In first alcohol case citing Tennessee Retailers, 8th Circuit allows farm wineries challenge to Minnesota requirement for majority in-state wine ingredients. The floodgates for suits against state alcohol laws are opening.
Mark Sorini over at the excellent alcohol policy and legal blog Alcohol Law Advisor (if you’re not following it, you should) has great coverage and prescient insight regarding how the Tennessee Retailers case has provided a roadmap for challenges to state alcohol statutes and regulations.
The 8th Circuit’s recent decision in Alexis Bailly Vineyard v. Harrington aptly bolsters this prediction by summarizing the Tennessee Retailers as it applies the farm wineries’ challenge to a statutory requirement that farm winery licensees produce wine with a majority of ingredients grown or produced in Minnesota – arguing that the requirement for in-state ingredients violates the Dormant Commerce Clause. In discussing the State’s requirement, the Court said:
What it cannot do [the State]—and what the Farm Wineries allege it has done—is condition a license on compliance with unconstitutional discrimination against out-of-state grape growers. See Tenn. Wine and Spirits Retailers Assoc’n v. Thomas, 139 S. Ct. 2449, 2470 (2019) (“[T]he Court has acknowledged that § 2 [of the Twenty-first Amendment] grants states latitude with respect to the regulation of alcohol, but the Court has repeatedly declined to read § 2 as allowing the states to violate the ‘nondiscrimination principle.’ ”).
In the recent decision, the Court did not decide the issue regarding the requirement, rather the challenge and appeal involved allowing the farm wineries to proceed with their challenge by overturning a district court order holding that they lacked standing to challenge the Minnesota requirement that they produce their wine with a majority of Minnesota grown ingredients because they could have chosen to obtain a wine manufacturer license instead of a farm winery license which would allow them to make wine regardless of the origin of the grapes or other ingredients.
We wrote about this case back in April – you can read our discussion of the case here.
The district court had granted summary judgment to the State holding that while they had proven an injury in fact (the potential inability to make wine if the State Commissioner did not grant them an annual reprieve from the in-state requirement) they had not shown that their injury was “fairly traceable” to the in-state requirement based on the availability of the wine manufacturer’s license. The 8th Circuit disagreed that this fact was relevant to the “traceability” of the farm wineries’ injuries holding that the State’s imposition favoring in-state growers and ingredients bore enough of a causal connection because it was the restraint that could potentially keep them from making and selling wine in any year in which they cannot source enough in-state ingredients and do not receive special dispensation waiving the requirement from the State Commissioner.
The Farm Wineries, who wish to operate unencumbered by the allegedly unconstitutional constraint imposed by the in-state requirement, have alleged injuries that are fairly traceable to that provision.
This means the farm wineries have standing to pursue their suit and for that reason, the Court reversed the district court and remanded the case for further proceedings to assess whether the provision requiring the use of the majority in-state ingredients violates the Dormant Commerce Clause by specifying differential treatment between in-state and out-of-state economic interests.
You can read the 8th Circuit’s opinion here.
Surely this suit is the first of many, some new and some pending, that will assess how far the rationales expressed in Tennessee Retailers can stretch to keep certain states’ requirements favoring in-state interests, like these and like prohibiting out-of-state retailers and wholesalers from selling into their states.