Indiana alcohol regulatory body enjoined from enforcing in-state residency requirements for packaged liquor retailer licenses. Tennessee Wine applied means some regular state arguments for statutory justification must be rejected and cannot satisfy health and safety analysis. Bonus: we’ve got the docs for you.

Upholding the rulings of Granholm and Tennessee Wine, A Federal Court in Indiana has enjoined the Indiana Alcohol and Tobacco Commission from enforcing a section of the Indiana Code that requires in-state residency for a portion of any packaged liquor retail licensee:

The challenged statute states:

The commission shall not issue an alcoholic beverage dealer’s permit of any type for the premises of a package liquor store to a limited liability company unless:

(1) at least sixty percent (60%) of the outstanding membership interest in the limited liability company is owned by persons who have been continuous and bona fide residents of Indiana for five (5) years; and

(2) the membership interest described in subdivision (1) constitutes a controlling interest in the limited liability company. Ind. Code § 7.1-3-21-5.4(b)

In ruling against the alcohol regulator and in favor of Indiana Fine Wine & Spirits (a Total Wine company), the District Court applied the Commerce Clause principles enunciated in Granholm and Tennessee Wine finding both that the measure discriminated against interstate commerce by treating in-state and out-of-state interests for liquor licenses differently and also that the proposed justifications put forth for the provision by the Indiana Attorney General’s office in looking to uphold the statute could be accomplished by other, less harmful means, and that the state – ala Tennessee Wine – could not rely on the stated goals of curtailing alcohol abuse, collecting tax revenues, and preventing underage drinking to support a health-and-safety argument under the Tennessee Wine standards because those justifications are constitutionally inadequate as health-and-safety justifications pursuant to Tennessee Wine:

“IFWS is highly likely to succeed on the merits of its claims. As described above, the Supreme Court’s recent decisions in Granholm and Tennessee Wine make it clear that the Twenty-First Amendment does not affect the basic non-discrimination principle of the dormant Commerce Clause, and residency requirements for alcoholic beverage licenses are subject to that principle. Where a statute on its face discriminates against out-of-state interests in violation of the dormant Commerce Clause, the statute can only be saved by the Twenty-First Amendment if there is a “legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.”  Granholm, 544 U.S. at 489; see also  Tennessee Wine, 139 S. Ct. at 2474–75. On its face,  Indiana Code § 7.1-3-21-5.4(b) discriminates against out-of-state limited liability companies. The ATC’s only proffered reasons to support the statute—curtailing alcohol abuse, preventing underage drinking, and collecting tax revenues—already have been determined to be constitutionally inadequate. See  Tennessee Wine, 139 S. Ct. at 2474–76. Thus, the Court determines that IFWS is highly likely to succeed on the merits and it has no adequate remedy at law.”

An interesting note from the opinion – apparently a previous Attorney General’s opinion even prior to Tennessee Wine had already concluded that the residency requirement was invalid under Granholm’s reasoning:

“IFWS directs the Court’s attention to an 2016 advisory letter from then-Indiana Attorney General Greg Zoeller to the ATC, wherein Attorney General Zoeller advised that the statute requiring in-state residency for corporations to receive an alcoholic beverages permit is, on its face, violative of the dormant Commerce Clause (Filing No. 1-1). Relying on the Granholm decision, Attorney General Zoeller opined that the statute did not serve a legitimate local purpose that could not be adequately served by reasonable non-discriminatory alternatives. Attorney General Zoeller noted in his letter to the ATC that there was “no apparent relationship” between the in-state residency requirement and “collecting revenue, inspecting inventory, monitoring sales practices, or preventing underage drinking.” Id. at 5.”

It is likely Indiana will try to appeal this one, which means the 7th Circuit could get a chance to address Granholm and Tennessee Wine before the Illinois Lebamoff case gets to review. One thing the parties may want to consider is whether the order entered by the District Court meets the Rule 65(d) requirement that hung-up the litigants in the MillerCoors corn syrup litigation and kept them from getting a speedy opinion as the 7th Circuit interprents Rule 65(d) to require the injunction be entered as a separate paper.

But what do I know…

It’s not clear why some state regulators take such a dim view of Supreme Court precedent, or why lower courts are want to apply it in the general course – the Sixth Circuit’s recent decision to not adhere to Tennessee Wine’s demand for evidence and proof based decision making when confronting Commerce Clause issues in their Lebamoff opinion is a prime example. There, they chose to attempt to side-step the analysis and just assumed that anything involving a certain set three-tier system was valid. A point not only unfounded in the law (they looked to dicta to support it) but also one unfounded by reasoned analysis and good principles. It is easy to overlook the requirement, but counsel pressing causes for greater access and less restrictions from States are well reminded of this point from Tennessee Wine:

“In Tennessee Wine, the United States Supreme Court explained that, when a state liquor law is facially discriminatory, courts consider “whether the challenged requirement can be justified as a public health or safety measure or on some other legitimate nonprotectionist ground.”  139 S. Ct. at 2474. States cannot meet this test with “mere speculation” or “unsupported assertions,” and “[w]here the predominant effect of a law is protectionism, not the protection of public health or safety, it is not shielded by § 2” of the Twenty-First Amendment. Id.”

Here are the documents:

Ashley Brandt

Hi there! I’m happy you’re here. My name is Ashley Brandt and I’m an attorney in Chicago representing clients in the Food and Beverage, Advertising, Media, and Real Estate industries. A while back I kept getting calls and questions from industry professionals and attorneys looking for advice and information on a fun and unique area of law that I’m lucky enough to practice in. These calls represented a serious lack of, and need for, some answers, news, and information on the legal aspects of marketing and media. I've got this deep seeded belief that information should be readily available and that the greatest benefit from the information age is open access to knowledge... so ... this blog seemed like the best way to accomplish that. I enjoy being an attorney and it’s given me some amazing opportunities, wonderful experiences, and an appreciation and love for this work. I live in Chicago and work at an exceptional law firm, Goldstein & McClintock, with some truly brilliant people. Feel free to contact me at any time with any issues, comments, concerns… frankly, after reading this far, I hope you take the time to at least let me know what you think about the blog and how I can make it a better resource.

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