Granholm v. Heald, Michigan Beer & Wine Wholesalers Ass'n v. Heald & Swedenburg v. Kelly (consolidated)
Both Michigan and New York have regulatory schemes that ban the direct shipment of out-of-state wine to in-state consumers. In Michigan, out-of-state wineries are only allowed to ship directly to wholesalers, while their in-state counterparts are allowed to ship directly to consumers. In addition, all parties wishing to access wholesalers must obtain a license from the state. The wholesale license costs $300 for out-of-state wineries and $50 for in-state wineries.
The New York regulatory scheme differs slightly. In New York, all wineries must be licensed to sell directly to consumers. To receive a license, a winery must pay certain regulatory fees, maintain an office within the state, and receive wine in a government-bonded winery, warehouse or storeroom located within the state.
Both regulatory schemes were challenged in federal district courts by out-of-state wineries and in-state wine consumers. The plaintiffs alleged that the state regulatory schemes violated the dormant Commerce Clause by discriminating against out-of-state wineries. In addition, the New York plaintiffs argued that the state regulatory scheme violated the Privileges and Immunities Clause by depriving New York residents of the same privileges enjoyed by residents of other states. The states, however, argued that their regulatory schemes are constitutional under the Twenty-first Amendment to the United States constitution.
In the Michigan case, the district court granted summary judgment in favor of the state and denied the plaintiffs' motion to reconsider. The plaintiffs appealed and the United States Court of Appeals reversed, holding the Michigan regulatory scheme was facially discriminatory towards out-of-state wineries and had the effect of benefiting in-state wineries. The court also found that the regulatory scheme was unconstitutional because it failed to fall “within the core of the State's power” under the Twenty-first Amendment.
In the New York case, the district court found the regulatory scheme directly discriminated against interstate commerce and did not “implicate the State's core concerns under the Twenty-first Amendment.” On appeal, the United States Court of Appeals for the Second Circuit reversed the lower court decision, holding the state regulatory scheme was within the ambit of powers granted by the Twenty-first Amendment and, therefore, exempt from the dormant Commerce Clause. In addition, the Court determined the regulatory scheme did not violate the Privileges and Immunities Clause because it operated without regard to residency.
Questions Presented:
Granholm v. Heald :
Under state law, the Michigan Liquor Control Commission generally bans out-of-state direct shipment of alcoholic liquor to consumers' doorsteps, but permits in-state licensed wineries to direct
ship to consumers, and out-of-state wineries to import through in-state licensed wholesalers. Out-of-state wineries may also petition the State Liquor Control Commission for an order permitting
them to ship wine directly to consumers in the State. Any denial of such a request may be appealed through the State court system. Section 2 of the 21st Amendment to the United States Constitution
expressly prohibits importation of alcoholic beverages into any state for delivery or use, in violation of the laws of the State. The Court of Appeals declared Michigan's alcoholic liquor
importation law facially unconstitutional in violation of the Commerce Clause. The question presented is:
Does Michigan's regulation of the importation of beverage alcohol under the 21st Amendment facially violate the Commerce Clause when it permits in-state licensed wineries to directly ship alcohol
to consumers, but requires out-of-state wineries to import its products through licensed in-state wholesalers and to sell its products through licensed retailers or request permission of the Liquor
Control Commission to bypass this distribution system and ship directly to consumers?
Michigan Beer & Wine Wholesalers Ass'n v. Heald :
Section 2 of the Twenty-first Amendment of the United States Constitution prohibits importation of alcoholic beverages into any state, for delivery or use therein, in violation of the laws thereof.
In the Webb-Kenyon Act, 27 U.S.C. ยง 122, Congress exercised its power under the Commerce Clause to impose essentially the same prohibition by federal statute. Michigan, like many other states,
generally prohibits the importation of alcoholic beverages by any unlicensed person. Michigan law permits licensed in-state wineries to ship wine directly to consumers, but does not, as a matter of
right, permit out-of-state wineries (which are not licensed by the state) to do so. An out-of-state entity may locate in Michigan and be licensed as an in-state winery. The Sixth Circuit ruled that
the Michigan statute is "facially discriminatory" and struck down the prohibition on importation, allowing Michigan consumers to order and receive wine from out-of-state sources without limitation.
The questions presented are:
1. Whether the Sixth Circuit erred in ruling (in conflict with a Seventh Circuit decision upholding a similar Indiana statute against the same challenge) that the Twenty-first Amendment and the
Webb-Kenyon Act do not authorize Michigan to enact statutes that prohibit the importation of alcoholic beverages by unlicensed persons, and that the Commerce Clause bars such statutes.
2. Whether the Sixth Circuit erred in ruling (in conflict with a Fourth Circuit decision with respect to a similar North Carolina statute) that the proper remedy for the alleged discrimination was
to invalidate the state's control over importation of alcoholic beverages rather than merely strike the offending exception for in-state wineries.
Swedenburg v. Kelly:
1. Does New York's discriminatory and protectionist prohibition against direct interstate shipment of wine to consumers violate the Commerce Clause of the U.S.
Constitution; and if so, is it "saved" by the 21st Amendment?
2. Does New York's discriminatory and protectionist prohibition against direct interstate shipment of wine to consumers violate the Privileges and Immunities Clause of the U.S. Constitution?
Decisions under Review:
Heald v. Engler (6th Circuit)
Swedenburg v. Kelly (2nd Circuit)
