Amicus Curiae Brief — Granholm v. Heald

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Nos. 03-1116, 03-1120 MAR 5 - 2004

OFFICE OF THE CLERK

IN THE

Supreme Court of the Anited States

JENNIFER M. GRANHOLM, Governor of Michigan; et a/.,

Petitioners,

and

MICHIGAN BEER AND WINE WHOLESALERS ASSOCIATION,

Petitioners,

V.

ELEANOR HEALD, et al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

BRIEF OF NATIONAL BEER WHOLESALERS

ASSOCIATION AS AMICUS CURIAE

IN SUPPORT OF PETITIONERS

Of Counsel: MICHAEL D. MADIGAN

Counsel of ..ecord

KATHERINE E. BECKER

MADIGAN, DAHL &

STEPHEN M. DIAMOND

Professor of Law

UNIVERSITY OF MIAMI

HARLAN, P.A.

SCHOOL ad Law 701 Fourth Avenue South,

1311 Miiler Drive Suite 1700

Coral Gables, Florida 33146 - ’ ,

(305) 284-2259 Minneapolis, Minnesota 55415

(612) 604-2000

PAUL R. ROMAIN

805 SW Broadway

Suite 1900

Portland, Oregon 97205

(503) 228-2337

Counsel for Amicus Curiae

SS

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D.C. 20001

PARTIES TO THE PROCEEDINGS

Petitioners, Defendant-Appellees below, are State of

Michigan officials including the Governor, the Michigan

Attorney General, and the Chair of the Liquor Control

Commission (hereafter collectively referred to as “Michigan”

or the “State”). The current holders of those offices have

been substituted as parties for the former office holders

pursuant to Sup. Ct. R. 35.3.

Petitioner, intervening Defendant-Appellee below, is the

Michigan Beer & Wine Wholesalers Association

(“MB&WWA”), a trade association of the Michigan beer

and wine wholesalers that intervened as a defendant in the

district court.

Respondents, Plaintiffs-Appellants below, include Eleanor

Heald, Ray Heald, John Arundel, Karen Brown, Richard

Brown, Bonnie McMinn, Gregory Stein, Michelle Morlan,

William Horwath, Margaret Christina, Robert Christina,

Trisha Hopkins, Jim Hopkins and Domaine Alfred, Inc. The

thirteen individual parties are Michigan residents who are

wine connoisseurs, wine journalists, and wine collectors.

Respondent Domaine Alfred, Inc. is a California winery.

(i)

TABLE OF CONTENTS

Page

PARTIES TO THE PROCEEDINGS .............:cccccceeeeees i

TABLE OF AUTHORITIES ..............:cccccessseeeeeeesensens iv

INTEREST OF AMICUS CURIAE ..0......ccccccceeseeeeeeeeeees l

SUMMARY OF ARGUMENT ......00.......cccccccceeseereeeeenees 3

ec 5

I. THERE IS A SUBSTANTIAL CONFLICT

AMONG THE FEDERAL’ CIRCUITS

REGARDING A _ STATE’S RIGHT TO

REGULATE THE IMPORTATION OF

BEVERAGE ALCOHOL UNDER’ THE

TWENTY-FIRST AMENDMENT ...............0++ 5

Il. THE HEALD DECISION CONFLICTS WITH

THE EXPRESS LANGUAGE OF THE

TWENTY-FIRST AMENDMENT, THE

WEBB-KENYON ACT, AND DECISIONS

OF THE UNITED STATES SUPREME

ee 6

A. History Of The Twenty-first Amendment

And Webb-Kenyon Act .0............:ccccceeeeeeeeees 6

B. The Heald Decision Is Inconsistent With

Prior Decisions Of This Court Interpreting

The Twenty-first Amendment ..................... 8

Ill. THE ISSUES INVOLVED IN THE HEALD

CASE ARE OF NATIONAL IMPORTANCE... 1]

SI IIEIIIET censilincnssssscsssoscvecesscsnsecescecscsesscessevesooorseee 13

(iii)

iV

TABLE OF AUTHORITIES

CASES Page

Bacchus Imports, Ltd. v. Dias, 408 U.S. 263

Te ncesonscnesicutnsecueniiisiptieniatasdaamaneiimiaiicndiasiemnanies 9

Bainbridge v. Turner, 311 F.3d 1004 (11th Cir.

Ti sancexenegucennnstansanmansanassnenssiaititiumiatansidadiatéaatte 3,5

Beskind v. Easley, 325 F.3d 506 (4th Cir. 2003)...3, 5, 12

Bowman v. Chicago & NNW Ry Co., 125 US.

Se cccccetensncscseretenepsemninenmeemmnien 7

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

(7th Cir. 2000), cert. denied, sub nom., Briden-

baugh v. Carter, 532 U.S. 1002 (2001)......... 3, 5,9, 10

Brown & Williamson Tobacco Corp. v. Pataki,

320 F.3d 200 (2d Cir. 2003) ............cccseeeeseeeesees 6

Buckley v. Valeo, 424 U.S. 108 (1976)...........0c0000 13

California Retail Liquor Dealers Ass'n v. Mid

Cal Aluminum, Inc., 445 U.S. 97 (1980)........... 8, 10

Capital Cities Cable, Inc. v. Crisp, 476 U.S. 694

EET epncennantanssneenemapmminenaninesstniieedmensiiabmnein 10

Carter v. Virginia, 321 U.S. 131 (1944)... 10

Clark Distilling Co. v. Western Maryland Rail-

way Co., 242 U.S. 311 (1917) .......ccecceeeseeeeeeees 7

Craig v. Boren, 429 U.S. 190 (1976).......ccccccceeesees 8, 10

Denver Area Educational Telecommunications

Consortium, Inc. v. FCC, 518 U.S. 727 (1966)... 12

Dickerson v. Bailey, 336 F.3d 388 (Sth Cir.

TE ecnerenecenietdasensnmesenmpigniatensiinueieuniiiemanannianie 3

Heald v. Engler, 342 F.3d 517 (6th Cir. 2003)...... passim

Hostetter v. Idlewild Bon Voyage Liquor Corp.,

yh) 0 3,5,9

Leisy v. Hardin, 135 U.S. 100 (1890)...........00cc0008 7

Leavitt v. Jane L., 518 U.S. 137 (1966)................. 12

Mahoney v. Joseph Triner Corp., 304 U.S. 401

V )

TABLE OF AUTHORITIES—Continued

Page

North Dakota v. United States, 459 U.S. 423

Ee eT 3,10

State Bd. Of Equalization v. Young's Market Co.,

a en itil atirieeeicatieainintiitins 3, 8, 10

Swedenburg v. Kelly, 2004 WL 254401 (2nd Cir.

a passim

Ziffrin v. Reeves, 308 U.S. 132 (1939) .....cccccceeee. 8

STATUTES

ig ne TR eT 4, 6,7,8

OTHER AUTHORITIES

Beer Wholesalers: Their Role and Economic

Performance at 46-47 (3d ed. 1999)... 2

Leonard Havion & Elizabeth Laine, After Repeal,

ET ce eee RD 7

Raymond B. Fosdick & Albert L. Scott, Tavard

Liquor Control, 10-11 (1933).........cccccccecseeseeeeee 7

CONSTITUTIONAL PROVISIONS

IU I I I iii passim

IN THE

Supreme Court of the Anited States

Nos. 03-1116, 03-1120

JENNIFER M. GRANHOLM, Governor of Michigan; et al.,

Petitioners,

and

MICHIGAN BEER AND WINE WHOLESALERS ASSOCIATION,

Petitioners,

Vv.

ELEANOR HEALD, et ai.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

BRIEF OF NATIONAL BEER WHOLESALERS

ASSOCIATION AS AMICUS CURIAE

IN SUPPORT OF PETITIONERS

INTEREST OF AMICUS CURIAE

Since 1938, the National Beer Wholesalers Association

(“NBWA”) has served as the national membership

organization of the beer wholesaling industry representing

over 2,200 licensed beer wholesalers. Its members reside in

all fifty states. In 1997, U.S. beer wholesaler direct sales

' This amicus curiae brief filed in support of the Petitioners was funded

solely by the National Beer Wholesalers Association and authored solely

by counsel for the National Beer Wholesalers Association. This brief

is filed with the consent of the parties, evidence of which is submitted

with this brief.

2

reached $30.5 Billion Dollars. Beer wholesalers employed

92,860 individuals and paid $3.4 Billion Dollars in wages.

The total economic activity directly generated by beer

wholesalers was $8.2 Billion Dollars. The total state and

local taxes paid directly by beer wholesalers was $2.4 Billion

Dollars. See Beer Wholesalers: Their Role and Economic

Performance, at 46-47 (3d ed. 1999).

The economic activity of distributing beer stimulates other

activity in the economy. Economists refer to this as the

“multiplier effect”. In other words, every dollar spent by

wholesalers to buy such things as vehicles, equipment, com-

puters and other goods and services represents income to

other industries. Taking into account the “multiplier effect”,

the total direct and indirect economic contribution of beer

wholesalers nationwide in 1997 was as follows: 368,010

jobs created, $10.2 Billion Dollars in wages paid, $28.4

Billion Dollars in total economic activity created, and $4.0

Billion Dollars in state and local taxes paid. /d. at 47.

Obviously, the economic contribution of beer wholesalers is

even greater today.

This case implicates the essential interests of NBWA and

its members. The Sixth Circuit decision in Heald v. Engler,

342 F.3d 517 (6th Cir. 2003) threatens to dismantle complex

state regulatory systems governing alcoholic beverages that

have worked remarkably well for over seventy (70) years.

Through these delicately balanced and historically tested

regulatory schemes, states have addressed several fundamen-

tal interests: preventing illegal sales to minors, inhibiting

overly aggressive marketing and consumption, collecting

taxes, creating orderly distribution and importation systems,

and preventing a recurrence of the problems that led to the

enactment of National Prohibition.

Specifically, the Heald decision puts at risk the require-

ment that all imported alcoholic beverages be delivered to an

in-state licensee, thereby assuring effective regulation. Ordi-

3

narily, wholesalers are the in-state licensed entities through

which imported alcoholic beverages must pass. Wholesalers

pay excise taxes on imported product and retain records of

their sales to retailers, thereby creating a transparent and

accountable distribution system. They have invested large

sums in creating these distribution systems in a highly

regulated environment. These investments are jeopardized

if the regulatory playing field is tipped against in-state

licensees and out-of-state entities are permitted to ship di-

rectly to consumers.

SUMMARY OF ARGUMENT

By every test used by this Court, the Petition for Writ of

Certiorari should be granted. First, there is substantial con-

flict among the federal circuits regarding the scope of a

State’s right to regulate the importation of alcoholic beverages

under the Twenty-first Amendment to the United States

Constitution. Specifically, the Sixth Circuit decision, as well

as a similar decision in the Fifth Circuit, conflicts with

decisions in the Second, Fourth, Seventh, and Eleventh

Circuits. See Heald v. Engler, 342 F.3d 517 (6th Cir. 2003);

Dickerson v. Bailey, 336 F.3d 388 (Sth Cir. 2003);

Swedenburg v. Kelly, et al., 2004 WL 254401 (2nd Cir. Feb.

12, 2004); Beskind v. Easley, 325 F.3d 506 (4th Cir. 2003);

Bridenbaugh v. Freeman-Wilson, 227 F.3d 848 (7th Cir.

2000), cert. denied sub. nom., Bridenbaugh v. Carter, 532

U.S. 1002 (2001); Bainbridge v. Turner, 311 F.3d 1004 (11th

Cir. 2002).

Second, the Sixth Circuit decision conflicts with (and

essentially ignores) the Twenty-first Amendment, the Webb-

Kenyon Act, 27 U.S.C. § 122, and numerous decisions of this

Court, including, without limitation, State Bd. Of Equaliza-

tion v. Young’s Market Co., 299 U.S. 59 (1936), Hostetter v.

Idlewild Bon Voyage Liquor Corp., 377 U.S. 324 (1964) and

North Dakota v. United States, 495 U.S. 423 (1990).

4

Finally, the issues involved in the Heald case are of

nationwide importance, as evidenced by the number of cases

devoted to these issues. Fundamentally, the case involves the

right of states to control and regulate the importation of

alcoholic beverages into and within their borders. In recogni-

tion of historical abuses and of the social costs that flow from

intemperate consumption, alcohol is one of the most heavily

regulated products in the country and is accorded a unique

status under our Constitution. As such, states are free to

regulate the product in accordance with community norms

and standards.

The Heald decision erodes, indeed destroys, the primary

keystone of state regulatory power, namely the right under the

Twenty-first Amendment to control the importation of

alcoholic beverages into the State and insist on importation

and distribution through licensed entities with a physical

presence in the state. Without apparent regard to the conse-

quences of its decision, the Heald case makes a Trojan Horse

of one minor Michigan statutory provision which permits in-

state wineries (which are subject to the licensing authority of

the state), but not out-of-state wineries (which are outside the

regulatory reach of the state), to ship direct to consumers, and

thereby topples a comprehensive three-tier system governing

alcoholic beverage distribution. Furthermore, the remedy not

only undermines effective reguiation, but discriminates

against licensed in-state wholesalers and retailers, since they,

unlike unlicensed out-of-state suppliers, are subject to en-

forceable regulations and taxation. In doing so, the Sixth

Circuit decision ignored (or at least rendered irrelevant) the

Twenty-first Amendment (which represents a national con-

sensus reached by the American people just seventy years

ago), a long line of decisions by this Court recognizing a

state’s fundamental and constitutional right to regulate

alcoholic beverages, and an Act of Congress (the Webb-

Kenyon Act) which explicitly grants states that right.

5

ARGUMENT

I. THERE IS A SUBSTANTIAL CONFLICT

AMONG THE FEDERAL CIRCUITS REGARD-

ING A STATE’S RIGHT TO REGULATE THE

IMPORTATION OF BEVERAGE ALCOHOL

UNDER THE TWENTY-FIRST AMENDMENT.

As noted and discussed in the Petitioners’ Briefs in Support

of Petition for Writ Of Certiorari, the Sixth Circuit’s decision

conflicts directly with decisions of the Seventh, Eleventh, and

Fourth Circuit. See Heald v. Engler, 342 F.3d 517 (6th Cir.

2003); Bridenbaugh v. Freeman-Wilson, 227 F.3d 848 (7th

Cir. 2000), cert. denied sub. nom., Bridenbaugh v. Carter,

532 U.S. 1002 (2001); Bainbridge v. Turner, 311 F.3d 1104

(11th Cir. 2002); Beskind v. Easley, 325 F.3d 506 (4th Cir.

2003). This conflict in and of itself justifies review by

the Court.

Since the submittal of Petitioners’ Briefs, the Second Cir-

cuit Court of Appeals rendered its decision in Swedenburg v.

Kelly, et. al., 2004 WL 254401 (2d Cir. Feb. 12, 2004). Ina

thoughtful and historically grounded analysis, the Sweden-

burg court, like the Seventh Circuit in Bridenbaugh v.

Freeman-Wilson, 227 F.3d 848 (7th Cir. 2000), cert. denied

sub. nom., Bridenbaugh v. Carter, 532 U.S. 1002 (2001), up-

held state laws regulating the importation of alcoholic bever-

ages by requiring that they pass through an in-state licensee.

The Swedenburg court noted that “‘[b]oth the Twenty-first

Amendment and the Commerce Clause are parts of the same

Constitution,’ and considers each ‘in the light of the other,

and in the context of the issues and interests at stake in any

concrete case.’” Swedenburg, supra, at 4 (quoting in part

Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324,

332 (1964)). The court focused upon “the scope of the

Twenty-first Amendment’s grant of authority such that it is

exempted from the effect of the dormant Commerce Clause.”

Id. This approach in consistent with the decisions of this

6

Court, which has never, by decision or language, suggested

any contrary mode of analysis when evaluating regulations

governing the importation of alcoholic beverages.

Significantly, the Second Circuit upheld New York’s regu-

latory scheme even though it prohibited out-of-state wineries

from importing and selling wine directly to consumers, while

it permitted local wineries to do so. The Second Circuit

expressly rejected the two-step analysis utilized by the Fifth,

Sixth, and Eleventh Circuits. In pertinent part, the Sixth

Circuit employed traditional dormant Commerce Clause

analysis. First, the Sixth Circuit examined whether the regu-

lation in question “affects interstate commerce in a manner

either that (i) discriminates against interstate commerce, or

(ii) imposes burden on interstate commerce that are in

commensurate with putative local gains.” Swedenburg v.

Kelly, et al., 2004 WL 254401, at 4 (2d Cir. Feb. 12, 2003)

(quoting Brown & Williamson Tobacco Corp. v. Pataki, 320

F.3d 200, 208 (2d Cir. 2003)). Second, concluding that the

regulation in question failed to pass muster, the Sixth Circuit

examined whether the regulation in question implicated one

of the Twenty-first Amendments “core concerns”. If so, it

may be “saved”, notwithstanding its discriminatory effect. /d.

As noted by the Swedenburg court, however, this analysis

ignored (or at least rendered irrelevant) the express language

of the Twenty-first Amencment, the Webb-Kenyon Act, and

numerous decisions of this Court. Swedenburg, supra, at 4-5.

Il. THE HEALD DECISION CONFLICTS WITH

THE EXPRESS LANGUAGE OF THE

TWENTY-FIRST AMENDMENT, THE WEBB-

KENYON ACT, AND DECISIONS OF THE

UNITED STATES SUPREME COURT.

A. History Of The Twenty-first Amendment And

Webb-Kenyon Act

Until the late nineteenth century, alcoholic beverages were

normally regulated at the local level. Ultimately, for a variety

7

of reasons, local regulation failed. Thereafter, states at-

tempted to regulate alcoholic beverage distribution and sales.

See Raymond B. Fosdick & Albert L. Scott, Tavard Liquor

Control, 10-11 (1933); Leonard Havion & Elizabeth Laine,

After Repeal, 6-7 (1936). These efforts were “thwarted by

Supreme Court decisions involving the doctrine now known

as the Commerce Clause.” Swedenburg, supra, at 5 (citing

Bowman v. Chicago & NW Ry Co., 125 U.S. 465 (1888);

Leisy v. Hardin, 135 U.S. 100 (1890)). States were freed

from this constraint by the Webb-Kenyon Act, which was

held constitutional in 1917. Clark Distilling Co. v. Western

Maryland Railway Co., 242 U.S. 311 (1917). Until the

passage of the Webb-Kenyon Act, states were effectively

unable to impose their own systems for the regulation of the

distribution and sale of alcoholic beverages. To do so re-

quired, and still requires, control of importation. Otherwise,

orderly markets are destroyed by competition from unli-

censed, unregulated, and untaxed out-of-state competitors.

States never had the opportunity to demonstrate that, after the

passage of the Webb-Kenyon Act, they could effectively

regulate the importation, distribution and sale of alcoholic

beverages. This was because of the adoption of National

Prohibition in 1919. The ultimate failure of Prohibition

showed that federal regulation of the distribution and sale of

alcoholic beverages, without regard to local norms and

standards, was also ineffective.

By 1933, it was evident to a majority of Americans that

National Prohibition was a failed experiment. Subsequently,

the nation ratified the Twenty-first Amendment, which

represents a constitutional commitment to make permanent

the policy behind the Webb-Kenyon Act: that the state be the

focus of alcoholic beverage control. Leonard Harrison and

Elizabeth Laine, After Repeal, 6-8, (1936). As observed by

the Swedenburg court, Section 2 of the Twenty-first Amend-

ment “effectively constitutionalizes most state prohibitions

regulating importation, transportation, and distribution of

8

alcoholic beverages from the stream of interstate commerce

in to the state.” Swedenburg v. Kelly, et al., 2004 WL

254401, at 6 (2d Cir. Feb. 12, 2004) (quoting in part Craig v.

Boren, 429 U.S. 190, 205-206 (1976)). Expressed in another

way, Section 2 grants “the States virtually complete control

over whether to permit importation or sale of liquor and how

to structure the liquor distribution system.” California Retail

Liquor Dealers Ass'n v. Mid Cal Aluminum, Inc., 445 U.S.

97, 110 (1980).

The Twenty-first Amendment embeds the Webb-Kenyon

Act in the Constitution of the United States. Craig v. Boren,

429 U.S. 190, 205-206 (1976). By its decision, the Heald

court rendered the Amendment essentially meaningless.

However, “(t]he Amendment was not a narrow legislative

delegation of federal authority; it was the will of a nation

speaking through its constitutional process.” Swedenburg,

supra, at 4.

B. The Heald Decision Is Inconsistent With Prior

Decisions Of This Court Interpreting The

Twenty-First Amendment.

xphortly after its enactment, this Court recognized the broad

powers conferred upon the states by the Amendment. See,

e.g., State Board of Equalization v. Young’s Market Co., 299

U.S. 59 (1936) (upholding a statute that imposed a license fee

on beer importers); Mahoney v. Joseph Triner Corp., 304

U.S. 401 (1938) (upholding a limitation on the types of

blended spirits imported into the state, which was not

imposed upon those produced in state); Ziffrin v. Reeves, 308

U.S. 132 (1939) (upholding regulation of the exportation of

alcoholic beverages out of the state). Specifically, these cases

upheld the states’ power to regulate alcoholic beverages even

when it burdens out-of-state interests vis-a-vis in-state inter-

ests. Jd. The common thread running through these decisions

is the recognition that control of importation is the essential

component of the states’ licensing and regulatory authority

9

and that the Twenty-first Amendment insulates that power

from dormant Commerce Clause challenge and from claims

of discriminatory treatment.

The Sixth Circuit, calling citation to earlier Twenty-first

Amendment decisions “u:singenuous,” declared that this

Court rejected these earlier decisions in Hostetter v. Idlewild

Bon Voyage Liquor Corp., 377 U.S. 324 (1964) and Bacchus

Imports, Ltd. v. Dias, 408 U.S. 263 (1984). Contrary to

the Sixth Circuit’s understanding, however, Hostetter and

Bacchus do not constitute the rejection of this Court’s earlier

jurisprudence. In Hostetter, New York attempted to close

down an airport duty free shop, whose products were deliv-

ered to the ultimate consumer just prior to boarding and were

used abroad. This Court simply held that such distribution

did not fall within the express terms of the Twenty-first

Amendment since consumption would not occur within

the state.

In Bacchus, Hawaii had exempted from taxation two

locally produced products, ti root brandy and pineapple wine.

The exemptions had explicitly been passed and were

explicitly defended by the state as exclusively motivated by a

desire to aid local industry. The Twenty-first Amendment

was not even cited by Hawaii until it submitted its brief to

this Court. Writing the majority opinion, Justice White found

this “belated” argument unconvincing.

Hostetter and Bacchus each presented an unusual set of

facts. These cases simply did not implicate the states’ inter-

ests under the Twenty-first Amendment: Certainly, no aspect

of the ruling in these cases provided a carte blanche for lower

federal courts to recast Twenty-first Amendment analysis or

discard state regulatory schemes governing the importation,

sale and distribution of alcoholic beverages. Furthermore, as

noted by the Bridenbaugh and Swedenburg courts, nothing in

these cases mandated dormant Commerce Clause or “core

power” analysis when considering challenges to state impor-

10

tation regulation or to requirements that alcoholic beverages

be distributed through in-state licensed entities. See Sweden-

burg, supra, at 17-21; Bridenbaugh supra, at 851-854; but see

Heald v. Engler, 342, F.3d 317, 324 (6th Cir. 2003).

This Court has consistently reaffirmed the right of states

under the Twenty-first Amendment to control the importation

of alcoholic beverages. In North Dakota v. United States, 495

U.S. 423 (1990), the Court upheld labeling and reporting

requirements for alcoholic beverages shipped to military

bases, under concurrent jurisdiction. Justice Stevens wrote

that “within the area of its jurisdiction, the state has ‘virtually

complete control’ over the importation and sale of liquor and

the structure of the liquor distribution system. /d. at 431; see

California Retail Liquor Dealers Assn. v. Midcal Aluminum,

Inc., 445 U.S. 97, 110 (1980); see also Capital Cities Cable,

Inc. v. Crisp, 476 U.S. 694, 712 (1984); California Board of

Equalization v. Young’s Market Co., 299 U.S. 59 (1936).”

He further noted that “[iJn the interest of promoting temper-

ance, ensuring orderly markets conditions, and raising

revenue, the state established a comprehensive system for

the distribution of liquor within its borders. That system is

unquestionably legitimate.” North Dakota v. United States,

495 U.S. 423, 432 (1990) (citing Carter v. Virginia, 321 U.S.

131 (1944) and State Board of Equalization v. Young's

Market, Co., 299 U.S. 59 (1936)).

The Heald Court either ignored or misinterpreted this

Court’s Twenty-first Amendment jurisprudence. This Court

has repeatedly reaffirmed the principle that the Twenty-first

Amendment authorized each state to regulate alcoholic

beverages within its borders and that the Twenty-first

Amendment creates “an exception to the normal operation of

the Commerce Clause.” Craig v. Boren, 429 U.S. 190, 206,

n. 11 (1976).

1]

Ill. THE ISSUES INVOLVED IN THE HEALD

CASE ARE OF NATIONAL IMPORTANCE.

The Heald decision cripples the ability of the state to

regulate alcoholic beverages by proscribing the power to

control importation. In Michigan, state law requires out-of-

state wineries (which are not licensed and are not subject to

effective control by the state) to sell only to licensed entities.

The law permits in-state wineries (which are licensed and are

subject to effective control by the state) to sell, under certain

circumstances, direct to consumers. Relying upon inapposite

dormant Commerce Clause analysis, the Sixth Circuit found

this differential treatment fatally defective, struck down the

direct shipment prohibition, and essentially ignored both the

Twenty-first Amendment and the effect of its decision upon

complex, state regulatory systems.

While this case may involve oenophiles, it is constitution-

ally indistinguishable from one involving spirits or beer.

There is no distinction between the importation of a highly

allocated cult wine and that of an alcopop or distilled spirits.

How are regulators expected to effectively police underage

sales when a resourceful teenager can order distilled spirits

through the mail? A state cannot effectively hold an out-of-

state licensed entity accountable for such a violation of state

law. Is state regulation at risk because of the existence of

brew-pubs, since in-state suppliers are permitted to sell on-

premise? Similarly, the logic of the opinions would further

seem to apply to importation controls that result in any

difference between an in-state licensee and an unlicensed out-

of-state supplier, even where the purpose of that importation

control is to ensure compliance with state law by requiring

that all importation be to a licensed entity physically present

within the state. As noted by the Second Circuit, “[p]resence

ensures accountability.” See Swedenburg v. Kelly, et al., 2004

WL 25 4401, at 10 (2nd Cir. Feb. 12, 2004) (“all [suppliers]

must either utilize the three-tier system or obtain a physical

12

presence from which the state can monitor and control the

flow of alcohol.”) Licensed, physical presence of at least one

party in the chain of distribution is the cornerstone of an

orderly, transparent, and accountable alcoholic beverage dis-

tribution system, and its validity has never been questioned

by this Court.

The Sixth Circuit also ignores the competitive advantage

that its decision confers upon out-of-state suppliers. By

effectively exempting out-of-state suppliers from the regula-

tory reach of the state, these suppliers are free to violate a

state’s laws without fear of consequences. Accordingly,

the inequitable outcome of the decision will be that out-

of-state suppliers are accorded a benefit not enjoyed by

in-state suppliers, while at the same time, states are ham-

strung in the effective enforcement of their laws over out-of-

state suppliers.

\ Finally, the Heald decision is of national significance be-

cause it apparently eliminates in their entirety the provisions

of Michigan law which require imported alcoholic beverages

to be delivered to in-state licensed entities. This remedy is

ungrounded in law and unnecessarily destructive of an

effective, comprehensive, and long-established state regula-

tory system. In Beskind, the Fourth Circuit found unconstitu-

tional North Carolina’s “juxtaposition” of a prohibition on

direct shipments from out-of-state wineries with an exception

for such shipments from in-state wineries. The Court,

however, struck down only the in-state exception and left “in

place the three-tiered system that North Carolina had

employed since 1937 and has given every indication it wants

to continue to employ.” See Beskind v. Easley, 325 F.3d 506

(4th Cir. 2003). The Sixth Circuit ruling runs afoul of the

principle that a constitutionally flawed provision must be

severed from the remainder of the statute and the statute

maintained insofar as it is valid. See, e.g. Leavitt v. Jane L.,

518 U.S. 137 (1996); Denver Area Educational Telecommu-

13

nications Consortium, Inc. v. FFC, 518 U.S. 727 (1996);

Buckley v. Valeo, 424 U.S. 108 (1976). One small exception

to the three-tier system of distribution, even if constitutionally

invalid, does not call for the dismantling of Michigan’s

regulatory scheme by eliminating an even-handed and essen-

tial requirement that all alcoholic beverages consumed in

Michigan pass through or originate from a licensee physically

present within the state.

CONCLUSION

For the reasons set forth above, Amicus Curiae NBWA

respectfully requests that the Court grant the Petition for a

Writ of Certiorari.

Respectfully submitted,

Of Counsel: MICHAEL D. MADIGAN

STEPHEN M. DIAMOND a... 4 _

Professor of Law - ag . BECKER

UNIVERSITY OF MIAMI ADIGAN, DAHL &

SCHOOL OF LAW - ery P.A.

1311 Miller Drive rte —_ — venue South,

Coral Gables, Florida 33146 _

(305) 284-2259 7” Minneapolis, Minnesota 55415

(612) 604-2000

PAUL R. ROMAIN

805 SW Broadway

Suite 1900

Portland, Oregon 97205

(503) 228-2337

Counsel for Amicus Curiae