Illinois Federal Court Upholds Three-Tier System Against Out-of-State Retailer Shipping Challenge
The Northern District of Illinois has weighed in on the ongoing national fight over state laws that bar out-of-state retailers from shipping alcohol directly to in-state consumers. In Freehan v. Berg (No. 22-CV-4956, Sept. 25, 2025), Judge Jeremy Daniel rejected the challenge brought by Washington retailer Full Pull Wines and two Illinois collectors, upholding Illinois’ three-tier system and granting summary judgment for the Illinois Liquor Control Commission and the intervening Wine and Spirits Distributors of Illinois. The court’s opinion is a full-throated endorsement of Illinois’ regulatory scheme, even while acknowledging that the rules are facially discriminatory against out-of-state businesses.
The plaintiffs argued that Illinois’ in-state physical presence requirement violates the dormant Commerce Clause by cutting off Illinois consumers from accessing out-of-state retailers. The court did not hesitate in recognizing the discriminatory nature of the statute—Illinois retailers can ship statewide, while out-of-state retailers cannot. But the court, citing both Granholm and the Seventh Circuit’s Lebamoff decision, moved quickly to the second step of the analysis: whether Illinois had put forth concrete, legitimate, non-protectionist justifications for its scheme.
On that score, Illinois presented a strong evidentiary record. Affidavits from Liquor Control Commission officials laid out the way the three-tier system enables oversight, citing nearly 12,000 annual inspections and a measurable violation rate that could not be replicated if sellers operated beyond Illinois’ borders. The testimony emphasized that regulators cannot rely on technology alone—physical inspections are required to police unlawful sourcing and underage sales. An expert report from Dr. William Kerr supplied the economic data, showing that Illinois’ significantly higher excise taxes generate around $280 million annually and demonstrably reduce alcohol-related harms such as drunk driving, domestic violence, and mortality. The court admitted Dr. Kerr’s report while excluding much of the plaintiffs’ expert evidence, leaving the state’s justifications largely unrebutted.
Perhaps most significant for those following the national litigation landscape, Judge Daniel did not shy away from addressing the “nondiscriminatory alternatives” prong. Plaintiffs pressed the idea that Illinois could simply tax shipments, require bonds, and audit out-of-state retailers. The court rejected these proposals, concluding they would require Illinois to construct an entirely new enforcement apparatus outside the three-tier system—hardly the “easy alternatives” contemplated by Commerce Clause precedent. This explicit embrace of the nondiscriminatory alternatives step matters. Since Tennessee Wine, courts and commentators have debated whether the full dormant Commerce Clause framework—including the “reasonable nondiscriminatory alternatives” inquiry from Granholm—still governs alcohol cases. The Freehan court had no hesitation in applying it. The analysis reinforces that Granholm remains fully in play and that courts expect plaintiffs not only to prove discrimination but also to show that states could meet their legitimate regulatory goals by easier means.
The opinion also shows clear alignment with Judge Scudder’s concurrence in the Seventh Circuit’s Chicago Wine Co. v. Braun, decided earlier this year, where he found Indiana’s ban on out-of-state retailer shipping justifiable on temperance and enforcement grounds. By crediting Illinois’ concrete regulatory and public health evidence and finding no realistic alternatives, Judge Daniel added another decision to the long list of federal courts upholding these laws.
For industry participants—whether retailers seeking to expand into new markets, distributors relying on the integrity of the three-tier system, or consumers frustrated by limited access to rare bottles—the decision is a reminder of just how steep the uphill climb remains. The court closed by granting judgment to Illinois, underscoring that while the law is discriminatory, it is also defensible. Until the Supreme Court revisits the issue, the fractured circuit landscape will continue with regard to the rationale for some of these decisions however the holdings are all coming out the same and Illinois has now put down a clear marker that the nondiscriminatory alternatives test remains part of the doctrine, and that robust evidentiary showings by states will carry the day.
