Amicus Curiae Brief — Bridenbaugh v. Carter

MOTION FILED rN

MAR 19 2001 No. 00-1323

In The

Supreme Court of the United States

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RUSSELL BRIDENBAUGH, JIM DAVIS, JOHN

DAVIS, MELISSA DAVIS, WILLIAM H. FRIDAY,

GREGORY KASZA, JOSEPH KEOUGH, LOYCE

KEOUGH, DAVID SABBAGH, JOHN SCANLAN,

LINDA SIMON, ROBERT SWANSON, AND

MARTHA SYKES,

Petitioners,

STEVE CARTER, ATTORNEY GENERAL OF

INDIANA; AND GLENN LAWRENCE, DIRECTOR

OF THE INDIANA ALCOHOLIC BEVERAGE

COMMISSION, IN THEIR OFFICIAL CAPACITIES;

AND WINE & SPIRIT WHOLESALERS OF INDIANA,

Respondents.

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On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

@

MOTION OF DAVID LUCAS AND

JUANITA SWEDENBURG FOR LEAVE TO

FILE AN AMICUS CURIAE BRIEF AND

BRIEF IN OPPOSITION TO THE PETITION

FOR A WRIT OF CERTIORARI

®

Cunt Bo.ick*

WiiuiaM H. ME LiLor

Marni J. SOUPCOFF

INSTITUTE FOR JUSTICE

1717 Pennsylvania Ave., N.W.

Suite 200

: Washington, DC 20006

(202) 955-1300

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

MOTION OF DAVID LUCAS AND JUANITA

SWEDENBURG FOR LEAVE TO FILE AN AMICUS

CURIAE BRIEF IN OPPOSITION TO THE PETITION

FOR A WRIT OF CERTIORARI

David Lucas and Juanita Swedenburg have requested

the consent of the parties to file an amicus curiae brief in

Opposition to the Petition for a Writ of Certiorari. The

petitioner has declined to consent, and the respondents

have not responded to the request.

Therefore, pursuant to Rule 37.2(b) of the Rules of

the Supreme Court of the United States, David Lucas and

Juanita Swedenburg hereby move this Court for leave to

file the following amicus curiae brief in Opposition to the

Petition for a Writ of Certiorari.

The amici are the proprietors of two small, family-

owned wineries located in Virginia and California,

respectively. They are plaintiffs in Swedenburg v. Kelly,

No. 00 Civ. 778 (S.D.N.Y., filed February 3, 2000), refer-

enced in the Petition for Writ of Certiorari at 4. They are

challenging New York’s three-tier system of alcohol dis-

tribution, as it applies to prohibit out-of-state wineries

from selling arc shipping wine to New York consumers,

as a violation of the Commerce Clause, U.S. Const. art.

§ 8. cl. 3; and the Privileges and Immunities clause, U.S.

Const. art. 4, § 2, cl. 1. See Swedenburg v. Kelly, 2000 U.S.

Dist. LEXIS 12758 (S.D.N.Y. Sept. 5, 2000) (denying

motion to dismiss).

The object of amici’s lawsuit - to remove protection-

ist, discriminatory barriers to the interstate trade of wine

~ is the same as the objective sought by the lawsuit here.

As a result, amici have a direct and tangible stake in the

outcome of the present litigation and in the decision by

this Court whether to grant the Petition. In addition, the

granting of this motion will not cause any harm or preju-

dice to any other party or amicus. David Lucas and

Juanita Swedenburg’s motion for leave to file an amicus

curiae brief in opposition to the petition for a writ of

certiorari in this case should accordingly be granted.

Respectfully submitted,

CLINT BoLick*

WILLIAM H. MELLoR

Marni J. SOUPCOFF

INSTITUTE FOR JUSTICE

1717 Pennsylvania Ave., N.W.

Suite 200

Washington, DC 20006

(202) 955-1300

* Counsel of Record

TABLE OF CONTENTS

Page

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THIS CASE IS NOT THE APPROPRIATE VEHI-

CLE FOR THIS COURT TO ADDRESS THE

IMPORTANT QUESTION OF WHETHER A

STATE MAY ENACT PROTECTIONIST AND

DISCRIMINATORY BARRIERS TO DIRECT

INTERSTATE SALES AND SHIPMENTS OF

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No direct circuit split yet exists. ...........

The plaintiffs are not wineries, which raises

I ae ha 04 545.5 8 pb .0-9-0 ww a We

The question of discrimination is not clear.

No privileges and immunities claim is pre-

The record does not seem sufficient to review

the court of appeals’ conclusion regarding

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TABLE OF AUTHORITIES

Page

CASEs:

Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984)...... 2

Bridenbaugh v. Freeman-Wilson, 237 F.3d 848 (7th

lee NEN ia G49 Aveda ah ee RAS a & 4, 3, 6, 8

Bridenbaugh v. O'Bannon, 78 F. Supp. 2d 828 (N.D.

Ae, ana es eee ee eae eee ar Pe eee rE ere ne 3

Cooper v. McBeath, 11 F.3d 547 (5th Cir. 1994) ........ 4

Cree D. BON, SES UES. EO CAG) aca oon kh cade sess ss 7

Fackiin @. Orbeck, 4357 US. S18 (1976). . «2... 56 cc ccs 7

Loretto Winery, Ltd. v. Duffy, 761 F.2d 140 (2nd Cir.

EE ag Orr Py ore Pr ree ens mens Pere -

Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456

ft FAIR Vonee per Oar eet See Fanny TP Oe perae r

North Dakota v. United States, 495 U.S. 423 (1990)..... 5

Quill Corp. v. North Dakota, 504 U.S. 298 (1992)....... 3

Swedenburg v. Kelly, 2000 U.S. Dist. LEXIS 12758

Core es GUE: Dy MUD Side e ee ckdaesedadipesadcenss 1

Swedenburg v. Kelly, No. 00 Civ. 778 (S.D.N.Y., filed

PE Se pa nen awk Need ek ake eee NR CESS 1

Toomer v. Witsell, 334 U.S. 385 (1948)................. 6

CONSTITUTIONAL PROVISIONS:

Ris ee Ms RS codon sha cuaeeacencakee ase 1

hi ens a MI Oe CO Bab eedeecb-ca sss Saws eelanecs 1

INTEREST OF AMICI

As set forth in the motion for leave to file this brief,

amici are the proprietors of two small, family-owned

wineries located in Virginia and California, respectively.!

They are plaintiffs in Swedenburg v. Kelly, No. 00 Civ. 778

(S.D.N.Y., filed February 3, 2000), referenced in the Peti-

tion for Writ of Certiorari at 4. They are challenging New

York’s three-tier system of alcohol distribution, as it

applies to prohibit out-of-state wineries from selling and

shipping wine to New York consumers, as a violation of

the Commerce Clause, U.S. Const. art. § 8. cl. 3; and the

Privileges and Immunities clause, U.S. Const. art. 4, § 2,

cl. 1.2 See Swedenburg v. Kelly, 2000 U.S. Dist. LEXIS 12758

(S.D.N.Y. Sept. 5, 2000) (denying motion to dismiss).

The object of amici’s lawsuit — to remove protection-

ist, discriminatory barriers to the interstate trade of wine

— is the same as the objective sought by the lawsuit here.

As a result, amici have a direct and tangible stake in the

outcome of the present litigation and in the decision by

this Court whether to grant the Petition.

¢

1 This brief was not authored, in whole or in part, by

counsel for a party. No person or entity, other than the amici

curiae and their counsel, made a monetary contribution to the

preparation or submission of the brief.

2 They also challenge restrictions on speech relating to

products and sales as a violation of the First Amendment.

ARGUMENT

THIS CASE IS NOT THE APPROPRIATE VEHICLE

FOR THIS COURT TO ADDRESS THE IMPORTANT

QUESTION OF WHETHER A STATE MAY ENACT

PROTECTIONIST AND DISCRIMINATORY ,

BARRIERS TO DIRECT INTERSTATE SALES AND

SHIPMENTS OF WINE.

Amici agree with petitioners that this case presents

important issues going to the central purpose of the Com-

merce Clause: the eradication of parochial trade barriers

among states. The Federalist No. 22 (Hamilton). Hence, as

this Court has held repeatedly, “If a state law purporting

to promote [legitimate] purposes is in reality ‘simple

economic protectionism,’ we have applied a ‘virtual per

se rule of invalidity’.” Minnesota v. Clover Leaf Creamery

Co., 449 U.S. 456, 471 (1981) (citations omitted). As peti-

tioners point out, the plethora of trade barriers prohibit-

ing the direct interstate sale and shipment of wine has led

to a multiplicity of lawsuits challenging their constitu-

tionality (Pet. 4).

We also agree that the decision below is wrongly

decided. Announcing that “our guide is the text and

history of the Constitution, not the ‘purposes’ or ‘con-

cerns’ that may or may not have animated its drafters,”

Bridenbaugh v. Freeman-Wilson, 237 F.3d 848, 850 (7th Cir.

2000), the court of appeals declined to apply this Court’s

most on-point precedents vindicating the respective core

purposes of the Commerce Clause and the 21st Amend-

ment. See, e.g., Bacchus Imports, Ltd. v. Dias, 468 U.S. 263,

267 (1984) (“The central purpose of [the 21st Amendment]

was not to empower States to favor local liquor industries |

by erecting barriers to competition”).

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The court of appeals acknowledged that the state’s

defense of the direct shipping ban amounted to “a euphe-

mism for reducing competition and facilitating tax collec-

tion.” Bridenbaugh v. Freeman-Wilson, 227 F.3d at 851.

However, its novel framework for constitutional inter-

pretation allowed the court to reach a disturbing result:

permitting a state to impose a substantial burden on

interstate trade based on the loss of tax revenue that

might occur if the products at issue were allowed to flow

freely across state lines, asserting that “this is precisely

what the [21st Amendment] is for.” Bridenbaugh v. Free-

man-Wilson, 237 F.3d at 854. The court’s ruling is sharply

at odds with this Court’s holding that the thirst for tax

revenue is not a justification for parochial barriers that

discriminate against or unduly burden interstate com-

merce. See, e.g., Quill Corp. v. North Dakota, 504 U.S. 298

(1992). Especially in an era of explosive growth in the

means of effectuating interstate commerce, such an

apparently unprecedented decision could bode seriously

adverse consequences.

But troubling and potentially far-reaching as the ram-

ifications of the circuit court’s reasoning may be, we

believe the Court should await one of the other half-

dozen cases presently in litigation to resolve the impor-

tant issues at stake. For the reasons stated below, this case

presents analytical and procedural impediments to a

comprehensive decision on the intersection between the

constitutional guarantee of freedom of commerce and the

state’s core powers under the 21st Amendment.

1. No direct circuit split yet exists. As noted above,

the decision below stands in direct conflict with U.S.

Supreme Court precedents regarding the respective

aaa octitndeimneee

boundaries of the Commerce Clause and the 21st Amend-

ment. Moreover, in contrast to the Seventh Circuit, other

courts of appeals have followed Supreme Court prece-

dents to strike down protectionist trade barriers relating

to alcoholic beverages against claims that they were justi-

fied by the 21st Amendment. See, e.g., Cooper v. McBeath,

11 F.3d 547 (5th Cir. 1994); Loretto Winery, Ltd. v. Duffy,

761 F.2d 140 (2nd Cir. 1985). However, the Seventh Circuit

is the first ruling precisely on the constitutionality of

prohibitions against interstate sales and shipments of

wine. Given the multiplicity of actions pending in district

courts around the country raising the same issue, it may

be prudent for the Court to wait and see how other courts

of appeals address the issue, so as to more precisely

frame the issue for resolution.

2. The plaintiffs are not wineries, which raises

standing issues. In this action, unlike most of the other

pending challenges to direct shipping barriers, the plain-

tiffs are solely in-state consumers and do not include out-

of-state wineries. This anomaly presents the court of

appeals with difficult questions of standing. As the Sev-

enth Circuit found, consumers unquestionably possess

standing under the Commerce Clause to challenge paro-

chial state trade barriers, because “every interstate sale

has two parties. ... ” Bridenbaugh v. Freeman-Wilson, 227

F.3d at 850. But the issue of redressability gave the court

pause, because the plaintiffs did not challenge the addi-

tional requirement that out-of-state sellers obtain permits

to distribute alcohol, and it is not clear that such permits

are available to out-of-state producers or that such sellers

would attempt to obtain them. That meant that an imped-

iment to direct wine shipments would remain in place

even if the challenged statutes were removed. Id. at

850-51. Although the court correctly resolved the issue in

favor of consumer standing, the only reason that the issue

was raised at all is because no wineries appear as plain-

tiffs. This Court can confront the substantive issue with-

out having to consider the procedural thicket if it waits

for a case in which wineries, or wineries and consumers,

appear as plaintiffs to challenge the trade barriers.

3. The question of discrimination is not clear. As

this Court emphasized in Clover Leaf, 449 U.S. at 471, even

an incidental burden on commerce triggers scrutiny

under the Commerce Clause; but discriminatory burdens

trigger a virtual per se rule of invalidity. Cf. North Dakota

v. United States, 495 U.S. 423, 488 (1990) (Scalia J. concur-

ring) (noting the analytical difference between discrimi-

natory and nondiscriminatory burdens in the context of

alcoho! distribution). Here, the question looms whether

the challenged statutes merely place a burden on inter-

state commerce or actually discriminate against it. The

district court found that “these statutes on their face

discriminate against out of state commerce.” Bridenbaugh

v. O'Bannon, 78 F. Supp. 2d 828, 832 (N.D. Ind. 1999). By

contrast, the court of appeals asserts that there is no

discrimination and that “Indiana insists that every drop

of liquor pass through its three-tiered system... . ”

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

The court of appeals’ assertion of nondiscrimination

is plainly belied by the facts, given that “holders of

Indiana wine wholesaler or retail permits may deliver

directly to consumers’ homes,” id., which is a privilege

that out-of-state producers, wholesalers, and retailers do

not enjoy. But the court of appeals notes that

plaintiffs are consumers, and that the statutory

conflict does not disable any wholesaler from

importing liquor to Indiana and reselling to con-

sumers. Plaintiffs do not complain about the

statute that apparently limits distribution per-

mits to Indiana’s citizens. These plaintiffs are

concerned only with direct shipments from out-

of-state sellers who lack and do not want Indiana

permits.

Id. at 854 (emphasis in original).

It seems apparent that a statutory scheme that treats

out-of-state and in-state sellers differently is inherently

discriminatory. But because the plaintiffs here are con-

sumers, not wineries, the court was able to somehow

transform a discriminatory statute into a nondiscrimina-

tory one. While we disagree with the court’s sleight of

hand, the issue of discrimination would be more crisply

presented if it were raised by a winery, whose desire to

ship directly to out-of-state consumers is statutorily unre-

quitable while in-state sellers may obtain the privilege to

do so. That factual scenario is presented in other pending

cases but not here.

4. No privileges and immunities claim is presented.

No claim is raised here under the Privileges and Immu-

nities Clause. As this Court declared in Toomer v. Witsell,

334 U.S. 385, 396 (1948), “one of the privileges which the

clause guarantees to citizens of State A is that of doing

business in State B on the terms of substantial equality

with the citizens of that State.” That is precisely what is

occurring in this case - but because plaintiffs are con-

sumers, not out-of-state businesses, they cannot allege it.

a i i

Although the Privileges and Immunities Clause and

the Commerce Clause have “a mutually reinforcing rela-

tionship,” see Hicklin v. Orbeck, 437 U.S. 518, 531 (1978),

they are analytically distinct. For one thing, Congress

cannot expand state authority as against the privileges

and immunities of citizenship, as it can in exercising

authority under the Commerce Clause. For another, the

21st Amendment limits the scope of the dormant Com-

merce Clause, but it does not limit other constitutional

protections. See, e.g., Craig v. Boren, 429 U.S. 190 (1976).

Hence with regard to privileges and immunities, there is

no question, as there is in the interstate commerce con-

text, of the respective spheres of two constitutional provi-

sions: the Privileges and Immunities Clause retains its

full vitality. This Court should await an opportunity to

consider a Privileges and Immunities challenge; or at

least to inform its Commerce Clause analysis with an

appreciation of the limits that the Privileges and Immu-

nities Clause necessarily places upon the 21st Amend-

ment.3

5. The record does not seem sufficient to review the

court of appeals’ conclusion regarding taxation. It is not

clear whether the Seventh Circuit employed casual Com-

merce Clause scrutiny because of its determination that

the Indiana statutes were nondiscriminatory; or alter-

natively whether it determined that the state’s interest in

3 Indeed, the Privileges and Immunities Clause provides

additional and independent support for the Court’s recognition

in Bacchus Imports and elsewhere that the 21st Amendment does

not create a safe constitutional harbor for protectionist state

regulations of interstate commerce in alcoholic beverages.

tax revenue is sufficient to overcome the virtual per se

rule of invalidity that is triggered by a discriminatory

trade barrier. Either way, however, plainly the crux of its

holding is that Indiana’s statutory scheme “channels [out-

of-state wineries’] sales through Indiana permit-holders,

enabling Indiana to collect its excise tax equally from in-

state and out-of-state sellers.” Bridenbaugh v. Freeman-

Wilson, 227 F.3d at 854. Even if this is a permissible basis

for burdening or discriminating against interstate trade -

a dubious and novel proposition — it is not clear whether

the record supports the conclusion. The district court

opinion makes no findings on whether the state might

have alternative means — such as use taxes or permit fees

— that might fulfill its revenue goals in a manner that is

less burdensome to interstate commerce; and although

the court of appeals concludes that this is the “one real

economic effect” of the challenged scheme, id., neither it

nor the district court cites anything other than the stat-

utes themselves for their determinations of economic

effect. Were this Court to consider the tax revenue issue

to be in play as a defense to the trade barrier, at best it

would have to remand the case for further factual devel-

opment on the real economic effects and the existence or

lack thereof of less burdensome alternatives.

¢

CONCLUSION

We ardently agree with petitioners that this case

raises important issues of free trade, and that the decision

below contradicts precedents of this Court and visits a

manifest injustice upon both producers and consumers.

We believe, however, that numerous aspects of this case

counsel the Court to await a different case that more

crisply presents the important issues arising from perva-

sive parochial barriers now afflicting the interstate wine

trade. Given the multiplicity of pending challenges to

such barriers, the Court should not have to wait long for

a better case.

Respectfully submitted,

Cunt Bouick*

Wiiutiam H. MELLor

Marni J. SOUPCOFF

INSTITUTE FOR JUSTICE

1717 Pennsylvania Ave., N.W.

Suite 200

Washington, DC 20006

(202) 955-1300

* Counsel of Record