Heald v. Engler

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206 2 Heald, et al. v. Engler; et al. No. 01-2720

ELECTRONIC CITATION: 2003 FED App. 0308P (6th Cir.)

File Name: 03a0308p.06

Intervening -

Defendant-Appellee. -

UNITED STATES COURT OF APPEALS -

N

FOR THE SIXTH CIRCUIT Appeal from the United States District Court

_________________ for the Eastern District of Michigan at Detroit.

No. 00-71438—Bernard A. Friedman, District Judge.

ELEANOR HEALD ; RAY X

HEALD ; JOHN ARUNDEL; - Argued: May 7, 2003

KAREN BROWN ; RICHARD -

- No. 01-2720 Decided and Filed: August 28, 2003

BROWN ; BONNIE MCMINN; -

GREGORY STEIN ; MICHELLE > Before: GUY, BOGGS, and DAUGHTREY, Circuit

,

MORLAN; WILLIAM - Judges.

HORWATH ; MARGARET - _________________

CHRISTINA; ROBERT -

CHRISTINA; TRISHA HOPKINS; - COUNSEL

JIM HOPKINS; DOMAINE -

- ARGUED: James A. Tanford, INDIANA UNIVERSITY

ALFRED, INC.,

- SCHOOL OF LAW, Bloomington, Indiana, for Appellants.

Plaintiffs-Appellants, -

Donald S. McGehee, OFFICE OF THE ATTORNEY

- GEN ER AL, MICH IGAN LIQUOR CONTROL

v. - COMMISSION, Lansing, Michigan, Anthony S. Kogut,

- WILLINGHAM & COTÉ, East Lansing, Michigan, for

JOHN ENGLER, Governor; - Appellees. ON BRIEF: James A. Tanford, INDIANA

- UNIVERSITY SCHOOL OF LAW, Bloomington, Indiana,

JENNIFER M. GRANHOLM , - for Appellants. Irene M. Mead, OFFICE OF THE

Attorney-General; - ATTORNEY GENERAL, MICHIGAN LIQUOR CONTROL

JACQUELYN STEWART , - COMMISSION, Lansing, Michigan, Anthony S. Kogut,

Chairperson, Michigan Liquor - WILLINGHAM & COTÉ, East Lansing, Michigan, for

Control Commission, in their - Appellees. Louis R. Cohen, WILMER, CUTLER &

Official Capacities, - PICKERING, Washington, D.C., William H. Mellor, Steven

- M. Simpson, INSTITUTE FOR JUSTICE, Washington, D.C.,

Defendants-Appellees, -

Clint Bolick, INSTITUTE FOR JUSTICE, Phoenix, Arizona,

- for Amici Curiae.

MICHIGAN WINE & BEER -

WHOLESALERS ASSOCIATION , -

1

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_________________ the direct shipment of alcoholic beverages from out-of-state

wineries, while allowing in-state wineries to ship directly to

OPINION consumers, provided that the in-state wineries comply with

_________________ certain minimal regulatory requirements. The plaintiffs, who

include wine connoisseurs, wine journalists, and one small

MARTHA CRAIG DAUGHTREY, Circuit Judge. In this California winery that ships its wines to customers in other

civil rights action brought pursuant to 42 U.S.C. § 1983, the states, claim that this system is unconstitutional under the

plaintiffs raise a constitutional challenge to Michigan’s dormant Commerce Clause because it interferes with the free

alcohol distribution system, contending that state provisions flow of interstate commerce by discriminating against out-of-

differentiating between in-state and out-of-state wineries state wineries. The defendants, who include Michigan

violate the Commerce Clause.1 Those regulations prohibit officials (referred to collectively in this opinion as “the state”)

and the intervening trade association, argue in response that

Michigan’s regulatory scheme is constitutional under the

1

Similar actions have been brought challenging direct shipment bans Twenty-first Amendment to the federal constitution.

in North Carolina, Virginia, Indiana, Texas, Florida and New Y ork,

amo ng other states. See, e.g., Beskind v. Easley, 325 F. 3d 306 (4th Cir. The parties filed cross-motions for summary judgment, and

2003) (affirming lower court finding that North Carolina’s statutory the district court granted the state’s motion and denied the

scheme discriminates between in-state and out-of-state wineries, violates

the Commerce Clause, and is not “saved” by the Twenty-first

plaintiffs’ motion. The plaintiffs then filed a motion to

Amendm ent); Bainbridge v. Turner, 311 F.3d 11 04, 1115 (11th Cir. reconsider, arguing that the district court should have

2002) (finding that Florida’s alcohol distribution statutes’ differentiation addressed cross-motions to strike various evidence submitted

between in-state and out-of-state wineries facially discriminates against by the two sides prior to the summary judgment decision.2

interstate commerce and remanding for further fact-finding on whether

Florid a’s statutory sc heme is “necessary to effectuate the . . . core concern

[of revenue raising] in a way that justifies treating out-of-state firms

differently from in-state firms”); Brindenbaugh v. Freeman-Wilson, 227

F.3d 848 , 851 (7th C ir. 2000) (finding that Indiana’s ban on direct meaningful evidence” showing that the state cannot “accomp lish its

shipment from out-of-state wineries is constitutional becau se Ҥ 2 of the legitimate interests without discriminating against out-of-state direct

twenty-first amendm ent empow ers Ind iana to control alcohol in ways that shippers of wine”), vacated by Bolick v. Danielson, 330 F.3d 274 (4th Cir.

it cannot control cheese”) ; Swedenbu rg v. K elly, 232 F.Supp. 2d 135 2003) (remanding for reconsideration in light of intervening chan ge in

(S.D. N.Y. 2002) (finding that New York’s ABC law’s ban on direct app licable statutes); see also Coope r v. McBe ath, 11 F .3d 5 47 (5th Cir.

shipment of out-o f-state wine is unconstitutional); Dickerson v. Bailey, 1994) (striking down Texas’s three-year durational residency and

212 F. Supp.2d 673, 695 (S.D. Tex. 2002) (finding that Texas’s ban on citizenship requireme nts for obtaining a liquor permit bec ause these

direct shipment by o ut-of-state wineries violates the dormant Commerce restrictions violated the dormant Commerce Clause and were not “saved”

Clause and noting that the state had “fail[ed] to demonstrate how a by the Twenty-first Amendment).

statutory exception for local wineries from T exas’ three-tier regulatory 2

system . . . is justified by any of the traditional core concerns of the Affidavits submitted by the plaintiffs included statements from

twenty-first amendm ent” or to show “that the core interests of taxation various oenophiles; the H ealds, who are wine critics and co nsultants;

and orderly market conditions . . . could not be effected by alternative, Dom aine Alfred, a California winery; and several other wine and alcohol

nondiscriminatory optio ns for these out-of-state wineries”), aff’d, manufacturers and distributers. Many of the affiants attested to the ir

Dickerson v. Bailey, 336 F.3d 388 (5th C ir. 200 3); Bolick v. Robe rts, 199 desire to have wine fro m out-of-state wine ries shipped directly to their

F. Supp.2d 397, 409 (E.D.Va. 20 02) (ad opting, with amendments, homes, their inability to do so, the general unavailability of certain wines

magistrate judge’s findings that Virginia’s ABC laws violated the dormant in Michigan, and the willingness of the wineries and distributors to pay

Commerce Clause and tha t the state had failed to produce “any required taxes an d ob tain necessary p ermits, if allowed to ship directly to

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The district court denied the motion to reconsider, noting that wholesalers; and wholesalers must purchase them from

it had effectively denied the cross- motions to strike as moot, licensed manufacturers. This system is similar to that used by

because it did not consider the challenged evidence in most states. See Vijay Shankar, Alcohol Direct Shipment

deciding the summary judgment motions. Laws, 85 Va. L. Rev. 353, 355 (1999).

The plaintiffs now appeal both the grant of summary The plaintiffs allege that Michigan’s system discriminates

judgment and the denial of their motion to reconsider. For the against out-of-state wineries in favor of in-state wineries

reasons set out below, we conclude that the regulations in because it prevents out-of-state wineries from shipping wine

question are discriminatory in their application to out-of-state directly to Michigan consumers, which in-state wineries are

wineries, in violation of the dormant Commerce Clause, and allowed to do. As the district court correctly noted, this

cannot be justified as advancing the traditional “core distinction between in-state and out-of-state wineries can only

concerns” of the Twenty-first Amendment. We therefore be understood by reading a number of provisions in

reverse the district court’s judgment and remand the case with conjunction with each other:

directions to the district court to enter judgment in favor of

the plaintiffs. [The distinction] can be gleaned from various Michigan

Liquor Control Commission regulations, which are

PROCEDURAL AND FACTUAL BACKGROUND codified within the Michigan Administrative Code.

R436.1057 states that “[a] person shall not deliver, ship,

Michigan regulates alcohol sales under a “three-tier or transport into this state beer, wine, or spirits without

system”: consumers must purchase alcoholic beverages from a license authorizing such action. . . .” The only

licensed retailers; retailers must purchase them from licensed applicable license, an “outstate seller of wine license,”

may according to R436.1705(2)(d) be obtained by a

“manufacturer which is located outside of this state, but

consumers.

in the United States, and which produces and bottles its

Do cuments filed on behalf of the defendants included reports from own wine.” However, under R436.1719(4) the holder of

the Michigan Department of Treasury, Office of Revenue and Tax such a license may ship wine “only to a licensed

Analysis, which detailed estimates of lost tax revenue to remote sales; an wholesaler at the address of the licensed premises except

affidavit from the manager of the Manufacturers and Wholesalers Section upon written order of the commission.” In answers to

of the Licensing Division of the Michigan Liquor Control Commission

that listed all licensed “Outstate Seller of Wine” license holders; an

interrogatories, a representative of the Michigan Liquor

affidavit from the director of the Licensing Division of the Michigan Control Commission indicates that “[a]t present, there is

Liquor Control Commission averring that, of the wineries from which the no procedure whereby an out-of-state retailer or winery

plaintiffs wish to purchase wine, som e are lice nsed as out-o f-state sellers, can obtain a license or approval to deliver wine directly

and the others have not applied for such licenses; an affidavit from the to Michigan residents . . . .”

director of the Enforcement Division of the Michigan Liquor Co ntrol

Commission detailing the number of “controlled buy operations”

conducted by the C omm ission in M ichigan to identify retailers that se ll

In contrast, the Michigan Liquor Control Commission

alcohol to minors; an affidavit from an assistant in the Liquor Control indicates that the “ability to deliver wine to the consumer

Division of the Michigan Dep artment of Attorney General, detailing is available to winemakers licensed in Michigan,

controlled buy operations co nduc ted over the internet; and an (unsworn) inasmuch as under the provisions of MCL 436.1113(9)

statement by Sen. Orrin Hatch, made before the Senate Judiciary these licensees are permitted to sell at retail the wines

Committee, entitled “Interstate Alcohol Sales and the 21st Amendment.”

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they manufacture. . . . A licensed Michigan winemaker “make specific findings of fact based on the record” before

may deliver their [sic] own products to customers reaching a final decision. The plaintiffs argued that the

without an SDM [specially designated merchant] license district court’s failure to rule on the motions to strike “left the

.... record devoid of evidence supporting the court’s conclusion

that the direct shipment law furthers legitimate 21st

The plaintiffs contend that this differential treatment of in- Amendment purposes,” and that the court had applied the

state and out-of-state wineries violates the dormant incorrect legal standard in dismissing the complaint. The

Commerce Clause because it gives in-state wineries a district court denied the plaintiffs’ motion for reconsideration,

competitive advantage over out-of-state wineries. In-state saying that it had not considered the challenged evidence in

wineries can, for example, bypass the price mark-ups of a ruling on the summary judgment motions and that the

wholesaler and retailer, making in-state wines relatively motions to strike were effectively denied as moot.

cheaper to the consumer and allowing them to realize more

profit per bottle. In addition, the cost to an out-of-state For the reasons set out below, we reverse the district court’s

winery of the license that enables it to sell to a Michigan judgment, vacate the order granting summary judgment in the

wholesaler is $300, while a comparable Michigan winery state’s favor, and remand the case for entry of summary

must pay only a $25 license fee to qualify to ship wine judgment in favor of the plaintiffs.

directly to Michigan customers. Finally, for customers who

desire home delivery, Michigan wineries have a competitive DISCUSSION

advantage over out-of-state wineries that cannot ship directly

to customers. In response, the state argues that the The central question in this case is how the “dormant”

regulations to which an in-state winery is subject “more than Commerce Clause and the Twenty-first Amendment interact

offset, both in costs and burden, any nominal commercial to limit the ways in which a state can control alcohol sales

advantage given by the ability to deliver directly to and distribution. Article I, Section 8, Clause 3 of the United

customers” and characterizes the burden on out-of-state States Constitution grants Congress the power “[t]o regulate

wineries as “de minimis.” Commerce with foreign Nations, and among the several

States, and with the Indian Tribes . . . .” The Supreme Court

In its order granting summary judgment to the state and has long held that “this affirmative grant of authority to

denying summary judgment to the plaintiffs, the district court Congress also encompasses an implicit or ‘dormant’

held that “Michigan’s direct shipment law is a permitted limitation on the authority of the States to enact legislation

exercise of state power under § 2 of the 21st Amendment” affecting interstate commerce.” Healy v. The Beer Institute,

because it is not “mere economic protectionism.” In reaching 491 U.S. 324, 326 n.1 (1989) (citations omitted).

this conclusion, the court found that Michigan’s statutory

scheme was designed “to ensure the collection of taxes from In 1933, Congress enacted the Twenty-first Amendment,

out-of-state wine manufacturers and to reduce the risk of which repealed the 18th Amendment, thereby ending

alcohol falling into the hands of minors.” Prohibition. Section 2 of the Twenty-first Amendment

prohibits “[t]he transportation or importation into any State,

After this order had issued, the plaintiffs filed a motion to Territory or possession of the United States for delivery or

reconsider, asking the district court to rule on the motions to use therein of intoxicating liquors, in violation of the laws

strike before granting either side summary judgment and to thereof . . . .” Initially, the Supreme Court afforded the states

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nearly limitless power to regulate alcohol under the new first Amendment has continued to develop since

amendment. See, e.g., Ziffrin, Inc. v. Reeves, 308 U.S. 132, Hostetter. In Capital Cities Cable v. Crisp, 467 U.S. 691

138 (1939) (“The Twenty-first Amendment sanctions the (1984), although not a liquor importation or Commerce

right of a state to legislate concerning intoxicating liquors Clause case, the Court found that a state ban on alcohol

brought from without, unfettered by the Commerce Clause.”); advertising conflicted with regulations of the Federal

Indianapolis Brewing Co. v. Liquor Control Comm’n, 305 Communications Commission. The Court applied a

U.S. 391, 394 (1939) (“Since the Twenty-first Amendment balancing test to determine “whether the interests

. . . the right of a state to prohibit or regulate the importation implicated by a state regulation are so closely related to

of intoxicating liquor is not limited by the Commerce the powers reserved by the [Twenty-first] Amendment

Clause. . . .”); State Bd. of Equalization v. Young’s Market that the regulation may prevail, notwithstanding that its

Co., 299 U.S. 59 (1936). requirements directly conflict with express federal

policies.” Id. at 714. The Court concluded that the

The state relied on these cases in the district court, but we federal interest must prevail because the state’s banning

find that reliance disingenuous at best because, as early as the of alcohol advertising did not directly relate to the core

1960s, the Supreme Court signaled a break with this line of concerns of the Twenty-first Amendment, i.e., to exercise

reasoning. In Hostetter v. Idlewild Bon Voyage Liquor Corp., “control over whether to permit importation or sale of

377 U.S. 324, 331-32 (1964), a case involving the prohibition liquor and how to structure the liquor distribution

of liquor sales to departing international airline travelers, the system.” Id. at 715 (quotation omitted).

Court observed:

In subsequent cases, the Supreme Court has continued to

To draw a conclusion from this line of decisions [Ziffrin, analyze challenges to state alcohol laws by determining how

Young’s Market, etc.] that the Twenty-first Amendment closely related the law in question is to the “core concerns” of

has somehow operated to ‘repeal’ the Commerce Clause the Twenty-first Amendment. Shortly after Capital Cities

wherever regulation of intoxicating liquors is concerned was decided, the Court issued Bacchus Imports v. Dias, 468

would, however, be an absurd oversimplification. If the U.S. 263 (1984), in which out-of-state wholesalers challenged

Commerce Clause had been pro tanto ‘repealed,’ then a Hawaii excise tax exemption for certain locally produced

Congress would be left with no regulatory power over alcoholic beverages. The state argued that the statute

interstate or foreign commerce in intoxicating liquor. advanced legitimate state interests, that it imposed no patent

Such a conclusion would be patently bizarre and is discrimination against interstate trade, and that the effect on

demonstrably incorrect. . . . interstate commerce was minimal. Id. at 270. The Court

rejected these defenses, finding that “the legislation

Both the Twenty-first Amendment and the Commerce constitutes ‘economic protectionism’ in every sense of the

Clause are parts of the same Constitution. Like other phrase,” id. at 272, and noting that “one thing is certain: The

provisions of the Constitution, each must be considered central purpose of the [21st Amendment] was not to empower

in the light of the other, and in the context of the issues States to favor local liquor industries by erecting barriers to

and interests at stake in any concrete case. competition.” Id. at 276. Instead, the Court considered

“whether the principles underlying the [Twenty-first]

The Supreme Court’s approach to cases involving the Amendment are sufficiently implicated by the [tax

intersection of the Commerce Clause and the Twenty- exemption] to outweigh the Commerce Clause principles that

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would otherwise be offended.” Id. at 275. In Bacchus, the commerce . . . invokes the strictest scrutiny of any purported

state did not contest that the law’s purpose was “to promote legitimate local purpose and of the absence of

a local industry,” so the Court did not have to engage in the nondiscriminatory alternatives”). Likewise, the language in

normal Commerce Clause analysis of whether the law was North Dakota to the effect that the states have “virtually

sufficiently closely related to the promotion of lawful complete control” over the importation and sale of liquor,

interests to vitiate its discriminatory effect. Instead, it found although heavily emphasized by the district court in this case,

that the law discriminated against interstate commerce in has little value in a case requiring a Commerce Clause

violation of the Commerce Clause and was therefore analysis. Because North Dakota did not involve

unconstitutional. interpretation of the Commerce Clause, we reject the

implication that a state’s “virtually complete control” over

Since Bacchus, the Supreme Court has been less than liquor regulation enables it to discriminate against out-of-state

prolific in construing the content of the Twenty-first interests in favor of in-state interests. Bacchus simply forbids

Amendment’s “core concerns,” addressing the definition of such an analysis.

“core concerns” only once – and then only in a plurality

opinion. In North Dakota v. United States, 495 U.S. 423 Given this background, we cannot endorse the district

(1990), the Court had before it an intergovernmental court’s characterization of the regulation in this case as a

immunity case, rather than a Commerce Clause challenge. At constitutionally benign product of the state’s three-tier system

issue was whether North Dakota’s reporting and labeling and, thus, “a proper exercise of [Michigan’s Twenty-first

requirements were constitutional, despite interfering with Amendment] authority, despite the fact that such a system

contrary federal interests in selling liquor to military places a minor burden on interstate commerce.” Instead, we

personnel. The Court upheld the statute, finding that the state invoke Justice Scalia’s view, expressed in an opinion

regulations “fall within the core of the State’s power under concurring in the Supreme Court majority’s decision striking

the Twenty-first Amendment” because they were enacted down a state price-affirmation statute, in which he explained

“[i]n the interest of promoting temperance, ensuring orderly that:

market conditions, and raising revenue . . . .” Id. at 432.

[The law’s] invalidity is fully established by its facial

But, because North Dakota did not involve a Commerce discrimination against interstate commerce . . . . This is

Clause challenge, the analysis in the plurality opinion cannot so despite the fact that the law regulates the sale of

be taken to control the analysis in this case. That is, we do alcoholic beverages, since its discriminatory character

not interpret the “in the interest of” language to mean that a eliminates the immunity afforded by the Twenty-first

state need only be motivated by the “core concerns” of the Amendment.

Twenty-first Amendment to shield its laws from

constitutional scrutiny. Under a Commerce Clause analysis, Healy v. Beer Institute, 491 U.S. 324, 344 (1989) (Scalia, J.,

facially discriminatory laws are still subject to strict scrutiny, concurring) (citations omitted).

meaning that the state must demonstrate that no reasonable

nondiscriminatory alternatives are available to advance the The proper approach in this case, then, is to apply the

same legitimate goals. See, e.g., Hughes v. Oklahoma, 441 traditional dormant Commerce Clause analysis and, if the

U.S. 322, 336-7 (1979) (finding that, “[a]t a minimum,” a provisions are unconstitutional under the Commerce Clause,

statute that “on its face discriminates against interstate to determine whether the state has shown that it has no

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reasonable nondiscriminatory means of advancing the “core McNeilus Truck & Mfg., Inc. v. Ohio ex rel. Montgomery, 226

concerns” of the Twenty-first Amendment. F.3d 429, 442 (6th Cir. 2000) (quotations omitted).

In reviewing challenges brought under the Commerce As we indicated in McNeilus, the proper starting point for

Clause, the Supreme Court has long held that statutes that dormant Commerce Clause analysis is to determine whether,

facially discriminate are “virtually per se” invalid, citing as a in fact, the state provision “directly, in effect, or in purpose

clear example “a law that overtly blocks the flow of interstate treats in-state and out-of-state interests differently . . . .” Id.

commerce at a State’s borders.” Philadelphia v. New Jersey, If a court finds that the statute does discriminate, then the

437 U.S. 617, 624 (1978). However, a lower level of scrutiny issue becomes, applying “rigorous scrutiny [,] . . . whether the

is applied when a statute does not discriminate on its face: statute serves a legitimate state interest that cannot otherwise

be met.” Id. In other words, laws that facially discriminate

Where the statute regulates evenhandedly to effectuate a are normally invalid, unless they advance “a legitimate local

legitimate local public interest, and its effects on purpose that cannot be adequately served by reasonable

interstate commerce are only incidental, it will be upheld nondiscriminatory alternatives.” New Energy Co. of Ind. v.

unless the burden imposed on such commerce is clearly Limbach, 486 U.S. 269, 278 (1988) (citations omitted).

excessive in relation to the putative local benefits. . . .

[T]he extent of the burden that will be tolerated will of Here, it is clear that the Michigan statutory and regulatory

course depend on the nature of the local interest scheme treats out-of-state and in-state wineries differently,

involved, and on whether it could be promoted as well with the effect of benefitting the in-state wineries and

with a lesser impact on interstate activities. burdening those from out of state. As discussed above,

Michigan wineries enjoy both greater access to consumers

Id., quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142 who wish to have wine delivered to their homes, and greater

(1970). Moreover, we have recognized the following test for profit through their exemption from the three-tier system.

determining whether state economic regulations violate the Out-of-state wineries, on the other hand, must participate in

dormant Commerce Clause: the costly three-tier system, to their economic detriment and,

although this is not clear from the record, may be shut out of

When a state statute directly regulates or discriminates the Michigan market altogether if unable to obtain a

against interstate commerce, or when its effect is to favor wholesaler. The Fourth Circuit reached a similar conclusion

in-state economic interests over out-of-state interests, in a case considering North Carolina’s alcohol distribution

[the Supreme Court has] generally struck down the system, which is nearly identical to Michigan’s. In Beskind

statute without further inquiry. When, however, a statute v. Easley, 325 F.3d 506 (4th Cir. 2003), the court found that

has only indirect effects on interstate commerce and North Carolina’s alcohol distribution laws, which

regulates evenhandedly, [the Supreme Court has] discriminate against out-of-state wineries in favor of in-state

examined whether the State’s interest is legitimate and wineries, are unconstitutional unless “the State can show that

whether the burden on interstate commerce clearly it advances a legitimate local purpose that cannot be

exceeds the local benefits. In either situation the critical adequately served by reasonable nondiscriminatory

consideration is the overall effect of the statute on both alternatives.” Id. at 515 (internal quotations and citations

local and interstate activity. omitted).

No. 01-2720 Heald, et al. v. Engler; et al. 15 16 Heald, et al. v. Engler; et al. No. 01-2720

Having determined that the provision is facially The district court correctly recognized that state liquor laws

discriminatory, we now turn to the question of whether the are not completely immune from Commerce Clause

regulatory scheme is nevertheless constitutional because it challenges, but it placed too much reliance on Supreme Court

“fall[s] within the core of the State’s power under the precedent that has specifically upheld the three-tier

Twenty-first Amendment,” having been enacted “in the distribution system, quoting North Dakota v. United States,

interest of promoting temperance, ensuring orderly market 495 U.S. at 431, for the proposition that the states have

conditions, and raising revenue,” North Dakota v. United “virtually complete control” over the importation and sale of

States, 495 U.S. 423, 432 (1990), and because these interests liquor. As we noted above, however, North Dakota involved

“cannot be adequately served by reasonable a Supremacy Clause challenge and did not implicate the

nondiscriminatory alternatives.” New Energy Co. of Ind. v. Commerce Clause. It therefore cannot be relied on in this

Limbach, 486 U.S. 269, 278 (1988) (citations omitted). case in light of Supreme Court cases that do discuss the

intersection of the Twenty-first Amendment and the

We conclude, based on the evidence in the record, that Commerce Clause, such as Bacchus.

defendants have not shown that the Michigan scheme’s

discrimination between in-state and out-of-state wineries Nor do we find persuasive the district court’s reliance on

furthers any of the concerns listed above, much less that no three additional cases. One, House of York, Ltd. v. Ring, 322

reasonable non-discriminatory means exists to satisfy these F. Supp. 530 (S.D.N.Y. 1970), is a district court opinion that

concerns. This is so even if, taking the evidence in the light pre-dates Bacchus. The second, Bainbridge v. Bush, 148 F.

most favorable to defendants, we assume that all of the Supp.2d 1306 (M.D.Fla. 2001), has subsequently been

evidence they submitted was admissible. It is important to reversed. See Bainbridge v. Turner, 311 F.3d 1104 (11th Cir.

keep in mind that the relevant inquiry is not whether 2002) (holding that the state must show that an alcohol-

Michigan’s three-tier system as a whole promotes the goals distribution statute that discriminates between in-state and

of “temperance, ensuring an orderly market, and raising out-of-state wineries furthers core concerns of the Twenty-

revenue,” but whether the discriminatory scheme challenged first Amendment in order to survive a Commerce Clause

in this case – the direct-shipment ban for out-of-state wineries challenge). The third, Bridenbaugh v. Freeman-Wilson, 227

– does so. See, e.g., Beskind, 325 F.3d at 517 (“The question F.3d 848 (7th Cir. 2000), is the sole federal court of appeals

is not whether North Carolina can advance its regulatory decision to find that analogous direct shipment laws are

purpose by imposing fewer burdens on in-state wineries than constitutional under the Twenty-first Amendment. However,

out-of-state wineries . . . . Rather, the question is whether Bridenbaugh is distinguishable on its facts, and it has been

discriminating in favor of in-state wineries . . . serves a criticized by several federal courts for its failure to engage in

Twenty-first Amendment interest.”). Obviously, the state the requisite dormant Commerce Clause analysis. See, e.g.,

bears the burden of justifying a discriminatory statute, and Bolick v. Roberts, 199 F. Supp.2d 397, 408 (E.D. Va. 2002)

“the standards for such justification are high.” New Energy (finding Brindenbaugh “improperly decided because it does

Co., 486 U.S. at 278; see also Cooper v. McBeath, 11 F.3d not rely on the established dormant Commerce Clause

547, 553 (5th Cir. 1994) (describing the burden of proof faced analysis”); Dickerson v. Bailey, 212 F. Supp.2d 673, 682

by the state as “towering”); Hughes v. Oklahoma, 441 U.S. (S.D. Tex. 2002) (observing that in its “concentration on

322, 337 (1979) (“[F]acial discrimination by itself may be a Indiana’s three-tiered scheme . . . [the court] did not discuss

fatal defect. . . . [A]t a minimum [it] invokes the strictest the last forty years of Supreme Court jurisprudence relating

scrutiny.”). to balancing and harmonizing the dormant commerce clause

No. 01-2720 Heald, et al. v. Engler; et al. 17 18 Heald, et al. v. Engler; et al. No. 01-2720

and §2 of the twenty-first Amendment”), aff’d, Dickerson v. Legislature has chosen this path to ensure the collection of

Bailey, 336 F.3d 388 (5th Cir. 2003) (finding that taxes from out-of-state wine manufacturers and to reduce the

Brindenbaugh was factually distinguishable from that case); risk of alcohol falling into the hands of minors” and its

Bainbridge v. Turner, 311 F.3d 1104, 1114 n.15 (11th Cir. conclusion that “the 21st Amendment gives it the power to do

2002) (commenting that the court “disagree[s] with the so,” without more, do not constitute strict scrutiny, as

analytical framework used in [Bridenbaugh]”). required by Supreme Court precedent. It is not enough that

the Michigan Legislature has chosen this particular regulatory

For example, Bridenbaugh did not involve any out-of-state scheme to further what are legitimate objectives. The proper

wineries as plaintiffs, and it thus addressed only whether the inquiry, detailed above, is whether it “advances a legitimate

Indiana statute discriminated against customers who wanted local purpose that cannot be adequately served by reasonable

to have out-of-state wine shipped directly to them. nondiscriminatory alternatives.” New Energy Co. of Ind. v.

Furthermore, it appears the Indiana statutes differ from the Limbach, 486 U.S. 269, 278 (1988). We find no evidence on

provisions at issue here, as the court found that “Indiana this record that it does.

insists that every drop of liquor pass through its three-tiered

system and be subjected to taxation.” Bridenbaugh, 227 F.3d CONCLUSION

at 853. Michigan, on the other hand, effectively exempts in-

state wineries from the three-tier system, an exemption it does For the reasons set out above, we REVERSE the judgment

not extend to out-of-state wineries. Finally, in contrast to this of the district court granting summary judgment to the

case, the Bridenbaugh plaintiffs were “concerned only with defendants and REMAND the case for entry of judgment in

direct shipments from out-of-state sellers who lack and do not favor of the plaintiffs.

want Indiana permits.” Id. at 854. By contrast, the plaintiffs

in this case are willing to acquire Michigan permits and pay

taxes on wines shipped; they simply want to be eligible for

such permits on the same basis as in-state wineries. For all of

these reasons, we do not find the opinion in Bridenbaugh

persuasive.

The district court in this case was correct in finding that the

Michigan alcohol distribution system discriminates between

in-state and out-of-state interests to the extent that in-state

wineries may obtain licenses to ship wine directly to

consumers, but out-of-state wineries may not and are instead

required to go through the more costly three-tier system.

What the district court did not do was undertake the necessary

analysis that follows from such a finding. Instead, it

concluded that Michigan’s system “cannot be characterized

as ‘mere economic protectionism,’” because the system

furthers the “core concerns” of the Twenty-first Amendment.

The district court’s observation that “[t]he Michigan