Reply Brief — Swedenburg v. Kelly, Chairman, New York Division of Alcoholic Beverage Control, State Liquor Authority

Supreme Court, U.S

G4) FILED

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49 4(@ | OCT 28 2004

a a” (4) wo vadheivand | OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

MICHIGAN BEER & WINE WHOLESALERS ASSOCIATION,

Petitioner,

v.

ELEANOR HEALD, et al.,

Respondents.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

REPLY BRIEF FOR PETITIONER

Of Counsel: ANTHONY S. KOGUT

LOUIS R. COHEN Counsel of Record

C. BOYDEN GRAY JOHN A. YEAGER

JONATHAN J. FRANKEL CURTIS R. HADLEY

TODD ZUBLER WILLINGHAM & COTE, P.C.

BRUCE L. GOTTLIEB 333 Albert Avenue, Suite 500

WILMER CUTLER PICKERING FEast Lansing, Michigan 48823

HALE AND DORR LLP (517) 351-6200

2445 M Street, N.W.

Washington, D.C. 20037

(202) 663-6000

a a

TABLE OF AUTHORITIES

I.

Il.

III.

IV.

TABLE OF CONTENTS

WEBB-KENYON AND THE TWENTY-FIRST

AMENDMENT NEITHER INCORPORATE NOR

PERMIT ANY REQUIREMENT THAT STATES

TREAT OUT-OF-STATE AND IN-STATE SUP.-

PR IGE: sccccncesstesnsnnsteinsenainiaiavivtiinmaes

THIS COURT'S CASES REFUTE PLAINTIFFS’

CONTENTION THAT ANY STATE STATUTE

THAT DRAWS A DISTINCTION BETWEEN IN-

STATE AND OUT-OF-STATE ALCOHOL SUPPLI-

ERS IS SUBJECT TO STRICT SCRUTINY. ............00000+

MICHIGAN’S DISTINCTION BETWEEN _IN-

STATE AND OUT-OF-STATE DIRECT SHIPMENT

IS REASONABLY CALCULATED TO ACHIEVE

LEGITIMATE STATE INTERESTS. .......:c.ccssssceseeeseneeee

A. Underage Drinking Is A Real Concern

Posed By Direct Shipping. ..................:ccceeseesees

B. Out-Of-State Alcohol Suppliers Cannot Be

Regulated As Effectively As In-State

TINT, cccnnssentsrsisnasianininrtnnninneinnineionneenetemies

PLAINTIFFS’ READING OF THE CONSTITUTION

WOULD DESTROY THE “UNQUESTIONABLY

LEGITIMATE” THREE-TIER SYSTEM. ...........0000s0000004

CONCLUSION

SOCORRO EERE EEE EEE EEE EEE HEE EEE

SEER EEE EEE EEE EEE EEE EEE EEE EE EEE TEETH EE EEE EEEEEEE EEE HEHEHE

ponenes 2

penmane 7

—_ 12

nese 13

— 15

wane 19

TABLE OF AUTHORITIES

CASES

Page(s)

Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984).....000008 10

Bowman vy. Chicago Northwestern Railway, 125

Ee eee 5

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

Gy SII csiscenssccnsstesenstnnstnssvonnenssansensesseesensesnseenseneess 6, 12, 18

Brown-Forman Distillers Corp. v. New York State

Liquor Authority, 476 U.S. 573 (1986)... onan 11

Case of the State Freight Tax, 82 U.S. (15 Wall.) 232

TTT cinienieriniiaresietieicieapliinienonetieademssenvosangnseneacennanaepimscsennees omen 8

Clark Distilling Co. v. Western Maryland Railway

Co., BIB US. S11 (1B 87) .nccccocscccsccsccccsssscscccevsssssscsesess — Fo

Dewsnup v. Timm, 502 U.S. 410 (1992)......cccccceseeeeeeeees a 4

Duckworth v. Arkansas, 314 U.S. 390 (1941) .......cccecenceeeeees 10

Dugan v. Bridges, 16 F. Supp. 694 (D.N.H. 1936).........000000« 5

H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525

STI iscsi ieaisanieciebiaaletnepaienbenemerenenmenecennsaemenceensceesennnTnat 9

Healy v. Beer Institute, Inc., 491 U.S. 324 (1989) .........000008 1]

Heublein, Inc. v. South Carolina Tax Commission,

gE 18

Hibbs v. Winn, 124 S. Ct. 2276 (2004) 0.0.0... ccccesesenneeenenneennnnes 4

Hostetter v. Idlewild Bon Voyage Liquor Corp, 377

UB. BBE (1DGBA) oecccccoccccccccececcecesescsscscesccecsssesuusnnenncanssnsenessees 10

Indianapolis Brewing Co. v. Liquor Conérol Com-

mission of State of Michigan, 205 US. 391

(BD ecccccceccscececccsscscescescsseccssesorecesAttietinenntnessenenneneeeneseeeen 4

Mahoney v. Joseph Triner Corp., 304 US. 401

(1GGB) .cccccecccccccscescosoccsccssssesesnnensnsnenesssseassessessonssssnssssssssssosess 9

North Dakota vy. United States, 495 US. 423

(| 2, 12, 20

Quill Corp. v. North Dakota, 504 U.S. 298 (1992)... 18

Rainier Brewing Co. v. Great Northern Pacific

Steamship Co., 259 U.S. 150 (1922) .......ccccceceeneeeeenneneneens 3

Rhodes v. Towa, 170 U.S. 412 (1898)...........cccccccseeseeeesenseeeeenenees 5

Scott v. Donald, 165 U.S. 5B (1807) .........ccc.ercccsereresscsseeseceseseees 6

eee

TABLE OF AUTHORITIES—Continued

Page(s)

Seaboard Air Line Railway v. North Carolina, 245

IT aeseterinensiiiisaieci tae 3

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

STI IIT cnn 8,9

Swedenburg v. Kelly, 358 F.3d 223 (2d Cir.), cert.

granted in part, 124 S. Ct. 2391 (2004)...................... 16, 17

Tiernan v. Rinker, 102 U.S. 123 (1880) o....cccccccccccccscsseeeees 4,5,8

Vance v. W.A. Vandercook Co., 170 U.S. 438 (1898)........... 3, 6

Walling v. Michigan, 116 U.S. 446 (1886) o.oo. 4, 5, 6,8

CONSTITUTIONAL AND STATUTORY PROVISIONS

U.S. Const. amend. XXI o......ccccccccccscscscscsssscseescsrereceseeesees passim

Webb-Kenyon Act

8 ET passim

Twenty-first Amendment Enforcement Act

oN ee 16, 17

Federal Aviation Administration Authorization Act

i A 7

49 U.S.C. § 41 713(D)C4)(A) ......cccccccccccsesccsscesesesecseseseseseeeseees 7

Mich. Comp. Laws

ee ee 17

iy Sana hesecseresitensstesneneinineiieciantieiasinttaaatntaiirie atic tata ata 20

LEGISLATIVE MATERIAL

I 3

49 Cong. Rec. 2,917 (1913) .....ccccccccccccccccccececcscesssceeseceeseeeeeesseceees 5

76 Cong. Rec. 4,143 (1988) .............cccceccccocoscsscsscssessecessessescsszeceece 5

OTHER AUTHORITIES

ATF Ruling 2000-1, Direct Shipment Sales of Alco-

hol Beverages, available at http://www.atf.gov/

alcohol/info/revrule/rules/2000-1 tm .........ccccccecceceeceeoeees 17

Fletcher, Linda A. et al., Alcohol Home Delivery

Services: A Source of Alcohol for Underage

Drinkers, 61 J. Studies on Alcohol 81 (2000).................. 13

iv

TABLE OF AUTHORITIES—Continued

Jackson, Robert H., Trade Barriers—A Threat to

National Unity, in Trade Barriers Among the

States: The Proceedings of the National Con-

ference on Interstate Trade Barriers 75 (1939)....

Mead, Irene M., State of Michigan’s Remarks, Fed-

eral Trade Commission Workshop, Possible

Anti-Competitive Efforts to Restrict Competi-

tion on the Internet (Oct. 8, 2002), available at

http://www.fte.gov/opp/ecommerce/anticompeti

tive/panel/mead.Ntm ...........ccesecesernenenenenenenenenenenenes

National Institutes of Health, Monitoring the Fu-

ture: National Survey Results on Drug Use,

1975-2003 (Aug. 2004), available at http://www.

monitoringthefuture.org / pubs / monographs /

ee

Staff of the FTC, Possible Anticompetitive Barriers

to E-Commerce: Wine (July 2003), available at

http://www.ftc.gov/os/2003/07/winereport2. pdf....

suemene 14

The Michigan plaintiffs (respondents in No. 03-1120)

concede that (i) States have unique interests in regulating

the distribution of beverage alcohol to their citizens (Br. 10,

22, 43); (ii) States cannot effectively regulate such distribu-

tion unless they can control the flow of beverage alcohol

across their borders (Br. 22); and (iii) the Twenty-first

Amendment and the Webb-Kenyon Act were therefore

adopted and worded to carve an exception to the dormant

Commerce Clause (Br. 21).

Plaintiffs argue that the constitutionally authorized bar-

rier against unlicensed imports that Michigan (like most

other States) has had in place since Prohibition comes tum-

bling down because the State gives one class of state licen-

sees, who are physically located in the State and subject to

its life-or-death regulation, 2 privilege of shipping directly to

customers that is not extes ed to unlicensed out-of-state

entities. Their argument is that the difference in regulation

is “discrimination” that eliminates Twenty-first Amendment

protection and subjects Michigan’s ‘aw to “strict scrutiny” to

see whether the interests of Michigan and its residents

would be just as well protected by a less restrictive ap-

proach than the Legislature has chosen.

But there is no constitutional principle that States must

treat out-of-state and in-state suppliers of beverage alcoho!

- identically or equally, nor (with respect to this product) is

there a national preference for open competition, minimal

regulation, maximal availability, and low prices. The

Twenty-first Amendment and Webb-Kenyon protect the

States’ broad discretion over the distribution of alcoho! to

their residents, by giving the States “virtually plenary” con-

trol over physical importation. Nothing in their language or

history or in this Court’s cases suggests that state control

over importation is to be limited by the way a State regu-

lattes purely in-state distribution activities. All that the

Constitution requires is that state regulation of the importa-

tion or transportation of beverage alcohol, including any dis-

tinctions the State chooses to draw, be rational (as congres-

sional regulation of other parts of commerce must be) and

2

not violate other provisions of the Constitution that the

Twenty-first Amendment was not intended to affect.

Even if it were the responsibility of the courts, rather

than the Michigan Legislature, to determine what regula-

tory system works best in Michigan, plaintiffs have not

shown how a State can effectively enforce its restrictions on

the distribution of alcoholic beverages and collect its tax

revenues if it must permit direct shipment by out-of-state

entities. A court-imposed permit system licensing an un-

bounded number of out-of-state sellers would overwhelm

Michigan regulators and leave them without their most ef-

fective tool: the ability to put violators out of business. The

federal enforcement mechanisms that plaintiffs cite are

weak substitutes, and forcing Michigan to rely on them is

inconsistent with the basic allocation of responsibility that

the Twenty-first Amendment established.

If Michigan cannot draw rational distinctions between

out-of-state and in-state suppliers of alcoholic beverages,

there is no obvieus reason why it would not be required to

allow any out-of-state wholesaler to ship wine, beer, and

spirits to in-state retailers, and to allow any out-of-state re-

tailer to ship wine, beer, and spirits directly to consumers.

That would largely mean the end of the three-tier system of

regulation that this Court has called “unquestionably legiti-

mate.” North Dakota v. United States, 495 U.S. 423, 482

(1990) (plurality opinion of Stevens, J.); see also id. at 447

(Scalia, J., concurring in judgment). This case is not about

“fine and rare wines” but about the viability of the entire

system of alcohol regulation that the States have relied upon

for 70 years.

1. Wesps-KENYON AND THE TWENTY-FIRST AMENDMENT

NEITHER INCORPORATE NOR PERMIT ANY REQUIREMENT

THAT STATES TREAT OUT-OF-STATE AND IN-STATE SUP-

PLIERS IDENTICALLY.

Webb-Kenyon and the Twenty-first Amendment grant

the States authority to regulate the “transportation or im-

portation” of beverage alcohol. Neither the texts of these

provisions nor their historical background authorize the im-

3

position of a requirement that States either treat out-of-

state suppliers identically with in-state licensees or face

strict judicial scrutiny.

1. Plaintiffs argue that Webb-Kenyon and, by implica-

tion, the Twenty-first Amendment “only prohibit{] ship-

ments into dry areas” (Br. 10), and that they therefore “can-

not be read” to displace the dormant Commerce Clause in

States (such as Michigan) that regulate, but do not bar, the

distribution of alcohol (Br. 10, 34; see also Br. 21, 23-25 &

n.9). That argument rests on misreading Seaboard Air Line

Railway v. North Carolina, 245 U.S. 298 (1917). The pas-

sage plaintiffs cite is the Court’s summary of the respon-

dent’s position in that case. See id. at 303. On the next page,

the Court rejects that position, and the actual holding of

Seaboard is the opposite of what plaintiffs claim: “{I}nstead

of interposing an absolute bar against all ... shipments [of

imported alcohol], as it was within the power of the state to

do,” North Carolina had the authority under Webb-Kenyon

to “permit{] them upon conditions .... The greater power

includes the less.” Jd. at 304.'

Representative Webb made this clear at the adoption of

Webb-Kenyon in 1913. It “applies to all States, ‘wet’ and

‘dry’ alike, because every State in the Union has laws

against the unrestricted sale of liquor, and this bill would

protect the ‘wet’ States whose laws are to be violated in the

use or sale of liquor as well as it would protect the ‘dry’

States under the same circumstances. It is a State rights

measure.” 49 Cong. Rec. 2,812 (1913). The later adoption of

nearly identical language in the Twenty-first Amendment in

‘Other pre-Twenty-first Amendment cases are consistent. See

Rainier Brewing Co. v. Great N. Pac. S.S. Co., 259 U.S. 150, 154 (1922)

(interpreting Webb-Kenyon to authorize State to limit quantity of alcohol

that citizens could import and manner in which it could be shipped); Clart

Distilling Co. v. Western Md. Ry. Co., 242 U.S. 311, 324 (1917) (Webb-

Kenyon Act “operated . . _ irrespective of whether the state law did or did

not prohibit the individual use of liquor.”); cf Vance v. W.A. Vandercook

Co., 170 U.S. 438, 447 (1898) (Wilson Act).

d

1933, and the re-enactment of Webb-Kenyon in 1935, ratified

the Court’s interpretation of Webb-Kenyon in Seaboard.’

2. The texts of the Twenty-first Amendment and

Webb Kenyon broadly prohibit exactly what plaintiffs seek

to do here, without any suggestion that state laws must

treat out-of-state suppliers identically or equally with in-

state licensees. See MB&WWA Br. 15. Plaintiffs neverthe-

less argue (Br. 20-25) that these provisions were adopted

only to reverse the “Bowman/Rhodes line of cases and did

not affect the rule against discrimination” plaintiffs say was

established in cases such as Tiernan v. Rinker, 102 U.S. 123

(1880), and Walling v. Michigan, 116 U.S. 446 (1886), and

that there is no legislative history specifically approving

state laws treating out-of-state and in-state entities differ-

ently.

But, first, there would be no warrant for limiting the

protection clearly granted by the Amendment and Webb-

Kenyon because of supposed silence in their legislative his-

tories. As the Court demonstrated in interpreting the

Amendment itself shortly after adoption (see infra pp. 7-9),

“where the language is unambiguous, silence in the legisla-

tive history cannot be controlling.” Dewsnup v. Timm, 502

U.S. 410, 419-420 (1992); see also Hibbs v. Winn, 124 S. Ct.

2276, 2300 (2004).

Second, the legislative history is not silent. An initial

draft of Webb-Kenyon included nondiscrimination language,

but Congress, on clear notice that States might discriminate

between in-state and out-of-state suppliers, chose not to in-

clude that language in either Webb-Kenyon or the Twenty-

? Plaintiffs also cite several statements in the legislative history as

establishing that “(tJhe core concern of the legislative drafters of ... the

Twenty-First Amendment” was to ensure that dry States could remain

dry after Repeal. Br. 25 n.9. But while this was obviously an objective, it

was hardly the only one. The statements cited by plaintiffs are perfectly

compatible with the many staternents showing that Congress intended to

protect state rights more broadly. See MB&WWA Br. 21-22.

5

first Amendment. See MB&WWA Br. 24.’ In historical con-

text, this choice must be read as intentional—and it was so

read at the time in a judicial decision that MB&WWA cited

but that plaintiffs fail to address. See Dugan v. Bridges, 16

F. Supp. 694, 704 (D.N.H. 1936). As Senator Blaine put it

during the deliberations, the Amendment gave States “abso-

lute control in effect over interstate commerce affecting in-

toxicating liquors which enter the confines of the States.” 76

Cong. Rec. 4,143 (1933) (emphasis added).*

Third, Bowman v. Chicago Northwestern Railway, 125

U.S. 465 (1888), Rhodes, supra, Tiernan, supra, and Wall-

ing, supra, all rested on the same principle—that importa-

tion of alcohol was interstate commerce with which States

could not interfere. See Walling, 116 U.S. at 461; Tiernan,

102 U.S. at 127. Indeed, the Court stated in Bowman that

“(t]he present case is concluded, we think, by the judgment

of this Court in Walling,” 125 U.S. at 495, and the Court ex-

pressly rejected any attempt to distinguish Walling on the

grounds that the statute there “made a discrimination” in

favor of in-state citizens, id. at 496. Rather, the operative

principle in both cases was that “{iJnterstate commerce can-

not be taxed at all, even though the same amount of tax

should be laid on domestic commerce ....” /d. (quoting

* Amici DKT Liberty Project (DKT) and Napa Valley Vintners

(NVV) attempt to dismiss the Senate's deletion of the nondiscrimination

language as merely a procedural maneuver in order to conform the Senate

version of the bill to the House version. See DKT Br. 17-18 n.5; NVV Br.

17. At best, that does not answer why the House bill omitted that lan-

guage in the first place.

* Amicus NVV misreads (NVV Br. 16-17) the statement by Senator

Stone that the Webb-Kenyon Act would “put the shipper outside of [a

State] upon a level ... with the shipper within the State.” 49 Cong. Rec.

2,917 (1913). In context, Senator Stone was merely explaining that Webb-

Kenyon would remedy a perverse consequence of the Wilson Act, namely

that out-of-state manufacturers could ship to in-state customers while in-

state shippers could not. See generally Rhodes v. lowa, 170 US. 412

(1898). Senator Stone later clarified that Webb-Kenyon was designed to

“enable the State to enforce its own internal policy” and “{hjow [the liquor

traffic) shall be regulated is a question each State should answer for itself

....” 49 Cong. Rec. 2,917 (1913).

6

Robbins v. Shelby County Taxing Dist., 120 U.S. 489, 497

(1887)). When Webb-Kenyon and the Twenty-first Amend-

ment rejected that principle, they overturned all four cases,

destroying the foundation of Tiernan and Walling as well as

that of Bowman and Rhodes.”

Fourth, and most important, the Twenty-first Amend-

ment and Webb-Kenyon are themselves inherently “dis-

criminatory” in the sense plaintiffs mean, because they focus

on “importation” to enable States to deal with the inherent

difference between out-of-state suppliers and in-state licen-

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

853 (7th Cir. 2000). Out-of-state suppliers are not effectively

_ subject to the full range of state regulation, so Michigan and

other States have chosen to require that when they sell for

in-state consumption, they do so through another firm that

is. This treatment of out-of-state producers as a distinct

class follows naturally from the States’ constitutional and

statutory authority to regulate “importation.”

* As the Court noted in Clark Distilling, Webb-Kenyon’s official title

was “An Act divesting intoxicating liquors of their interstate character in

certain cases,” 242 U.S. at 321, and the statute was enacted to “prevent

the immunity characteristic of interstate commerce from being used to

permit the receipt of liquor through such commerce in States contrary to

their laws,” id. at 324. If imported alcohol is divested of its “interstate

character” and stripped of the “immunity characteristic” ordinarily ac-

corded by the Constitution, it must be treated, for constitutional purposes,

as intrastate commerce—i.e., subject to the plenary regulatory power of

the State, which is subject to constitutional challenge only to the same

very limited extent as other state internal economic regulation.

Amicus DKT asserts that “discriminatory laws are not proper or

bona fide police laws in the first place” (DKT Br. 15), but it cites no source

for any such free-floating restriction on state legislative power. The cases

that DKT does cite are cases in which the police power was limited by the

dormant Commerce Clause. See, e.g., Vance, 170 U.S. at 455; Scott v.

Donald, 165 U.S. 58, 91 (1897) (“We cheerfully concede that the |discrimi-

natory} law in question was passed in the bona fide exercise of the police

power,” but that statute still may be “repugnant to the constitution of the

United States”); Walling, 116 U.S. at 455. Since the Amendment ren-

dered that doctrine inapplicable to restrictions on alcohol importation, the

States’ police power is not subject to any other limitation.

7

3. Finally, plaintiffs’ argument (Br. 19-20) that this

Court should read a nondiscrimination clause into the

Twenty-first Amendment, because it has previously read

exceptions into the Amendment to protect personal consti-

tutional rights and Congress’s authority to enact legislation,

misses the point. None of the constitutional provisions or

federal laws at issue in those cases played any role in the

adoption of Webb-Kenyon and the Twenty-first Amend-

ment. The purpose of Webb-Kenyon and the Twenty-first

Amendment, as plaintiffs concede (Br. 21), was to exempt

States from the dormant Commerce Clause. At least after

the Twenty-first Amendment, there is no constitutional

right to have beverage alcohol as widely and cheaply avail-

able as possible, or to sell into a State on the same terms as

an in-state licensee.°

Il. THIS COURT’S CASES REFUTE PLAINTIFFS’ CONTENTION

THAT ANY STATE STATUTE THAT DRAWS A DiSTINCTION

BETWEEN IN-STATE AND OUT-OF-STATE ALCOHOL SuUP-

PLIERS IS SUBJECT TO STRICT SCRUTINY.

This Court’s cases have consistently interpreted the

Twenty-first Amendment to allow States to draw rational

distinctions between in-state and out-of-state suppliers of

alcoholic beverages. In adopting the Twenty-first Amend-

ment, the Nation gave each State the authority to regulate |

one small portion of interstate commerce—the “transporta-

tion or importation” of alcohol into the State “for delivery or

use therein”—and nothing in this Court’s case law suggests

° The Privileges and Immunities Clause argument raised by amicus

Virginia Wineries Association is not properly before the Court: it was

never raised by the Michigan plaintiffs and was excluded from the grant of

certiorari in the New York case. For a similar reason, the argument of

amicus Cargo Airline Association (“CAA”) that § 601 of the Federal Avia-

tion Administration Authorization Act (FAAAA), 49 U.S.C.

$§ 14501(c)(1), 41713(b)(4)(A), preempts Michigan’s alcohol regulations

should be rejected. See CAA Br. 12. This argument—which goes far be-

yond plaintiffs’ discriminatior, argument and would condemn virtually all

state laws governing alcohol importation—has never previously been

raised in this case or in any of the direct-shipment litigation nationwide.

8

that a State’s exercise of that authority is subject to greater

judicial scrutiny than Congress itself receives when it legis-

lates pursuant to the Commerce Clause.

Plaintiffs misdeseribe this Court’s first case interpret-

ing the Twenty-first Amendment, State Board of Equaliza-

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

lished that States may discriminate against out-of-state al-

cohol. Contrary to plaintiffs’ suggestion (Br. 26), the Court’s

opinion expressly recognized that the California law at issue

(which the Court upheld) discriminated against out-of-state

alcohol. California imposed a $500 license fee for the privi-

lege of importing alcohol, and the Court noted that the State

did not “exact[] an equal fee for the privilege of transporting

domestic beer from its place of manufacture to the whole-

saler’s place of business.”’ Indeed, the California law was

essentially the same as the laws struck down in Tiernan and

Walling.* Young’s Market uphe!d the California statute and

thus effectively overruled Tiernan and Walling, because of

the intervening adoption of the Twenty-first Amendment.

The Court’s statement in Young’s Market that the case

did “not present a question of discrimination prohibited by

the commerce clause,” 299 U.S. at 62, read in context, did not

mean that there was no discrimination, but rather that the

statute’s problems under the Commerce Clause went well

beyond discrimination: the statute directly regulated inter-

state commerce by taxing importation and, under the Case

of the State Freight Tax, 82 U.S. (15 Wall.) 232 (1872), that

problem could not be remedied simply by equally burdening

in-state beer. See Young’s Market, 299 U.S. at 62. The

Court, however, held that the Twenty-first Amendment

eliminated all dormant Commerce Clause objections to stat-

’ The $750 fee cited by plaintiffs (Br. 26 n.10) applied to manufactur-

ers of beer and was not analogous to the $500 fee imposed on wholesalers

that imported out-of-state beer. See Young’s Market, 299 U.S. at 64.

* See Walling, 116 U.S. at 454 (striking down $300 Michigan tax on

persons selling alcohol imported from out-of-state); Tiernan, 102 U.S. at

127 (striking down $200 Texas tax on persons selling beer and wine manu-

factured out-of-state). '

~ 9

utes regulating alcohol importation. Indeed, the Court sp--

cifically rejected the contention that the Twenty-first

Amendment gave States authority over importation yet

prohibited discrimination: “To say that, would involve not a

construction of the Amendment, but a rewriting of it.” Jd. at

62.

The Court’s subsequent cases did not (as plaintiffs

claim) merely “characterize Young’s Market as affirmatively

holding that ‘discrimination against imported liquor is per-

missible.”” Br. 26. Both Mahoney v. Joseph Triner Corp.,

304 U.S. 401 (1938), and Indianapolis Brewing Co. v. Liquor

Control Commission of State of Michigan, 305 U.S. 391

(1939), expressly held that the Twenty-first Amendment

permits States to enact “clearly discriminat[ory]” laws. Ma-

honey, 304 U.S. at 403. Plaintiffs studiously avoid discussing

the facts of these cases, and with good reason: Mahoney up-

held a law that limited the importation of liquor stronger

than 50 proof without limiting its in-state manufacture, 304

U.S. at 402-403, and Indianapolis Brewing upheld a statute

that prohibited in-state dealers from selling any beer from

Indiana or nine other States, 305 U.S. at 392. And there is

absolutely no support for plaintiffs’ assertion that the Court

“characterized the law at issue [in /ndianapolis Brewing] as

nondiscriminatory.” Br. 26 n.10. To the contrary, the Court

upheld the law on the principle that “discrimination between

domestic and imported intoxicating liquors . . . is not prohib-

ited by the equal protection clause.” 305 U.S. at 394.”

* Plaintiffs highlight (Br. 13-14) the Court’s opinion, written by Jus-

tice Jackson, in H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525 (1949),

which extolled the virtues of unrestricted interstate commerce, but noth-

ing in that opinion contradicts the Court’s contemporaneous view that

alcohol was different. As then-Solicitor General Jackson stated in 1939,

“[AJn exception was made to the generally exclusive power of Congress,

and control of commerce between States in intoxicating liquors was

handed back to the States of destination.” Robert H. Jackson, Trade Bar-

riers—A Threat to National Unity, in Trade Barriers Among the States:

The Proceedings of the National Conference on Interstate Trade Barriers

75 (1939). Even legislation that discriminated to protect local interests,

Jackson said, “is quite properly sustained by the Supreme Court.” /d. at

10

Plaintiffs are equally wide of their mark in their inter-

pretation of the Court’s more recent decisions. Plaintiffs and

amici repeatedly cite the Court’s statement in Hostetter v.

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

the Twenty-first Amendment did not repeal the Commerce

Clause. Br. 21, 27 The Court was referring, however, to

whether the Twenty-first Amendment repealed Congress's

affirmative power under the Commerce Clause (something

not at issue here). See Hostetter, 377 U.S. at 332 (“If the

Commerce Clause had been pro tanto ‘repealed,’ then Con-

gress would be left with no regulatory power over interstate

or foreign commerce in intoxicating liquor.”). The Court

strongly reaffirmed that the Twenty-first Amendment im-

munized state laws against dormant Commerce Clause chal-

lenges. See id. at 330.

In Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984),

the Court struck down a discriminatory excise tax in Hawaii,

but plaintiffs fail to explain the Court’s basis for doing so.

Neither Hawaii nor the Court could identify any justification

for the difference in Hawaii’s treatment of in-state and out-

of-state alcohol other than protectionism. The tax, in other

words, was “not supported by any clear concern of the

Twenty-first Amendment,” id. at 276 (emphasis added), and

it thus failed rational-basis review. Bacchus never sug-

gested that Hawaii’s distinction between in-state and out-of-

state alcohol triggered “strict scrutiny.” Quite the opposite’

the Court’s actual holding was that state laws constituting

“mere economic protectionism” are “not entitled to the same

deference as laws enacted to combat the perceived evils of an

unrestricted traffic in liquor.” Id. (emphasis added). A

state law that draws a distinction between in-state and out-

of-state alcohol that is related to the concerns of the Twenty-

first Amendment is entitled to deference."

76; see also Duckworth v. Arkansas, 314 U.S. 390, 398-402 (1941) (Jackson,

J., concurring in result).

” Plaintiffs also are wrong that Hawaii's excise tax was “obviously a

regulation of the ‘importation’ of liquor into the State.” Br. 29. The tax

1]

Plaintiffs are also wrong to suggest (Br. 27) that Brown-

Forman Distillers Corp. v. New York State Liquor Author-

ity, 476 U.S. 573 (1986), and Healy v. Beer Institute, Inc., 491

U.S. 324 (1989), applied plaintiffs’ “nondiscrimination” prin-

ciple to strike down state alcohol regulations. Brown-

Forman was not based on discrimination at all but on the

fact that New York’s regulation “directly regulate[d] inter-

state commerce.” Brown-Forman, 476 U.S. at 582. In

Healy, the Court found two Commerce Clause problems

with the Connecticut price-affirmation statute: its extrater-

ritorial “effect of controlling commercial activity occurring

wholly outside the boundary of the State,” Healy, 491 U.S.

at 337, and its “discriminat[ion] against interstate com-

merce,” id. at 340. The “discrimination,” however, was not a

distinction between in-state and out-of-state suppliers, and

the Court did not cite Bacchus. It was an (apparently acci-

dental) discrimination among entities that sold beer in Con-

necticut, penalizing those that also sold elsewhere (including

in-state entities). /d. at 341. The ruling was consistent with

the Court’s theme that Connecticut could not project its

regulatory regime into other States. Moreover, the Court

held that the Connecticut statute fell outside the protection

of the Twenty-first Amendment not because of the “dis-

crimination” but only because of the extraterritorial effect.

See id. at 342 (“Here, as in Brown-Forman, our finding of

unconstitutional extraterritorial effects disposes of the

Twenty-first Amendment issue.”).'' Healy thus leaves in-

tact the Twenty-first Amendment’s protection for a statute

like Michigan’s, which does not regulate liquor sales in other

States.

was imposed at wholesale, after liquor was imported, and was not an exer-

cise of the core power to control physical importation.

'' Justice Scalia, writing only for himself, stated that the statute’s

“discriminatory character eliminates the immunity afforded by the

Twenty-first Amendment,” 491 U.S. at 344, but as noted, the “discrimina-

tion” at issue was against firms that also did business out of state, not in

favor of in-state suppliers.

12

Indeed, just one year after Healy, the Court in North

Dakota upheld a state regulatory scheme that imposed spe-

cial reporting and labeling requirements on alcohol import-

ers and out-of-state distillers. See 495 U.S. at 428-429. De-

spite the facial distinction between in-state and out-of-state

aleohol that North Dakota drew, the Court did not apply

strict scrutiny. Instead, the Court upheld the labeling and

reporting requirements because, in the words of the plural-

ity opinion, they “fle]ll within the core of the State’s power

under the Twenty-first Amendment,” id. at 432, and they

“unquestionably serve valid state interests,” id. at 433."

III. MICHIGAN’S DISTINCTION BETWEEN IN-STATE AND OUT-

OF-STATE DIRECT SHIPMENT IS REASONABLY CALCU-

LATED TO ACHIEVE LEGITIMATE STATE INTERESTS.

Plaintiffs attempt to draw the Court into the minutiae of

alcohol regulation, arguing that other regulatory rules could

protect Michigan as well as its current system, and that

Michigan’s regime therefore does not meet strict scrutiny.

But strict scrutiny is not the standard. The proper standard

of review is rational-basis scrutiny, and Michigan’s regime

easily passes that test. As explained below, the distinction

that Michigan draws between in-state and out-of-state direct

shipping is rationally related to the temperance and tax col-

lection goals of the Twenty-first Amendment. Michigan’s

regime may not be the only way to way to achieve those

goals, but under the Twenty-first Amendment, it is a consti-

tutionally protected way.

'? Plaintiffs distort the Seventh Circuit’s holding in Bridenbaugh.

The Indiana statute was for present purposes indistinguishable from

Michigan's. See 227 F.3d at 851 (Indiana permits “local wineries, but not

[out-of-state] wineries ... to ship directly” to consumers). The Seventh

Circuit upheld the statute because there was no “functional discrimina-

tion,” id. at 853, since the law simply “mal[dJe alcohol from every source

equally amenable to state regulation,” which “is precisely what § 2 [of the

Twenty-first Amendment) is for,” id. at 854.

————<—=== lr

13

A. Underage Drinking Is A Real Concern Posed By

Direct Shipping.

Plaintiffs dismiss the concerns expressed by Michigan,

the 33 other States that support Michigan, the National Con-

ference of State Liquor Administrators, and the Michigan

Association of Secondary School Principals, among others,

about the effect on underage drinking if States should now

lose their control over direct shipping.'’ The arguments of a

financially interested California winery and a handful of

Michigan oenophiles should not obscure the real concerns of

those who deal with underage drinking on a daily basis.

The argument of plaintiffs that “[t}here is simply no

evidence that ... direct shipment would be a likely strategy

for minors seeking to purchase liquor” (Br. 37) is false. In a

Wirthlin survey, 35 percent of college students under 21 said

they would be likely to purchase alcohol online if they could

get away with it. C.A. App. 358. Indeed, minors are already

having alcohol shipped to their homes. As plaintiffs note,

one study showed that 10 percent of surveyed high-school

seniors said they had used home delivery services to order

alcohol. See Linda A. Fletcher et al., Alcohol Home Delivery

Services: A Source of Alcohol for Underage Drinkers, 61 J.

Studies on Alcohol 81, 82 (2000). That the participants in the

survey ordered from local retail stores, not out-of-state sup-

pliers, hardly helps plaintiffs’ argument. It demonstrates

that minors can wait for alcohol to be delivered, and in this

age of overnight delivery services it hardly takes “several

days” (Br. 37) to ship alcohol across the country.

Plaintiffs’ argument that minors are unlikely to drink

wine (Br. 37) is both wrong and irrelevant. It is wrong be-

cause about 13 percent of 12th graders (more than a quarter

of the 12th graders who report drinking alcohol) say they

'3 See Ohio and 32 Other States Br. 23-24; Mich. Ass’n of Secondary

School Principals Br. 3-23; Nat'l Alcohol Beverage Control Ass'n Br. 11;

Ill. Alcoholism and Drug Dependence Ass’n Br. 5-16.

14

have consumed wine in the past 30 days.’ It is irrelevant

because, as discussed below in Part IV, plaintiffs’ position

would logically require States to permit direct shipment not

only of wine, but of beer and spirits as well.

The Federal Trade Commission (“FTC”) staff report on

which plaintiffs heavily rely does not show the “twenty-six

States that permit direct shipping have encountered no ...

problems.” Br. 36. That conclusion was based entirely on

the responses of 11 states to a questionnaire sent by the

FTC. See Staff of the FTC, Possible Anticompetitive Barri-

ers to E-Commerce: Wine 31-34, App. B (July 2003) (“FTC

Staff Report”).'* None of those 11 States, however, had con-

ducted any active investigation, making the FTC staffs

“finding” virtually wo ."* As explained by amici, the

only real way to detect illegal sales to minors is through

“stings,” since neither minors nor retailers report illegal

sales, and such sales otherwise come to light only by chance

as States investigate crimes or traffic accidents that happen

to be related to an illegal purchase. See Mich. Ass’n of Sec-

ondary School Principals Br. 11-12.

The States that have investigated the problem have

found that alcohol can be purchased by minors over the

Internet with alarming ease. Michigan, for example, con-

‘* National Institutes of Health, Monitoring the Future: National

Survey Results on Drug Use, 1975-2003 (Aug. 2004), Vol. 1, at 501, 512,

available at http://www.monitoringthefuture.org/pubs/monographs/vol1_

2003.pdf. Five percent of 12th graders reported drinking 5 or more

glasses of wine in a row within the past two weeks. /d. at 513. Further-

more, the Fletcher study did not find that the illegal deliveries reported in

that study “were mostly of keg beer.” Br. 38. The study revealed only

that retailers that delivered alcohol were more likely than other retailers

to sell keg beer; it made no attempt to determine what alcohol those re-

tailers sold to minors. See Fletcher, supra, at 83. :

'S Available at http://www .ftc.gov/os/2003/07/winereport2.pdf.

'° North Dakota’s response, for example, to the question “Have you

had problems with out-of-state or in-state shippers shipping wine directly

to minors?” was “No information.” FTC Staff Report, supra, App. B. The

State of Washington stated bluntly that out-of-state direct shipping “is a

problem of concern” on a nationwide basis. /d.

| |

15

ducted a series of stings, which revealed that one-third of

the websites contacted allowed minors to purchase wine

“with no more age verification than a ‘click’ of the mouse.”"’

Massachusetts recently conducted a similar sting and dis-

covered that underage college students were able to order

beer, wine, and spirits from online retailers without having

to verify their age. See Ohio and 32 Other States Br. 23.

B. Out-Of-State Alcohol Suppliers Cannot Be Regu-

lated As Effectively As In-State Suppliers.

When they stop trying to deny the dangers posed by

direct shipping, plaintiffs fall back to a second argument:

that the dangers posed by out-of-state direct shipping are no

greater than the dangers of in-state direct shipping and that

States therefore do not need to distinguish between in-state

and out-of-state entities in order to address these dangers.

Plaintiffs propose instead a permit system that would license

out-of-state entities to ship directly to consumers. Such a

system, however, would overwhelm state regulators and

leave them without their most effective tool: the ability to

put violators out of business.

Michigan can enforce its alcohol regulations by inspect-

ing licensees, attaching their property, and putting violators

out of business by revoking their licenses. Plaintiffs’ sugges-

tion that Michigan license out-of-state wineries would not

give Michigan anything like the same real power over them.

To begin with, Michigan has no way to limit the number of

licenses it could be required to grant and no practical way to

oversee the thousands of wineries that might ship directly to

Michigan consumers. As the Second Circuit noted, “Requir-

ing New York officials to traverse the country to ensure that

direct sales to consumers (no matter how small) comply with

New York law would render the regulatory scheme useless.”

Irene M. Mead, State of Michigan's Remarks, Federal Trade

Commission Workshop, Possible Anti-Competitive Efforts to Restrict

Competition on the Internet (Oct. 8, 2002) 9-10, available at http://

C.A. App. 322-327.

16

Swedenburg v. Kelly, 358 F.3d 223, 239 (2d Cir. 2004). But

even if Michigan could find some way to allocate a finite

number of licenses without regard to location (see Br. 46),

the cost of inspecting wineries as far away as California

would be far higher, and plaintiffs cannot be serious in their

suggestion (see Br. 43) that Michigan should have to depend

on California to enforce Michigan's regulations against a

California winery. Plaintiffs suggest Michigan could defray

the higher inspection costs by imposing a higher fee for im-

portation permits, but under plaintiffs’ theory of the case,

Michigan would have to justify its differential license fees

under heightened scrutiny, since out-of-state licensees

would inevitably pay more than in-state licensees.'’ Plain-

tiffs cannot have it both ways. Either Michigan has a right

to draw rational distinctions between in-state and out-of-

state entities or all such distinctions will end up in litigation.

Moreover, Michigan could threaten a noncompliant out-

of-state winery only with the loss of its Michigan license, not

with loss of its business. Plaintiffs effectively concede that

this would be a less effective sanction and therefore argue

that Michigan could instead rely on the federal Tax and

Trade Bureau (“TTB”) to revoke a noncompliant out-of-state

winery’s federal license, or could use the Twenty-first

Amendment Enforcement Act (“TAEA”), 27 U.S.C. § 122a,

to sue the winery in federal court. But neither is an effec-

tive substitute for state administrative control over entities

“There is no support for plaintiffs’ contention (Br. 43 n.19) that

Michigan does not conduct inspections or searches of in-state wineries.

The interrogatory cited by plaintiffs asked only what steps Michigan has

taken “to enforce restrictions on deliveries to consumers” by in-state win-

eries. C.A. App. 100. Michigan said it had not taken any enforcement

action regarding illegal deliveries (because there was no evidence of such

deliveries), but Michigan cited other action that it had taken against in-

state wineries (see D. Ct.-Docket No. 54, Ex. 11, Attach. C), and it no-

where suggested that it does not inspect in-state wineries.

None of the examples that plaintiffs cite in which Michigan

charges differential fees based on the cost to the State in other regulatory

areas (Br. 46) is analogous, since they all pertain to in-state entities; none

involves Michigan charging higher fees to out-of-state entities as such.

17

with an in-state presence. The TTB has hardly “assured the

States that will act on their complaints,” as plaintiffs claim.

Br. 46. In language omitted by plaintiffs, TTB said only that

it “could under appropriate circumstances take administra-

tive action.” ATF Ruling 2000-1, Direct Shipment Sales of

Alcohol Beverages (emphasis added).” Plaintiffs cite no case

in which TTB has, in fact, acted on a State’s complaint, and

TTB denies any authority to take action against an out-of-

state retailer that ships alcohol directly to a consumer. See

id. More fundamentally, making enforcement of state laws

dependent on federal officers is exactly what the framers of

the Twenty-first Amendment did not want. As for the

TAEA, there is no reported case in which a State has used

it, and the statute hardly matches the deterrence provided

by the threat of revoking an in-state entity’s license in an

administrative proceeding. The TAEA forces a State to liti-

gate in federal courts across the country (to ensure personal

jurisdiction), and the only remedy it provides is injunctive

relief against further violations of the State’s laws. See 27

U.S.C. § 122a.”

Michigan does, as plaintiffs note, currently license “out-

state sellers of wine,” Mich. Comp. Laws § 436.1109(9), but

that system is not comparable to what plaintiffs propose, and

it would not work for regulating direct shipping to consum-

ers. Michigan currently licenses approximately 290 outstate

sellers of wine (many of which are distributors that act as

agents for numerous brands of wine) making enforcement

much more manageable than under a licensing scheme in-

volving thousands of wineries across the Nation. See C.A.

App. 305-314. Furthermore, the current system allows li-

censees to ship into Michigan only through a limited number

of in-state wholesalers, allowing Michigan regulators to

match the records of the out-of-state seller against the re-

” Available at http://www.atf.gov/alcohol/info/revrule/rules/2000- 1

2" Cf. Swedenburg, 358 F.3d at 239 n.13 (TAEA “while helpful to

states, can only be used after a violation occurs. Under section 2, states

have the authority to be proactive as well as reactive.”).

18

cords of the in-state wholesaler to ensure that taxes are be-

ing collected and the State’s other regulations are being re-

spected. This Court has long recognized the importance of

“localizing” alcohol sales in this manner.” Direct shipments

of alcohol from thousands of wineries nationwide to an

unlimited number of Michigan consumers would give the

State no similar means of verifying regulatory compliance.

Michigan has also found that requiring a licensee with

an in-state presence is importart to revenue collection.

Plaintiffs object to tis but, ironically, 11 of the plaintiffs in-

voked the Fifth Amendment when asked whether they had

paid the applicable Michigan taxes on alcohol they had or-

dered from unlicensed shippers. See C.A. App. 363, 372, 381,

386, 392, 399, 405, 423, 429, 435, 441. And plaintiffs’ tax eva-

sion is hardly exceptional. One complaint of the plaintiff

wine buyers in Bridenbaugh was that Indiana’s insistence on

a state licensee would force them to pay Indiana taxes that

California direct-shippers had not been collecting. 227 F.3d

at 849-850. There may or may not be a legal problem in fore-

ing out-of-state entities to collect and remit Michigan taxes,

cf. Br. 41 n.17, Quill Corp. v. North Dakota, 504 U.S. 298

(1992); C.A. App. 325-355, but there is an obviously greater

practical problem when a State has no effective capacity to

audit an out-of-state shipper, which has no attachable prop-

erty in the State and cannot be put out of business.

Finally, plaintiffs’ argument that because other States

permit some limited forms of direct shipping, the Constitu-

tion requires Michigan to do exactly the same is fundamen-

2 See Heublein, Inc. v. South Carolina Tax Comm'n, 409 U.S. 275,

282-283 (1972) (“There must be complete records of the quantities, brands,

and prices involved at every stage of each liquor sale. By requiring manu-

facturers to localize their sales, [the State} establishes a ch2-k on the ac-

curacy of these records. For example, when a manufacturer can transfer

its goods to a wholesaler in the State only after it submits an invoice

showing the price and after it receives permission for the transfer, it is

easier for the State to enforce its requirement that the wholesale price in

[the State] be no higher than that elsewhere in the country. The require-

ment that sales be localized is, unquestionably, reasonably related to the

State’s purposes... .”).

19

tally inconsistent with the Twenty-first Amendment princi-

ple that the choice belongs to each State. The Nation’s his-

tory of alcohol regulation is that what is desired, or works. in

one State may not be suitable for another. And more fun-

damentally, this case is not about whether all States should

adopt some uniform regime of exceptions, but whether

States can broadly require all importation to be done by li-

censed entities with a substantial in-state presence. That is

the requirement that the court of appeals struck down.

IV. PLAINTIFFS’ READING OF THE CONSTITUTION WOULD

DESTROY THE “UNQUESTIONABLY LEGITIMATE” THREE-

TIER SYSTEM.

Plaintiffs (wine consumers and one California winery)

did not bring this case to eliminate the exception that allows

a small number of licensed Michigan wineries to ship directly

to their customers. Their objective, in which they succeeded

at the Sixth Circuit, was to break down the requirement

that all beverage alcohol go through in-state licensees, and

their success would undo the three-tier system for regulat-

ing beverage alcohol MB&WWA Br. 39-40. Plaintiffs do

not deny this crucial point.

State control over the distribution of beverage alcohol

depends on the principle that States may require out-of-

state entities to sell through licensed in-state entities, even

though the requirement is inherently “discriminatory” in the

sense in which plaintiffs use that term. The system was con-

ceived as an alternative to establishing state monopolies for

the sale of alcoholic beverages in the post-Repeal era. See

Wine & Spirits Wholesalers of Am. Br. 8-12. States found

that they could achieve the benefits of a monopoly system

without the burdens if they limited the right to traffic in al-

coholic beverages to in-state entities known to, and licensed

by, local officials. Jd. at 10-11. Out-of-state manufacturers

were free to introduce their products into the State, but only

through the state-monitored three-tier system. /d.

Plaintiffs’ interpretation of the Twenty-first Amend-

ment would render the three-tier system subject to “strict

scrutiny” and almost certainly unconstitutional. The three-

20

tier system permits only in-state wholesalers to sell to in-

state retailers. See North Dakota, 495 U.S. at 447 (Scalia, J.,

concurring in judgment). Under plaintiffs’ novel and ahis-

torical “nondiscrimination” principle, this requirement would

constitute facial discrimination. States would have to defend

it under strict scrutiny, with the predictable result that the

States would be required to allow any wholesaler anywhere

to sell to. in-state retailers.

Plaintiffs’ principle would not stop there. Since Michi-

gan allows in-state retailers to ship alcohol directly to in-

state consumers, see Mich. Comp. Laws § 436.1203, plaintiffs’

nondiscrimination principle would require Michigan to allow

out-of-state retailers to ship alcohol directly to the State’s

consumers, or face strict scrutiny for not doing so. Even a

State that barred all direct shipping would be open to the

charge of discrimination, since only in-state retailers could

sell directly to consumers. Such a State would have to de-

fend its decision under heightened scrutiny, and plaintiffs’

brief lays the groundwork for such a challenge, arguing that

an in-state presence is not necessary for entities selling al-

cohol directly to consumers. See, e.g., Br. 38 (minors “far

more likely” to obtain alcohol illegally from in-state retailers

than via direct shipping); Br. 41 (Michigan can protect tax

revenues via permit system for direct shippers). Such a

challenge would include all forms of alcohol sold by in-state

retailers, and thus would open up the States to shipments of

beer and spirits as well.

There is no stopping point short of the destruction of

the three-tier system. Plaintiffs’ principle would usher in an

unrestricted national market in mail-order beverage alco-

hol—something that would shock the legislators who drafted

the Amendment, who thought they had ensured that States

would never again be powerless, as they were after Bowman

and Rhodes, to regulate the direct shipment of beverage al-

cohol to their residents.

CONCLUSION -

The judgment of the United States Court of Appeals for

the Sixth Circuit should be reversed.

Respectfully submitted,

Of Counsel:

LOUIS R. COHEN

C. BOYDEN GRAY

JONATHAN J. FRANKEL

TODD ZUBLER

BRUCE L. GOTTLIEB

WILMER CUTLER PICKERING

HALE AND DORR LLP

2445 M Street, N.W.

Washington, D.C. 20037

(202) 663-6000

OCTOBER 2004

ANTHONY S. KOGUT

Counsel of Record

JOHN A. YEAGER

CURTIS R. HADLEY

WILLINGHAM & COTE, P.C.

333 Albert Avenue, Suite 500

East Lansing, Michigan 48823

(517) 351-6200