7th Circuit Upholds a Ban on In-State Retailers Shipping to In-State Customers via Third-Party Carrier

1850 Cowperthwait – Mitchell Map of IndianaSince Granholm v. Heald, we’ve seen a piecemeal erosion of state imposed restrictions on the interstate shipment of wine that hasn’t really found its way to an express inclusion of beer an liquor.  People should be excited about these cases.  Not just because they’re changing the way individuals have access to a new, freer, market for alcohol, but also because they’re consistently decided on grounds that represent a tour de force in Constitutional law pitting citizens utilizing the commerce clause or the supremacy clause against some state restriction grounded in the state’s rights under the 21st Amendment.

In one of these cases, the 7th Circuit recently found against Indiana wine retailers who wanted to ship directly to in-state customers in violation of an Indiana law stating that retailers needed to deliver the product themselves and couldn’t use a third-party carrier:

IC 7.1-3-10-7 Scope of permit
     Sec. 7. … (c) A liquor dealer may deliver liquor only in permissible containers to a customer’s residence or office in a quantity that does not exceed twelve (12) quarts at any one (1) time. However, a liquor dealer who is licensed under IC 7.1-3-10-4 may deliver liquor in permissible containers to a customer’s residence, office, or designated location. This delivery may only be performed by the permit holder or an employee who holds an employee permit. The permit holder shall maintain a written record of each delivery for at least one (1) year that shows the customer’s name, location of delivery, and quantity sold.
    

The case, Lebamoff Enterprises, Inc. v. The Indiana Alcohol and Tobacco Commission, upholds a district court ruling and finds that the proscription against retailers using third-party carriers is valid because the regulation on the delivery of alcohol and the regulations Indiana put in place regarding that delivery represent a strong state interest in alcohol policy that falls within the state’s 21st Amendment powers which are not preempted by the supremacy clause (the 21st Amendment gives the state the right to regulate this alcohol-related behavior and it isn’t in conflict with some federal law).  The Court also held that the commerce clause wasn’t implicated because the law challenged and the challenge brought involved intra-state parties and as an intra-state dispute – not the interstate style dispute necessary to invoke the commerce clause.

More importantly, Judge Posner (a blogger himself) issued the opinion and took the time, to make two remarks regarding this challenge – the first is that this debate is consistently about wine and not beer or liquor:

The state law challenged in the present case does not regulate motor carriers, but it forbids liquor stores to use motor carriers to deliver wine (also beer and liquor, Ind. Code 7.1-3-5-3(d), 7.1-3-10-7(c), products that Cap N’ Cork also sells, but for unexplained reasons the company doesn’t challenge the beer and liquor provisions), and the effect is to prohibit motor carriers from offering a service they’d like to offer.

The second was that if this was a case brought by a third-party carrier, seeking access to deliver wine under the statute, it may have come out differently:

We might have a different case if a motor carrier were asking the state to allow it to opt into the same training requirement imposed on drivers employed by retailers of wine. That would both weaken the attempt to justify the challenged law on the basis of the Twenty-First Amendment (which so far as relates to this case merely allows a state to take reasonable measures for preventing underage drinking), and discriminate without apparent justification against motor carriers. But as far as appears, no motor carrier has sought such equal treatment with the retailers or been denied it and sued. No motor carrier is a party to this case.

Readers interested in the debate over the powers of state regulation and enforcement should consider these two comments, the former implicit and the latter explicit, a foreshadowing of the cases to come.