Block v. Canepa

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

DEREK BLOCK, et al.,

:

Plaintiffs,

Case No. 2:20-cv-3686

v. Chief Judge Sarah D. Morrison

Magistrate Judge Chelsey M.

Vascura

JIM CANEPA, et al.,

:

Defendants.

OPINION AND ORDER

Plaintiffs’ constitutional challenge to Ohio’s wine importation laws is before

the Court following remand from the Sixth Circuit Court of Appeals. Plaintiff

Kenneth M. Miller is an Ohio resident and wine collector. His co-plaintiff, The

House of Glunz, Inc., is an Illinois wine retailer with no permit or license from the

Ohio Division of Liquor Control.1 Defendant Dave Yost serves as Ohio’s Attorney

General. The Wholesale Beer & Wine Association of Ohio (“WBWAO”) has

intervened as a defendant. The parties’ cross-Motions for Summary Judgment (ECF

Nos. 114, 116, and 119) and the WBWAO’s motion to strike certain testimony and

exhibits offered in support of Plaintiffs’ Motion for Summary Judgment (ECF No.

120) are ripe for decision.

1 Plaintiff Derek Block voluntarily dismissed his claims. (ECF No. 30.)

I. FACTUAL BACKGROUND

A. Ohio law establishes a three-tier system for the sale of wine.

Alcohol “is the only consumer product identified in the Constitution. Only its

regulation by States is given explicit warrant.” Wine Country Gift Baskets.com v.

Steen, 612 F.3d 809, 813 (5th Cir. 2010). The history of alcohol regulation in

America has been told many times. See Tenn. Wine & Spirits Retailers Ass’n v.

Thomas, 139 S. Ct. 2449, 2462–70 (2019); Granholm v. Heald, 544 U.S. 460, 476–89

(2005). Rather than recite the full history here, it is enough to say that Prohibition

began with the Eighteenth Amendment and ended with the Twenty-first. See U.S.

CONST. amend. XVIII, repealed by U.S. CONST. amend. XXI. While § 1 of the

Twenty-first Amendment repealed the Eighteenth, § 2 prohibits:

The transportation or importation into any State. . . for delivery or use

therein of intoxicating liquors, in violation of the laws thereof[.]

U.S. Const. amend. XXI, § 2. Thus, § 2 “grants the States the power to regulate

commerce with respect to alcohol.” Lebamoff Enters. Inc. v. Whitmer, 956 F.3d 863,

869 (6th Cir. 2020), reh’g denied, Case No. 18-2199, Docket No. 56 (May 26, 2020),

cert. denied, 141 S.Ct. 1049 (2021).

Ohio has taken full advantage of that power. Chapters 4301 and 4303 of the

Ohio Revised Code, along with their implementing regulations, establish a

comprehensive scheme governing the transportation, importation, distribution, and

sale of alcoholic beverages, including wine. Those laws establish a three-tier system

for distributing wine in Ohio. Entities operating in each tier (first, suppliers;

second, wholesalers; and third, retailers) must obtain a permit from the Ohio

Division of Liquor Control. See, e.g., Ohio Rev. Code §§ 4303.03, 4303.07, 4303.10,

4303.12. Generally, permitted suppliers must sell to permitted wholesalers (who

may purchase only from permitted suppliers), see Ohio Rev. Code §§ 4303.07,

4303.10, 4301.58(C), and permitted wholesalers must sell to permitted retailers

(who may purchase only from permitted wholesalers), see Ohio Rev. Code.

§§ 4303.03(B)(1), 4303.35; Ohio Admin. Code 4301:1-1-46(B), (F). With limited

exception, wine must pass through each tier before reaching a consumer.2

Wholesalers and retailers are required to maintain a physical presence within the

state of Ohio, and all wine sold by those entities is required to “come to rest” at that

physical location. (See ECF No. 114-1, ¶ 62.a.); see also Ohio Rev. Code

§§ 4301.10(A)(1), 4301.10(A)(6), 4303.292(A); Ohio Admin Code 4301:1-1-22(B).

To qualify for a permit, participants in the three-tier system must comply

with a host of regulations and requirements. See Ohio Rev. Code § 4303.25. For

example, permit applicants must submit to an initial inspection of their premises by

the Ohio Division of Liquor Control’s Investigative Services Unit. (ECF No. 116-3,

¶ 7. See also ECF No. 53-2, ¶ 14.) A permit holder must then submit to annual

renewal inspections of their premises and books and records, as well as inspections

based on any complaints the Division might receive. (ECF No. 116-3, ¶ 7. See also

ECF No. 53-2, ¶¶ 18, 20.) During an inspection, Compliance Agents monitor for

2 The most notable exception is of recent vintage. Beginning in 2007, small

wineries could apply for a permit to sell and deliver wine directly to Ohio

consumers. (ECF No. 114-1, PAGEID # 5479–80.) In 2021, similar permits were

made available to large wineries. (Id.) All such wineries are licensed by the federal

Alcohol and Tobacco Tax and Trade Bureau. (Id.)

adherence to: ownership rules, see, e.g., Ohio Rev. Code § 4301.24(B), Ohio Admin.

Code 4301:1-1-24(B); environmental cleanliness and product safety standards, see,

e.g., Ohio Admin. Code 4301:1-1-17; minimum pricing requirements, see, e.g., Ohio

Admin. Code 4301:1-1-03; and form-of-payment restrictions, see, e.g., Ohio Rev.

Code § 4301.24(D). (ECF No. 53-2, ¶¶ 17–18.) If a violation is found, the permit

holder may be subject to enforcement action(s), including Correction Notices and

fines, up to suspension or revocation of the permit. (ECF No. 53-1, ¶ 24.)

B. Plaintiffs want to buy and sell wine at retail outside of Ohio’s

three-tier system.

Plaintiffs challenge two components of Ohio’s three-tier system. First, Ohio

law prohibits wine retailers who do not have a Division-issued permit from shipping

wine directly to Ohio consumers (the “Direct Ship Restriction”). See Ohio Rev. Code

§§ 4301.58(C), 4301.60, 4303.25, 4303.27. Because Ohio requires permitted retailers

to maintain a physical presence in the state, the Direct Ship Restriction has the

effect of severely limiting out-of-state retailers’ ability to sell their wares to Ohio

consumers—even those retailers that are licensed to sell wine by their home state.

(See ECF No. 52-4, ¶¶ 9–13, 19, 27, 57.) And second, Ohio law prohibits individuals

from transporting more than 4.5 liters (six bottles) of wine from out-of-state in any

30-day period (the “Transportation Limit”), further restricting out-of-state retailers’

access to the Ohio market. See Ohio Rev. Code §§ 4301.20(L), 4301.60.

Mr. Miller is “an active wine consumer who looks for good wines at good

prices wherever [he] can find them.” (ECF No. 52-2, ¶ 2.) He would like to purchase

wine from out-of-state retailers and have it shipped directly to his home in Ohio.

(ECF No. 52-2, ¶ 5.) He would also like to purchase wine while out-of-state and

personally transport it back home. (ECF No. 34-5, ¶ 3.) Chicago-based House of

Glunz “is a family business . . . engage[d] in retail wine sales, including online sales,

and has customers from all over the country[.]” (ECF No. 52-3, ¶ 1–2.) House of

Glunz is licensed to sell wine by the City of Chicago and the State of Illinois. (ECF

No. 50, 61:7–19.) The company would like to sell wine to Ohio consumers and ship it

directly to their homes. (ECF No. 52-3, ¶¶ 5–7.) Plaintiffs contend that the Direct

Ship Restriction and the Transportation Limit, which prevent them from engaging

in their desired conduct, run afoul of the United States Constitution.

II. PROCEDURAL BACKGROUND

Plaintiffs’ Complaint challenged the Direct Ship Restriction and the

Transportation Limit by bringing claims against four state officials—Jim Canepa,

Superintendent of Liquor Control for the Ohio Division of Liquor Control; Dave

Yost, Ohio Attorney General; Thomas J. Stickrath, Director of the Ohio Department

of Public Safety; and Deborah Pryce, Chair of the Ohio Liquor Control Commission.

(ECF No. 1.)

This Court dismissed Plaintiffs’ claims against Superintendent Canepa,

Director Stickrath, and Chair Pryce after concluding that they were entitled to

Eleventh Amendment immunity, and that the Ex Parte Young exception to such

immunity did not apply. (ECF No. 33.) The Court also found that Plaintiffs lacked

standing to challenge the Transportation Limit in a pre-enforcement action because

they did not allege a credible threat of prosecution. (ECF No. 36.)

After completing discovery, the parties filed cross-motions for summary

judgment on the remaining claim. The Court resolved those motions in a September

12, 2022 Opinion & Order granting summary judgment in favor of Defendants.

(ECF No. 91.)

Plaintiffs appealed to the Sixth Circuit Court of Appeals, which issued an

Opinion on July 17, 2023. (ECF No. 104.) The Sixth Circuit held that (i) Mr. Miller

adequately alleged a credible threat of prosecution under the Transportation Limit

and (ii) this Court should have conducted additional analysis of the evidentiary

record before granting summary judgment. (Id.) It remanded the case for further

proceedings, with the express mandate that this Court

consider the facts and evidence presented in this case and determine

whether the challenged statutes (1) “can be justified as a public health

or safety measure or on some other legitimate nonprotectionist ground,”

and whether (2) their “predominant effect” is “the protection of public

health or safety,” rather than “protectionism.”

(Id. (quoting Tenn. Wine & Spirits, 139 S. Ct. at 2474.)

The parties have since had the opportunity to exchange supplemental

discovery and brief renewed motions for summary judgment. (See ECF No. 111.)

III. MOTION TO STRIKE

The Court will first address the WBWAO’s motion to strike Tom Wark’s

expert report and deposition testimony. (ECF No. 120.) Attorney General Yost joins

the Motion. (ECF No. 122, PAGEID # 6669.) Plaintiffs responded in opposition (ECF

No. 124) and the WBWAO replied (ECF No. 125).

The admissibility of expert testimony is governed by Federal Rule of

Evidence 702:

A witness who is qualified as an expert by knowledge, skill, experience,

training, or education may testify in the form of an opinion or otherwise

if:

(a) the expert’s scientific, technical, or other specialized knowledge

will help the trier of fact to understand the evidence or to

determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods;

and

(d) the expert has reliably applied the principles and methods to the

facts of the case.

Fed. R. Evid. 702. The Rule incorporates the Supreme Court’s instruction in

Daubert v. Merrell Dow Pharma., Inc., 509 U.S. 579 (1993) and Kumho Tire Co.,

Ltd. v. Carmichael, 526 U.S. 137 (1999), requiring the trial court to serve as a

“gatekeeper,” tasked with “ensuring that an expert’s testimony both rests on a

reliable foundation and is relevant to the task at hand.” Daubert, 509 U.S. at 597.

Courts are afforded “considerable leeway” both in determining whether to admit

expert opinion testimony and how to test its reliability and relevance to the case at

bar. Kumho Tire, 526 U.S. at 152. The proponent of the expert testimony bears the

burden of proving its admissibility. See Fed. R. Evid. 104(a); Sigler v. Am. Honda

Motor Co., 532 F.3d 469, 478 (6th Cir. 2008). Nonetheless, the Federal Rules of

Evidence provide a “permissive backdrop,” favoring the admission of expert opinion

testimony. Daubert, 509 U.S. at 588–89.

Plaintiffs use a 2021 report by Tom Wark, Executive Director of the National

Association of Wine Retailers, to support their Motion for Summary Judgment. (See

ECF No. 119 (citing ECF No. 52-4).) The WBWAO challenges Mr. Wark’s

qualifications as an expert and the reliability and relevance of his opinions. (ECF

No. 120.) As such, they seek to strike Mr. Wark’s report and deposition transcript

from the record. (Id.) The WBWAO’s Motion is GRANTED in part and DENIED

in part.

A. Mr. Wark is qualified to testify as an expert on the retail wine

business.

The WBWAO first argues that Mr. Wark is not qualified to testify as an

expert in this matter. (Id.) As of the date of his report, Mr. Wark had worked as a

public relations consultant in the alcohol industry for more than thirty years. (ECF

No. 52-4, PAGEID # 1276, 1287.) For thirteen of those, he was Executive Director of

the National Association of Wine Retailers and publisher of a daily blog on the

business of wine. (Id.) Although Mr. Wark’s curriculum vitae boasts expertise in

“Media Relations,” “Wine Industry Marketing,” “Marketing Communications,”

“Alcohol Industry Regulation,” “Writing,” “Association Management,” “Wine

Evaluation,” and “Wine Industry Politics” (ECF No. 52-4, PAGEID # 1287),

Plaintiffs offer him as “an expert in the retail wine business” (ECF No. 124,

PAGEID # 6706). His experience managing an association representing wine

retailers qualifies him as such. See Fed. R. Evid. 702 advisory committee’s notes to

2000 amendments (“[T]he text of Rule 702 expressly contemplates that an expert

may be qualified on the basis of experience.”).

B. Eleven of the fourteen proffered pieces of testimony are

admissible.

The WBWAO next seeks a ruling that the contents of Mr. Wark’s 2021 report

are inadmissible. (ECF No. 120.) In his report, Mr. Wark offers “a basic description

of the market conditions in which wine consumers and wine retailers interact” as of

July 2021. (ECF No. 52-4, PAGEID # 1277.) He also draws ten “conclusions” on the

basis of the recited background facts. (Id., PAGEID # 1285.)

Plaintiffs oppose Defendants’ motion in part because it is overbroad; only

fourteen paragraphs of Mr. Wark’s report are cited in their Motion for Summary

Judgment. (ECF No. 124.) The Court construes Plaintiffs’ argument as a disclaimer

of all other paragraphs in Mr. Wark’s report and will thus confine its analysis to the

fourteen cited.

Paragraphs 10 and 11 discuss the availability of wines for sale in the United

States at the national and local levels. Mr. Wark states that “the total number of

wines approved and available for resale somewhere in the U.S. could reach up to 1

million.” (ECF No. 52-4, ¶ 10.) He further describes the effect of state laws like the

Direct Ship Restriction on the number of wines available to those states’ consumers.

(Id., ¶ 11.) These general market dynamics are appropriate subjects for a wine

retailing expert’s testimony, and they are relevant because they illustrate the

economic impact of state laws like the Direct Ship Restriction. The WBWAO’s

motion is DENIED as to paragraphs 10 and 11 of Mr. Wark’s report.

Paragraphs 21, 23, and 24 describe the characteristics and experience of a

wine consumer. Mr. Wark describes several legitimate—and perhaps common—

circumstances in which consumers may want to buy and ship wines across state

lines. (Id., ¶ 21.) He again stresses the limited number of wines available in

common retailer-categories, like grocery stores. (Id., ¶¶ 23, 24.) This testimony is

also reliably given and a relevant illustration of how state laws can impact

interstate commerce in wine. The WBWAO’s motion is thus DENIED as to

paragraphs 21, 23, and 24.

Paragraphs 29 and 30 describe the experience of a wine retailer. Mr. Wark

discusses considerations for brick-and-mortar wine retailers seeking to maximize

profit, and the effect of those considerations on the local availability of “rare and

collectible wines” in any given market. (Id., ¶ 29.) He opines that the Direct Ship

Restriction “bar[s] access to the vast majority of rare, hard to find and collectible

wines sold by the[] relatively small number of specialty wine retailers.” (Id., ¶ 30.)

The Court finds paragraphs 29 and 30 to be reliable testimony on a topic relevant to

the issue at hand. The WBWAO’s motion is DENIED as to paragraphs 29 and 30.

Paragraph 38 provides:

According to the Wine Institute, 44 states currently allow shipments

from out-of-state wineries to consumers. The Wine Institute is the

leading authority on the wine production industry in the U.S.

The first sentence is inadmissible hearsay. See Fed. R. Evid. 801, 802. Because the

first sentence is the report’s only reference to the Wine Institute, the second

sentence is irrelevant. The WBWAO’s motion is GRANTED as to paragraph 38.

Paragraphs 41, 42, and 43 summarize the process by which consumers

“most commonly” receive wine by direct shipment from an out-of-state retailer in

the states that permit such activity. (ECF No. 52-4, ¶ 41; see also id., ¶42 (detailing

the steps as they “[m]ost often” occur).) This testimony is also reliable and relevant.

The WBWAO’s motion is DENIED as to paragraphs 41, 42, and 43.

Paragraph 44 summarizes the findings of a 2003 report by the Federal Trade

Commission and a 2012 study by the Maryland Comptroller. Those reports, which

are included in the record, speak for themselves. Mr. Wark’s summary is

inadmissible as hearsay and lesser evidence. See Fed. R. Evid. 802, 1002. The

WBWAO’s motion is GRANTED as to paragraph 44.

Paragraph 45 states:

In fact, there has been no study nor any report ever produced by any law

enforcement or any alcohol regulatory body that shows the direct

shipment of wine from out-of-state retailers has led to a problem with

minors obtaining alcohol in any state. While a limited number of

academic and law enforcement studies have shown via coordinated

“stings” that minors could be able to obtain alcohol via direct shipment,

no study has shown that minors actually use the Internet to obtain

alcohol. The 2015 National Survey on Drug Use and Health carried out

by the Substance Abuse and Mental Health Services Administration

looked at how minors obtain alcohol. No minor responding to the

national survey cited the Internet as their source of alcohol. In fact, no

state has produced any report or evidence that direct shipment of wine

from out-of-state wineries or retailers in any way negatively impacts the

health and safety of its residents.

The third and fourth sentences of paragraph 45 are inadmissible hearsay for the

reasons already discussed. The first, second, and final sentences make sweeping

statements that “no” study or report has ever shown that direct shipment of wine to

a state’s consumers results in certain adverse outcomes. In deposition, Mr. Wark

acknowledged that he did not review anything outside the few studies specifically

mentioned in his report. (See ECF No. 49, PAGEID 674–75.) This is not the type of

searching review necessary to support the broad claims in his opinion. The Court

cannot conclude that those sentences are based on sufficient facts or data and so,

exercising its gatekeeping function, will exclude them from the record. The

WBWAO’s motion is GRANTED as to paragraph 45.

Finally, in paragraph 54, Mr. Wark states:

All wine sold at wine retail stores is in sealed containers and has been

approved for sale to the public by the TTB and the state alcohol

regulatory agency in which the retailer is located. There are no reports

of any contaminated or harmful wine sold and shipped from these

retailers to consumers.

Neither Mr. Wark nor his proponents have shown the Court that these statements

are based on sufficient facts or data to be admissible. The WBWAO’s motion is

GRANTED as to paragraph 54.

C. The deposition testimony is properly included in the record.

In view of the above rulings, the Court sees no reason to strike Mr. Wark’s

deposition testimony from the record. The WBWAO’s motion is DENIED as to the

deposition transcript.

IV. MOTIONS FOR SUMMARY JUDGMENT

Summary judgment is appropriate when “there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a matter of law.” Fed.

R. Civ. P. 56(a). The movant has the burden of establishing there are no genuine

issues of material fact, which may be achieved by demonstrating the nonmoving

party lacks evidence to support an essential element of its claim. Celotex Corp. v.

Catrett, 477 U.S. 317, 322–23 (1986); Barnhart v. Pickrel, Schaeffer & Ebeling Co.,

12 F.3d 1382, 1388–89 (6th Cir. 1993). The burden then shifts to the nonmoving

party to “set forth specific facts showing that there is a genuine issue for trial.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quoting Fed. R. Civ. P.

56). When evaluating a motion for summary judgment, the evidence must be viewed

in the light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398

U.S. 144, 157 (1970).

A genuine issue exists if the nonmoving party can present “significant

probative evidence” to show that “there is [more than] some metaphysical doubt as

to the material facts.” Moore v. Philip Morris Cos., 8 F.3d 335, 339–40 (6th Cir.

1993). In other words, “the evidence is such that a reasonable jury could return a

verdict for the nonmoving party.” Anderson, 477 U.S. at 248. See also Matsushita

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (concluding that

summary judgment is appropriate when the evidence could not lead the trier of fact

to find for the nonmoving party).

Here, Defendants have submitted sufficient admissible evidence that there is

no genuine issue of material fact and they are entitled to judgment as a matter of

law. Plaintiffs have failed to present significant probative evidence establishing

otherwise.

A. This case must be analyzed under Tennessee Wine.

Plaintiffs assert that the Direct Ship Restriction and the Transportation

Limit unconstitutionally discriminate against out-of-state businesses.3 As the Sixth

3 Attorney General Yost concedes that Ohio’s Direct Ship Restriction

discriminates against out-of-state retailers. (See ECF No. 116, PAGEID # 5973.)

Although the statutes comprising that restriction do not distinguish between in-

state and out-of-state businesses on their face (see Ohio Rev. Code §§ 4301.01,

4303.12, 4303.22, 4303.27), the Ohio Division of Liquor Control will not issue a

permit to a wine retailer that does not maintain a physical presence in the state.

Circuit recently explained in a similar case out of Michigan, such a challenge “turns

on the accordion-like interplay” between the Commerce Clause and the Twenty-first

Amendment:

The [Commerce] Clause grants Congress power to preempt or permit

state laws that interfere with interstate commerce, and it impliedly

“prohibits state laws,” as determined by the federal courts, “that unduly

restrict interstate commerce.” Tenn. Wine & Spirits, 139 S. Ct. at 2459.

Under the implied prohibition, if a state law discriminates against “out-

of-state goods or nonresident economic actors,” it may survive only if

tailored to advance a legitimate state purpose. Id. at 2461.

. . . While the Commerce Clause grants Congress power to eliminate

state laws that discriminate against interstate commerce, the Twenty-

first Amendment grants the States the power to regulate commerce with

respect to alcohol. Section 2 of the Amendment bars “[t]he

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.” U.S. Const. amend. XXI, § 2. The section

gives the States broad latitude to regulate the distribution of alcohol

within their borders. See North Dakota v. United States, 495 U.S. 423,

432–33 (1990) (plurality opinion); see also id. at 447–48 (Scalia, J.,

concurring in the judgment). Indeed, had Congress (as opposed to the

people through the ratification process) enacted this exact law, it is

doubtful there would be any role for the federal courts to play. When

faced with a dormant Commerce Clause challenge to an alcohol

regulation, as a result, we apply a “different” test. Tenn. Wine & Spirits,

139 S. Ct. at 2474. Rather than skeptical review, we ask whether the

law “can be justified as a public health or safety measure or on some

other legitimate nonprotectionist ground.” Id. But if the “predominant

effect of the law is protectionism,” rather than the promotion of

The WBWAO argues that the implicit nature of the discrimination deprives

Plaintiffs of standing to challenge it. (ECF No. 114, PAGEID # 5414.) The Court

disagrees. The state’s position on out-of-state retailers’ eligibility for a permit

caused Plaintiffs’ alleged injury and is redressable. See Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560–61 (1992) (discussing the three elements of Article III

standing: injury-in-fact, causation, and redressability); cf. Granholm v. Heald, 544

U.S. 460, 477 (2005) (explaining that the Commerce Clause prevents states from

imposing impermissible burdens on interstate commerce, even through application

of “facially neutral laws”); Day v. Henry, — F.4th — (9th Cir. 2025) (finding that

plaintiffs in an analogous action against Arizona liquor control laws had standing to

sue).

legitimate state interests, the Twenty-first Amendment does not

“shield[ ]” it. Id.

Lebamoff Enters. Inc. v. Whitmer, 956 F.3d 863, 869 (6th Cir. 2020), reh’g denied,

Case No. 18-2199, Docket No. 56 (May 26, 2020), cert. denied, 141 S.Ct. 1049 (2021).

In its September 2022 Opinion, this Court endeavored to apply the Tennessee

Wine test, as illuminated by Lebamoff, to Plaintiffs’ challenge to the Direct Ship

Restriction. (See ECF No. 91.) The Court of Appeals found fault in this Court’s

approach, however, and remanded for further consideration of Plaintiffs’ challenge

to both the Transportation Limit and the Direct Ship Restriction. In particular, the

Court was directed to evaluate

the facts and evidence presented in this case [to] determine whether the

challenged statutes (1) “can be justified as a public health or safety

measure or on some other legitimate nonprotectionist ground,” and

whether (2) their “predominant effect” is “the protection of public health

or safety,” rather than “protectionism.”

(ECF No. 104 (quoting Tenn. Wine, 139 S. Ct. at 2474).) The Court will turn to that

evidence now.4

4 Plaintiffs urge the Court to consider whether there are nondiscriminatory

alternatives to the scheme established by the Ohio General Assembly. (See ECF No.

119, PAGEID # 6564.) But as the First Circuit Court of Appeals explained in Anvar

v. Dwyer, that argument “conflates the proper Twenty-first Amendment inquiry

with a traditional analysis under the dormant Commerce Clause.” 82 F.4th 1, 11

(1st Cir. 2023); see also id. at 8 (explaining that nondiscriminatory alternatives are

only considered if, after consideration of the Tennessee Wine test, “the law’s

predominant effect is protectionist in nature”).

B. The challenged laws can be justified on legitimate

nonprotectionist grounds.

The first question before the Court is whether the challenged laws can be

justified on legitimate nonprotectionist grounds. The most salient of the legitimate

grounds is protecting public health and safety. Tenn. Wine, 139 S. Ct. at 2474

(recognizing that Ҥ 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”).

In arguing whether the Direct Ship Restriction and the Transportation Limit

can be justified as health and safety measures, the parties offer very different

framing. Plaintiffs urge the Court to focus on whether direct shipping and personal

transportation threaten public health. (See ECF No. 119, PAGEID # 6556, 6566.)

But Defendants zoom out. They argue that the Direct Ship Restriction and the

Transportation Limit are trusses supporting a larger structure—namely, the three-

tier system—and cannot be excised for review outside that context. (See, e.g., ECF

No. 116, PAGEID # 5973–74.) The difference is significant, as the state must

present “concrete evidence” showing the challenged laws’ “purpose and effect.”

Tenn. Wine, 139 S. Ct. at 2473–74. In Plaintiffs’ frame, the relevant evidence is

narrowly drawn to whether bottles shipped or carried across state lines are more

dangerous than those that were not. While in Defendants’, the relevant evidence

goes to the system’s effect on public health and safety.

Allowing out-of-state retailers to deliver wine directly to Ohio’s consumers

would effectively eliminate the role of Ohio’s wholesalers and “create a sizeable hole

in the three-tier system.” Lebamoff, 956 F.3d at 872. Accord B-21 Wines, Inc. v.

Bauer, 36 F.4th 214, 228 (4th Cir. 2022) (observing that striking down North

Carolina’s corollary to the Direct Ship Restrictions “would open the North Carolina

wine market to less regulated wine, undermining the State’s three-tier system and

the established public interest of safe alcohol consumption that it promotes”), reh’g

denied, No. 21-1906, Docket No. 58 (June 28, 2022), cert. denied, 143 S. Ct. 567

(2023); Sarasota Wine Mkt., LLC v. Schmitt, 987 F.3d 1171, 1184 (8th Cir. 2021)

(concluding that a physical presence requirement for retailers was an “essential

feature of [Missouri’s] three-tiered system”); Wine Country Gift Baskets, 612 F.3d at

821 (same).. The same would be true if Ohio consumers could import wine

themselves by buying from out-of-state retailers and bringing the product in bulk

across state lines. The Court is thus persuaded that Defendants’ framing is the

correct one and will evaluate evidence of the purpose and effect of the challenged

laws within the context of Ohio’s three-tier system.

Ohio’s three-tier system sets out a prescribed supply chain, with a limited

number of legislatively considered exceptions. The system is designed to:

(A) Promote temperance by preventing consumption by underage

persons and by discouraging abusive consumption;

(B) Promote orderly markets by requiring transparent, accountable,

and stable distribution of beer and intoxicating liquor and

preventing unfair competition; [and]

(C) Facilitate the collection of taxes related to the sale and

consumption of beer and intoxicating liquor.

Ohio Rev. Code § 4303.011. Defendants’ evidence shows how the state performs

against these goals and what they serve to accomplish.

Oversight. Defendants first argue that Ohio’s three-tier system allows the

state regulatory and enforcement agencies to keep close watch over the movement

and sale of wine throughout the state (see ECF No. 114-1, ¶ 4), which serves the

legislative purposes of preventing underage driving and promoting orderly markets

by ensuring that the distribution of wine is done in a transparent and accountable

manner. Attorney General Yost offers a recent example illustrating the vital

importance of these oversight mechanisms.

In January 2021, the Ohio Division of Liquor Control and the Ohio

Investigative Unit (“OIU”) launched a joint investigation after a consumer reported

becoming ill after drinking “Saint Sadler” wine. (ECF No. 116-3, ¶ 15.) No such

wine product was registered with the Division, and no such wine producer was

permitted. (Id.) The investigation revealed that an individual, Paul Sadler, had

purchased several “make your own wine” kits from a permit holder called Grape

and Granary, Inc. (Id., ¶ 20.) Though these kits are widely available to home-

vintners, their wine is not licensed for sale. (Id., ¶ 19.) OIU executed a search

warrant on a warehouse connected to Sadler’s operation. (ECF No. 116-5, ¶ 12; see

also ECF No. 116-6, PAGEID # 6425.) When agents arrived, they found four people

actively engaged in the bottling process[.]” (ECF No. 116-6, PAGEID # 6426.) The

warehouse was “filthy, with many areas looking to be under construction[.]” (Id.)

Wine jugs were “uncovered and open to the air with no top or means to prevent

contamination.” (Id.) There was nothing preventing fill hoses from touching the

ground and nothing available to clean the fill hoses after use. (Id.) The restrooms

“contained no hand soap or sanitary towels” for bottlers “to properly wash hands

after restroom use.” (Id.) OIU confiscated more than 600 intact bottles of Saint

Sadler wine and “several gallons” more in various stages of fermentation. (ECF No.

116-5 ¶ 13.) The Division then conducted on-site inspections at licensed retailers

suspected of stocking the stuff. (ECF No. 116-3, ¶ 22.) It seized another 437 bottles

from eighteen outlets. (Id.) This case highlights the importance of physical access to

information and premises in policing alcohol sales. It also supports Defendants’

position that the three-tier system—including the Direct Ship Restriction and

Transportation Limit—can be justified by public health and safety.

Price Controls. Defendants next argue that the three-tier system allows the

state to control alcohol prices, including by efficient collection of an excise tax at the

wholesaler lever. Keeping the price of alcohol high promotes temperance, and tax

proceeds are used to offset the societal costs of alcohol consumption. (See ECF No.

114-1, ¶ 77.)

Defendants’ position is supported by expert testimony on the economics of

alcohol use and testimony by individuals working inside Ohio’s liquor control

agencies. William Kerr, PhD, Senior Scientist and Scientific Director at the Alcohol

Research Group, prepared and supplemented an expert report on the purpose and

effect of Ohio’s liquor control laws. (ECF No. 116-1.) Dr. Kerr has authored or co-

authored more than 160 peer-reviewed articles on alcohol-related topics, including

trends in alcohol consumption and the effectiveness of alcohol control policies. (Id.,

¶ PAGEID # 6072.) Dr. Kerr’s report summarizes scholarship on the correlation

between availability, prices, consumption, and bad outcomes within the market for

alcoholic beverages. (Id., generally.) Generally, as availability increases, prices fall;

as prices fall, consumption increases; and as consumption increases, so too do bad

outcomes. Against that backdrop, Dr. Kerr opines that:

Allowing the direct shipment of alcoholic beverages from retailers to

Ohio consumers would be expected to increase alcohol consumption,

heavy drinking and the consequences associated with alcohol use and

abuse through the expansion of alcohol suppliers. Similar problems

would be expected to arise if Ohioans were permitted to transport an

unlimited quantity of alcoholic beverages into the State for personal

consumption. This is particularly true given that the new suppliers in

neighboring states may be able to supply the alcohol to Ohio consumers

at lower prices, which could increase price competition and lower prices.

(Id., PAGEID # 6077.)

Division agents use on-site compliance checks to ensure that licensed

retailers comply with state laws, including price controls. (ECF No. 116-4.) For

example, agents compare wholesaler invoices with a retailer’s in-store prices to

determine whether mandatory mark-ups are being charged. (Id., ¶ 8.) If a retailer is

not charging a mandatory mark-up, a Division agent can initiate corrective action,

educate the permit holder, and “ensure that the product pricing is immediately

changed” while on-site. (Id.)

In view of this evidence, the Direct Ship Restriction and the Transportation

Limit are justified on public health and safety grounds.

C. The challenged laws’ predominant effect is not protectionism.

The Court next considers whether the facts and evidence presented in this

case show that the challenged laws’ predominant effect is protectionism.

In support of their argument that the challenged laws’ predominant effect is

protectionism, Plaintiffs first demonstrate that certain wines—perhaps of a rare

vintage or from emerging winemaking regions—are unavailable for purchase from

Ohio-licensed retailers. (See, e.g., ECF No. 52-8, PAGEID # 3809–11; ECF No. 52-

11, PAGEID # 3825.) Many are also unavailable for Ohio-licensed retailers to sell.

(Id.) Plaintiffs also show that certain products available for purchase online—for

example, a Hickory Farms Mumm Napa Sparkling Wine Gift Box and a wine club

membership from K&L Wine Merchants—are unavailable to Ohio consumers

because they necessarily require shipment of wine across state lines. (See ECF Nos.

52-14, 52-16.) And while K&L Wine Merchants’ wine club cannot access the Ohio

market, The Wine Merchant (a Cincinnati, Ohio-based wine retailer) has a wine

club that can. (See ECF No. 52-15.)

Next, Plaintiffs offer evidence that undermines the health and safety goals

the state claims to pursue. For example, Plaintiffs undercut Dr. Kerr’s testimony by

showing that several Ohio retailers sell wine at discount prices—sometimes, for less

than $4 per bottle. (See ECF Nos. 52-35, 52-36, 52-37.) They also submit studies

such as a 2016 report by the National Institute on Alcohol Abuse and Alcoholism

showing alcohol consumption by state (ECF No. 52-20), a 2019 report by the

National Highway Traffic Safety Administration showing alcohol-impaired driving

rates (ECF No. 52-21), and a 2021 report by the National Coalition Against

Domestic Violence showing domestic violence rates (ECF No. 52-23). These studies

do not show an obvious correlation between a state’s decision to allow direct-to-

consumer alcohol shipping and the outcomes they track (though the studies are

unaccompanied by expert testimony or statistical analysis).5

Finally, Plaintiffs offer correspondence between their counsel and employees

at the state liquor control agencies in six states that allow direct-to-consumer

shipping. In that correspondence, the state employees respond to counsel’s informal

request for information about “any regulatory or monitoring issues [that] have

arisen concerning improper shipments by permittees, failure to remit taxes, or

anything else.” (See, e.g., ECF No. 52-30, PAGEID # 3952.) None of the six states

report major problems. But the responses are not sworn, and there is little to no

information about the responding employee—including whether that individual is

authorized to respond or knowledgeable on the topic. The correspondence is now

more than four years old.

Defendants argue that the challenged laws’ predominant effect is the

promotion of health and safety. They offer evidence on the operation and

effectiveness of the state’s liquor control enforcement agencies. That evidence

highlights the importance of on-site inspections. For example, the Division conducts

thousands of on-site inspections each year for purposes of renewing permits and

investigating complaints. (ECF No. 116-2, ¶¶ 7–9) Between September 1, 2021, and

January 31, 2024, the Division issued 935 Correction Notices and 46 formal

citations to permit holders. (Id., ¶¶ 10–11.) The OIU conducted another 2,915 on-

5 Construing the evidence in the light most favorable to the Plaintiffs, the

Court overlooks certain evidentiary deficiencies in these studies and the manner in

which their results are presented to the Court.

site compliance checks between September 1, 2021, and February 02, 2024. (ECF

No. 116-5, ¶ 7.)

Beyond being unable to physically inspect store shelves and monitor

compliance with laws like mandatory mark-ups and the prohibition against selling

alcohol to minors (see, e.g., ECF No. 116-5, ¶¶ 4–6), Dr. Kerr opines that Ohio “does

not have effective enforcement tools to use against out-of-state retailers who fail to

abide by Ohio law.” (ECF No. 116-1, ¶ 34.) He states that fines, suspensions, and

revocations would be administratively burdensome and “likely ineffective”—largely

because the out-of-state retailers are outside of Ohio’s three tier system. He

explains that Ohio could not “cut off the flow of alcohol to a non-compliant out-of-

state retailer” or “strand[]” a non-compliant out-of-state retailer “with product it

cannot sell once its license is revoked or suspended[.]” (Id., ¶¶ 35–36.)

In view of all the evidence in the record, the Court is persuaded that it can

decide as a matter of law whether the challenged laws’ predominant effect is

protectionist. It is not. Defendants have produced concrete evidence that the Direct

Ship Restriction and the Transportation Limit are essential components of Ohio’s

three-tier system, and operate with the predominant purpose and effect of

promoting public health and safety. Plaintiffs have not produced sufficient evidence

upon which a reasonable jury could find otherwise.

V. CONCLUSION

For these reasons, the WBWAO’s Motion to Strike (ECF No. 120) is

GRANTED in part and DENIED in part. The WBWAO’s and Attorney General

Yost’s Motions for Summary Judgment (ECF Nos. 114, 116) are GRANTED;

Plaintiffs’ Motion for Summary Judgment (ECF No. 119) is DENIED.

The Clerk is DIRECTED to TERMINATE this case.

IT IS SO ORDERED.

/s/ Sarah D. Morrison

SARAH D. MORRISON, CHIEF JUDGE

UNITED STATES DISTRICT COURT