Amicus Curiae Brief — Michigan Beer & Wine Wholesalers Assn. v. Heald

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No. 03-1116, No. 03-1120

IN THE

Supreme Court of the United States

JENNIFER M. GRANHOLM, Governor, ef al..

Petitioner,

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 THE NATIONAL ALCOHOL BEVERAGE

CONTROL ASSOCIATION AND THE NATIONAL

CONFERENCE OF STATE LIQUOR

ADMINISTRATORS AS AMICI CURIAE

IN SUPPORT OF PETITIONERS

JAMES M. GOLDBERG *

GOLDBERG & ASSOCIATES, PLLC

Suite 1000

1101 Connecticut Avenue, N.W.

Washington, DC 20036

(202) 628-2929

* Counsel of Record Counsel for Amici Curiae

SETS

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

QUESTION PRESENTED

Did the Sixth Circuit err in ruling, contrary to decisions by

the Second Circuit and Seventh Circuit in similar cases, that a

State cannot prohibit the shipment of alcohol beverages from

out-of-state producers directly to in-state consumers pursuant

to the provisions of the Twenty-First Amendment and the

Webb-Kenyon Act, 27 USC §122, while allowing in-state

producers to ship directly to consumers?

(i)

TABLE OF CONTENTS

Page

QUES TION PRESEN TED. nccccccccccscccssccsscccscocssccsscossceess i

TABLE OF AUTHORITIES ...0..cccccccscccssccsescsscocssessseeess iv

INTEREST OF THE AMICI CURIAE ........c.ccc00ccceee0ee 2

STATEMENT OF THE CASE ....cccccccccscccsccssccsscesccsseees 3

PITT ccccsnsnsssstenscecscnvsscescnasecsnsceccsscessecscsscneseenscees 4

I. THE SIXTH CIRCUIT'S DECISION CON-

‘FLICTS WITH THE PLAIN LANGUAGE

OF THE TWENTY-FIRST AMENDMENT

AND THE WEBB-KENYON ACT AS WELL

AS DECISIONS OF THIS COURT.................. 4

Il. THE SIXTH CIRCUIT’S DECISION CON-

FLICTS WITH DECISIONS IN THE

SECOND AND SEVENTH CIRCUITS

CONCERNING A REGULATORY SCHEME

THAT IS VIRTUALLY IDENTICAL TO

THE ONE IN THE INSTANT CASE.....ccssos--. 7

lll. THE CASE HAS SIGNIFICANT NA-

TIONAL IMPORTANCE ooccccccscccsseessoeessveesseeee 8

ein i

(iti)

iv

TABLE OF AUTHORITIES

CASES Page

44 Liquormart, Inc. v. Rhode Island, 517 U.S.

ABA (1GBG) .2crccccccccccccseccrercccrsccsccsssscscssescsossesscesoss 6

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

(Tithe Cit. 2ODD) ..cccccccccsesecccssccocsscccccscssccsssseesosseess 7

California Retail Liquor Dealers Assn. v. Midcal

Aluminum, 445 U.S. 97 (1980) ....ccccccceeeeeeeeeeeees 6

Heald v. Engler, 342 F.3d 517 (6th Cir. 2003)...... 2

Hostetter v. Idlewild Bon Voyage Liquor Corp.,

377 U.S. 324 (1964) ....ccccccccccccssrssrsserseeeseersssesees 5

North Dakota v. U.S., 495 U.S. 423 (1989)... 6

Quill v. North Dakota, 504 U.S. 298 (1992) .....040: 9

Swedenburg, et al. v. Kelly, et al., Nos. 02-9511,

02-7089 Con. Slip Op. (2nd Cir. Feb. 12,

2004), 2004 WL 254401 ........ccccasereerrreeeereeeenens 8

Ziffrin, Inc. v. Reeves, 308 U.S. 132 (1939) .....00«. 5

_ STATUTES -

Webb-Kenyon Act, 27 USC § 122 .....ccccccseeeeneenees 3,4

Wilson Act, 27 USC § 121 .....cccccceceeseeeeeeeeeenenneees 3

CONSTITUTIONAL PROVISIONS

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

MISCELLANEOUS

Reducing Underage Drinking: A_ Collective

Responsibility. Richard J. Bonnie and Mary

Ellen O'Connell, Editors. National Research

Council and Institute of Medicine (2003).......... 9

IN THE

Supreme Court of the United States

No.03-1116, No. 03-1120

JENNIFER M. GRANHOLM, Governor, et al...

Petitioner,

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 THE NATIONAL ALCOHOL BEVERAGE

CONTROL ASSOCIATION AND THE NATIONAL

CONFERENCE OF STATE LIQUOR

ADMINISTRATORS AS AMICI CURIAE '

IN SUPPORT OF PETITIONERS

Pursuant to Rule 37 of the Rules of this Court, the National

Alcohol Beverage Control Association (NABCA) and the

National Conference of State Liquor Administrators (NCSLA),

by their attomey, file this brief as amici curiae supporting the

position of the Petitioners and respectfully urge this Court

' Counsel of record for the amici curiae was the sole author of this

brief. No person or organization other than the amici curiae have made a

monetary contribution to the preparation or submission of this brief.

2

to overtum the judgment of the United States Court of Appeals

for the Sixth Circuit in Heald v. Engler, 342 F.3d 517

(6th Cir. 2003). This brief is filed with the consent of the

parties, evidence of which is submitted with this brief.

INTEREST OF AMICI CURIAE

NABCA is a Wyoming non-profit corporation whose

members are the alcohol beverage regulatory agencies in the 18

states (Alabama, Idaho, lowa, Maine, Michigan, Mississippi,

Montana, New Hampshire, North Carolina, Ohio, Oregon,

Pennsylvania, Utah, Vermont, Virginia, Washington, West

Virginia and Wyoming) that directly control the distribution

and sale of alcohol beverages within their borders by means of

government-operated wholesale and, in some cases, retail out-

lets. In addition to the enumerated states, Montgomery County,

Maryland is an Active Member of NABCA and the North

Carolina Association of ABC Boards and Worcester County,

Maryland are Participating Members. These jurisdictions are

commonly referred to as “control” jurisdictions.

NABCA member agencies also perform licensing and

regulatory functions with regard to private alcohol beverage

distribution channels within their jurisdiction. Additionally,

these agencies are responsible for the enforcement of laws

pertaining to alcohol beverage distribution in the private sector.

NCSLA is an unincorporated organization which represents

the remaining 32 states, often called “open” or “license” states.

In these jurisdictions, the state government acts only in a

licensing, regulatory and/or enforcement capacity, having

chosen, pursuant to the Twenty-First Amendment to the US.

Constitution, to permit the distribution of alcohol beverages to

be accemplished entirely by the private sector.

Thus, together, the NABCA and NCSLA member juris-

dictions represent all 5O states.

3

Because statutes similar to the one implicated in the instant

case is or has been the subject of litigation in nearly a dozen

states across the country and because alcohol beverage

regulation has largely been a matter for state, rather than federal

government control, the amici have a great interest in the

outcome of this matter.

STATEMENT OF THE CASE

Alcohol beverages constitute one of the most highly

regulated lawful commodities available in commerce. The

American experience with this product includes a history of

taxation and regulation dating back to colonial times. With few

exceptions—the federal excise tax and the failed experiment of

national Prohibition being the prime examples—the regulation

of alcohol beverages has taken place at the state level.

The mix of state regulation was recognized as a problem for

interstate Commerce more than a century ago when Congress

adopted the so-called Wilson Act, sometimes referred to as the

“Original Packages Act.”” This law had its flaws, however, and

Congress subsequently adopted the Webb-Kenyon Act, which

specifically divested alcohol beverages of their interstate

commerce protection where the interstate shipment occurred in

violation of state laws.”

A few years later, the Eighteenth Amendment to the

Constitution was ratified, launching a lengthy, but eventually

unsuccessful effort at creating a “dry” nation, one totally free of

the distribution and sale of alcohol beverages. When the effort

failed after a dozen years, Congress adopted and the states

ratified the Twenty-First Amendment. This enactment not only

repealed the Eighteenth Amendment, but it also, in Section 2,

? 27 USC $121

" The Act of Mar. 1, 1913, c. 90, was entitled “An Act divesting intox-

icating liquors of their interstate character in certain cases.”

4

declared a clear national policy to carve out an exception to

normal Commerce Clause jurisprudence:

The transportation or importation into any State. . . for

delivery or use therein of intoxicating liquors, in violation

of the laws thereof, is hereby prohibited.

And, so there would be no mistake about its intent, following

ratification of the Twenty-First Amendment, Congress re-

enacted the Webb-Kenyon Act in 1935.* The language of that

Act, for all practical purposes, is identical to Section 2.

It is against this backdrop that the Sixth Circuit, in the instant

case, held that Michigan's statutory provisions treat out-of-state

and in-state wineries differently and that the differential

treatment did not fall within the so-called “core powers”

reserved to the state under the Twenty-First Amendment.

SUMMARY OF ARGUMENT

NABCA and NCSLA believe that the Sixth Circuit's

decision was in error and that this Court should review and

ultimately overturn the decision because it ignores the plain

language of the Twenty-First Amendment, because it conflicts

with a lengthy series of decisions of this Court, because it

conflicts with decisions of other circuits in similar cases, and,

finally, because the issue is of significant national importance to

the alcohol beverage regulatory scheme of the several states.

I. THE SIXTH CIRCUIT’S DECISION CONFLICTS

WITH THE PLAIN LANGUAGE OF THE

TWENTY-FIRST AMENDMENT AND THE

WEBB-KENYON ACT AS WELL AS DECISIONS

OF THIS COURT.

The Sixth Circuit’s approach was to apply a “traditional”

dormant Commerce Clause anaiysis and, if the state’s

* The Act now appears at 27 U.S.C.§ 122.

5

provisions were found to be unconstitutional, to then determine

if they were somehow “saved” by application of the Twenty-

First Amendment. NABCA and NCSLA believe that this

approach is in error.

As indicated, the plain language of Section 2 of the Twenty-

First Amendment could not be clearer with regard to Con-

gressional intent. Nowhere does Section 2, or the Webb-

Kenyon Act, which was adopted under Congress’ Commerce

Clause authority and which both predated and subsequently

reaffirmed Section 2, state that the importation of alcohol

beverages must comply only with those state laws that treat in-

state products in a like manner to the way out-of-state products

are treated.

Indeed, this Court has consistently recognized the

significance of this language. In one of its earliest pronoun-

cements on the subject, this Court held

The Twenty-First Amendment sanctions the right of a

state to legislate concerning intoxicating liquors brought

from without, unfettered by the Commerce Clause.

Without doubt a state may absolutely prohibit the

manufacture of intoxicants, their transportation, sale, or

possession, irrespective of when or where produced or

obtained, or the use to which they are to be put.

Ziffrin, Inc. v. Reeves, 308 U.S. 132, 138 (1939)

The Court went on to conclude the greater power to prohibit

transportation also includes the lesser power to permit such

transportation only under definitely prescribed conditions.

“The state may protect her people against evil incident to

intoxicants and it may exercise large discretion as to means

employed,” this Court flatly declared. /bid., at 138.

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

324 (1964), in which this Court set out a principle of

accommodating the Twenty-First Amendment with the

Commerce Clause, this Court nevertheless stated that had a

6

state sought to regulate or control the transportation of the

liquor into its jurisdiction until its delivery into another

jurisdiction (in this case, a national park), the state “would have

been constitutionally permitted to do so.”

In California Retail Liquor Dealers Assy. V. Midcal

Aluminum, 445 U.S. 97 (1980), this Court set out a balancing

test between the Twenty-First Amendment and the Commerce

Clause, but noted that the test applies only to regulations other

than whether to permit importation or sale of liquor and how to

structure the liquor distribution system.

Less than a decade later, in North Dakota v. U.S., 495 U.S.

423 (1989), this Court cited Midcal in again asserting that states

have “virtually complete control” over the importaiion and sale

of liquor and the structure of the distribution system within their

jurisdictions.

And, finally, in 44 Liquormart, Inc. v. Rhode Island, 517

U.S. 484 (1996), the last instance in which this Court has

reviewed the Twenty-First Amendment, this Court once again

declared that the Amendment delegated to the states the power

“to prohibit commerce in” alcohol beverages.

Thus, put quite simply, the Sixth Circuit misapplied the law

in this case and departed from the settled interpretations of this

Court with regard to the importation of alcohol beverages.

While a Commerce Clause analysis may have a place with

regard to “other regulations,” NABCA and NCSLA submit that

it has no place in consideration of state laws which regulate, or

even prohibit the importation of alcohol beverages.

7

Il. THE SIXTH CIRCUIT DECISION CONFLICTS

WITH DECISIONS OF THE SECOND AND

SEVENTH CIRCUITS CONCERNING A

REGULATORY SCHEME THAT IS VIRTUALLY

IDENTICAL TO THE ONE IN THE _INS-

TANT CASE.

As further rationale as to why this Court should review the

Sixth Circuit’s decision, NABCA and NCSLA note that it

conflicts squarely with a unanimous decision of the Seventh

Circuit in a case involving virtually the same regulatory

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

(7th Cir. 2000), cert. denied sub nom. Bridenbaugh v. Carter,

532 U.S. 1002 (2001).

In that case, Judge Easterbrook wrote that Indiana’s ban on °

direct shipments of wine from outside the state to consumers

within the state was a valid exercise of Indiana’s plenary power

under the Twenty-First Amendment, which, he noted, directly

authorizes states to “control alcohol in ways that it cannot

control cheese.”

No longer may the dormant commerce clause be read to

protect interstate shipments of liquor from regulation;

§ 2 speaks directly to these shipments. Indeed all “impor-

tation” involves shipments from another state or nation.

Every use of § 2 could be called “discriminatory” in the

sense that plaintiffs use that term, because every statute

limiting importation leaves intrastate commerce unaf-

fected. If that were the sort of discrimination that lies

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

No decision of the Supreme Court holds or implies that

laws limited to the importation are problematic under the

dormant commerce clause.

lhid., 227 F.3d at 853.

8

Subsequent to the Sixth Circuit’s decision, a unanimous

panel in the Second Circuit, after an extensive discussion of the

history of the Twenty-First Amendment and the decisions of

this Court, concluded that the statutory scheme in New York, as

in Michigan, regulated only the importation into and

distribution of alcohol within the state and the statute fell within

the ambit of the powers granted to states by the Twenty-First

Amendment. The state’s regime, said the panel, targets “valid

state interests in controlling the importation and transportation

of alcohol.” Swedenburg, et al. v. Kelly, et al., Nos. 02-9511,

02-7089 Con (Slip Op. 2nd Cir. Feb. 12, 2004), 2004 WL

254401.

If the Sixth Circuit’s opinion is allowed to stand, there will

be differing rules in differing circuits as to the manner in which

states are allowed to regulate or control the importation of

alcohol beverages, leading to the same confusion and incon-

sistency in state laws that this Court and Congress sought to

resolve beginning more than a century ago.

Ill. THIS CASE HAS SIGNIFICANT NATIONAL

IMPORTANCE.

As indicated, alcohol beverages constitute one of the most

heavily regulated and taxed lawful products traveling in

commerce today. Not everyone can sell alcohol beverages.

Producers, importers and wholesalers must apply for and be

granted a federal Basic Permit by the Alcohol and Tobacco Tax

and Trade Bureau, an agency of the Department of the

Treasury. They, like brewers and retailers, must also be

licensed by the states (one or more) in which they propose to do

business: the licensing process often involves an extensive

criminal background check.

And not everyone can buy alcohol beverages. Purchasers in

every state must be twenty-one years of age or older. In many

states, on-premises retailers (e.g., restaurants, tavems, and bars)

9

are prohibited from selling alcohol beverages to any adult who

is Or who appea’s to be intoxicated.

The only way a state can insure compliance with its laws is

to have a system of accountability, with penalties associated

with violations of state law. Accountability can only occur if

the states have the ability to reach the seller, i.e., if the seller has

some kind of presence in the state to justify jurisdiction and

enforcement. Without accountability, there can be no effective

regulation. Upholding the Sixth Circuit’s decision would

undermine accountability and create what some have called

“alcohol anarchy.”

Some states have chosen to permit direct shipping of alcohol

beverages, but only under carefully controlled circumstances.

That is their right under the Twenty-First Amendment. But no

state allows unlimited and unregulated direct shipping. For

them and for the states like Michigan and more than two dozen

others which have opted to secure accountability through other

means and which ban the interstate direct shipment of alcohol

beverages, this case has enormous importance.

If the Sixth Circuit’s decision is upheld, how are states going

to effectively keep alcohol beverages out of the hands of

minors? A recent federally-funded study suggests that the

problem of internet alcohol beverage purchases is so great that

“an argument can certainly be made for banning Internet and

home delivery sales altogether in light of the likelihood that

these methods will be used by underaged purchasers.””

If the Sixth Circuit’s decision is upheld, how are states going

to effectively collect the taxes that are due on alcohol beverage

sales? This Court’s decision in Quill v. North Dakota, 504 U.S.

298 (1992) makes it clear that attempts to require out-of-state

. Reducing Underage Drinking: A Collective Responsibility. Richard J.

Bonnie and Mary Ellen O’Connell, Editors. National Research Council

and Institute of Medicine (2003), at 176.

10

sellers to remit sales, and possibly other, taxes place

impermissible burdens on interstate commerce that only

Congress can rectify.

If the Sixth Circuit’s decision is upheld, how are states going

to insure that alcohol beverages do not reach “dry” areas where

residents have determined that they do not wish the sale of

alcohol beverages to occur?

As indicated, the issues surrounding this case have been, and

are being litigated across the country. Decisions have been

rendered in the Fourth Circuit,° Fifth Circuit’ and Eleventh

Circuit.” , aes are currently pending at the trial level in

Arizona,’ New Jersey,” Ohio'' and Rhode Island.'* Other

states are potential targets of similar litigation. A clear mandate

from this Court is needed to avoid further inconsistency and

conflict.

The cormerstone of alcohol beverage regulation in this

country has always been that it is up to the states—not the

federal government or the federal judiciary—to regulate the

importation and transportation of alcohol beverages into their

jurisdictions. This is not a case about a few oenophiles wanting

to buy fine wine that might not otherwise be available in their

community, or other purchasers wanting the convenience of

sitting at their computers and ordering on-line, the way they

order books and apparel. Alcohol beverages and their regulation

are sui generis and should remain that way.

® Beskind vy. Easley, 325 F.3d 506 (4th Cir. 2003) and Bolick v.

Danielsen, 330 F.3d 274 (4th Cir. 2003).

’ Dickerson v. Bailey, 336 F.3d 274 (Sth Cir. 2003).

* Bainbridge v. Turner, 311 F.3d 1104 (11th Cir. 2002).

* Parker v. Morrison, No. 2:03-cv-01948 (D. Ariz.).

Freeman v. McGreevey, No. 2:03-cv-03140 (D. N.J.).

'' Stahl v. Taft, No. 2:03-cv-00597 (S.D. Ohio).

'? Wolfson v. Carcieri, No. 1:03-cv-00463 (D. R.L.).

11

CONCLUSION

For the reasons stated above, it is urged that this Court

reverse the opinion of the United States Court of Appeals for

the Sixth Circuit and declare that, pursuant to the Twenty-First

Amendment and 27 U.S.C. § 122, states have the right to

prohibit the direct shipment of alcohol beverages from out-of-

Stale sources even when they permit in-state suppliers to ship

directly.

Respectfully submitted,

JAMES M. GOLDBERG *

GOLDBERG & ASSOCIATES, PLLC

Suite 1000

1101 Connecticut Avenue, N.W.

Washington, DC 20036

(202) 628-2929

* Counsel of Record Counsel for Amici Curiae

February 26, 2004