying the same rights to out-of-state producers [are] a clear Commerce Clause violation under Granholm,” attorney Sean O’Leary—not affiliated with this suit—told Wine Spectator via email, referencing the U.S. Supreme Court’s watershed decision Granholm v. Heald, which overturned Michigan and New York state laws banning shipments to consumers from out-of-state wineries while permitting shipments from in-state wineries.

As we’ve seen in other legal battles in New Jersey, Ohio and elsewhere, state governments have argued that other shipping restrictions, such as bans on shipping by out-of-state retailers, are needed for alcohol regulation. The 21st Amendment has guaranteed state control of alcohol sales since the repeal of prohibition. But the Supreme Court has repeatedly said laws restricting alcohol sales must be for either maintaining orderly markets or promoting temperance, not for benefiting local businesses.

Koral pointed out that state arguments may not hold up after the Supreme Court’s decisions on Granholm and, in 2019, Tennessee Wine and Spirits Retailers Association v. Russell F. Thomas. In Tennessee, seven Justices ruled against Tennessee’s residency requirement for alcohol retailers on the grounds it violated the Commerce Clause. Since then, some courts have demanded harder evidence that state alcohol shipping and distribution laws are actually essential for maintaining public health and safety.

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The wineries in this latest case argue that California’s restriction isn’t…


Source : https://www.winespectator.com/articles/california-wine-legal-battle

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