Amicus Curiae Brief — Tennessee Wine and Spirits Retailers Association, Petitioner v. Russell F. Thomas, Executive Director of the Tennessee Alcoholic Beverage Commission, et al.

No. 18-96

IN THE

Supreme Court of the United States

___________________________________________________________________

TENNESSEE WINE AND SPIRITS RETAILERS

ASSOCIATION,

Petitioner,

v.

ZACKARY W. BLAIR, ET AL.,

Respondents.

___________________________________________________________________

ON WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

___________________________________________________________________

BRIEF OF AMICUS CURIAE RETAIL

LITIGATION CENTER, INC. IN SUPPORT OF

RESPONDENTS

_________________________________________________________________

Deborah R. White

RETAIL LITIGATION

CENTER, INC.

1700 N. Moore Street

Suite 2250

Arlington, VA 22209

Zayn Siddique

ORRICK, HERRINGTON &

SUTCLIFFE LLP

51 West 52nd Street

New York, NY 10019

Kelsi Brown Corkran

Counsel of Record

ORRICK, HERRINGTON &

SUTCLIFFE LLP

1152 15th Street NW

Washington, DC 20005

(202) 339-8497

kcorkran@orrick.com

Randy J. Kozel

ORRICK, HERRINGTON &

SUTCLIFFE LLP

405 Howard Street

San Francisco, CA 94105

Counsel for Amicus Curiae

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ..................................... ii

INTEREST OF AMICUS CURIAE .......................... 1

INTRODUCTION AND SUMMARY OF

ARGUMENT ....................................................... 2

ARGUMENT ............................................................. 5

I.

The Granholm Framework Determines

The Validity Of Alcohol Regulations

Under The Commerce Clause. ........................... 5

Step 1: Is there discrimination? ......................... 7

Step 2: Is the law authorized by the

Twenty-first Amendment? ............................ 9

Step 3: Does the law advance a legitimate

goal that cannot be served by

nondiscriminatory alternatives? ................ 13

II. Tennessee’s Durational Residency

Requirement Fails Under The Granholm

Analysis............................................................. 14

A. Discrimination............................................. 14

B. Immunity. .................................................... 16

C. Nondiscriminatory Alternatives. ................ 19

CONCLUSION ........................................................ 25

ii

TABLE OF AUTHORITIES

Page(s)

Cases

44 Liquormart, Inc. v. Rhode Island,

517 U.S. 484 (1996)..........................................5, 19

Bacchus Imports, Ltd. v. Dias,

468 U.S. 263 (1984)............ 5, 7, 8, 9, 11, 12, 16, 17

Brown-Forman Distillers Corp. v. N.Y.

State Liquor Auth.,

476 U.S. 573 (1986)................................ 6, 8, 10, 11

City of Philadelphia v. New Jersey,

437 U.S. 617 (1978)............................................7, 9

Cooper v. Tex. Alcoholic Beverage

Comm’n,

820 F.3d 730 (5th Cir. 2016)................................12

Craig v. Boren,

429 U.S. 190 (1976)..........................................5, 19

Dep’t of Revenue of Ky. v. Davis,

553 U.S. 328 (2008)................................................6

Granholm v. Heald,

544 U.S. 460 (2005)...................................... passim

Halliburton Oil Well Cementing Co. v.

Reily,

373 U.S. 64 (1963) ..................................................8

iii

Healy v. Beer Inst.,

491 U.S. 324 (1989)......................................5, 8, 10

Lewis v. BT Inv. Managers, Inc.,

447 U.S. 27 (1980) ................................................20

New Energy Co. of Indiana v. Limbach,

486 U.S. 269 (1988)..........................................6, 13

North Dakota v. United States,

495 U.S. 423 (1990)............................................5, 6

Oregon Waste Sys., Inc. v. Dep’t of

Envtl. Quality of Or.,

511 U.S. 93 (1994) ..............................................2, 7

South Dakota v. Wayfair, Inc.,

138 S. Ct. 2080 (2018)............................................4

Wal-Mart Stores, Inc. v. Texas Alcoholic

Beverage Comm’n,

313 F. Supp. 3d 751 (W.D. Tex.

2018) ...............................................................23, 24

Constitutional Authorities

U.S. Const. amend. XXI .................................... passim

U.S. Const. art. 1, § 8, cl.3 ................................ passim

Statutes

Ariz. Rev. Stat. Ann. § 4-243(A) ...............................18

Ark. Code Ann. § 3-2-103 ..........................................21

ch. 235 Ill. Comp. Stat. Ann. § 5/6-1.5......................18

iv

ch. 235 Ill. Comp. Ill. Stat. § 5/6-4(a) .......................18

1989 Minn. Sess. Law Serv. 49.................................24

Minn. Stat. Ann. § 340A.402 ....................................23

Minn. Stat. Ann. § 340A.412 ..............................21, 24

Minn. Stat. Ann. § 340A.414 ....................................24

Mont. Code Ann. § 16-4-1005 ...................................22

N.D. Cent. Code Ann. § 5-02-11................................23

N.J. Stat. Ann. § 33:1-25 ...........................................24

N.J. Stat. Ann. § 33:1-35 ...........................................24

N.Y. Alco. Bev. Cont. Law § 101(1) ..........................18

N.Y. Alco. Bev. Cont. Law App. § 81.1 .....................24

Neb. Rev. Stat. Ann. § 53-1,104................................23

Neb. Rev. Stat. Ann. § 53-169(1) ..............................18

Neb. Rev. Stat. Ann. § 53-171...................................18

Or. Rev. Stat. Ann. § 471.341 ...................................22

Tenn. Code Ann. § 57-3-204 ................................15, 20

Tenn. Code Ann. § 57-3-803 ......................................21

Tenn. Code Ann. § 57-4-101 ................................18, 21

Tenn. Code Ann. § 57-4-102 ................................18, 21

v

Tenn. Code Ann. § 57-4-201 ................................18, 21

Tenn. Code Ann. § 57-5-103 ......................................21

1

INTEREST OF AMICUS CURIAE1

The Retail Litigation Center, Inc. (RLC) is a public policy organization whose members include many

of the country’s largest and most innovative retailers.

They employ millions of workers throughout the

United States, furnish goods and services to tens of

millions of consumers, and account for tens of billions

of dollars in annual sales. The RLC seeks to provide

courts with retail-industry perspectives on important

legal issues impacting its members, and to highlight

the practical consequences of pending cases. Since its

founding in 2010, the RLC has participated as amicus

curiae in more than 100 cases.

The RLC and its members have a significant interest in this case. Some RLC members sell liquor. As

interstate retailers, they would be barred by Tennessee’s durational residency law, and by others like it, if

it were enforceable. More generally, RLC members

have an interest in ensuring that the Commerce

Clause continues to serve its crucial role as a bulwark

against protectionism in all industries.

1 The parties have consented to the filing of this amicus

brief. No counsel for a party authored the brief in whole or in

part. No party, counsel for a party, or any person other than amicus and its counsel made a monetary contribution intended to

fund the preparation or submission of the brief.

2

INTRODUCTION AND SUMMARY OF

ARGUMENT

Tennessee’s durational residency law keeps interstate retailers out of the alcohol trade based simply

on where their owners, officers, directors, and stockholders live. The legislature could achieve every one

of its purported public policy objectives in a host of

nondiscriminatory ways. The real beneficiaries are

the local retailers the law protects from competition.

Petitioner’s response is not so much to dispute

these points as to argue that they don’t matter. On

Petitioner’s logic, the very act of asking whether protectionism is afoot goes too far: “A bar on protectionist

laws would amount to reasonableness review,” and

such review “is irreconcilable” with the Twenty-first

Amendment. Pet. Br. 43-44.

Petitioner is wrong. This Court has made clear

that economic protectionism violates an overarching

principle of constitutional law embodied in the Commerce Clause. Nondiscrimination is more than a fragile aspiration that gives way any time someone pours

a drink. See Granholm v. Heald, 544 U.S. 460, 472

(2005) (“[S]tate 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.’” (quoting Oregon Waste

Sys., Inc. v. Dep’t of Envtl. Quality of Or., 511 U.S. 93,

99 (1994)). Hence this Court’s repeated rejection of

claims that the Twenty-first Amendment renders concerns about protectionism irrelevant. See id. at 48687 (holding that “the Twenty-first Amendment does

3

not supersede other provisions of the Constitution”

and collecting cases).

In filing this amicus brief, the RLC seeks first and

foremost to make a basic point: Petitioner’s proposed

approach to assessing the constitutionality of alcohol

regulations is not simply novel, but would upend the

framework the Court established in Granholm. That

three-step test asks first whether the regulation discriminates; if so, whether that discrimination is protected by the Twenty-first Amendment; and finally,

whether the state could have pursued its goals in nondiscriminatory ways. See id. at 472, 476, 489. The

Court carefully tailored this framework to reflect the

Commerce Clause’s commitment to interstate competition free from discrimination as well as the Twentyfirst Amendment’s grant of regulatory authority to

the states.

The laws at issue in Granholm were discriminatory under familiar Commerce Clause principles.

They were not saved by the Twenty-first Amendment,

and they pursued goals that could be advanced without discriminating against out-of-state interests. The

same is true of Tennessee’s durational residency law,

as the Sixth Circuit properly concluded. See Pet. App.

33a.

Rather than taking Granholm’s framework on its

own terms—which is fatal to Tennessee’s residency

law—Petitioner posits that the Commerce Clause

simply has no application to retailers. See Pet. Br. 4344. There is no warrant for Petitioner’s cramped view.

Like the cases that preceded it, Granholm harmonized the Commerce Clause with the Twenty-first

4

Amendment as a general matter, yielding an analysis

that applies to discrimination against interstate commerce, not just interstate products. As this Court recognized last Term, Granholm reflects the importance

of nondiscrimination as an enduring constitutional

principle. See South Dakota v. Wayfair, Inc., 138 S.

Ct. 2080, 2091 (2018) (citing Granholm as supporting

the “virtually per se” rule for invalidating discriminatory laws).

The RLC’s second reason for submitting this brief

is to underscore an obvious reality, notwithstanding

Petitioner’s suggestions to the contrary: State residency has nothing to do with whether a retailer is a

law-abiding member of, and valued contributor to, a

local community. Interstate retailers can and do work

hard to comply with drinking age laws. They can and

do keep careful records for calculating and submitting

taxes. They can and do invest in communities and

hire local employees to staff their stores. Yet in Tennessee, none of that matters if their owners, officers,

directors, and stockholders have not lived inside the

state’s borders for a long enough time. This protection

of in-state sellers from interstate competition is not

subtle; it is evident on the face of Tennessee’s statute.

Such discrimination is a paradigmatic violation of the

Commerce Clause and in no way immunized by the

Twenty-first Amendment. The latter authorizes

states to regulate alcohol sales, not to prop up local

interests by keeping competitors at bay.

5

ARGUMENT

I.

The Granholm Framework Determines The

Validity Of Alcohol Regulations Under The

Commerce Clause.

This Court has evaluated the constitutionality of

alcohol regulations on numerous occasions and in a

range of contexts. See, e.g., 44 Liquormart, Inc. v.

Rhode Island, 517 U.S. 484 (1996) (challenge under

the First Amendment); Craig v. Boren, 429 U.S. 190

(1976) (challenge under the Equal Protection Clause).

Included among those cases are several controversies

over the consistency of alcohol-related laws with the

Commerce Clause. See, e.g., North Dakota v. United

States, 495 U.S. 423 (1990); Healy v. Beer Inst., 491

U.S. 324 (1989); Bacchus Imports, Ltd. v. Dias, 468

U.S. 263 (1984). The Court’s most recent discussion of

that intersection is also its most extensive: Granholm,

544 U.S. 460.

Granholm dealt with laws in Michigan and New

York that allowed in-state wineries to sell directly to

consumers while making it illegal or impractical for

out-of-state wineries to do so. The Court considered

the same issue that animates this case: the relationship between the nondiscrimination principle of the

Commerce Clause and state regulatory authority under the Twenty-first Amendment. It concluded that

both interests could be served. Discriminatory laws

violate the Commerce Clause even in the field of alcohol regulation. See Granholm, 544 U.S. at 489. At the

same time, states possess extensive discretion to regulate the alcohol trade in nondiscriminatory ways, including by establishing a tiered system that divides

6

the operations of producers, wholesalers, and retailers. See id. As the Court has previously observed, the

three-tier system allows states to pursue goals such

as “promoting temperance, ensuring orderly market

conditions, and raising revenue.” North Dakota, 495

U.S. at 432.

Drawing on the body of Commerce Clause jurisprudence as well as the history of the Twenty-first

Amendment, Granholm took a three-step approach to

evaluating the laws at issue. The first question is

whether a law discriminates against interstate commerce. See 544 U.S. at 472. If there is discrimination,

the Court moves on to consider whether the law is

saved by the Twenty-first Amendment. See id. at

476.2 Finally, if the Twenty-first Amendment does not

save the law, the Court asks whether the law nevertheless “advances a legitimate local purpose that cannot

be

adequately

served

by

reasonable

nondiscriminatory alternatives.” Id. at 489 (quoting

New Energy Co. of Indiana v. Limbach, 486 U.S. 269,

278 (1988)).

Granholm’s three-step analysis applies in full

measure to cases like this one. The Court set forth a

2 Granholm did not have occasion to discuss the implica-

tions of finding that no discrimination is present, though this

Court has indicated that “[w]hen … a statute has only indirect

effects on interstate commerce and regulates evenhandedly, we

have examined whether the State’s interest is legitimate and

whether the burden on interstate commerce clearly exceeds local … benefits.” Brown-Forman Distillers Corp. v. N.Y. State

Liquor Auth., 476 U.S. 573, 579 (1986); see also Dep’t of Revenue

of Ky. v. Davis, 553 U.S. 328, 353 (2008).

7

framework that safeguards interstate competition

and forecloses economic protectionism while preserving states’ discretion to regulate alcohol. Petitioner’s

response is to advance a revisionist account of

Granholm based on snippets that mention out-ofstate products, even as it ignores the framework the

Court deliberately applied. In the sections that follow,

we describe the full scope of this Court’s controlling

constitutional analysis.

Step 1: Is there discrimination?

Granholm begins by asking whether the laws at

issue discriminated against out-of-state interests. See

544 U.S. at 472 (“Time and again this Court has held

that, in all but the narrowest circumstances, 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.’” (quoting Oregon Waste, 511 U.S. at 99)).

This is the threshold step—with respect to alcohol as

well as other goods and services—because discriminatory laws “face ‘a virtually per se rule of invalidity.’”

Id. at 476 (quoting City of Philadelphia v. New Jersey,

437 U.S. 617, 624 (1978)); see also Bacchus, 468 U.S.

at 268, 274-76. The path of the constitutional analysis

depends in the first instance on whether discrimination is afoot.

The laws in Granholm were plainly discriminatory. In Michigan, only wineries within the state could

ship directly to consumers. See 544 U.S. at 473-74. As

for New York, in-state producers could ship directly

to consumers, while out-of-state producers needed to

open “a branch office and warehouse” within the

8

state. Id. at 474-75. That approach contravened the

Court’s “admonition that States cannot require an

out-of-state firm ‘to become a resident in order to compete on equal terms.’” Id. (quoting Halliburton Oil

Well Cementing Co. v. Reily, 373 U.S. 64, 72 (1963)).

While Granholm took discrimination as its starting point, Petitioner would have this Court ignore discrimination altogether. On Petitioner’s telling, the

“Twenty-first Amendment makes the dormant Commerce Clause inapplicable to most state laws regulating liquor distribution.” Pet. Br. 24. Petitioner’s claim

is nothing more than old wine in new bottles.

Granholm rejected it, instead broadly embracing the

well-established premise that laws cannot “deprive

citizens of their right to have access to the markets of

other States on equal terms.” 544 U.S. at 473. The

Court affirmed that “state regulation of alcohol is limited by the nondiscrimination principle of the Commerce Clause,” 544 U.S. at 487, with cites to Bacchus

Imports, Ltd. v. Dias, 468 U.S. 263, Brown-Forman

Distillers Corp., 476 U.S. 573, and Healy, 491 U.S.

324. It punctuated the point by quoting Brown-Forman for the proposition that “[w]hen a state statute

directly regulates or discriminates against interstate

commerce, or when its effect is to favor in-state economic interests over out-of-state interests, we have

generally struck down the statute without further inquiry.” 544 U.S. at 487 (quoting Brown–Forman, 476

U.S. at 579).

The discrimination inquiry comes first, because it

shapes the ensuing analysis of whether a law is authorized by the Twenty-first Amendment. From the

standpoint of the Commerce Clause, protectionism is

9

no less of a concern in the alcohol industry than it is

in other domains.

Step 2: Is the law authorized by the Twentyfirst Amendment?

After concluding that the laws at issue discriminated against out-of-state interests—and thus triggered the “virtually per se rule of invalidity”— the

Granholm Court proceeded to consider whether they

were immunized by the Twenty-first Amendment.

544 U.S. at 476 (quoting City of Philadelphia, 437

U.S. at 624).

In conducting that analysis, the Court began with

history. It explained that the Twenty-first Amendment “restored to the States the powers they had under the Wilson and Webb-Kenyon Acts.” Id. at 484.

Those Acts expanded state regulatory authority over

the alcohol industry, but they did not endorse or authorize protectionism. See id. at 483-84.

The Court also looked to its precedents, which emphasize the importance of vigilance against protectionism even in the alcohol trade. In Bacchus, the

Court invalidated a tax that exempted certain locally

produced beverages in Hawaii. In doing so, it rejected

any suggestion that the Twenty-first Amendment

served to “empower States to favor local liquor industries by erecting barriers to competition.” 468 U.S. at

276. Likewise, the Court in Brown-Forman held that

a New York law violated the Commerce Clause by effectively preventing distillers from running certain

promotions outside of New York. This was itself a

form of protectionism, for “[w]hile a State may seek

10

lower prices for its consumers, it may not insist that

producers or consumers in other States surrender

whatever competitive advantages they may possess.”

476 U.S. at 580; see also id. (“Economic protectionism

is not limited to attempts to convey advantages on local merchants; it may include attempts to give local

consumers an advantage over consumers in other

States.”).

A few years after Brown-Forman, Healy v. Beer

Institute struck down a Connecticut statute that required out-of-state beer shippers to affirm that their

prices in Connecticut were no higher than their prices

in neighboring states. See 491 U.S. at 326. The Court

reasoned that while Connecticut has significant regulatory discretion over alcohol distribution, it may not

“penaliz[e] Connecticut brewers if they seek borderstate markets and out-of-state shippers if they choose

to sell both in Connecticut and in a border State.” Id.

at 341. Punishing those who do business in other

states is antithetical to the Commerce Clause, whatever the industry.

Based on its historical and doctrinal analysis, the

Court in Granholm concluded that the discriminatory

laws before it were not saved by the Twenty-first

Amendment. That Amendment allows a state “which

chooses to ban the sale and consumption of alcohol altogether” to “bar its importation.” 544 U.S. at 488-89.

It also allows states to “assume direct control of liquor

distribution through state-run outlets or funnel sales

through the three-tier system.” Id. at 489. Even so, it

is “well settled that the Twenty-first Amendment did

not entirely remove state regulation of alcohol from

the reach of the Commerce Clause.” Brown-Forman,

11

476 U.S. at 584. The laws in Michigan and New York

went too far by discriminating against out-of-state

competitors.

Granholm is not alone in highlighting the salience

of protectionism in cases involving alcohol. In Bacchus, the Court observed that “[s]tate laws that constitute mere economic protectionism are … not

entitled to the same deference as laws enacted to combat the perceived evils of an unrestricted traffic in liquor.” 468 U.S. at 276. The Sixth Circuit recognized

this principle in the decision below, noting that the

Commerce Clause “prevents ‘economic protectionism’—e.g., a state protecting in-state economic interests by burdening out-of-state economic interests.”

Pet. App. 28a. And Judge Sutton, who parted ways

with the majority over some aspects of Tennessee’s

system, agreed that discriminatory laws are invalid if

“they serve no purpose besides ‘economic protectionism.’” Pet. App. 49a (quoting Bacchus, 468 U.S. at

276). That Petitioner will not accept even this fundamental point is both striking and indicative of the extreme position it has staked out. See Pet. Br. 43.

Petitioner thus takes upon itself the unenviable

task of defending the power of states to enact protectionist laws. Any other approach, Petitioner maintains, would amount to “reasonableness review” that

is inconsistent with the Twenty-first Amendment.

Pet. Br. 43-44. This argument not only ignores the

Court’s long history of applying the nondiscrimination principle in a clear and rigorous fashion, but remarkably portrays economic protectionism as none of

the judiciary’s concern. See Pet. Br. 44 (contending

that scrutinizing protectionist laws “would bog down

12

the courts in policy disputes and leave the states with

little certainty as to the validity of their liquor laws”).

That depiction, as explained above, is impossible to

square with cases like Granholm and Bacchus.

Petitioner’s response is to reimagine those cases.

See Pet. Br. 43. Because Granholm and Bacchus involved “products,” Petitioner concludes that the Court

implicitly endorsed discrimination against out-ofstate retailers. See Pet. Br. 41-44. But Petitioner has

distilled the wrong lesson from this Court’s cases.

Granholm and Bacchus found discrimination against

out-of-state interests to be unlawful, and they affirmed the significance of nondiscrimination as a constitutional principle. See Granholm, 544 U.S. at 472;

Bacchus, 468 U.S. at 276. Nothing in those decisions

supports Petitioner’s claim that states have free rein

to discriminate so long as they pick the right targets.

Further, Granholm expressly rejected an invitation to overrule Bacchus or limit the case to its facts.

544 U.S. at 488; see also Cooper v. Tex. Alcoholic Beverage Comm’n, 820 F.3d 730, 743 (5th Cir. 2016)

(Cooper II) (“State regulations of the producer tier ‘are

protected under the Twenty-first Amendment when

they treat liquor produced out of state the same as its

domestic equivalent.’ … But state regulations of the

retailer and wholesaler tiers are not immune from

Commerce Clause scrutiny just because they do not

discriminate against out-of-state liquor.” (quoting

Granholm, 544 U.S. at 489)). In effect, Petitioner asks

this Court to do what it has already refused in

Granholm.

13

Step 3: Does the law advance a legitimate

goal

that

cannot

be

served

by

nondiscriminatory alternatives?

Having determined that the discriminatory Michigan and New York laws were not excused by the

Twenty-first Amendment, the Granholm Court

turned finally to “whether either state regime ‘advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory

alternatives.’” 544 U.S. at 489 (quoting New Energy

Co. of Ind., 486 U.S. at 278).

The main justifications offered by the states were

“keeping alcohol out of the hands of minors and facilitating tax collection.” Id. Neither withstood scrutiny.

The argument about use by minors was undermined

by the lack of evidence implicating direct shipments

of wine. See id. at 490. There was also a problem of

underinclusiveness: even with the laws in place, minors could order wine directly from in-state producers. See id. As for the tax-collection rationale, it had

no purchase in Michigan, which already taxed out-ofstate wineries for shipments made to in-state wholesalers and could extend that practice to direct shipments. See id. at 491. Similarly, New York could

require out-of-state direct shippers to apply for a permit and submit sales data, which would facilitate orderly taxation. See id.

Ultimately, Michigan and New York fell short of

the “exacting standard” they needed to satisfy in

order to show that “nondiscriminatory alternatives

will prove unworkable.” Id. at 493.

14

Again placing itself in opposition to Granholm,

Petitioner disputes the relevance of this inquiry into

nondiscriminatory alternatives. It begrudgingly

mentions

the

presence

of

nonprotectionist

justifications “[t]o the extent it matters.” Pet. Br. 47.

Of course, as Granholm holds, it matters greatly. And

as explained below, the absence of any such

justifications for Tennessee’s law confirms its

invalidity.

II. Tennessee’s

Durational

Residency

Requirement Fails Under The Granholm

Analysis.

A straightforward application of the Granholm

framework demonstrates that Tennessee’s durational

residency requirement is invalid. Like every state,

Tennessee possesses broad authority to regulate the

distribution of alcohol, including through its implementation of the three-tier system. It has numerous

avenues within that system to ensure that retailers

doing business within its borders are complying with

all applicable laws. But that is not a license to discriminate against interstate retailers or out-of-state

interests, especially when the retail practices described below demonstrate that interstate retailers,

operating in nondiscriminatory regulatory environments, are just as able to serve the reasonable objectives of alcohol oversight as their single-state

counterparts.

A. Discrimination.

The Michigan laws at issue in Granholm allowed

in-state wineries to ship directly to consumers while

15

foreclosing out-of-state wineries from doing the same.

Discrimination was easy to discern. See 544 U.S. at

473-74. New York did not strictly bar out-of-state wineries from direct shipments; rather, it required them

to set up an in-state distribution apparatus that instate wineries could skip. See id. at 474. This, too, was

discriminatory. See id.

Tennessee’s residency requirement comes from

the same mold. Under Tennessee law, it is not enough

to set up a brick-and-mortar retail outlet within the

state. To obtain the requisite liquor license, a wouldbe retailer must have lived within Tennessee for what

the legislature deems to be a sufficient amount of

time. Tenn. Code Ann. § 57-3-204(b)(2)(A) (establishing a two-year residency requirement for any individual seeking a retail liquor license). That residency

period is even longer for a retailer seeking to renew

its license. Id. (requiring ten years of residency prior

to issuing a renewal). A corporate retailer must go still

further, ensuring that all its officers, directors, and

capital stockholders have lived in Tennessee for the

requisite amount of time. Id. § 57-3-204(b)(3)(A)-(B),

(D) (establishing a two-year residency requirement

for any officer, director, or stockholder of a corporation seeking a retail liquor license).3

3 Petitioner has not defended the stockholder residency requirement or the extended residency requirement for renewals

before this Court. See Pet. Cert. Reply 2. Nevertheless, those provisions are notable in illustrating the dramatic and onerous implications of Tennessee’s regulatory approach for would-be

entrants to its market.

16

The upshot of Tennessee’s law is that if the owners, directors, officers, and stockholders of your organization have lived in Tennessee for a long enough

time, you can establish a retail outlet there. If they

haven’t, you can’t. As the Sixth Circuit explained, the

law “prevents out-of-state residents from obtaining

retail licenses and protects in-state residents who are

retailers.” Pet. App. 31a. That is the essence of discrimination.4

B. Immunity.

The next question is whether Tennessee’s discriminatory law is saved by the Twenty-first Amendment. See Granholm, 544 U.S. at 476. Petitioner’s

position is that regulations governing retailers are

4 Aside from its discriminatory effect, there is also evidence

that Tennessee’s durational residency requirement was enacted

with a discriminatory purpose. Cf. Bacchus, 468 U.S. at 270

(holding that “either discriminatory purpose … or discriminatory effect” provide a basis for finding “economic protectionism”

(citation omitted)). The Attorney General of Tennessee, for instance, suggested such a conclusion when he opined that the legislative history of a precursor provision “reveals no legitimate

public policy … and indeed provides some evidence that the legislative intent … was to deter the sale of alcoholic beverages from

outside Tennessee.” Opp. App. 11a. In reaching that determination, the Attorney General pointed to evidence such as a floor

debate in which a Tennessee legislator remarked that the Tennessee House had just voted “to kill interstate banking” and “all

[the durational residency requirement] does is kill interstate

whiskey.” Opp. App. 9a. Given the procedural posture of this

case, the Court of Appeals had no occasion to rule on discriminatory purpose. If this Court were inclined to reverse the discriminatory effect finding, however, it should remand to permit the

lowers courts to develop the factual record as to discriminatory

purpose.

17

somehow exempt from nondiscrimination principles,

such that legislatures have carte blanche. See Pet. Br.

43-44. That theory runs headlong into Granholm,

which set forth a framework for accommodating the

Commerce Clause and the Twenty-first Amendment

without any suggestion that retailing plays by an entirely different set of rules. See supra at 9-12.

The Sixth Circuit followed this Court’s lead by

considering the relationship between Tennessee’s law

and the scope of states’ regulatory discretion over the

alcohol industry. See Pet. App. 24a (citing Bacchus,

478 U.S. at 275-76). It concluded that the protectionist residency requirement is not immunized by the

Twenty-first Amendment. The three-tier system of alcohol regulation might permissibly require that alcohol retailers have a physical presence within the

state, the Sixth Circuit observed, but that is no warrant for durational residency requirements based on

where owners, directors, officers, and stockholders

live. Pet. App. 27a.

The Sixth Circuit’s analysis coheres with this

Court’s recognition in Bacchus that “one thing is certain” when it comes to the Twenty-first Amendment:

“The central purpose of the provision was not to empower States to favor local liquor industries by erecting barriers to competition.” Bacchus, 468 U.S. at 276.

It is likewise consistent with Granholm, which confirmed the validity of the three-tier system but drew

the line at efforts to favor in-state interests. See 544

U.S. at 489.

The corollary is that invalidating Tennessee’s discriminatory residency law would in no way challenge

18

the legitimacy of the three-tier system of regulation.

States like Tennessee can still insist that producers

sell to wholesalers, who sell to retailers, who sell to

customers. See Granholm, 544 U.S. at 489 (“States

may … assume direct control of liquor distribution

through state-run outlets or funnel sales through the

three-tier system.”). And they can establish separate

licensing requirements at each stage. Numerous

states maintain such a system without any residency

requirements. See, e.g., Neb. Rev. Stat. Ann. §§ 53169(1), 53-171; Ariz. Rev. Stat. Ann. § 4-243(A); ch.

235 Ill. Comp. Stat. §§ 5/6-1.5, 5/6-4(a); N.Y. Alco.

Bev. Cont. Law § 101(1). Indeed, Tennessee itself imposes no residency requirement whatsoever for permits to sell liquor by the drink in bars and

restaurants for consumption on the premises. See

Tenn. Code Ann. §§ 57-4-101, 102, 201. Other states

allow businesses to satisfy their residency requirements by “incorporating or registering to do business

in the State.” Resp. Total Wine Br. 4-5 n.2; see also id.

(noting that “[a]ffiliates of Total Wine are currently

operating licensed retail package stores in many of

the States that are claimed to have residency requirements, including Arizona, California, Georgia, Kentucky, Massachusetts, Missouri, North Carolina,

South Carolina, Virginia, Washington, and Wisconsin”).

What a state cannot do is condition eligibility to

operate a retail shop on where owners, directors, officers, and stockholders live. The Twenty-first

Amendment provides states with regulatory authority over the structure and operation of the alcohol

trade. But it does not grant them permission to disre-

19

gard constitutional imperatives. Regulatory discretion does not excuse deprivations of free speech. See

44 Liquormart, 517 U.S. at 516 (“[T]he Twenty-first

Amendment does not qualify the constitutional prohibition against laws abridging the freedom of speech

embodied in the First Amendment.”). It does not excuse denials of equal protection. See Craig v. Boren,

429 U.S. at 209 (“[T]he Twenty-first Amendment does

not alter the application of equal protection standards

that otherwise govern this case.”). And it does not excuse economic discrimination against people who live

in other states. See Granholm, 544 U.S. at 487 (“[T]he

Court has held that state regulation of alcohol is limited by the nondiscrimination principle of the Commerce Clause.”). The Sixth Circuit put the point well:

Tennessee “is not merely regulating the distribution

of alcohol within its borders—it is dictating who can

and cannot engage in its economy” based on where

people live. Pet. App. 17a n.5.

C. Nondiscriminatory Alternatives.

The final question is whether, notwithstanding

its discriminatory character, Tennessee’s residency

requirement serves a legitimate local purpose that

cannot be advanced through nondiscriminatory

means. See Granholm, 544 U.S. at 489.

The jumping-off point is Tennessee’s own

(belated) description of its objectives,5 which stresses

the importance of “oversight, control, and

5 As Respondent Total Wine notes, the legislative statement

of intent was added two decades after Tennessee enacted a durational residency requirement. See Resp. Total Wine Br. 8.

20

accountability.” Tenn. Code Ann. § 57-3-204(b)(4).

The residency requirement, the argument runs,

fosters these goals because “those who better know a

community better serve it,” Pet. Br. 49, and because

resident retailers are easier to regulate, Pet. Br. 48.

Yet the Sixth Circuit had no trouble generating a list

of nondiscriminatory paths to the same ends: for

example, “requiring (1) a retailer’s general manager

to be a resident of the state, (2) both in-state and outof-state retailers to post a substantial bond to receive

a license, and (3) public meetings regarding the

issuance of a license.” Pet. App. 32a. Mechanisms like

these ensure local familiarity and facilitate oversight

without indulging in protectionism. Petitioner depicts

Tennessee’s discriminatory law as the product of

“experiment[ing] with the best ways of regulating

alcohol sales,” Pet. Br. 47, but the bounds of

permissible experimentation do not encompass “local

parochialism.” Lewis v. BT Inv. Managers, Inc., 447

U.S. 27, 43-44 (1980) (striking down state residency

requirement for investment advisory businesses).

The practical realities of interstate retailing

confirm that laws like Tennessee’s cannot be justified

by interests in oversight, control, and accountability.

First, as mentioned above, numerous states

accomplish the same regulatory objectives as

Tennessee without imposing any durational

residency requirement. Consider the brief of thirtyfive states and the District of Columbia, which is

nominally filed in support of Petitioner but which

notes on its first page that some of the signatory

states “do not impose residency requirements but do

21

require that retailers have a physical presence in the

State.” Ill. et al. Amicus Br. 1. Likewise, Tennessee

itself imposes no residency requirements on retailers

selling beer and wine for off-premises consumption,

see Tenn. Code Ann. §§ 57-5-103 (beer), 57-3-803

(wine), or, as noted above, those selling any alcoholic

beverages—beer, wine, and liquor—for on-premises

consumption in bars and restaurants, id. §§ 57-4-101,

102, 201.

Nor is there any reason to believe that singlestate retailers are better equipped or more committed

to lawful and orderly behavior than their interstate

counterparts. Like single-state sellers, interstate

retailers hire and train local employees to staff their

stores and operate their cash registers. Those

employees do not become any more or less familiar

with their communities depending on whether their

employer’s officers, directors, and stockholders

happen to live in Tennessee rather than Kentucky or

North Carolina.

When deciding whom to hire, interstate retailers,

like their single-state counterparts, must comply with

state background check requirements for those who

seek to sell alcohol at retail. See, e.g., Ark. Code Ann.

§ 3-2-103 (authorizing background checks for retail

license applicants) Minn. Stat. Ann. § 340A.412

(same). These requirements are both perfectly

sensible and entirely unrelated to where a company’s

top executives live.

Once hired, interstate retailers engage in

extensive and ongoing training to allow their

22

employees to comply with drinking-age laws by,

among other things, requiring the presentation of

valid identification and recognizing forgeries. In some

cases, this training is responsive to state law. See, e.g.,

Mont. Code Ann. § 16-4-1005 (requiring all licensees

to ensure training); Or. Rev. Stat. Ann. § 471.341

(requiring employees found to have sold alcohol to

minors to undergo training). In other cases, training

may be intended to respond to the needs of local

communities. Some interstate retailers that operate

in university communities, for example, have

designed targeted trainings to combat the higher

prevalence of fake identification cards that may be

expected in such environments.

In addition to their training programs, interstate

retailers’ experience operating within multiple

regulatory environments may lead to the adoption of

compliance mechanisms that draw on best practices

from across jurisdictions. For instance, interstate

retailers may post a single set of extensive warnings

regarding the minimum age to purchase alcohol and

the attendant legal penalties in order to ensure

compliance with all state and local signage and

posting requirements; such warnings will necessarily

exceed the requirements in some jurisdictions.

Interstate retailers may deploy point-of-sale locking

mechanisms that require cashiers to enter an

individual’s date of birth prior to permitting the sale

of alcohol. And many invest in cutting-edge

technologies, such as advanced identification card

scanners, to further target unlawful behavior.

23

When it comes to accountability, single-state and

interstate retailers alike face the prospect of fines and

license revocations for violations. See, e.g., Neb. Rev.

Stat. Ann. § 53-1,104 (authorizing “suspension,

cancellation, or revocation” of license for repeated

unauthorized sales); N.D. Cent. Code Ann. § 5-02-11

(authorizing revocation of license). Notwithstanding

Petitioner’s insinuations to the contrary, see Pet. Br.

48, a retailer’s effectiveness at complying with

drinking-age laws has nothing to do with where its

directors, officers, or stockholders live, see, e.g., WalMart Stores, Inc. v. Texas Alcoholic Beverage Comm’n,

313 F. Supp. 3d 751, 765 (W.D. Tex. 2018), appeal

docketed, No. 18-50299 (5th Cir. Apr. 16, 2018)

(finding that the ten largest retailers in a class of

alcohol permittees that included out-of-state

corporations had fewer alcohol violations per store

than did the ten largest retailers in a class of

permittees that included only in-state companies).

If anything, interstate retailers are more able to

pursue

extensive

internal

accountability

mechanisms. For instance, some interstate retailers

deploy “secret shoppers” to audit whether employees

are lawfully selling alcohol. Where violations are

detected, they have required not just the offending

employee but the entire team to undergo additional

training. Interstate retailers may also utilize internal

monitoring systems to track legal infractions and

detect problem retail outlets.

What is more, interstate retailers with brick-andmortar outlets in Tennessee are easy to find, inspect,

and tax. See, e.g., Minn. Stat. Ann. §§ 340A.402,

24

340A.414

(omitting

residency

from

license

requirements but requiring “establishment[s] holding

a permit under this section [be] open for inspection”);

N.J. Stat. Ann. §§ 33:1-25, 33:1-35 (adopting a similar

approach). Their assets and investments in the state

give retailers even greater incentives to ensure lawful

and orderly operations. See Wal-Mart Stores, 313 F.

Supp. 3d at 765 (finding that “the literature indicates

public corporations tend to be very concerned with

compliance and reputation”). And, to the extent a

state deems it necessary, it can require retailers to

post bonds. Compare N.Y. Alco. Bev. Cont. Law App.

§ 81.1 (requiring bonds for all license classes) with

Liquor—Licenses,

Sales,

Samples,

Bonding

Requirements, 1989 Minn. Sess. Law Serv. 49

(repealing bond requirements for retail licenses

previously codified at Minn. Stat. Ann. § 340A.412).

Oversight of the alcohol industry is an important

objective, and reasonable regulatory minds can differ

about the optimal approach. But that is not what is

happening in Tennessee. The state has adopted a

protectionist regime that shields local sellers from

out-of-state

competition.

The

Twenty-first

Amendment puts an array of regulatory tools on the

table. But the Commerce Clause makes clear that

protectionism is not one of them.

25

CONCLUSION

This Court should affirm the judgment of the

court of appeals.

Respectfully submitted,

Deborah R. White

RETAIL LITIGATION

CENTER, INC.

1700 N. Moore Street

Suite 2250

Arlington, VA 22209

Zayn Siddique

ORRICK, HERRINGTON &

SUTCLIFFE LLP

51 West 52nd Street

New York, NY 10019

December 20, 2018

Kelsi Brown Corkran

Counsel of Record

ORRICK, HERRINGTON &

SUTCLIFFE LLP

1152 15th Street N.W.

Washington, D.C. 20005

(202) 339-8497

kcorkran@orrick.com

Randy J. Kozel

ORRICK, HERRINGTON &

SUTCLIFFE LLP

405 Howard Street

San Francisco, CA 94105