The opinion
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
CHICAGO WINE COMPANY, )
DEVIN WARNER, STAN SPRINGER, )
CYNTHIA SPRINGER, and DENNIS NEARY, )
)
Plaintiffs, )
)
v. ) Case No. 1:19-cv-02785-TWP-DML
)
ERIC HOLCOMB, TODD ROKITA, and )
JESSICA ALLEN, 1 )
)
Defendants. )
________________________________________ )
)
WINE & SPIRITS DISTRIBUTORS OF )
INDIANA, )
)
Intervenor Defendant. )
ENTRY ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
This matter is before the Court on Cross-Motions for Summary Judgment filed pursuant to
Federal Rule of Civil Procedure 56 by the parties. Plaintiffs Chicago Wine Company ("Chicago
Wine"), Devin Warner ("Warner"), Stan Springer ("Mr. Springer"), Cynthia Springer ("Ms.
Springer"), and Dennis Neary ("Neary") (collectively, "Plaintiffs") filed their Motion on July 2,
2020, (Filing No. 49). Thereafter, Defendants Eric Holcomb ("Governor Holcomb"), Todd Rokita
("Rokita"), and Jessica Allen ("Allen") (collectively, "State Defendants") (Filing No. 61), and
Intervenor Defendant Wine & Spirits Distributors of Indiana ("WSDI"), (Filing No. 57), filed cross
motions. The Plaintiffs initiated this lawsuit against the State Defendants to challenge the
constitutionality of Indiana Code §§ 7.1-3-21-3, 7.1-5-11-1.5(a), and 7.1-3-15-3(d). After WSDI
1 Subsequent to the filling of this cause of action, Todd Rokita was elected as Indiana Attorney General thereby
replacing Curtis Hill as a Defendant in this matter, and Defendant David Cook was replaced as Chair of the Indiana
Alcohol and Tobacco Commission by Jessica Allen (see Filing Nos. 75 and 77, respectively).
intervened as a defendant, the parties filed their Cross-Motions for Summary Judgment on the
constitutional challenge. For the reasons explained below, the Court grants in part and denies
in part each of the Motions.
I. BACKGROUND
The Plaintiffs brought this civil action against the State Defendants pursuant to 42 U.S.C.
§ 1983 to challenge the constitutionality of three Indiana statutes that the Plaintiffs allege prohibit
out-of-state wine retailers from selling and delivering wine directly to Indiana consumers but allow
in-state wine retailers to do so.
Plaintiff Chicago Wine is a wine retailer located in Chicago, Illinois. It delivers wine to
its customers in Illinois and in other states where it is legal to do so. It has customers in Indiana
who have asked for delivery of wine, but cannot not ship wine to Indiana customers because it
does not have an Indiana liquor permit, which it cannot get because it is not an Indiana resident.
Chicago Wine would apply for a license to deliver wine directly to Indiana consumers if one
existed and if there were no residency requirements. Chicago Wine would then deliver wine in its
own vehicles to Indiana customers who live near Chicago and would deliver wine by common
carrier to those who live beyond its delivery area if it were legal to do so. Plaintiff Warner is a
professional wine consultant, advisor and merchant who resides in California, and one of the
principals of Chicago Wine (Filing No. 49-2 at 1–2).
Plaintiffs Mr. and Ms. Springer are a married couple residing in Indianapolis, Indiana. Mr.
Springer is a businessman, and Ms. Springer is a practicing attorney. They are wine collectors and
consumers of fine wine. They enjoy drinking wine, particularly Argentinian Malbecs, some of
which are difficult to find in Indiana. They have attempted to order wine from out-of-state retailers
to add to their wine collection, but were refused because of Indiana's prohibition. They contacted
Binny's Beverage Depot in Chicago, Illinois, but were informed that it will not deliver wine to
Indiana consumers but would do so if Indiana law is changed (Filing No. 49-3 at 1–2).
Plaintiff Neary is a resident of Indianapolis, Indiana, and he has his own video production
business. In the past, Neary has tried to order wine and have it delivered to him, but out-of-state
wine retailers have not shipped wine to him because of Indiana's prohibition. Neary recently
contracted Covid-19 and has since recovered. However, this has caused Neary to be more careful
about in-store shopping. He looks to the internet to be able to purchase wine and have it delivered
to his home (Filing No. 49-4 at 1–2).
The State Defendants are Governor Holcomb, the Governor of Indiana, the chief executive
officer of the State; Rokita, who is the Attorney General of Indiana; and Allen, who is the
Chairwoman of the Indiana Alcohol and Tobacco Commission. The State Defendants are sued in
their official capacities (Filing No. 16 at 5–6; Filing No. 75; Filing No. 77).
Intervenor Defendant WSDI is an unincorporated association composed of members
holding wine and liquor wholesaler's permits in Indiana. WSDI is an affiliate of the Wine & Spirits
Wholesalers of America, which represents wine and liquor wholesalers nationwide. WSDI
represents members before the Indiana General Assembly, state agencies, regulatory bodies,
courts, alcohol beverage industry organizations, and the general public, (Filing No. 19 at 1–2).
Title 7.1 of the Indiana Code governs all things alcohol-related in the State of Indiana.
Indiana Code § 7.1-3-21-3 provides, "The commission shall not issue an alcoholic beverage
retailer's or dealer's permit of any type to a person who has not been a continuous and bona fide
resident of Indiana for five (5) years immediately preceding the date of the application for a
permit."
Indiana Code § 7.1-5-11-1.5(a) states,
Except as provided in IC 7.1-3-26,2 it is unlawful for a person in the business of
selling alcoholic beverages in Indiana or outside Indiana to ship or cause to be
shipped an alcoholic beverage directly to a person in Indiana who does not hold a
valid wholesaler permit under this title. This includes the ordering and selling of
alcoholic beverages over a computer network (as defined by IC 35-43-2-3(a)).
And Indiana Code § 7.1-3-15-3(d) provides,
However, a wine dealer who is licensed under IC 7.1-3-10-43 may deliver wine
only in permissible containers to a customer's residence, office, or designated
location. This delivery may only be performed by the permit holder or an employee
who holds an employee permit. The permit holder shall maintain a written record
of each delivery for at least one (1) year that shows the customer's name, location
of delivery, and quantity sold.
The Plaintiffs' Amended Complaint challenges Indiana Code §§ 7.1-3-21-3 and 7.1-5-11-
1.5(a) specifically. The Plaintiffs allege these code provisions violate the Commerce Clause and
the Privileges and Immunities Clause of the United States Constitution. In their Amended
Complaint, "[t]he plaintiffs seek an injunction barring the defendants from enforcing these laws,
practices and regulations, and requiring them to allow out-of-state wine retailers to sell, ship, and
deliver wine to Indiana consumers upon equivalent terms as in-state wine retailers." (Filing No. 7
at 2.)
The Plaintiffs expanded their constitutional challenge in their Motion for Summary
Judgment to explicitly include Indiana Code § 7.1-3-15-3(d) with §§ 7.1-3-21-3 and 7.1-5-11-
1.5(a). However, the Plaintiffs noted in their summary judgment brief that "[t]he Complaint also
alleged a violation of the Privileges and Immunities Clause, but Plaintiffs are not seeking summary
judgment on that issue." (Filing No. 49 at 6.) In their summary judgment brief, the Plaintiffs
assert, "The laws should be declared unconstitutional and the defendant[s] enjoined from enforcing
them." Id. at 30.
2 Indiana Code § 7.1-3-26 concerns the issuance of a direct wine seller's permit and the requirements related to such a
permit. This chapter of the Indiana Code allows wineries (not wine retailers) to sell and ship directly to consumers.
3 Indiana Code § 7.1-3-10-4 concerns the issuance of a liquor dealer's permit to a package liquor store.
After the Plaintiffs filed their Motion for Summary Judgment, the State Defendants and
WSDI each filed Cross-Motions for Summary Judgment, asking the Court to uphold the three
challenged statutes as constitutionally valid as part of Indiana's three-tier system for the
manufacture, distribution, and sale of alcoholic beverages.
II. SUMMARY JUDGMENT STANDARD
The purpose of summary judgment is to "pierce the pleadings and to assess the proof in
order to see whether there is a genuine need for trial." Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986). Federal Rule of Civil Procedure 56 provides that summary
judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law." Hemsworth v.
Quotesmith.com, Inc., 476 F.3d 487, 489–90 (7th Cir. 2007). In ruling on a motion for summary
judgment, the court reviews "the record in the light most favorable to the non-moving party and
draw[s] all reasonable inferences in that party's favor." Zerante v. DeLuca, 555 F.3d 582, 584 (7th
Cir. 2009) (citation omitted). "However, inferences that are supported by only speculation or
conjecture will not defeat a summary judgment motion." Dorsey v. Morgan Stanley, 507 F.3d 624,
627 (7th Cir. 2007) (citation and quotation marks omitted). Additionally, "[a] party who bears the
burden of proof on a particular issue may not rest on its pleadings, but must affirmatively
demonstrate, by specific factual allegations, that there is a genuine issue of material fact that
requires trial." Hemsworth, 476 F.3d at 490 (citation omitted). "The opposing party cannot meet
this burden with conclusory statements or speculation but only with appropriate citations to
relevant admissible evidence." Sink v. Knox County Hosp., 900 F. Supp. 1065, 1072 (S.D. Ind.
1995) (citations omitted).
"In much the same way that a court is not required to scour the record in search of evidence
to defeat a motion for summary judgment, nor is it permitted to conduct a paper trial on the merits
of [the] claim." Ritchie v. Glidden Co., 242 F.3d 713, 723 (7th Cir. 2001) (citations and quotation
marks omitted). "[N]either the mere existence of some alleged factual dispute between the parties
nor the existence of some metaphysical doubt as to the material facts is sufficient to defeat a motion
for summary judgment." Chiaramonte v. Fashion Bed Grp., Inc., 129 F.3d 391, 395 (7th Cir.
1997) (citations and quotation marks omitted).
These same standards apply even when each side files a motion for summary judgment.
The existence of cross-motions for summary judgment does not imply that there are no genuine
issues of material fact. R.J. Corman Derailment Serv., LLC v. Int'l Union of Operating Eng'rs.,
335 F.3d 643, 647 (7th Cir. 2003). The process of taking the facts in the light most favorable to
the non-moving party, first for one side and then for the other, may reveal that neither side has
enough to prevail without a trial. Id. at 648. "With cross-motions, [the court's] review of the
record requires that [the court] construe all inferences in favor of the party against whom the
motion under consideration is made." O'Regan v. Arbitration Forums, Inc., 246 F.3d 975, 983
(7th Cir. 2001) (citation and quotation marks omitted).
III. DISCUSSION
Plaintiffs bring three claims in their Amended Complaint: Count I: Commerce Clause
Violation for Discrimination; Count II: Violation of the Commerce Clause for Economic
Protectionism; and Count III: Privileges and Immunities Clause Violation. In their Cross-Motions
for Summary Judgment, the parties argue the constitutionality of Indiana Code §§ 7.1-3-21-3, 7.1-
5-11-1.5(a), and 7.1-3-15-3(d) under the Commerce Clause of the United States Constitution. The
Court will first discuss legal principles governing Commerce Clause and Twenty-first Amendment
claims and then turn to each of the challenged statutes.
A. Legal Principles Governing Commerce Clause and Twenty-First Amendment Claims
The Commerce Clause provides that "the Congress shall have Power . . . to
regulate Commerce . . . among the several States." Art. I, § 8, cl. 3. Though phrased
as a grant of regulatory power to Congress, the Clause has long been understood to
have a "negative" aspect that denies the States the power unjustifiably to
discriminate against or burden the interstate flow of articles of commerce.
Or. Waste Sys. v. Dep't of Envtl. Quality, 511 U.S. 93, 98 (1994).
The Twenty-first Amendment to the United States Constitution provides, "The
transportation or importation into any State, Territory, or possession of the United States for
delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby
prohibited." U.S. CONST., AMEND. XXI, § 2. Section two of the Twenty-first Amendment gives
power to the states to regulate transportation and importation of alcoholic beverages.
The tug-of-war between the Commerce Clause's prohibition against states unjustifiably
burdening interstate commerce and the Twenty-first Amendment's grant of power to the states to
regulate the flow of alcoholic beverages has generated much litigation. The United States Supreme
Court and the Seventh Circuit have provided guidance to the district courts for deciding Commerce
Clause challenges to states' liquor laws.
The Seventh Circuit has noted,
The Commerce Clause grants Congress the power to "regulate Commerce . . .
among the several States." Art. 1, § 8, cl. 3. The positive grant of power implies
that "state laws violate the Commerce Clause if they mandate 'differential treatment
of in-state and out-of-state economic interests that benefits the former and burdens
the latter.'" Granholm, 544 U.S. at 472.
Lebamoff Enters. v. Rauner, 909 F.3d 847, 851 (7th Cir. 2018). The court further noted,
[T]he states [have] greater leeway to regulate alcoholic beverages than they enjoy
with respect to any other product. But the Supreme Court has decided that this
leeway is not boundless. Drawing lines that are sometimes difficult to follow, it has
decreed that states may not infringe upon other provisions of the Constitution under
the guise of exercising their Twenty-first Amendment powers.
Id. at 849.
The United States Supreme Court has explained,
The Twenty-first Amendment grants the States virtually complete control over
whether to permit importation or sale of liquor and how to structure the liquor
distribution system. . . . State policies are protected under the Twenty-first
Amendment when they treat liquor produced out of state the same as its domestic
equivalent.
Granholm v. Heald, 544 U.S. 460, 488–89 (2005) (internal citations and quotation marks omitted).
Very recently, the Supreme Court discussed the relationship between the Commerce
Clause and the Twenty-first Amendment:
[B]ecause of §2 [of the Twenty-first Amendment], we engage in a different inquiry.
Recognizing that §2 was adopted to give each State the authority to address alcohol-
related public health and safety issues in accordance with the preferences of its
citizens, we ask whether the challenged requirement can be justified as a public
health or safety measure or on some other legitimate nonprotectionist ground.
Section 2 gives the States regulatory authority that they would not otherwise enjoy,
but as we pointed out in Granholm, "mere speculation" or "unsupported assertions"
are insufficient to sustain a law that would otherwise violate the Commerce Clause.
544 U. S., at 490, 492, 125 S. Ct. 1885, 161 L. Ed. 2d 796. Where the predominant
effect of a law is protectionism, not the protection of public health or safety, it is
not shielded by §2.
Tenn. Wine & Spirits Retailers Ass'n v. Thomas, 139 S. Ct. 2449, 2474 (2019). "[T]he Twenty-
first Amendment can save an otherwise discriminatory regulation only if it is demonstrably
justified by a valid factor unrelated to economic protectionism." Lebamoff, 909 F.3d at 853
(internal citation and quotation marks omitted).
In distilling the Supreme Court's Twenty-first Amendment decisions, the Seventh Circuit
summarized that the
[Supreme] Court extracts three principles from its Twenty-first Amendment case
law: (1) the Amendment does not save state laws that violate other provisions of
the Constitution (i.e. clauses other than the Commerce Clause), (2) the Amendment
"does not abrogate Congress' Commerce Clause powers with regard to liquor," and
(3) "state regulation of alcohol is limited by the nondiscrimination principle of the
Commerce Clause." Granholm, 544 U.S. at 486–87.
Id. at 854.
"A state law that discriminates explicitly ('on its face,' lawyers are fond of saying) is almost
always invalid under the Supreme Court's commerce jurisprudence." Baude v. Heath, 538 F.3d
608, 611 (7th Cir. 2008). However, on the other hand,
"[W]here the statute regulates even-handedly to effectuate a legitimate local public
interest, and its effects on interstate commerce are only incidental, it will be upheld
unless the burden imposed on such commerce is clearly excessive in relation to the
putative local benefits." Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S. Ct.
844, 25 L. Ed. 2d 174 (1970). State laws regularly pass this test, see Davis, 128 S.
Ct. at 1808-09, for the Justices are wary of reviewing the wisdom of legislation
(after the fashion of Lochner) under the aegis of the commerce clause.
Id.
The Seventh Circuit explained,
When some form of heightened scrutiny applies--as it does if a law's own terms
treat in-state and out-of-state producers differently--then the burdens of production
and persuasion rest on the state. But when challenging a law that treats in-state and
out-of-state entities identically, whoever wants to upset the law bears these burdens.
Id. at 613.
B. Indiana Code § 7.1-3-21-3
The first statute challenged by the Plaintiffs, Indiana Code § 7.1-3-21-3, explicitly requires
a person or entity to be an Indiana resident for five years preceding the date of their permit
application in order to be eligible to receive an alcoholic beverage retailer's or dealer's permit of
any type. The Plaintiffs argue that this statute, on its face, discriminates against out-of-state wine
retailers to the benefit of in-state wine retailers and, thus, violates the Commerce Clause. The
Plaintiffs note, "The Supreme Court has ruled that a 'residency requirement for retail license
applicants blatantly favors the State's residents and has little relationship to public health and
safety, [so] it is unconstitutional' under the Commerce Clause. Tenn. Wine & Spirits Retailers
Ass'n v. Thomas, 139 S. Ct. at 2457." (Filing No. 49 at 18–19.)
The State Defendants respond, "The Indiana Alcohol and Tobacco Commission ('the
Commission') has been enjoined from enforcing . . . Ind. Code § 7.1-3-21-3, so any claim stemming
from that statute is moot." (Filing No. 62 at 6.) They further explain,
The District Court for the Southern District of Indiana has enjoined the Commission
from enforcing the Residency Requirement for alcoholic beverage permits. See
Indiana Fine Wine & Spirits, LLC v. Cook, et al., No. 120CV00741TWPMJD, 2020
WL 2319740, at *10 (S.D. Ind. May 11, 2020). The State does not analyze the
Plaintiffs' claims regarding this requirement because the issue is moot.
Id. at 7. WSDI makes a similar concession regarding Indiana Code § 7.1-3-21-3. (See Filing No.
58 at 5 ("The District Court for the Southern District of Indiana has entered an injunction against
Indiana enforcing its residency requirements for alcoholic beverage permits.").)
Indeed, this Court recently analyzed an Indiana alcohol permit residency requirement under
Indiana Code § 7.1-3-21-5.4(b) in the case of Indiana Fine Wine & Spirits v. Cook, 459 F. Supp.
3d 1157 (S.D. Ind. 2020). The Court reviewed and applied the Supreme Court's recent decision in
Tennessee Wine & Spirits Retailers Association v. Thomas, 139 S. Ct. 2449 (2019), and determined
that Indiana's residency requirement violated the Commerce Clause and could not be enforced.
The same applies in this case as acknowledged by the State Defendants and WSDI. Therefore,
summary judgment is granted in favor of the Plaintiffs, and the State Defendants (and their agents)
may not enforce Indiana Code § 7.1-3-21-3 as a statutory requirement for the issuance of "an
alcoholic beverage retailer's or dealer's permit of any type." The five-year residency requirement
of Section 7.1-3-21-3 is declared violative of the Commerce Clause of the United States
Constitution and may not be enforced.
C. Indiana Code § 7.1-3-15-3(d)
The Plaintiffs also challenge the constitutionality of Indiana Code § 7.1-3-15-3(d), which
requires that any wine delivery to consumers be made by the permit holder or an employee who
holds an employee permit.
Indiana wine retailers may obtain a wine dealer permit under Section 7.1-3-15-3 and a
package store permit under Section 7.1-3-10-4, and the combination of these two permits allows
the permit holder to sell wine at retail and deliver the wine to the consumer. Consequentially,
Plaintiffs argue, a wine retailer outside of Indiana may not sell wine and deliver it to Indiana
consumers because Indiana will not issue a permit to out-of-state retailers. They argue that the
State Defendants have conceded that "[a]ny application would need to meet Indiana's licensing
standards, which would include maintaining a physical presence in Indiana," and "there is no
obvious permit" that would allow a retailer to sell and deliver wine directly to consumers from an
out-of-state premises (Filing No. 49-23 at 2; Filing No. 49-24 at 1–2).
The Plaintiffs assert that different treatment of in-state and out-of-state businesses
constitutes unlawful discrimination if the discrimination benefits in-state economic interests and
burdens out-of-state interests, and the different treatment in this case meets that standard. The
statute benefits in-state wine retailers by shielding them from competition and giving them the
exclusive right to make home deliveries, which is a significant economic advantage especially
during the current pandemic. When a consumer cannot buy wine from an out-of-state retailer, they
will buy from an in-state retailer, which shifts economic resources from out-of-state to in-state
businesses. The Plaintiffs argue the statute plainly is economically protectionist.
Plaintiffs argue that Chicago Wine cannot establish and maintain a physical presence in Indiana
for the purpose of delivering wine to Indiana consumers because such a physical presence would
be economically unfeasible. This, Plaintiff's assert, is another way the State Defendants are
unlawfully discriminating against out-of-state businesses and burdening interstate commerce.
The Plaintiffs further contend that the restriction in Section 7.1-3-15-3(d) that wine
"delivery may only be performed by the permit holder" in its own vehicles, and not by common
carrier, is an indirect form of discrimination. Most wine sold in the United States is available only
from out-of-state retailers. Most out-of-state retailers who sell wine online are located far beyond
Indiana's borders˗˗a majority of which are state of California˗˗ and they cannot afford to deliver a
few cases of wine by driving their own vehicles from California to Indiana. It is cost-prohibitive
even for Chicago Wine to use its own vehicles to deliver to much of Indiana. The effect of this
restriction is discriminatory and protectionist. And even if Indiana were to license out-of-state
retailers and permit them to deliver using their own vehicles, Plaintiffs contend the effect would
be the same as an explicit ban.
The Plaintiffs argue the statute additionally violates the Indiana consumer plaintiffs' right
to purchase wine in interstate commerce. Plaintiffs point out that they have a right to transact in
alcoholic beverage sales across state lines, however, Indiana's laws make it difficult if not
impossible to buy rare and older wines that are not available in Indiana. Thus, they are being denied
their right to engage in interstate commerce. Moreover,
The discriminatory effect of the ban on using common carriers is not 100%. Some
out-of-state retailers located close to Indiana's borders could use their own vehicles
to make home deliveries, and some Indiana retailers located at the far ends of the
state cannot deliver to the opposite end as a practical matter. These facts are
irrelevant. A statute discriminates against interstate commerce if the overall effect
of the law is to disadvantage out-of-state businesses and benefit in-state ones, even
if a few out-of-state firms are not harmed and a few in-state firms may also be
burdened.
(Filing No. 49 at 25 (emphasis in original; internal citations omitted).)
The State Defendants and WSDI argue that statutes having a disparate impact on interstate
commerce (rather than facial discrimination) are subject to strict scrutiny only if the impact is
"powerful, acting as an embargo on interstate commerce without hindering intrastate sales." Nat'l
Paint & Coatings Ass'n v. City of Chicago, 45 F.3d 1124, 1131 (7th Cir. 1995). If, instead, the
discriminatory effect is "weak" or "mild," the flexible balancing standard articulated in Pike v.
Bruce Church applies. Id. They argue that Indiana's alcohol laws challenged by the Plaintiffs do
not violate the nondiscrimination principles of Granholm and do not manifest the kinds of blatant
economic protectionism and facial discrimination that cannot be shielded by the Twenty-first
Amendment. The requirement of face-to-face delivery is not facially discriminatory and likely has
no disparate impact on out-of-state commerce. Thus, the law's impact is only on the method of
distribution, which the Commerce Clause does not affect and the Twenty-first Amendment
specifically protects.
The State Defendants and WSDI next argue the Plaintiffs have not shown that Indiana is
treating Indiana wine any differently from wine produced in any other state. If wine is delivered
by a wine dealer, delivery must be made by the permit holder or a trained employee. The statute
makes no distinction between in-state and out-of-state wine dealers; both may deliver wine only
by the permit holder or an employee who holds an employee permit.
They assert that, even if there is some incidental impact on interstate commerce, any burden
is far outweighed by the public health and safety benefits of the regulation. Afterall, ease of access
and availability of alcohol impacts the health and safety of Indiana citizens in the form of drunk
driving, domestic violence, binge drinking and its health effects, and the transmission of sexually-
transmitted diseases due to increased risky sexual behavior. Indiana's regulation is part of its
overall three-tier system to control the amount of alcohol in the State, which helps limit health and
safety concerns.
The State Defendants and WSDI assert that "keeping alcohol out of minors' hands is a
legitimate, indeed a powerful, [local] interest." Baude, 538 F.3d at 614. The Seventh Circuit
previously has accepted the State's reasoning that face-to-face verification for wine shipments
would reduce the number of shipments that go to minors. Id. at 614–15. They contend,
Under Pike, when statutes regulating wine distribution are facially neutral, and
therefore the threshold question is the degree of burden on interstate commerce,
Section 2 of the Twenty-first Amendment tips the scales in favor of the State, even
in close cases. After all, "[t]he aim of the Twenty-first Amendment was to allow
States to maintain an effective and uniform system for controlling liquor by
regulating its transportation, importation, and use." Granholm, 544 U.S. at 484.
Granholm expressly reaffirmed that "the Twenty-first Amendment grants the states
virtually complete control over whether to permit importation or sale of liquor and
how to structure the liquor distribution system." Id. at 488. Moreover, the Seventh
Circuit has recognized that Pike balancing does not "authorize a comprehensive
review of [a] law's benefits, free of any obligation to accept the legislature's
judgment." See Nat'l Paint, 45 F.3d at 1130.
(Filing No. 62 at 33.)
The Court notes that this same statute, Indiana Code § 7.1-3-15-3(d), was challenged nearly
ten years ago in the case of Lebamoff Enters. v. Snow, 757 F. Supp. 2d 811 (S.D. Ind. 2010). There,
the plaintiff challenged the statute's prohibition against using a common carrier to deliver wine to
consumers and the requirement of the wine retailer to deliver the wine itself. While the plaintiff
in that case was an in-state wine retailer, it advanced arguments that the statute violated the
Commerce Clause because of its alleged facial discrimination and its burden on interstate
commerce. In that case, the State advanced nearly identical arguments to support the statute as it
advances in this case.
The court considered what level of scrutiny was appropriate to evaluate Indiana Code §
7.1-3-15-3(d) and determined that the statute was subject to the Pike balancing test rather than
strict scrutiny because the statute was not facially discriminatory. Snow, 757 F. Supp. 2d at 820–
21. The court went on to analyze Indiana Code § 7.1-3-15-3(d) under the Pike test and reached
the conclusion that the statute serves legitimate local interests, and any burden on commerce was
not clearly excessive in relation to the local interests. Id. at 821–26. The plaintiff appealed the
district court's decision, and the Seventh Circuit affirmed. See Lebamoff Enters. v. Huskey, 666
F.3d 455 (7th Cir. 2012).
The Court concludes, like the court concluded in Snow, that Indiana Code § 7.1-3-15-3(d)
is not facially discriminatory. The statute treats in-state and out-of-state wine retailers identically:
their "delivery may only be performed by the permit holder or an employee who holds an employee
permit." In reaching its decision in this case, the Court adopts the analysis and conclusions
regarding Section 7.1-3-15-3(d) from the Snow decision. See Snow, 757 F. Supp. 2d at 820–26.
The Plaintiffs designated evidence from Tom Wark and a 2003 Federal Trade Commission
study to suggest that online sales of wine and direct shipment do not result in minors obtaining
alcohol more easily (Filing No. 49-20; Filing No. 49-22). This same 2003 Federal Trade
Commission study was cited with approval in Granholm in 2005 but was subsequently considered
and essentially rejected in the Snow, Huskey, and Baude cases, and the Seventh Circuit noted,
After the Supreme Court held in Crawford v. Marion County Election Board, 128
S. Ct. 1610, 170 L. Ed. 2d 574 (2008), that a belief that in-person verification with
photo ID reduces vote fraud has enough support to withstand a challenge under the
first amendment, it would be awfully hard to take judicial notice that in-person
verification with photo ID has no effect on wine fraud and therefore flunks the
interstate commerce clause.
Baude, 538 F.3d at 614.
Since the decision in Snow and its affirmance by Huskey, the United States Supreme Court
has issued the 2019 decision in Tennessee Wine & Spirits Retailers Association v. Thomas. The
Supreme Court explained that "because of §2 [of the Twenty-first Amendment], we engage in a
different inquiry." Tenn. Wine, 139 S. Ct. at 2474. "Recognizing that §2 was adopted to give each
State the authority to address alcohol-related public health and safety issues in accordance with
the preferences of its citizens, we ask whether the challenged requirement can be justified as a
public health or safety measure or on some other legitimate nonprotectionist ground." Id. "Section
2 gives the States regulatory authority that they would not otherwise enjoy, but . . . [w]here the
predominant effect of a law is protectionism, not the protection of public health or safety, it is not
shielded by §2." Id.
The State Defendants have presented evidence in the form of a sworn declaration from
Brian Stewart, an Indiana State Excise Police sergeant, (Filing No. 63-1), which supports the
argument that the statute helps advance the State's interests in keeping alcohol out of the hands of
minors, controlling the quantity of alcohol in the State to curtail public health concerns, and
protecting against unsafe or counterfeit products. These public health and safety benefits justify
Indiana Code § 7.1-3-15-3(d) on "nonprotectionist grounds". Indiana Code § 7.1-3-15-3(d)
withstands the Plaintiffs' Commerce Clause challenge under Tennessee Wine and Seventh Circuit
precedent; therefore, the Court grants summary judgment to the State Defendants and WSDI as
to Section 7.1-3-15-3(d).
D. Indiana Code § 7.1-5-11-1.5(a)
The Plaintiffs additionally challenge Indiana Code § 7.1-5-11-1.5(a) as violative of the
Commerce Clause. This statute states,
Except as provided in IC 7.1-3-26, it is unlawful for a person in the business of
selling alcoholic beverages in Indiana or outside Indiana to ship or cause to be
shipped an alcoholic beverage directly to a person in Indiana who does not hold a
valid wholesaler permit under this title. This includes the ordering and selling of
alcoholic beverages over a computer network (as defined by IC 35-43-2-3(a)).
The Plaintiffs argue that Code § 7.1-5-11-1.5 prohibits an out-of-state seller from
delivering wine to anyone in Indiana other than a wholesaler. This prohibition benefits in-state
wholesalers to the detriment of out-of-state retailers. The Plaintiffs challenge the constitutionality
of this statute alongside Section 7.1-3-15-3(d) and advance essentially the same arguments.
The State Defendants and WSDI likewise advance similar arguments in support of this
statute alongside their arguments in support of Section 7.1-3-15-3(d). They argue that the statute
does not discriminate against out-of-state wine dealers because it applies equally to both in-state
and out-of-state dealers; both must go through a permitted wholesaler.
The Court first notes that the statute, on its face, applies equally to in-state and out-of-state
sellers. The statute previously was challenged on the basis that it violated the Commerce Clause
by prohibiting direct shipment of wine to Indiana consumers from out-of-state wine dealers—
which is the same basis for the constitutional challenge here. See Bridenbaugh v. Freeman-Wilson,
227 F.3d 848 (7th Cir. 2000). When the statute was challenged in Bridenbaugh, the language of
the statute explicitly applied only to "a person in the business of selling alcoholic beverages in
another state or country." Id. at 849. Despite this explicit application to persons in another state
or country, the Seventh Circuit upheld the law as a valid exercise of the State's power under Section
Two of the Twenty-first Amendment to regulate importation of alcohol. The Seventh Circuit
analyzed the statute and concluded that it did not "impose a discriminatory condition on
importation" because all alcohol, regardless of its origination, had to pass through Indiana's
wholesalers. Id. at 853–54. The statute has since been amended to apply to any "person in the
business of selling alcoholic beverages in Indiana or outside Indiana."
For the reasons discussed in the section above concerning Section 7.1-3-15-3(d), the Court
concludes that Section 7.1-5-11-1.5(a) is valid under the Twenty-first Amendment and is not
violative of the Commerce Clause. The State Defendants' argument is well-taken and supported
by evidence and case law that Section 7.1-5-11-1.5(a) advances legitimate local interests by
controlling the quantity of alcohol in the State to curtail public health concerns, protecting against
unsafe or counterfeit products, and keeping alcohol out of the hands of minors. This is sufficient
to satisfy Tennessee Wine's concern of "whether the challenged requirement can be justified as a
public health or safety measure or on some other legitimate nonprotectionist ground." Thus,
summary judgment is granted in favor of the State Defendants and WSDI as to Section 7.1-5-11-
1.5(a).
IV. CONCLUSION
For the reasons explained above, the Court GRANTS in part and DENIES in part the
parties' Cross-Motions for Summary Judgment (Filing No. 49; Filing No. 57; Filing No. 61).
Summary judgment is GRANTED in favor of the Plaintiffs as to Indiana Code § 7.1-3-21-3. The
State Defendants (and their agents) may not enforce Indiana Code § 7.1-3-21-3 as a statutory
requirement for the issuance of an alcoholic beverage retailer's or dealer's permit of any type.
Summary judgment is GRANTED in favor of the State Defendants and WSDI as to Indiana Code
§$§ 7.1-5-11-1.5(a) and 7.1-3-15-3(d).
This Order does not address the Plaintiffs’ Privileges and Immunities claim, and that claim
remains pending for trial. Accordingly, no final judgment will issue at this time.
The parties are directed to contact the Magistrate Judge to schedule a status conference.
SO ORDERED.
Date: 3/30/2021
( Nae \ atten Varcatt
Hon. Tanya Walton Pratt, Chief Judge
United States District Court
Southern District of Indiana
18
Distribution:
Joseph Beutel Jefferson S. Garn
EPSTEIN COHEN SEIF & PORTER INDIANA ATTORNEY GENERAL
joe@beutellaw.com Jefferson.Garn@atg.in.gov
Robert David Epstein Jill Gagnon Haddad
EPSTEIN COHEN SEIF & PORTER INDIANA ATTORNEY GENERAL
rdepstein@aol.com jill.haddad@atg.in.gov
James E. Porter, II Sarah Ann Hurdle Shields
EPSTEIN COHEN SEIF & FLORA INDIANA ATTORNEY GENERAL
james@jeporterlaw.com sarah.shields@atg.in.gov
James Alexander Tanford Lauren Ashley Lattea
EPSTEIN COHEN SEIF & PORTER INDIANA ATTORNEY GENERAL
tanfordlegal@gmail.com lauren.lattea@atg.in.gov
John B. Herriman Michael P. Maxwell, Jr.
CLARK QUINN MOSES SCOTT & GRAHN CLARK QUINN MOSES SCOTT & GRAHN
bherriman@clarkquinnlaw.com mmaxwell@clarkquinnlaw.com