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AN E-BULLETIN
LEGAL INFORMATION INSTITUTE -- CORNELL LAW SCHOOL
lii\@lii.law.cornell.edu
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The following decisions have just arrived via the LII's
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GRANHOLM v. HEALD
Web-accessible at:
http://straylight.law.cornell.edu/supct/html/03-1116.ZS.html
Argued December 7, 2004-Decided May 16, 2005
Opinion author: Kennedy
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SUPREME COURT OF THE UNITED STATES
GRANHOLM, GOVERNOR OF MICHIGAN, et al. v. HEALD et
al.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE SIXTH CIRCUIT
No. 03-1116.
Argued December 7, 2004-Decided May 16, 2005
Michigan and New York regulate the sale and importation of wine through three-
tier systems requiring separate licenses for producers, wholesalers, and
retailers.
These schemes allow in-state, but not out-of-state, wineries to make direct
sales
to consumers. This differential treatment explicitly discriminates against
interstate commerce by limiting the emerging and significant direct-sale
business.
Influenced by an increasing number of small wineries and a decreasing number of
wine wholesalers, direct sales have grown because small wineries may not produce
enough wine or have sufficient consumer demand for their wine to make it
economical for wholesalers to carry their products. In Nos. 03-1116 and 03-
1120, Michigan residents, joined by an intervening out-of-state winery, sued
Michigan officials, claiming that the State's laws violate the Commerce Clause.
The
State and an intervening in-state wholesalers association responded that the
direct-shipment ban was a valid exercise of Michigan's power under the Twenty-
first Amendment. The District Court sustained the scheme, but the Sixth Circuit
reversed, rejecting the argument that the Twenty-first Amendment immunizes
state liquor laws from Commerce Clause strictures and holding that there was no
showing that the State could not meet its proffered policy objectives through
nondiscriminatory means. In No. 03-1274, out-of-state wineries and their New
York customers filed suit against state officials, seeking, inter alia, a
declaration
that the State's direct-shipment laws violate the Commerce Clause. State liquor
wholesalers and retailers' representatives intervened in support of the State.
The
District Court granted the plaintiffs summary judgment, but the Second Circuit
reversed, holding that New York's laws fell within the ambit of its powers under
the Twenty-first Amendment. Here, respondents in the Michigan cases and
petitioners in the New York case are referred to as the wineries, while the
opposing parties are referred to as the States.
Held: Both States' laws discriminate against interstate commerce in violation of
the Commerce Clause, and that discrimination is neither authorized nor permitted
by the Twenty-first Amendment. Pp. 8-30.
(a) This Court has long held that, in all but the narrowest circumstances,
state
laws violate the Commerce Clause if they mandate "differential treatment of in-
state and out-of-state economic interests that benefits the former and burdens
the latter." Oregon Waste Systems, Inc. v. Department of Environmental Quality
of Ore., 511 U.S. 93, 99. Laws such as those at issue contradict the principles
underlying this rule by depriving citizens of their right to have access to
other
States' markets on equal terms. The Michigan system's discriminatory character
is obvious. It allows in-state wineries to ship directly to consumers, subject
only
to a licensing requirement, but out-of-state wineries, even if licensed, must go
through a wholesaler and retailer. The resulting price differential, plus the
possible inability to secure a wholesaler for small shipments, can effectively
bar
small wineries from Michigan's market. New York's scheme also grants in-state
wineries access to state consumers on preferential terms. It allows in-state
wineries to ship directly to consumers, but requires an out-of-state winery to
open a New York branch office and warehouse, which drives up its costs. Out-of-
state wineries are also ineligible for a "farm winery" license, which provides
the
most direct means of shipping to New York consumers. Pp. 8-12.
(b) Section 2 of the Twenty-first Amendment does not allow States to
regulate
direct shipment of wine on terms that discriminate in favor of in-state
producers.
The States' position is inconsistent with this Court's precedents and the
Amendment's history. Pp. 12-26.
(1) This Court invalidated many state liquor regulations before the
Eighteenth Amendment's ratification, finding either that the Commerce Clause
prevented States from discriminating against imported liquor, Scott v. Donald,
165 U.S. 58, or that States could not pass facially neutral laws that placed an
impermissible burden on interstate commerce, Bowman v. Chicago &
Northwestern R. Co., 125 U.S. 465. While States could ban domestic liquor
production, Mugler v. Kansas, 123 U.S. 623, such laws were ineffective because
they could not regulate imported liquor in its original package, Leisy v.
Hardin,
135 U.S. 100. To resolve this matter, Congress passed the Wilson Act, which
empowered the States to regulate imported liquor on the same terms as domestic
liquor. After this Court narrowly construed the Act to permit regulation of the
resale of imported liquor, not its direct shipment to consumers, Rhodes v. Iowa,
170 U.S. 412, Congress passed the Webb-Kenyon Act to close the direct-shipment
loophole, see Clark Distilling Co. v. Western Maryland R. Co., 242 U.S. 311. The
States argue that the Webb-Kenyon Act went further, removing any barrier to
discriminatory state liquor regulations, but that reading conflicts with Clark
Distilling's description of the Webb-Kenyon Act's purpose, which was simply to
extend the Wilson Act. Nor does the statute's text compel a different response.
At the very least, it expresses no clear congressional intent to depart from the
principle disfavoring discrimination against out-of-state goods. Last, and most
importantly, the Webb-Kenyon Act did not purport to repeal the Wilson Act, which
expressly precludes state discrimination. The Wilson Act reaffirmed, and the
Webb-Kenyon Act did not displace, the Court's Commerce Clause cases striking
down state laws that discriminated against out-of-state liquor. States were
required to regulate domestic and imported liquor on equal terms. Pp. 12-21.
(2) A brief respite from these legal battles brought on by the
Eighteenth
Amendment's ratification ended with the Twenty-first Amendment. The States
contend that 2 of the Twenty-first Amendment transfers to States the authority
to discriminate against out-of-state goods, but the pre-Amendment history
recited here provides strong support for the view that 2 only restored to the
States the powers they had under the Wilson and Webb-Kenyon Acts. The Twenty-
first Amendment's aim was to allow States to maintain an effective and uniform
system for controlling liquor by regulating its tran
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