Tennessee Wine and Spirits Retailers v TABC

In our ongoing coverage of the Supreme Court this term (apparently we’ve turned into a news feed), this week the United States Supreme Court weighed in on alcohol beverage distribution issues (Tennessee Wine and Spirits Retailers Assn v. Tennessee Alcohol Beverage Commission, decided June 26, 2019). Justice Alito wrote the opinion for the majority (7-2), Justice Gorsuch wrote a dissent joined by Justice Thomas.

The case is somewhat convoluted, so I’ll try to stay focused on what it means for you, the Wisconsin retailer/wholesaler/manufacturer/interested person.

Under Tennessee law, you can only get a liquor license if you have lived in the state for at least 2 years, or, if you are a corporation, if all of your stockholders are residents of Tennessee. Total Wine and Spirits and Kimbrough Fine Wine both applied for liquor licenses for off-premise retail stores. Total Wine and Spirits is an LLC owned by Maryland residents; Kimbrough is owned by two people who had just moved to Tennessee from Utah – neither applicant satisfied the residency requirements.

The Supreme Court ruled that Tennessee law violates the Constitution and that a residency requirement for approval of liquor licenses is not permitted.

Wisconsin law has a 90-day residency requirement; or for corporations, that an appointed agent of the corporation be a Wisconsin resident for at least 90 days.

The court based its decisions primarily on an interpretation of the Constitution called “the Dormant Commerce Clause.” Article I, Section 8, Clause 3 of the Constitution is the Commerce Clause and says (basically) that Congress (not the states) gets to regulate commerce between states (interstate commerce). The Court has inferred from this clause that this means that states cannot unduly restrict interstate commerce. This inference is called The Dormant Commerce Clause and basically means that states cannot discriminate against other states; according to the Court: “… removing state trade barriers was a principal reason for the adoption of the Constitution. Under the Articles of Confederation, States notoriously obstructed the interstate shipment of goods.” In other words, in the United States, one state cannot prevent goods (or people) from another state from entering its territory without a “legitimate local purpose.”

” Tennessee’s 2-year durational-residency requirement plainly favors Tennesseans over nonresidents, and neither the Association nor the dissent below defends that requirement under the standard that would be triggered if the requirement applied to a person wishing to operate a retail store that sells a commodity other than alcohol.”

Tennessee tried to defend the law by saying that the 21st Amendment gives states, not the federal government, the right to regulate alcohol within its borders. But the Court held, probably not surprisingly, that the grant of the 21st Amendment does not supersede other Constitutional rights (i.e., the Dormant Commerce Clause). By way of analogy, the Court opined that it would be ridiculous to state that the 21st Amendment meant that states could discriminate based on race in handing out liquor licenses.

So, that’s it in a nutshell. I’m sure law clerks everywhere will condemn me for being overly general in my summary.

What does it mean for Wisconsin’s law. Well, we already know that parts of Chapter 125 are blatantly unconstitutional based on the (Dormant) Commerce Clause. But it also means that Wisconsin’s 90-day requirement is also, possibly, unconstitutional. It may also mean that Wisconsin’s requirement that wholesaler, winery and distillery permits can only be issued to Wisconsin corporations may also be unconstitutional.

2 thoughts on “Tennessee Wine and Spirits Retailers v TABC”

  1. Very interesting. I’ve been wondering for several years when ch 129.29, sec 3, sub g requiring WI breweries to only sell other breweries beers only if it was manufactured in WI. Might this provision be challenged on the same grounds? Just like in Granholm v Heald.

    • Page, I’ve actually talked to some folks about this. The general consensus seems to be that it’s better not to push it in the courts, but to get some legislative fixes behind the scenes. The concern is that if a court strikes it down (which they would because it is blatantly unconstitutional), they will strike serving other beer (beer not manufactured on the premises) in the taproom entirely, not open it up to beer from other states as you might hope. Plus, I don’t think (Wisconsin) breweries particularly care a lot about this, so it would take a non-Wisconsin brewery to challenge it and it’s just not clear there’s enough benefit to an outside brewery for them to waste money on challenging it.

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