RESPONDENT:Eleanor Heald et al.
LOCATION:City of New London Town Hall
DOCKET NO.: 03-1116
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Sixth Circuit
CITATION: 540 US 460 (2005)
ARGUED: Dec 07, 2004
DECIDED: May 16, 2005
Alan J. Gardner – for the private respondents.†
Clint Bolick – argued the cause for Petitioners in 03-1274
Caitlin J. Halligan – argued the cause for Respondents in 03-1274
Howard Graff – for the private respondents.†
J. Warren Mangan – for the private respondents.†
Katherine E. Becker – for the National Beer Wholesalers Association in Nos. 03-1116 and 03-1120 urging reversal in both cases and affirmance in No. 03-1274
Kathleen M. Sullivan – argued the cause for Respondents in 03-1116 & 03-1120
Miguel A. Estrada – for the private respondents.†
Michael D. Madigan – for the National Beer Wholesalers Association in Nos. 03-1116 and 03-1120 urging reversal in both cases and affirmance in No. 03-1274
Mark A. Perry – for the private respondents.†
Paul R. Romain – for the National Beer Wholesalers Association in Nos. 03-1116 and 03-1120 urging reversal in both cases and affirmance in No. 03-1274
Robert S. Getman – for Millbrook Vineyards & Winery as amicus curiae in No. 03-1274
Robert M. Heller – for the private respondents.†
Stephen M. Diamond – for the National Beer Wholesalers Association in Nos. 03-1116 and 03-1120 urging reversal in both cases and affirmance in No. 03-1274
Thomas L. Casey – argued the cause for Petitioners in 03-1116 & 03-1120
Victoria A. Kummer – for the private respondents.†
Facts of the case
Michigan and New York laws allowed in-state wineries to directly ship alcohol to consumers but restricted the ability of out-of-state wineries to do so. In separate cases groups sued the states and argued the laws violated the U.S. Constitution’s “dormant” commerce clause. The dormant commerce clause prohibited states from passing laws affecting interstate commerce, particularly laws favoring in-state business over out-of-state business. The states argued the laws were valid exercises of state power under the 21st Amendment, which ended federal Prohibition and allowed states to regulate alcohol importation. A federal district court ruled for Michigan. The Sixth Circuit Court of Appeals reversed and ruled the Michigan law violated the dormant commerce clause and did not advance the core concerns of the 21st Amendment (such as temperance). A separate federal district court ruled against New York. The Second Circuit Court of Appeals reversed and ruled the 21st Amendment allowed New York’s law.
Does a state law that allows in-state wineries to directly ship alcohol to consumers, but restricts the ability of out-of-state wineries to do so, violate the dormant commerce clause in light of the 21st Amendment?
Media for Granholm v. Heald
Audio Transcription for Opinion Announcement – May 16, 2005 in Granholm v. Heald
William H. Rehnquist:
The opinion of the Court in Granholm against Heald and companion cases will be announced by Justice Kennedy.
Anthony M. Kennedy:
As the Chief Justice indicated, the court is consolidated Granholm versus Heald, Michigan Beer and Wine Wholesalers versus Heald, and Swedenburg versus Kelley.
These are consolidated cases which challenge laws in Michigan and New York.
It simplifies the statement somewhat but suffice it to say here that each state, Michigan and New York, with different mechanisms forbids of severely restricts the sales of wine by out of state wineries directly to consumers.
The states however do allow direct sales to consumers by wineries located instate.
We consolidated the cases.
We granted certiorari on the following questions:
Does a state’s regulatory scheme that permits instate wineries directly to ship alcohol to consumers but restricts the ability of out-of-state wineries to do so violate the Dormant Commerce Clause in light of Section two of the Twenty-first Amendment?
The Court of Appeals for the Sixth Circuit invalidated the Michigan law.
The Court of Appeals for the Second Circuit sustained the New York law.
The first part of our analysis is whether these laws do discriminate against interstate commerce contrary to the mandated Commerce Clause.
The second part of the analysis is whether discriminatory state laws are permitted nevertheless by the Twenty-first Amendment.
We have little trouble concluding that the laws of both states do discriminate against interstate commerce in violation of well-established Commerce Clause principles.
Time and again, the court has held that in all but the narrower circumstances.
State laws violate the Commerce Clause if they mandate differential treatment of instate and out-of-state economic interests and if that discrimination benefits the instate interest and burdens the out-of-state interest.
This rule is essential to the foundations of the union.
The mere fact of non-residence should not foreclose a producer in one state from access to markets in other states.
States may not enact laws that burden out-of-state producers simply to give a competitive advantage to instate businesses.
The opinion of the court explains in more detail how the Michigan and the New York regulatory schemes in these cases do discriminate against out-of-state wine producers.
The state contends that nevertheless, their statutes are saved by Section 2 of the Twenty-first Amendment.
And Section 2 of that constitutional provision says as follows, the transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors in violation of the laws thereof is hereby prohibited.
The states’ position that this provision saves their laws is, we hold, inconsistent with our precedent and with the history of the Twenty-first Amendment.
The aim of the Twenty-first Amendment was to allow states to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use.
The Amendment did not give states the authority to pass uniform laws in order to discriminate against out-of-state goods, a privilege they have not enjoyed at any earlier time.
The court has held that state regulation of alcohol is limited by the non-discrimination principle of the Commerce Clause.
When a state’s statute directly regulates or discriminates against interstate commerce or when its effect is to favor instate economic interest over out-of-state interest, we have generally strucked down the statute without further inquiry.
The court decided a case called Bacchus Imports versus Dias, and that provides a particularly telling example of this proposition.
In that case, what was at issue was an excise tax enacted by Hawaii that exempted certain alcoholic beverages produced in that state.
The court rejected the argument that Hawaii’s discrimination against out-of-state liquor was authorized by the Twenty-first Amendment.
Despite attempts by the states to distinguish it in the instant case, Bacchus forecloses any contention that Section 2 of the Twenty-first Amendment immunizes discriminatory direct shipment laws from Commerce Clause scrutiny.
Anthony M. Kennedy:
Now, the states offered two primary justifications for restricting direct shipments from out-of-state wineries.
One is keeping alcohol out of the hands of minors and another is facilitating tax collection.
The states provide little evidence that the purchase of wine over the internet by minors is a problem.
Without concrete evidence, the direct shipping of wine is likely to increase alcohol consumption by minors.
We are left with the states’ unsupported assertions.
Under our precedence which requires the clearest showing to justify discriminatory state regulation, this is not enough.
The states’ tax collection justification is also insufficient.
While the states’ concerns are not wholly illusory, their regulatory objectives can be achieved without discriminating against interstate commerce.
Out-of-state licensees could be required to submit regular sales reports and to remit taxes.
Indeed, various stages use this approach for taxing direct interstate wine shipments and report no problems with tax collection.
States have broad power to regulate liquor under Section 2 of the Twenty-first Amendment.
This power, however, does not allow states to ban or severely limit the direct shipment of out-of-state wine while simultaneously authorizing direct shipment by instate producers.
We affirm the judgment of the Court of Appeals for the Sixth Circuit.
We reverse the judgment of the Court of Appeals for the Second Circuit and remand the case for further proceedings consistent with our opinion.
Justice Stevens has filed a dissenting opinion in which Justice O’Connor joins; Justice Thomas has filed a dissenting opinion in which the Chief Justice, Justice Stevens, and Justice O’Connor join.