Breaking Down the Dormant Commerce Clause Case Against Unevenly Applied Rights Between In-State and Out-of-State Manufacturers: Buckel Family Wine v. Mosiman

In a decision from the United States District Court for the Southern District of Iowa pointing out once again that the issue is not with the three-tiered system, but with a State’s unconstitutional application of exceptions to that system, the court addressed the constitutionality of Iowa’s wine licensing laws under the dormant Commerce Clause and the Twenty-first Amendment. The case, Buckel Family Wine LLC v. Mary Mosiman et al., underscores the ongoing tension between state alcohol regulations unevenly applied between in-state and out-of-state manufacturers and federal commerce protections. Here’s what happened and why it matters.

The Case in a Bottle

Buckel Family Wine LLC, a Colorado-based winery, sought to sell its wine directly to Iowa retailers. Under Iowa law, this would require a class “A” wine permit—available only to wineries with in-state premises. In contrast, Iowa wineries with the same permit can sell directly to local retailers without additional barriers. In essences, these wineries can self-distribute, bypassing the wholesaler tier. Buckel challenged this requirement, asserting it discriminates against interstate commerce, violating the dormant Commerce Clause of the U.S. Constitution.

The court agreed in part, finding that Iowa’s in-state premises requirement for a class “A” wine permit unjustly discriminates against out-of-state wineries and is unconstitutional.

Discrimination on Display

Iowa’s regulations are emblematic of state laws that subtly favor local businesses at the expense of outsiders. By restricting direct-to-retailer sales to only in-state wineries, Iowa creates an uneven playing field. This echoes the Michigan and New York laws struck down in Granholm v. Heald (2005), where similar provisions were deemed discriminatory and protectionist.

The court noted that Iowa’s requirement forces out-of-state wineries to either forgo the Iowa market or bear the prohibitive costs of establishing in-state operations. This results in a clear benefit to in-state wineries, increasing the price and limiting the availability of out-of-state wines for Iowa consumers.

A Toast to the Dormant Commerce Clause

Under the dormant Commerce Clause, state laws may not unduly burden interstate commerce. When applied to alcohol laws, courts balance this principle against the Twenty-first Amendment, which grants states broad power to regulate alcohol. However, as clarified in Granholm and reaffirmed in Tennessee Wine & Spirits Retailers Ass’n v. Thomas (2019), the Twenty-first Amendment does not authorize states to enact protectionist measures.

In this case, Iowa’s in-state premises requirement could not survive scrutiny. The court ruled that it discriminates against interstate commerce without being “reasonably necessary” to achieve legitimate public health or safety goals.

Iowa’s Arguments Fall Flat

Iowa defended its regulations by citing enforcement challenges, tax collection, and community connection as justifications. But the court found these arguments speculative and unsupported by “concrete evidence.” For instance:

• Tax collection and compliance: The court noted that Iowa already regulates out-of-state direct-to-consumer wine shipments effectively. The same mechanisms could apply to direct-to-retailer sales.
• Public health and safety: Advances in technology, like electronic reporting and remote audits, make it feasible to monitor out-of-state wineries without requiring in-state premises.

A Remedy with Limits

While striking down the discriminatory provision, the court avoided disrupting Iowa’s broader alcohol regulatory system. It ruled that out-of-state wineries with a class “A” permit may sell only wine they manufacture directly to Iowa retailers—ensuring compliance with the principles of the three-tier distribution system. Those of you used to wine shipping and manufacturing rules may recognize this as problematic for wine from states where a winery can buy shiners of others wine or may contract package for multiple brands… all would ostensibly be wine “manufactured” by that winery.

What This Means for the Industry

This decision marks another victory for out-of-state alcohol producers seeking fair access to local markets in the same manner that in-state alcohol manufacturers have access to those markets. It reinforces that state alcohol laws must align with constitutional commerce protections, even under the Twenty-first Amendment. For Iowa retailers and consumers, it opens the door to more diverse wine options while maintaining the integrity of the state’s regulatory framework.

The case is also a reminder to states crafting alcohol regulations: ensure policies are non-discriminatory and backed by concrete evidence, or risk being uncorked in court.

What’s Next?

The ruling provides Buckel Family Wine an avenue to compete in the Iowa market but may prompt broader reforms to Iowa’s wine licensing system. For now, wineries across the U.S. can raise a glass to another court decision affirming the importance of a level playing field in the interstate wine trade.

This case will undoubtedly ripple across the industry as stakeholders assess its implications for state alcohol laws nationwide. Stay tuned as the legal battle between local favoritism and interstate commerce continues to unfold.