Opposition Brief — Jelovsek v. Bredesen (No. 09-22)

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In The

Supreme Court of the Anited States

FREDERICK JELOVSEK,

Petitioner,

v.

PHIL BREDESEN, GOVERNOR OF TENNESSEE, et al.,

Respondents.

On Petition for Writ of Certiorari to the United

States Court of Appeals for the Sixth Circuit

BRIEF IN OPPOSITION

RosBert E. Cooper, JR. LYNDSAY FULLER SANDERS*

ATTORNEY GENERAL & REPORTER ASSISTANT ATTORNEY GENERAL

425 FirtH AVENUE NORTH

MICHAEL E. Moore P.O. Box 20207

SOLICITOR GENERAI. NASHVILLE, TN 37202-0207

(615)741-4087

*Counsel of Record

Counsel for Respondents

August 4, 2009

Becker Gallagher - Cincinnatr, OH - Wastungton, DC. - 800.890.5001

Il.

i

QUESTIONS PRESENTED FOR REVIEW

Whether discriminatory and protectionist laws in

Tennessee’s three-tier alcoho} distribution system

are immune from challenge on Commerce Clause

grounds, contrary to the law of this Court and other

circuits?

Whether the Sixth Circuit erred in failing to strike

down the following provisions of state laws in

violation of the Petitioner’s right of equal access to

the interstate wine market as protected by the

Commerce Clause:

A. The laws that require in-state residency and

presence to obtain a Tennessee wholesale or

retail alcohol license, which laws restrict the

Petitioner’s access to a wide variety of wines

offered by out-of-state vendors.

B. The law that prohibits direct shipment of wine

to the Petitioner from out-of-state retailers,

when the State allows him to purchase as much

wine as he wants from in-state retailers.

C. The law that criminalizes the Petitioner’s

possession of wines purchased from out-of-state

retail venders upon which Tennessee taxes have

not been paid, when there is no mechanism to

pay such taxes.

il

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW ...... i

Eg OS li

eee PACEPPORIIIES .................- iv

MEP WY 8 eee 1

STATEMENT OF JURISDICTION ............ 1

pememes Or THE CASE ................ 1

REASONS FOR DENYING THE WRIT ........ 4

I. CERTIORARI [IS NOT WARRANTED

BECAUSE, CONTRARY TO PETITIONER'S

ASSERTION, THE SIXTH CIRCUIT DID

NOT HOLD THAT THE CHALLENGED

LAWS WERE IMMUNE FROM

COMMERCE CLAUSE CHALLENGE. ... 4

IT. MOST OF THE QUESTIONS PRESENTED

BY PETITIONER HAVE BEEN

RENDERED MOOT BY RECENT ACTS OF

THE TENNESSEE LEGISLATURE,

WHICHHAVE EFFECTIVELY AFFORDED

THE PETITIONER ALL OF THE RELIEF

THAT HE SOUGHT IN HIS COMPLAINT.

a |

Hil. THE SIXTH CIRCUIT NEVER

ADDRESSED TENNESSEPR’S RESIDENCY

REQUIREMENTS TO BECOME

LICENSED LIQUOR WHOLESALERS AND

RETAILERS, AND PETITIONER LACKED

ill

STANDING TO CHALLENGE SUCH

RE rink ES ER A Eee eee 7

Lee ES 0 a5 3b eee ae a od eee ee 9

APPENDIX

Appendix A: 2009 Tenn. Pub. Acts Ch. 273 .. 1b

Appendix B: 2009 Tenn. Pub. Acts Ch. 348 . 10b

Appendix C: 2009 Tenn. Pub. Acts Ch. 434 . 16b

lv

TABLE OF AUTHORITIES

CASES

Bacchus v. Imports, Lid. V. Dias,

GRR | | Sn rr 3

DeFunis v. Odegaard,

416 U.S. 312, 94 S.Ct. 1704 (U.S. 1974) ...... 5

Granholm v. Heald,

6460.5. G60 C2005) 2... cc ice cece ee. 1, 3, 4,5

Lance v. Coffman,

See i OE kc hk Es eee ee es 8

Liner v. Jafco, Inc.,

375 U.S. 301, 84 S.Ct. 391, 11 L.Ed.2d 347

PTs SARs ee. td oe Ne A a! 6

North Carolina v. Rice,

404 U.S. 244, 92 S.Ct. 402, 30 L.Ed.2d 413

Li» 2 6 Resa ia aera Men AP ieckenge iy ai hrs tn er nls trae 5

Powell v. McCormack,

395 U.S. 486, 89 S.Ct. 1944, 23 L.Ed.2d 491

G).: RRNA tee eae eae ae rua hagree a ne Ay ag Aces oe a 6

Sibron v. New York,

392 U.S. 40, 88 S.Ct. 1889, 20 L.Ed.2d 917

he te a oe ee ee ees 6

STATUTES

SR ee SS rr evan ame aren 1

pure 2m. Fup. Acte Ch. ZIG 6k ec ec ce ees 4,6

2008 Tenn. Pub. Actes Ch. 346 .... 2.0... .64. 4,6

moe Lenn, Pub. nce Ch. AS Cw. oe See 4,6

1

OPINIONS BELOW

The October 24, 2008, panel opinion of the United

States Court of Appeals for the Sixth Circuit, which

affirmed, in part, and vacated, in part, the district

court judgment, is reported at 545 F.3d 431. (Pet.App.

la) The January 26, 2009, order of the Sixth Circuit

denying rehearing en banc is not reported. (Pet.App.

43a) The order and memorandum opinion of the

district court dismissing the petitioner’s claim is

reported at 482 F.Supp.2d 1013. (Pet.App. 20a)

STATEMENT OF JURISDICTION

Petitioner invokes this Court’s jurisdiction under

28 U.S.C. § 1254.

STATEMENT OF THE CASE

Petitioner was one of several plaintiffs who sued

the Governor and Attorney General of Tennessee, as

well as the Executive Director of the Tennessee

Alcoholic Beverage Commission, to raise a dormant

commerce clause challenge to Tennessee laws

governing the wine industry. As the Sixth Circuit

noted, this lawsuit was one of several that were filed

across the country in the wake of this Court’s

invalidation of laws in Michigan and New York that

allowed only in-state wineries to sell and ship wine

directly to consumers. See Pet. App. 3a (citing

qranholm v. Heald, 544 U.S. 460 (2005)). Petitioner,

an individual oenophile, sought better access to wine

produced outside of Tennessee.

The Sixth Circuit accurately summarized the

statutory scheme at issue in this lawsuit:

2

Tennessee employs what is commonly referred

to as a three-tier system of alcohol regulation.

The Tennessee Alcoholic Beverage Commission

(“TABC”) issues separate classes of licenses to

manufacturers and distillers, wholesalers, and

liquor retailers. Tenn. Code Ann. § 57-3-201.

Unlicensed sales of alcohol are not permitted.

Id. § 404(a). Manufacturers are limited to

selling to wholesalers; wholesalers may sell to

retailers, or in some cases other wholesalers;

consumers are required to buy only from

retailers. Jd. § 404(b)-(d).

Statutes curtail the importation of alcoholic

beverages, including wine, into the state, as

well as the transportation of alcoholic beverages

by individuals who are not licensees. These

statutes seem to contradict each other, which

creates a confusing web of seemingly applicable

laws, and in its briefing and argument to the

court the state did little to unravel the mystery.

The district court found, and the state concedes,

that a Tennessee resident may transport a

greater quantity of wine purchased from a

Tennessee winery as compared to wine

purchased in another state.

Tennessee wineries are also subject to the

three-tier system, and have their own class of

license. Id. § 201(4). However, wineries are

subject to further regulation, as well as being

afforded some exceptions from the general

liquor control statutes, through Tennessee’s

Grape and Wine Law. Id. § 207. The Grape and

Wine Law, inter alia, restricts winery licenses

to individuals who have been Tennessee

3

residents for at least two years, or to

corporations whose stock is wholly owned by

Tennessee residents of at least two years; and

permits Tennessee wineries which use a

sufficient percentage of Tennessee-grown grapes

in their wine production to serve complimentary

samples to patrons, and to sell at retail directly

to customers without any additional license. /d.

§ 207(d), (). The Grape and Wine Law also

provides that, notwithstanding the

transportation restrictions in other statutes,

wine purchased at a Tennessee winery may be

transported within the state of Tennessce. Jd.

§ 207(i).

(Pet.App. 3a)

The district court granted the defendants’ motion

for judgment on the pleadings, concluding that since

both in- and out-of-state wineries are prohibited from

selling and shipping wine directly to Tennessee

consumers, this case was distinguishable from

Granholm, where the laws in question denied only out-

of-state wineries the ability to ship to consumers.

(Pet.App. 23a) While the Sixth Circuit likewise upheld

Tennessee’s ban on the direct shipment of wine to

consumers, it held unconstitutional Tennessee’s Grape

and Wine Law, which further regulates wineries. The

court ruled that this law facially discriminates against

out-of-state wineries, and favors in-state wineries, in

violation of the Commerce Clause. (Pet. App.4a) (citing

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

The court remanded the case to the district court to

afford the state an opportunity to defend the law’s

infirmities or, if necessary, to fashion an appropriate

remedy. (Pet.App.17a)

4

After the Sixth Circuit rendered its decision,

however, the ‘Tennessee Legislature enacted three

separate laws directly addressing the issues presented

in this case. 2009 Tenn. Pub. Acts Ch. 273 eliminates

any residency requirements for obtaining a winery

license and eliminates ajl the domestic content

requirements. (BIO App. 1b) 2009 Tenn. Pub. Acts Ch.

348 creates a direct shipper’s license, which authorizes

a licensee to sell and deliver wine by common carrier

to Tennessee citizens over twenty-one (21) years old.

(BIO App. 10b) Finally, 2009 Tenn. Pub. Acts Ch. 434

makes the quantity of wine that can be transported

from wineries within and from wineries outside of the

state consistent at five gallons in each instance. (BIO

App. 16b)

REASONS FOR DENYING THE WRIT

I. CERTIORARI IS NOT WARRANTED

BECAUSE, CONTRARY TO PETITIONER’S

ASSERTION, THE SIXTH CIRCUIT DID

NOT HOLD THAT THE CHALLENGED

LAWS WERE IMMUNE FROM

COMMERCE CLAUSE CHALLENGE.

Petitioner asserts that the Sixth Circuit held in this

case “that the challenged laws are immune from

Commerce Clause Challenge”; but this assertion

misconstrues the Sixth Circuit decision. The Sixth

Circuit held only that “Tennessee’s decision to adhere

to a three-tier distribution system is immune trom

direct challenge on Commerce Clause grounds.”

(Pet.App. 9a) (citing Granholm, 544 U.S. at 489)

(emphasis added)). Furthermore, the court so held only

in the context of the challenge to Tennessee's ban on

direct shipment of alcohol and wine to consumers,

5

which, the court found, “applied equally to in-state and

out-of-state wineries.” (Pet.App. 9a) See Granholm,

544 U.S. at 489 (“State policies are protected under the

Twenty-first Amendment when they treat liquor

produced out of state the same as its domestic

equivalent.”)

In contrast, the Sixth Circuit found no such

mmunity” in connection with the challenge to

Tennessee’s Grape and Wine Law, which offered a

“multitude of exceptions” to Tennessee’s wineries, and

which the court thus found to be “facially

discriminatory.” (Pet.App. 15a) Cf Granholm, 544 U.S.

at 489 (“The instant cases, in contrast, involve

straightforward attempts to discriminate in favor of

local producers.”). Viewed in the proper context, the

decision of the Sixth Circuit does not conflict with the

decisions of other circuits cited by petitioner. And,

relying as it does on this Court’s decision in Granholm,

the Sixth Circuit decision certainly does not conflict

with decisions of this Court.

|

II. MOST OF THE QUESTIONS PRESENTED

BY PETITIONER HAVE BEEN RENDERED

MOOT BY RECENT ACTS OF THE

TENNESSEE LEGISLATURE, WHICH

HAVE EFFECTIVELY AFFORDED TIE

PETITIONER ALL OF THE RELIEF THAT

HE SOUGHT IN HIS COMPLAINT.

“(FJederal courts are without power to decide

questions that cannot affect the rights of litigants in

the case before them.” DeFunts v. Odegaard, 416 U.S.

312, 316, 94 S.Ct. 1704, 1705 - 1706 (U.S. 1974)

(quoting North Carolina v. Rice, 404 U.S. 244, 246, 92

S.Ct. 402, 404, 30 L..Ed.2d 413 (1971)). The inability of

6

the federal judiciary “to review moot cases derives

from the requirement of Art. III of the Constitution

under which the exercise of judicial power depends

upon the existence of a case or controversy.” Liner v.

Jafco, Inc., 375 U.S. 301, 306 n. 3, 84S.Ct. 391, 394, 11

L.Ed.2d 347 (1964); see Powell v. McCormack, 395 U.S.

486, 496 n. 7, 89 S.Ct. 1944, 1950, 23 L.Ed.2d 491

(1969): Sibron v. New York, 392 U.S. 40, 50 n. 8, 88

S.Ct. 1889, 1896, 20 L.Ed.2d 917 (1968).

In the wake of the Sixth Circuit decision in this

case, the Tennessee Legislature passed three separate

bills that have effectively rendered this lawsuit moot.

2009 Tenn. Pub. Acts Ch. 273 was passed on May 7,

2009, and was approved by the Governor on May 21,

2009. The specific purpose of Chapter 273 was to

remedy the constitutional infirmities of the Grape and

Wine Law cited by the Sixth Circuit in Jelousek. (BIO

App. lb) Chapter 273 eliminated any residency

requirements for obtaining a winery license and all of

the domestic content requirements for any wine

produced under such licenses. 2009 Tenn. Pub. Acts

Ch. 348 was passed on May 21, 2009, and was

approved by the Governor on June 4, 2009. (BIO App.

10b) Chapter 348 created a direct shipper’s license,

which authorizes a licensee to sell and deliver wine by

common carrier to Tennessee citizens over twenty-one

(21) years old. Finally, 2009 Tenn. Pub. Acts Ch. 434

was passed on May 26, 2009, and was approved by the

Governor on June 12, 2009. (BIO App. 16b) Chapter

434 cleared up certain ambiguities with regard to

conflicting transport amounts. See Pet.App. 18a. Now

the number of gallons of wine that can be transported

from wineries both within and without the state is the

same and has been expanded to five gallons.

7

The enactment of these laws has provided the

Petitioner with all of the relief that he sought in his

complaint. Certiorari is thus unwarranted on

questions that have been rendered moot.

Il THE SIXTH CIRCUIT NEVER

ADDRESSED TENNESSEE’S RESIDENCY

REQUIREMENTS TO BECOME LICENSED

LIQUOR WHOLESALERS AND

RETAILERS, AND PETITIONER LACKED

STANDING TO CHALLENGE SUCH LAWS.

Petitioner couches his petition as if he had

presented a self-standing claim specifically challenging

the residency requirements of ‘l'ennessee’s wholesaler

and retailer licensing statutes. He did not. Petitioner

challenged these requirements, to be sure, but as the

district court observed, he did so only as part of his

challenge to the entire regulatory scheme as it

pertained to the direct sale and shipment of wine from

out-of-state vendors to Tennessee residents. See Pet.

App. 22a. Both the district court and the Sixth Circuit

thus considered Petitioner’s challenge to the

Tennessee residency requirements as part and parcel

of his challenge to ‘Tennessee’s ban on direct sales and

shipments from out-of-state wineries to Tennessee

consumers. Consequently, neither the district court

nor the Sixth Circuit squarely addressed the

constitutionality of these particular residency

requirements.

Moreover, Petitioner could not mount a separate

challenge to the residency requirements for obtaining

a wholesaler or retailer license because he lacks

standing to do so As this Court has recently

8

reiterated, a plaintiff must show a “particularized

harm” in order to establish standing.

[A! plaintiff raising only a generally available

grievance about government -- claiming only

harm to his and every citizen’s interest in

proper application of the Constitution and laws,

and seeking relief that no more directly and

tangibly benefits him than it does the public at

large -- does not state an Article III case or

controversy.

Lance v. Coffinan, 127 S.Ct. 1194, 1196-1197 (2007)

(internal citations omitted). Throughout the course of

this litigation, Petitioner has asserted nothing but his

own interest in the purchase and consumption of wine.

But there is nothing to indicate that Petitioner has

been injured, or is likely to suffer a particularized

injury not common to the public at large, because of

the residency requirements for wholesaler and retail

licensing. Petitioner is a consumer and a self-

professed ocnophile. He is not a_ producer,

manufacturer, or retailer of wine, and he has not

sought or been denied a Tennessee wholesaler license.

The kind of injury he asserts -- unavailability of

certain wines -- is not a particularized “injury”; it is a

narm that he suffers in common with the public

generally. Because of his lack of standing, Petitioner

is in no position now to ask this Court to review an

issue that neither of the lower courts saw fit to

address.

9

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be denied.

Respectfully submitted,

ROBERT E. COOPER, JR.

Attorney General and Reporter

State of Tennessee

MICHAEL E. MOORE

Solicitor Genera!

LYNDSAY FULLER SANDERS

Assistant Attorney General

Counsel of Record

425 Fifth Avenue North

P.O. Box 20207

Nashville, TN 37202-0207

(615)741-4087

Counsel for Respondents

Roceensl nec

APPENDIX

Ns sey

rts os ee

lb

APPENDIX A

STATE OF TENNESSEE

PUBLIC CHAPTER NO. 273

SENATE BILL NO. 944

By Overbey, Ketron, Faulk, Yager, Stanley

Substituted for: House Bill No. 1549

By Casada, Shepard, McDaniel, Bone, Shipley,

McCord, Sargent, Eldridge, Phillip Johnson, Lollar,

Carr, Maggart, Weaver, Hensley, Fincher,

Winningham, Tidwell, Bass, Matheny, Montgomery,

Curtis Johnson, Watson, Litz, Mike Turner, Faulkner,

Shaw, Stewart, Niceley

AN ACT to amend Tennessee Code Annotated, Title

57, Chapter 3, Part 2, relative to the “Grape and Wine

Law”.

WHEREAS, cn October 24, 2008 in Jelovusek, et al.

v. Bredesen, et al., the United States Court of Appeals

for the Sixth Circuit held that portions of Tennessee’s

Grape and Wine Law is discriminatory on its face and

remanded the case to the United States District Court

for further proceedings; and

WHEREAS, if Tennessee’s Grape and Wine Law is

left as it exists, and the district court ultimately holds

that it violates the dormant commerce clause of the

2b

Constitution, which appears likely, the judicial branch

of government will amend the law to make it comport

with the commerce clause; and

WHEREAS, if the General Assembly fails to

address the defects in the law, the district court may

strike portions of the law which would prevent

wineries from operating in Tennessee; now, therefore,

BE IT ENACTED BY THE GENERAL ASSEMBLY

OF THE STATE OF TENNESSEE:

SECTION 1. Tennessee Code Annotated, Section

57-3-207, is amended by deleting such section in its

entirety and substituting instead the following:

§ 57-3-207.

(a) This section shall be known and may be

cited as the “Grape and Wine Law”. This section

shall prevail over any conflicting statutory

provision.

(b) A winery license may be issued as

hereinafter provided for the manufacture of

alcoholic vinous beverages, as defined in

§ 57-3-101, upon verified, written application to

the commission on proper form herein

authorized to be prescribed and furnished, and

the application may be granted by the

commission, subject to the restrictions of this

chapter. Any winery license issued pursuant to

this section shall authorize the holder thereof to

manufacture, but not rectify, alcoholic vinous

beverages, unless the holder thereof is also a

distiller and/or rectifier holding a license to

3b

distill and/or rectify alcoholic spirituous

beverages, and such winery license shall

authorize the holder thereof to place the same

in containers or bottles. Out-of-state wineries

may apply for and obtain a winery license

issued in accordance with this section.

(c) Each applicant for a winery license issued

pursuant to this section shall pay to the

commission a one-time, nonrefundable fee in the

amount of three hundred dollars ($300) when

the application is submitted for review. Such

license shall not be issued until a license fee of

one hundred and fifty dollars ($150) is paid to

the commission by the winery, but issuance of

the license is exempt from the requirements of

§ 57-3-106. The commission shall deposit

collections with the state treasurer to be

earmarked for and allocated to the commission

for the purpose of the administration and

enforcement of the duties, powers and functions

of the commission.

(d) No winery license shall be issued except

to persons who have not been convicted, and

whose officers and principals have not been

convicted, within a period of five (5) years

preceding application of any felony or any

violation of any state or federal laws relating to

alcoholic beverages.

(e) Notwithstanding the provisions of this

section, a private individual in that person’s

own home may manufacture wine in an amount

not in excess of that amount annually permitted

as of March 22, 1973, by federal statute and

4b

regulations relative to household manufacture

and consumption, provided that the same is for

personal consumption by members of that

person’s household.

(f)(1) A winery licensed under this section

may serve wine without charge as

complimentary samples for tasting at the

winery and may sell wine at retail in sealed

containers at the winery, but not for

consumption on the bonded premises.

(2) A winery licensed under this section

may donate wine without charge to nonprofit

religious, educational or charitable

institutions or associations.

(g) A winery licensed under this section may

exchange wine in bulk with other wineries and

no such bulk exchange, whether in return for

wine or other consideration, shall be considered

a sale subject to tax.

(h) In addition to its own wine, a winery

licensed under this section located in Tennessee

is authorized to sell the following items on the

winery premises, and out-of-state wineries

licensed under this section may sell such items

as their state law permits:

(1) Juices or concentrates derived

therefrom, or any agricultural products;

(2) Items used in home winemaking; and

5b

(3) Other gift, tourism, or wine-related

items as defined by regulations duly

promulgated by the commission.

(i) A winery licensed under this section

located in Tennessee may sell no more than five

(5) cases or sixty (60) liters of wine to any single

retail customer in one (1) day. It shall be legal

for any purchaser of wine from a winery

licensed under this section to transport into and

within the State of Tennessee no more than five

(5) cases or sixty (60) liters of wine in one (1)

day. Any wine transported pursuant to this

section must be accompanied by a bill of sale

sufficiently identifying the nature, quantity,

purchaser, date and place of purchase of the

wine. Bills of sale purchased from out-of-state

wineries licensed under this section must reflect

that the wine was purchased for transport into

Tennessee and that Tennessee taxes have been

paid.

(j) Any licensee or other person who shall

sell, furnish, dispose of, give, or cause to be sold,

furnished, disposed of, or given, any wine in the

State of Tennessee or for transport into the

State of Tennessee, to any person under the age

of majority as established by § 57-4-203(b),

commits a misdemeanor.

(k) The commission is empowered and

authorized to promulgate such rules and

regulations as may be necessary tocarry out the

duties of the commission as provided in this

section, including, but not limited to, procedures

governing the production, sale and

6b

transportation of wine. The Commissioner of

Revenue shall establish procedures governing

the keeping of records for tax purposes and the

payment of taxes by a _ winery licensed

’ hereunder, and for any failure to comply with

such procedures, the commissioner shal! notify

the commission, which is authorized to revoke

or suspend the license of any winery.

(1) It is the duty of the Commissioner of

Agriculture to disseminate the best information

available as to the methods of cultivation of

crops which may be utilized in Tennessee for

the production of wine and the methods of

making such wines. It is also the duty of the

commissioner to establish reasonable

procedures requiring proper sanitary conditions

about the winery and to certify that these

conditions have been met before the commission

shall issue any license. The commissioner shall

establish reasonable procedures requiring the

process of producing wine to be carried on under

proper sanitary conditions and in a sanitary

manner, and for any failure tocomply with such

procedures, the commissioner shall notify the

commission, which is authorized to revoke or

suspend the license of any winery.

(m)(1) Any nonprofit association organized to

encourage and support grape growing and

winemaking with ten (10) or more wineries

licensed under this section as members shall

be allowed to hold not more than eight (8)

wine festivals per calendar year. Each

festival shall not exceed a_ period of

seventy-two (72) hours.

7b

(2) Any winery licensed under this

section participating in a festival authorized

by this subsection (m) shall be allowed to

transport, serve and offer complimentary

samples of their wines for tasting at such

festival. The complimentary sample size

shall be restricted to a one-ounce (1 02.)

serving with only one ().) sample per person

for each type of wine. Any person serving

wine at such festival shall possess a server

permit from the commission as described in

Part 7 of this chapter. |

(3) Any winery licensed under this

section participating in a festival authorized

by this subsection (m) shall be allowed to

transport wine produced by such winery to

sell at the festival for consumption

off-premises.

(4A) Any nonprofit association

authorized by this subsection (m) to hold

a wine festival shall apply for a special

occasion license as defined in § 57-4-102,

in order for participating wineries

licensed under this section to serve

complimentary samples as described in

subdivision (m)(2) and to sell wine

produced by such wineries for

consumption off-premises.

(B) Notwithstanding the provisions of

§ 57-4-102(30)(A), a special occasion

license issued for a_ wine festival

authorized by this subsection shall be for

the duration of such festival for which

8b

application is made for a period not to

exceed seventy-two (72) hours. A special

occasion license issued pursuant to this

subsection shall only be available upon

the payment of the fee as required by law

for each separate day of the festival.

(C) Anonprofit association authorized

to conduct a wine festival pursuant to

this subsection (m) shall be permitted to

hold such festival in any municipality or

county of the state in the manner

provided in subdivision (m)(5).

(5) A nonprofit association, as defined in

subdivision (m)(1), is authorized to conduct

a wine festival pursuant to this subsection

(m) in a municipality or county of this state

which has approved the sale of alcoholic

beverages or has a licensed winery located in

such municipality or county, subject to

complying with all permit requirements of

such municipality or county, and in all other

municipalities or counties upon receiving

approval of the legislative body of such

municipality or county to hold such a festival!

at a location and in such manner authorized

by such legislative body.

(n) If any provision of this act or application

thereof to any person or circumstance is held

invalid, such invalidity shall not affect other

provisions or applications of the act which can

be given effect without the invalid provision or

application, and to that end the provisions of

this act are declared to be severable.

9b

SECTION 2. This act shall take effect upon

becoming a law, the public welfare requiring it.

PASSED: May 7, 2009

/s/ Ron Ramsey sss

RON RAMSEY

SPEAKER OF THE SENATE

/s/ Kent Williams

KENT WILLIAMS, SPEAKER

HOUSE OF REPRESENTATIVES

APPROVED this 21st day of May 2009

/s/ Phil Bredesen

PHIL BREDESEN, GOVERNOR

LOb

APPENDIX B

STATE OF TENNESSEE

PUBLIC CHAPTER NO. 348

SENATE BILL NO. 166

By Stanley, Ketron, Johnson

Substituted for: House Bill No. 1155

By Shepard, Lundberg

AN ACT to amend Tennessee Code Annotated, Title

57, Chapter 3, relative to wine shipment.

WHEREAS, the Federal Trade Commission issued

a staff report in 2003 finding that, banning interstate

direct shipments, states limit consumers’ access to

thousands of labels from smaller wineries; and

WHEREAS, the FTC report further found that

states that permit interstate direct shipping generally

report few or no problems with shipments to minors;

and

WHEREAS, the FTC report further stated that

states that have sought to achieve’ voluntary

compliance with their tax laws report few, if any,

problems with tax collection: now, therefore,

llb

BE IT ENACTED BY THE GENERAL ASSEMBLY

OF THE STATE OF TENNESSEE:

SECTION 1. Tennessee Code Annotated, Title 57,

Chapter 3, Part 2, is amended by adding the following

as a new section:

§7-3-217.

(a) Any person, firm or corporation which

holds a federal basic permit pursuant to the

Federal Alcohol Administration Act and is in

the business of manufacturing, bottling or

rectifying wine, may apply to the commission

for a direct shipper’s license under this section.

(b) A direct shipper, meeting’ the

requirements of this section, shall be authorized

to make sales and delivery of wine, as defined in

§ 57-3-101(20), by common carrier, to the

citizens of this state over the age of twenty-one

(21) who have purchased such wine directly

from the direct shipper, subject to the

limitations and requirements imposed by this

section.

(c) As a condition to the issuance of a direct

shipper’s license as authorized in this section,

an applicant for such license must satisfy the

following conditions:

(1) Pay to the commission a one-time

non-refundable fee in the amount of three

hundred dollars ($300) when the application

is submitted for review. A direct shipper’s

license under this section shall not be issued

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until the applicant shall have paid to the

commission the annual license fee of one

hundred fifty dollars ($150).

(2) Execute a consent to jurisdiction and

venue of all actions brought before the

commission, any state agency or the courts

of this state, such that any and all hearings,

appeals and other matters relating to the

license of such direct shipper shall be held in

the State of Tennessee.

(3) Acknowledge, in writing, that it will

contract only with common carriers which

agree that any delivery of wine, made in this

state, shall be by face-to-face delivery and

that deliveries will only be made _ to

individuals who demonstrate that such

individuals are over the age of twenty-one

(21) years, and which individuals sign upon

receipt of such wine.

(d)(1) No direct shipper may ship more than

a total of nine (Y) liters of wine to any individual

during any calendar month nor shall such

shipper ship more than twenty-seven (27) liters

of wine to any individual in any calendar year.

(2) No direct shipper may ship wine to an

address that is located in a jurisdiction that has

not authorized the sale of alecholic beverages by

local option referendum pursuant to § 57-3-106.

(3) Any shipment of wine pursuant to this

section shall be made only in containers which

clearly indicate on the exterior of the container,

13b

visible to a person at least three feet (3') away,

that the container “CONTAINS ALCOHOL:

SIGNATURE OF PERSON AGE 21 OR OLDER

REQUIRED FOR DELIVERY”.

(e)(1) A direct. shipper shall be responsible

for remitting all sales taxes due resulting from

any sale made under this section. In addition to

all sales taxes imposed upon such sale, a direct

shipper shall remit the gallonage tax as

imposed by § 57-3-302.

(2) The taxes levied on sales made by a

direct shipper as authorized by this section

shall become due and payable on the first day of

each month following the month during which

such sales occur, and shall become delinquent if

not paid on or before the 20th day of each such

following month. For the purpose of

ascertaining the amount of tax due, it is the

duty of any direct shipper licensed pursuant to

this section to transmit to the Commissioner of

Revenue appropriate returns on _ forms

prescribed by the commissioner.

(3) Upon request of the commission or its

designated agent, any direct shipper licensed

pursuant to this section shall provide to the

commission, under penalty of perjury, a list of

any wine shipped to an address within this

state, including the addressee.

(4) The commission may enforce the

requirements of this section by administrative

action, may suspend or revoke a direct shipper’s

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license, and may accept an offer in compromise

in lieu of suspension.

(5) A direct shipper that is found to have

violated any of the provisions of this title, in

addition to any fine imposed by the commission,

shall reimburse the commission for all costs

incurred in connection with the investigation

and administrative action, including the

out-of-pocket costs and reasonable personnel

costs.

(6) No direct shipper may avoid liability

under this section by subcontracting with a

third party to perform its obligations required

pursuant to this section.

(f) The commission and the Department of

Revenue are authorized to promulgate rules and

regulations which may be necessary to

implement this act, in accordance with Title 4,

Chapter &.

(g)(1) It is an offense for a person who does

not possess a direct shipper’s license to ship

wine to residents of this state.

(2) A violation of subdivision (1) is a class

EK felony, punishable by a fine only.

SECTION 2. Tennessee Code Annotated, Section

57-3-201, is amended by deleting the word “and” from

the end of subdivision (3); by deleting the period at the

end of subdivision (4) and substituting instead the

language “; and”, and by adding the following language

as a new subdivision (5):

L5b

(5) Direct shipper’s license.

SECTION 3. Tennessee Code Annotated, Section

57-3-402(b), is amended by deleting the first word,

“No”, and by substituting instead the language “Except

as provided in § 57-3-217, no”.

SECTION 4. For purposes of rulemaking, this act

shall take effect upon becoming a law, the public

welfare requiring it; for all other purposes this act

shall take effect July 1, 2009, the public welfare

requiring it.

PASSED: May 21, 2009

/s/ Ron Ramsey

RON RAMSEY

SPEAKER OF THE SENATE

/s/ Kent Williams

KENT WILLIAMS, SPEAKER

HOUSE OF REPRESENTATIVES

APPROVED this 4th day of June 2009

/s/ Phil Bredesen

PHIL BREDESEN, GOVERNOR

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APPENDIX C

STATE OF TENNESSEE

PUBLIC CHAPTER NO. 434

HOUSE BILL NO. 1160

By Representatives Fraley, Ulysses Jones,

Shepard, Odom

Substituted for: Senate Bill No. 1184

By Senator Haynes

AN ACT to amend Tennessee Code Annotated, Title

39, Chapter 17, Part 7 and Title 57, Chapter 3, relative

to transportation of alcoholic beverages.

BE IT ENACTED BY THE GENERAL ASSEMBLY

OF THE STATE OF TENNESSEE:

SECTION 1. Tennessee Code Annotated, Section

39-17-703(a), is amended by deleting the language

“does not have affixed to it a proper state of Tennessee

revenue stamp’ and substituting instead the language

“has not had all taxes attributable to such intoxicating

liquor paid”.

SECTION 2. Tennessee Code Annotated, Section

39-17-703(b), is amended by deleting the language

“that does not have a proper state of Tennessee

revenue stamp affixed thereto” and substituting

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instead the language “which is not accompanied by a

receipt or documentation from an entity holding a

license issued under §§ 57-3-204, 57-3-203, or

57-3-207”.

SECTION 3. Tennessee Code Annotated, Section

57-3-102, is amended by deleting the section in its

entirety and substituting instead the following:

Section 57-3-102.

(a) It is lawful to manufacture, store, sell,

distribute and purchase alcoholic beverages or

wine subject to proper licensing, payment of

taxes, compliance with the _ limitation,

regulations and conditions provided in this

chapter, in counties or municipalities of this

state which, by local option elections so permit

as hereinafter provided.

(b) It shall be lawful for an individual to

transport up to five gallons (5 gals.) of alcoholic

beverages or wine for personal or household use

of such individual in counties or municipalities

which have not permitted the sale of alcoholic

beverages or wine by local option elections as

hereinafter provided and amounts in excess of

five (5 gals.) if accompanied by a receipt or other

documentation demonstrating legal purchase or

transport from an entity licensed under

§§ 57-3-203, 57-3-204 or 57-3-207.

SECTION 4. Tennessee Code Annotated, Section

57-3-207(i), is amended by adding the following

language as a new sentence at the end of the

subsection:

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Any person transporting such wine in excess of five

gallons (5 gals.) shall have with such shipment a

receipt or other documentation demonstrating that the

wine was purchased from a winery as licensed herein.

SECTION 5. Tennessee Code Annotated, Section

57-3-304(b), is amended by deleting the language

“three gallons (3 gals.)” and substituting instead the

language “five gallons (5 gals.)”.

SECTION 6. Tennessee Code Annotated, Section

57-3-401, is amended by deleting the section in its

entirety and substituting instead the following:

Section 57-3-401.

(a)

(1) It is an offense for any person, firm or

’ corporation, other than a common carrier or

entity licensed under this title, to transport,

either in person or through an agent, employee

or independent contractor, untaxed alcoholic

beverages or wine as defined in § 57-3-101

within, into, through or from the state of

Tennessee in quantities in excess of five gallons

(5 gals.). Except as provided in § 57-3-103(b)

authorizing a person to. store alcoholic

beverages intended for a person’s personal or

social use, it is an offense for any person, firm,

corporation or association to possess untaxed

alcoholic beverages or wine in quantities in

excess of five gallons (5 gals.). A violation of this

subdivision (1) is a Class E felony.

19b

(2) Any person, firm, corporation, or

association transporting any alcoholic beverages

or wine within or into this state shall bear the

burden of proof that the taxes imposed by this

title on alcoholic beverages or wine have been

paid. A_ receipt or other documentation

demonstrating Jegal purchase or transport from

an entity licensed under §§ 57-3-203, 57-3-204

or 57-3-207 shall be adequate proof that such

taxes have been paid.

(b)

(1) It is an offense for any person, firm,

corporation or association to import, ship,

deliver or cause to be imported, shipped or

delivered into this state any alcoholic beverages

upon which the tax imposed by this title has not

been paid or where such transportation is not

authorized under this title to an _ entity

possessing a license issued under this title. A

violation of this subdivision (1) is a Class E

felony.

(2) Except as provided in § 57-3-207 for

purchases made by an individual at a winery

licensed pursuant to such section, and

notwithstanding the prohibition in subdivision

(b)(1), it shall be lawful for any individual to

transport not more than five gallons (5 gals.) of

alcoholic beverages or wine into or within this

state for the personal or household use of that

individual.

SECTION 7. Tennessee Code Annotated, Section

57-3-402(d), is amended by deleting the language

20b

“three gallons (3 gals.)” and substituting instead the

language “five gallons (5 gals.)”.

SECTION 8. Tennessee Code Annotated, Section

57-3-403(a), is amended by deleting the language

“three gallons (3 gals.)” and substituting instead the

language “five gallons (5 gals.)”.

SECTION 9. Tennessee Code Annotated, Section

57-3-403(a), is further amended by inserting in the

introductory sentence after the words “with this

section” and before the colon “:” the language “or as

otherwise permitted in this chapter” and in

subdivision (a)(2) by inserting after the language “of

this section,” the language “or as otherwise permitted

in this chapter”.

SECTION 10. Tennessee Code Annotated, Section

57-3-411(b), is amended by deleting the language “one

gallon (1 gal.)” and substituting instead the language

“five gallons (5 gals.).”

SECTION 11. Tennessee Code Annotated, Section

57-9-201(a), is amended by adding the language “in

excess of five (5) gallons” after the language “alcoholic

beverages of more than five percent (5%) alcohol”; and

by deleting the language “purchased or obtained from

a licensed Tennessee retailer or wholesaler” and by

substituting instead the language “purchased or

obtained from an entity holding a license issued under

§§ 57-3-204, 57-3-203, or 57-3-207”.

SECTION 12. If any provision of this act or the

application thereof to any person or circumstance 1s

held invalid, such invalidity shall not affect other

provisions or applications of the act which can be given

21b

effect without the invalid provision or application, and

to that end the provisions of this act are declared to be

severable.

SECTION 13. This act shall take effect upon

becoming a law, the public welfare requiring it.

PASSED: May 26, 2009

/s/ Kent Williams es

KENT WILLIAMS, SPEAKER

HOUSE OF REPRESENTATIVES

/s/ Ron Ramsey

RON RAMSEY

SPEAKER OF THE SENATE

APPROVED this 12th day of June 2009

/s/ Phil Bredesen.

PHIL BREDESEN, GOVERNOR