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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2009

## Text

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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

12b

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

14b

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

16b

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

17b

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:

18b

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_0717%3A2. Public record. Not legal advice.