Opposition Brief — Sarasota Wine Market, LLC, et al., Petitioners v. Eric S. Schmitt, Attorney General of Missouri, et al.

Supreme Court briefSep 10, 2021

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No. 20-1767

In the

Supreme Court of the United States

SARASOTA WINE MARKET, LLC, et al.,

Petitioners,

ERIC S. SCHMITT,

Attorney General of Missouri, et al.,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Eighth Circuit

BRIEF IN OPPOSITION

ERIC S. SCHMITT

Missouri Attorney General

D. JOHN SAUER

Solicitor General

Counsel of Record

JESUS A. OSETE

Deputy Solicitor General

OFFICE OF THE MISSOURI

ATTORNEY GENERAL

Supreme Court Building

P.O. Box 899

Jefferson City, MO 65102

(573) 751-8870

John.Sauer@ago.mo.gov

Counsel for Respondents

QUESTION PRESENTED

Whether the Commerce Clause and § 2 of the

Twenty-First Amendment to the United States

Constitution authorize the States to require alcohol

retailers to establish physical presence within the

State before retailers directly ship alcohol products to

in-state consumers.

TABLE OF CONTENTS

QUESTIONS PRESENTED ...................................... i

INTRODUCTION ...................................................... 1

SUMMARY OF ARGUMENT ................................... 2

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

There is no circuit split over alcohol retailer

presence requirements warranting this

Court’s review ............................................ 2

II.

Further percolation is warranted, as seven

challenges to similar laws are pending in

the lower federal courts ............................ 7

III.

The Eighth Circuit properly applied

Tennessee Wine in this case ...................... 8

A. The Eighth Circuit properly stated the

rule of law provided in this Court’s

precedents ............................................ 9

B. States are authorized to funnel alcohol

sales in a non-discriminatory manner

through their three-tier systems under

§ 2 of the Twenty-First Amendment . 11

C. Holding in-state retailer presence laws

unconstitutional would undermine state

iii

regulatory control over alcohol sales as

guaranteed by § 2 of the Twenty-First

Amendment ........................................ 13

CONCLUSION ........................................................ 15

TABLE OF AUTHORITIES

Cases

Bridenbaugh v. Freeman-Wilson,

227 F.3d 848 (7th Cir. 2000) .............................. 5, 14

Granholm v. Heald,

544 U.S. 460 (2005) .................. 1, 3, 4, 6, 7, 9, 11, 12

Healy v. Beer Inst.,

491 U.S. 324 (1989) ................................................ 13

Lebamoff Enterprises., Inc. v. Rauner,

909 F.3d 847 (7th Cir. 2018) ....................................7

Lebamoff Enterprises v. Whitmer,

956 F.3d 863 (6th Cir. 2020) .......................... 5, 7, 13

North Dakota v. United States,

495 U.S. 423 (1990) .............................................. 4, 6

Or. Waste Systems, Inc.,

v. Dept. of Envir. Quality of State of Or., 511 U.S.

93 (1994) ................................................................. 10

Tennessee Wine & Spirits Retailers Ass’n v. Thomas,

139 S. Ct. 2449 (2019) .................................... passim

Statutes

MO. REV. STAT. §§ 311.010 ..........................................1

MO. REV. STAT. § 311.050 ...................................... 1, 12

MO. REV. STAT. § 311.060.1 ................................... 1, 12

MO. REV. STAT. § 311.200.1 ....................................... 12

MO. REV. STAT. § 311.280.1 ....................................... 12

MO. REV. STAT. §§ 311.220.1, 311.240.1-.3 .................1

U.S. CONST. amend. XXI ........................................... 14

Regulations

11 CSR 70-2.120, 2130(2) and (3) ............................. 12

INTRODUCTION

Petitioners Sarasota Wine Market, LLC, et al.,

(“Petitioners”) challenge provisions of Missouri’s

Liquor Control Law (“LCL”), codified at MO. REV.

STAT. §§ 311.010 et seq., that require alcohol retailers

to obtain a license before shipping alcohol products to

in-state consumers. MO. REV. STAT. § 311.050. Under

Missouri law, retailer licensees must identify a

specific location within the State to be licensed and

available for inspection as well as appoint an agent

(known as “the managing officer”) who is an employee

“of good moral character” and a “citizen of the county,

town, city or village.” MO. REV. STAT. §§ 311.220.1,

311.240.1-.3, 311.060.1; CSR 70-2.030(7). Missouri

imposes these conditions as part of its tiereddistribution system for regulating alcohol shipment

and sale within the State—a system this Court has

recognized as “unquestionably legitimate.” Granholm

v. Heald, 544 U.S. 460, 489 (2005). Petitioners argue

that § 311.050—imposing a license requirement on all

alcohol retailers—and § 311.060—establishing the instate presence licensing condition—unlawfully

discriminate against out-of-state alcohol retailers who

wish to sell alcohol online to in-state consumers. See

Pet., at 2. Petitioners’ arguments lack merit. The instate presence requirement is non-discriminatory

because it applies equally to in-state and out-of-state

retailers, and it serves unquestionably legitimate,

nonprotectionist interests by enabling inspection of

retailers and enforcement of Missouri’s liquor laws,

among others.

SUMMARY OF ARGUMENT

This Court should deny the petition for writ of

certiorari. Petitioners have not demonstrated that

“compelling reasons” to grant review exist. First,

there is no circuit split warranting this Court’s

intervention, as two federal circuit courts have upheld

similar in-state presence laws. Second, this case does

not present an important issue that needs resolution

by this Court, because at least seven similar

challenges remain pending in lower federal courts,

warranting further percolation of the legal issues.

Third, the Eighth Circuit both properly stated the

applicable rule of law and correctly applied it in this

case.

ARGUMENT

There is no circuit split over alcohol retailer

presence requirements warranting this

Court’s review.

This case does not present a conflict of

authority that warrants the Court’s review. S. Ct. R.

10. Until recently, licensing provisions like those

challenged in this case were “consistently upheld” as

essential to the three-tiered alcohol distribution

system that this Court deemed “unquestionably

legitimate.” App.17a-18a (collecting cases from the

Second, Fourth, Fifth, and Sixth Circuits). In 2019,

this Court decided Tennessee Wine & Spirits Retailers

Ass’n v. Thomas 139 S. Ct. 2449, 2471-72 (2019),

which stated in dictum that, while Granholm

approved the three-tiered model, it did not

constitutionalize every element thereof.

Tennessee Wine addressed the relationship

between the Commerce Clause and § 2 of the TwentyFirst Amendment. First, it held that the antidiscrimination principle of the dormant Commerce

Clause applied to wholesalers and retailers as well as

producers. Tenn. Wine, 139 S. Ct. at 2470-71. Second,

it provided a standard for analyzing state alcohol laws

under both the Commerce Clause and § 2. Tennessee

Wine provided that “[§ 2] allows each State leeway to

enact the measures that its citizens believe are

appropriate to address the public health and safety

effects of alcohol use and to serve other legitimate

interests,” but that § 2 does not sanction “protectionist

measures with no demonstrable connection to those

interests.” Id. at 2474. Applying this test, this Court

first found that Tennessee’s two-year durational

residency law facially discriminated against

nonresident retailers. See id. Instead of moving to the

second prong of the traditional dormant Commerce

Clause analysis, this Court performed a “different

inquiry,” asking whether the “challenged requirement

can be justified as a public health or safety measure

or on some other legitimate nonprotectionist ground.”

Id. The law was ultimately struck down, as Tennessee

failed to show the law’s connection to preserving

health, safety, and other “legitimate interests.” Id.

To be sure, this Court did not address the

constitutionality of “pure” in-state presence laws. In

Tennessee Wine, this Court only invalidated a

durational residency law which discriminated against

newcomers in the alcohol retail marketplace. 139 S.

Ct. at 2474-75. As a result, non-durational presence

statutes were not affected by Tennessee Wine’s

holding. App.17a (“[T]hat conclusion [in Tennessee

Wine] does not resolve the Commerce Clause issue in

this case, because [Petitioners] are not applicants for

an in-state Missouri liquor license challenging a

durational residency requirement.”).

Consequently, the Courts of Appeals have

remained free to pass upon the constitutionality of

non-durational physical presence requirements

imposed on alcohol retailers. At this time, only two

circuit courts—the Sixth and Eighth Circuits—have

considered Commerce Clause challenges to such laws

after this Court decided Tennessee Wine. Both circuits

have found such laws constitutional.

In this case, the Eighth Circuit explained that

this Court’s precedents confirmed the “three-tiered

distribution system itself” as “ ‘unquestionably

legitimate,’ ” App.12a-14a (quoting Granholm, 544

U.S. at 489 (quoting North Dakota v. United States,

495 U.S. 423, 432 (1990) (plurality opinion))), while

leaving the component elements of the three-tier

distribution systems subject to dormant Commerce

Clause scrutiny. Id. The Eighth Circuit articulated

the Tennessee Wine test, explaining that if Missouri’s

laws discriminate against out-of-state retailers, the

inquiry turns to Missouri’s interest in addressing

“public health and safety” and “other legitimate

interests” relating to alcohol consumption. App.15a16a (citing Tenn. Wine, 139 S. Ct. at 2474). Applying

this test, the Eighth Circuit resolved the matter on the

discrimination prong, concluding that imposing the

same licensing requirements on in-state and out-ofstate retailers does not amount to discrimination

against

out-of-state

retailers.

App.21a (citing

Bridenbaugh v. Freeman-Wilson 227 F.3d 848, 853

(7th Cir. 2000) (“Every use of § 2 could be called

‘discriminatory’ ... because every statute limiting

importation leaves intrastate commerce unaffected. If

that were the sort of discrimination that lies outside

state power, then § 2 would be a dead letter.”)).

The Sixth Circuit addressed a similar challenge

to Michigan’s retailer-presence statute and likewise

concluded that the law was constitutional under

Tennessee Wine. See Lebamoff Enters. v. Whitmer, 956

F.3d 863, 870 (6th Cir. 2020), cert. denied, 131 S. Ct.

1049 (2021). In Whitmer, the court addressed whether

Michigan may permit only its in-state licensed

retailers the option of offering at-home alcohol

delivery. Id. at 868. The court correctly noted that

even if the challenging Indiana retailer and in-state

Michigan licensees were similarly situated so as to

raise the specter of discrimination, “challenges to

alcohol regulation face a ‘different’ test.” Id. at 871

(citing Tenn. Wine, 139 S. Ct. at 2474). The Sixth

Circuit held that, after Tennessee Wine, the relevant

question was whether Michigan’s law could be

“justified as a public health or safety measure or on

some other legitimate nonprotectionist ground.” Id.

at 869. If the “predominant effect of the law is

protectionism,” rather than advancing legitimate

state interests, the Twenty-First Amendment does not

“shield” it. Id (citing Tenn. Wine, 139 S. Ct. at 2474).

Applying that test, the Sixth Circuit did not

reach the discrimination inquiry, concluding that

Michigan’s law promoted “plenty of legitimate state

interests,” because the states have a legitimate

interest in “ ‘promoting temperance, and controlling

the distribution of [alcohol].’ ” Id. at 871 (citing North

Dakota, 495 U.S. at 433). “To promote these interests,

States have ‘virtually complete control over whether

to permit importation or sale of liquor and how to

structure the[ir] liquor distribution system[s].’ ” Id. at

871 (quoting Granholm, 544 U.S. at 488). Had the

Indiana retailers succeeded in their Commerce Clause

challenge, the Sixth Circuit recognized that Michigan

would see “direct deliveries from out-of-state

retailers” that would open the State up to “alcohol that

passes through out-of-state wholesalers or for that

matter no wholesaler at all,” leaving a “sizeable hole

in the three-tier system.” Id. at 872. This hole would

allow out-of-state retailers to undercut local prices set

by Michigan (which by law was the exclusive

wholesaler and price-regulator of liquor products) and

thus “escape the

consumption.” Id.

State’s

interest

limiting

Petitioners cite a lone Seventh Circuit decision

as evidence of confusion among the lower courts about

how to apply this Court’s precedents. See Pet., at 6

(citing Lebamoff Enters., Inc. v. Rauner, 909 F.3d 847,

853-54 (7th Cir. 2018)). But the cited portion of

Rauner merely acknowledges that lower courts were

once divided over whether this Court’s decision in

Granholm limited the dormant Commerce Clause’s

antidiscrimination principle to laws regulating

alcohol producers. See id. That issue was resolved in

Tennessee Wine, and Rauner does not create a circuit

split that warrants this Court’s review.

Petitioners provide no other cases to establish

a split of authority on the constitutionality of alcohol

retailer presence statutes. Two circuits have passed

on the issue after Tennessee Wine, and both have

found such regulations lawful. See App.18a23a; Whitmer, 956 F.3d at 873. Because there is no

circuit split over the question presented, granting

certiorari is unwarranted.

II.

Further percolation is warranted, as seven

challenges to similar laws are pending in

the lower federal courts.

Even if the Court views the issue as important

enough to support review, further percolation is

warranted. Petitioners cite seven pending challenges

against “state laws banning direct shipping by out-of-

state wine retailers[.]” Pet., at 8 (collecting cases).

Petitioners assert that these cases present similar

legal issues to those in this case. Pet., at 8. As

mentioned, only the Sixth and Eighth Circuits have

squarely addressed the legality of in-state retailer

presence laws under Tennessee Wine. Permitting the

issues to percolate in these courts and be addressed

on appeal will likely generate additional reasoned

decisions on the issues here, and it may also generate

a circuit split.

III.

The Eighth Circuit properly

Tennessee Wine in this case.

applied

“A petition for writ of certiorari is rarely granted

when the asserted error consists of erroneous factual

findings or the misapplication of a properly stated rule

of law.” S. Ct. R. 10. The Eighth Circuit properly

stated the applicable rule of law distilled from

Tennessee Wine, and it made no error when applying

the law to this case. This Court’s precedents make

clear that states are permitted to engage in nondiscriminatory funneling of alcohol products through

state three-tiered schemes. And deciding this case in

favor of the Petitioners would greatly undermine the

regulatory authority provided to the states by § 2 of

the Twenty-First Amendment.

The Eighth Circuit properly stated the

rule of law provided in this Court’s

precedents.

Petitioners claim that Tennessee Wine made

clear that the nondiscrimination principle of the

Commerce Clause applies to laws regulating alcohol

retailers and wholesalers. Pet., at 3. In their brief

before the Eighth Circuit, Respondents argued that

under Tennessee Wine, Missouri’s laws are not

discriminatory and have the primary purpose of

promoting public health and safety. See Mo. C.A. Br.

28. As discussed above, the Eighth Circuit properly

explained the rule this Court issued in Tennessee

Wine. This alone provides an adequate basis to deny

certiorari. See S. Ct. R. 10.

At its core, Petitioners disagree with the Eighth

Circuit’s application of the rule in Tennessee Wine. In

their petition, they state that the Eighth Circuit

erroneously affirmed dismissal of the complaint on

the pleadings “without an evidentiary record despite

the holdings in both Tenn. Wine … , and

Granholm … , that a discriminatory liquor law could

be upheld only if concrete evidence shows [the

requirement] advances a legitimate purpose which

could not be served by nondiscriminatory

alternatives.” Pet., at 5.

This is not the test this Court established in

Tennessee Wine and Granholm. This reading reduces

§ 2 of the Twenty-First Amendment to a nullity.

Indeed, the Commerce Clause, by its own force,

requires discriminatory state laws to be supported by

a “legitimate local purpose that cannot be adequately

served by reasonable nondiscriminatory alternatives.”

Or. Waste Sys., Inc. v. Dept. of Envir. Quality of State

of Or., 511 U.S. 93, 101 (1994) (quotation marks

omitted). To suggest that § 2 of the Twenty-First

Amendment protects discriminatory laws in a manner

coterminous with the Commerce Clause reduces § 2 to

a dead letter. It is for this reason that Tennessee Wine

prescribes “a different inquiry.” 139 S. Ct. at 2475. If

the law discriminates against out-of-state commerce

in the context of alcohol production or sale, this Court

asks “whether the challenged requirement can be

justified as a public health or safety measure or on

some other legitimate nonprotectionist grounds.” Id.

at 2474.

Petitioners also suggest that the Eighth Circuit

departed from Tennessee Wine’s requirement that in

order to avoid invalidation, there must be “concrete

evidence” that the discriminatory law supports public

health or safety or some other “legitimate purpose.”

Pet., at 7. Petitioners are, again, mistaken. The

requirement

provide

“concrete

evidence”

supporting the law’s public health or safety purpose

followed only after the preliminary finding that the

law was discriminatory. Tenn. Wine, 139 S. Ct. at

2474-75 (noting that after finding the law

discriminatory, the inquiry turned to public health

and safety justifications). Because the Eighth Circuit

found that Missouri’s residency laws were

nondiscriminatory, no “concrete evidence” was

required. App.21a-23a.

Petitioners also argue that the Eighth Circuit

“upheld the residency requirement for retailers

despite the holding in Tenn. Wine, that a ‘residency

requirement for retail license applicants blatantly

favors

the

State’s

residents

[and]

unconstitutional.’ ” Pet., at 5 (citing Tenn. Wine, 139

S. Ct. at 2457). But Petitioners omit key words

immediately preceding the citation: “Tennessee’s 2year.” Tenn. Wine, 139 S. Ct. at 2457 (“Because

Tennessee’s 2-year residency requirement for retail

license applicants blatantly favors the State’s

residents and has little relationship to public health

and safety, it is unconstitutional.”) (emphasis added).

Tennessee Wine did not use broad strokes to strike

down all retailer residency requirements; the case

was limited to durational residency laws that

deprived out-of-state retailers from market access.

States are authorized to funnel alcohol

sales in a non-discriminatory manner

through their three-tier systems under § 2

of the Twenty-First Amendment.

In Granholm, this Court stated that “[s]tates

may also assume direct control of liquor distribution

through state-run outlets or funnel sales through the

three-tier system.” 544 U.S. at 489 (emphasis added).

Of course, laws causing the funneling effect would

presumably be subject to the Commerce Clause’s

antidiscrimination provision. App.14a-16a (noting

that Tennessee Wine said the antidiscrimination rule

applies to all three tiers of the three-tiered system).

However, Tennessee Wine left this rule from

Granholm undisturbed. 1

Missouri’s retailer licensing provisions do not

discriminate against out-of-state retailers. Like outof-state retailers, domestic retailers must meet the

same three requirements: (1) they must operate a

qualifying business outside the alcohol industry, MO.

REV. STAT. § 311.200.1; (2) they must identify a

specific location to be licensed that is open for

inspection, id. § 311.240.3; 11 CSR 70-2.120, 2130(2);

and (3) they must designate an in-state managing

REV.

officer

business

agent,

MO.

STAT. § 311.060.1; 11 CSR-2.030(7). All retail liquor

sold in-state by licensees must be purchased from

licensed

Missouri

wholesalers.

MO.

REV.

STAT. § 311.280.1. Only then can a retailer make

direct delivery to customers, provided the sale is

completed on the retail premises and the delivery is

not made to persons either intoxicated or under 21

years old. Id. § 311.300.

The collective effect of the above provisions,

taken together with MO. REV. STAT. § 311.050, which

1 The law invalidated in Tennessee Wine was unrelated to

funneling alcohol sales, as Tennessee’s residency law imposed a

competition moratorium as a precondition for in-state licensing.

139 S. Ct. at 2457.

requires all alcohol retailers to hold a license, ensures

no package-liquor alcohol products are sold outside

Missouri’s three-tiered regulatory scheme. By

requiring physical presence in the state, Missouri

ensures that alcohol directed into Missouri is brought

within the scope of Missouri’s regulatory authority.

Inspection and enforcement of retailers would be

impracticable if retailers lacked a physical presence in

Missouri. Such authority would be absent if Missouri,

instead, attempted to regulate retailers operating

wholly outside the State. Whitmer, 956 F.3d at 872

(“The extraterritoriality doctrine, also rooted in the

dormant Commerce Clause, bars state laws that have

the ‘practical effect’ of controlling commerce outside

their borders”) (citing Healy v. Beer Inst., 491 U.S.

324, 336 (1989)). Among other interests, Missouri

advances this legitimate, nonprotectionist interest

through its retailer-presence requirement. Because

Missouri’s licensing laws are both non-discriminatory

and a reasonable means of assuring that all alcohol

sold to consumers within the State is subject to

Missouri’s three-tiered regulatory scheme, the

presence provisions are constitutional.

Holding in-state retailer presence laws

unconstitutional would undermine state

regulatory control over alcohol sales as

guaranteed by § 2 of the Twenty-First

Amendment.

Finally, denying States the power to require

alcohol retailers doing business within the state to

maintain an in-state presence would greatly

undermine state regulatory authority under § 2 of the

Twenty-First Amendment.

At the close of Prohibition, thirty-eight state

conventions passed the Twenty-First Amendment,

which both repealed the Eighteenth Amendment and

gave the states the power to regulate the

“transportation and importation” of alcohol. U.S.

CONST. amend. XXI, §§ 1 & 2. Section 2 of the TwentyFirst Amendment mirrored the Webb-Kenyon Act, the

language of which § 2 closely tracks. Tenn. Wine, 139

S. Ct. at 2467. “Like the Webb-Kenyon Act, § 2

incorporates [the] state prohibitions into a federal

rule” by “clos[ing] the loophole left by the dormant

commerce clause[.]” Bridenbaugh, 227 F.3d at 853.

That loophole provided that “direct shipments from

out-of-state sellers to consumers” were categorically

beyond the states’ regulatory power. Id. And while

this Court has held that such pre-Prohibition state

regulation did not include interstate discrimination,

see Tenn. Wine, 139 S. Ct. at 2467-68, the suggestion

that states were precluded from any discrimination

flips the plain meaning of § 2 upon its head. As Judge

Easterbrook has acknowledged, “all ‘importation’

involves shipments from another state or nation” and

so “[e]very use of § 2 could be called ‘discriminatory’ ...

because every statute limiting importation leaves

intrastate commerce unaffected.” Bridenbaugh, 227

F.3d at 853. If any state law limiting the channels of

entry for alcohol products into a state, no matter how

evenhanded, was considered “discriminatory” and

thereby unlawful under the Commerce Clause and

unprotected by § 2 of the Twenty-First Amendment,

§ 2 would be a “dead letter.” Id. Because the plain

language of § 2 anticipates that form of

“discrimination” and both the Commerce Clause and

the Twenty-First Amendment are to be read together,

see Tenn. Wine, 139 S. Ct. at 2463 (noting § 2 must be

read as part of a “unified constitutional scheme”), § 2

must, at the very least, allow states to require alcohol

retailers maintain an in-state presence before

transacting with in-state consumers.

CONCLUSION

The Court should deny the petition for writ of

certiorari.

Respectfully submitted,