358 F.3d 223 (2nd Cir. 2004), 02-9511, Swedenburg v. Kelly

Docket Nº:02-9511, 03-7089.
Citation:358 F.3d 223
Party Name:Juanita SWEDENBURG, in her own capacity, Juanita Swedenburg, as proprietor of Swedenburg Winery, a Virginia partnership, David Lucas, in his own capacity, David Lucas, as proprietor of The Lucas Winery, a California sole proprietorship, Patrick G. Fitzgerald, Cortes Derussy, Robin Brooks, Plaintiffs-Appellees, v. Edward F. KELLY, Chairman of the St
Case Date:February 12, 2004
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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358 F.3d 223 (2nd Cir. 2004)

Juanita SWEDENBURG, in her own capacity, Juanita Swedenburg, as proprietor of Swedenburg Winery, a Virginia partnership, David Lucas, in his own capacity, David Lucas, as proprietor of The Lucas Winery, a California sole proprietorship, Patrick G. Fitzgerald, Cortes Derussy, Robin Brooks, Plaintiffs-Appellees,

v.

Edward F. KELLY, Chairman of the State Liquor Authority, Division of Alcoholic Beverage Control, State of New York, in his official capacities, Lawrence J. Gedda, Commissioner of the New York State Liquor Authority, Division of Alcoholic Beverage Control, State of New York, in his official capacities, Joseph Zariello, Commissioner of the New York State Liquor Authority, Division of Alcoholic Beverage Control, State of New York, in his official capacities, Defendants-Appellants,

CHARMER INDUSTRIES, INC., Premier Beverage Company LLC, Peerless Importers Inc, Local 2D of the Allied Food and Commercial Workers International Union, Eber Brothers Wine and Liquor Corp, Metropolitan Package Store Association, Inc. Intervenor-Defendants-Appellants.

Nos. 02-9511, 03-7089.

United States Court of Appeals, Second Circuit

February 12, 2004

Argued: Sept. 3, 2003.

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Clint Bolick, Institute for Justice, Washington, District of Columbia (William M. Mellor, Steven M. Simpson, Institute for Justice, Lance J. Gotko, Friedman Kaplan Seiler & Adelman LLP, New York, New York, on the brief) for Plaintiffs-Appellees.

Deon J. Nossel, Assistant Solicitor General, Department of Law, State of New York, New York, New York (Eliot Spitzer, Attorney General for New York State) (Caitlin J. Halligan, Solicitor General, Michael S. Belohlavek, Deputy Solicitor General, on the brief) for Defendants-Appellants.

Randy M. Mastro, Gibson, Dunn & Crutcher LLP, New York, New York (Michael G. Honeymar, Jr., Gibson, Dunn & Crutcher, LLP, New York, New York, Deborah A. Skakel, Victoria A. Kummer, Dickstein Shapiro Morin & Oshinsky LLP, New York, New York, J. Warren Mangan, O'Connor & Mangan, P.C., Long Island City, New York, Robert M. Heller, Kramer Levin Naftalis & Frankel LLP, New York, New York, Alan J. Gardner, Verini & Gardner, New York, New York, John F. O'Mara, Davidson & O'Mara, Elmira, New York, on the brief) for Intervenor-Defendants-Appellants Peerless Importers Inc., Charmer Industries, Inc., Local 2d of the Allied Food and Commercial Workers International Union, Premier Beverage Company LLC, Metropolitan Package Store Association, Inc., and Eber Brothers Wine & Liquor Corp.

Howard Graff, Dickstein Shapiro Morin & Oshinsky LLP, New York, New York for Intervenor-Defendant-Appellant Charmer Industries, Inc.

Frederick P. Schaffer, Esq., New York, New York for City University of New York, State University of New York, Fordham University, and St. Francis College, Amicus Curiae.

Louis R. Cohen, Wilmer Cutler & Pickering, Washington, District of Columbia (C. Boyden Gray, Todd Zubler, on the brief) (M. Craig Wolf, Wine & Spirits Wholesalers of America, Inc., Washington, District of Columbia, of counsel) for Wine and Spirits Wholesalers of America, Inc., National Association of Beverage Importers, American Beverage Licensees, National Beer Wholesalers Association, Coalition of Licensed Beverage Associations, and Presidents' Forum on the Beverage Alcohol Industry, Amicus Curiae.

Elizabeth C. Dribusch, Glenmont, New York (Kathleen S. Holland on the brief) for New York Farm Bureau, Inc., Amicus Curiae.

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Robert S. Getman, New York, New York for Wine America, Amicus Curiae.

Leah B. Warnick, McKenna Long & Aldridge LLP, Washington, District of Columbia (Michael J. Bearman, Daniel G. Jarcho, on the brief) for Consumer Alert, Amicus Curiae.

Kenneth W. Starr, Kirkland & Ellis, Washington, District of Columbia (Kannon K. Shanmugam, Susan Kearns, Kirkland & Ellis, Tracy K. Genesen, Kirk E. Trost, Miller Owen & Trost, Sacramento, CA, on the brief) for Family Winemakers of California and Coalition for Free Trade, Amicus Curiae.

Before: NEWMAN, SOTOMAYOR, and WESLEY, Circuit Judges.

WESLEY, Circuit J.

On December 6, 1933, the New York Times declared that "[p]rohibition of alcoholic beverages as a national policy ended at 5:32 1/2 p.m. Eastern Standard Time" when Utah became the thirty-sixth state to ratify the Twenty-first Amendment. Final Action at Capital, N.Y. TIMES, Dec. 6, 1933, at 1. Utah had seen fit to delay its vote so that it might have the "honor" of ending the Prohibition era--Pennsylvania and Ohio had ratified the Amendment earlier that day. As the nation prepared to return to the legal use of alcohol, extra quotas of Canadian whiskies were made ready at the border while leaders of the Anti-Saloon League lamented that the sponsors of repeal would have to accept responsibility for the "evils of liquor." Id. at 2. The noble experiment, as President Hoover had called it, was at an end.

The Twenty-first Amendment is unequaled in our constitutional experience--it repeals one constitutional provision and creates an exception to another. The Amendment was not a narrow legislative delegation of federal authority; it was the will of a nation speaking through its constitutional process. The Amendment brought an end to Prohibition while reaffirming the states' power to control the delivery or use of alcohol within their borders. Section 2 of the Twenty-first Amendment prohibits "[t]he transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof." U.S. Const. amend XXI, § 2. The language of this simple and straightforward amendment has not changed in the last seventy years. But the jurisprudence that gives the Amendment its life and effect has changed its sweep.

This case requires us to reconcile the competing demands of the Twenty-first Amendment's grant of authority to the states to regulate the intrastate traffic of alcohol, with the power reserved to Congress under the Commerce Clause "[t]o regulate Commerce ... among the several States." U.S. Const. art. 1, § 8, cl. 3. Thus, we must determine whether New York's alcohol regulatory regime, insofar as it relates to the direct shipment of wine to New York consumers, is properly within the scope of section 2 of the Twenty-first Amendment, such that it is exempted from "the normal operation of the Commerce Clause," or more precisely, the dormant Commerce Clause. Craig v. Boren, 429 U.S. 190, 206, 97 S.Ct. 451, 50 L.Ed.2d 397 (1976). We conclude that the challenged regime is within the ambit of the Twenty-first Amendment and also does not violate the Privileges and Immunities Clause. We hold, however, that section 102(1)(a) of the State's regulatory regime violates the First Amendment insofar as it prohibits all commercial speech pertaining to the sale of alcoholic beverages directed to New York consumers by unlicensed entities.

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BACKGROUND

A. New York's Regulatory Regime

Shortly following the ratification of the Twenty-first Amendment, New York, like most states, adopted a three-tiered system for the sale and distribution of alcoholic beverages. See N.Y. Alco. Bev. Cont. Law § 100(1) (McKinney 2000). One of the fundamental principles of the system is that all sales of alcohol within New York must be made to or by state-licensed entities. To this end, section 100(1) of New York's Alcoholic Beverage Control Law (the "ABC Law") provides that "[n]o person shall manufacture for sale or sell at wholesale or retail any alcoholic beverage within the state without obtaining the appropriate license therefor required by this chapter." Id. Section 102(1)(c) of the ABC Law also provides in relevant part that "[n]o alcoholic beverages shall be shipped into the state unless the same shall be consigned to a person duly licensed hereunder to traffic in alcoholic beverages."1 Id. In addition, the ABC Law prohibits a common carrier or any other person from bringing or carrying any alcoholic beverages into the state "unless the same shall be consigned to a person duly licensed hereunder to traffic in alcoholic beverages." Id. § 102(1)(d).

Generally, the license application process is rigorous to ensure that only reputable individuals and their companies enter the alcoholic beverage trade. Applicants must identify any person with an interest in the business along with the sources of funds used in the licensed business. Id. § 110(1)(g). Licensees must also post an appropriate penal bond that may be subject to forfeiture for violation of the ABC Law or State Liquor Authority ("SLA") regulations. Id. § 112; N.Y. Comp.Codes R. & Regs. tit. 9, §§ 81.1-81.7 (2003). A conviction for a felony or certain misdemeanors precludes a person from obtaining a license, N.Y. Alco. Bev. Cont. Law § 126(1) (McKinney 2000), and any person who commits a violation of the ABC Law cannot obtain a license for a period of two years. Id. § 126(5). Additionally, licensees must maintain adequate books and records on their premises and make them available for inspection by the SLA. Id. §§ 103(7), 104(10), 105(15), 106(12). These requirements facilitate the SLA's role in generating and collecting tax revenue, and in ensuring that licensees comply with the provisions of New York's regulatory scheme.

Section 76 of the ABC Law sets forth the requirements for obtaining a New York winery license. As defined under the ABC Law, a licensed winery is one that has paid the required licensing fee, id. § 76, and "has and maintains a branch factory, office or storeroom within the state of New York and receives wine in this state consigned to a United States government bonded winery, warehouse or...

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