Cherry Hill Vineyards, LLC v. Lilly

• Decision Date: 24 December 2008
• Docket Number: No. 07-5128.,07-5128.
• Citation: 553 F.3d 423
• Parties: CHERRY HILL VINEYARDS, LLC; William G. Schneider, Jr.; John D. Reilly, Jr., Plaintiffs-Appellees, v. Christopher L. LILLY, in his official capacity as Executive Director of the Kentucky Office of Alcoholic Beverage Control, Defendant, Wine and Spirits Wholesalers of Kentucky, Inc., Intervening Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

553 F.3d 423

CHERRY HILL VINEYARDS, LLC; William G. Schneider, Jr.; John D. Reilly, Jr., Plaintiffs-Appellees, v. Christopher L. LILLY, in his official capacity as Executive Director of the Kentucky Office of Alcoholic Beverage Control, Defendant Wine and Spirits Wholesalers of Kentucky, Inc., Intervening Defendant-Appellant.

No. 07-5128.

United States Court of Appeals, Sixth Circuit.

Argued: September 18, 2008.

Decided and Filed: December 24, 2008.

ARGUED: Kenneth S. Handmaker, Middleton & Reutlinger, Louisville, Kentucky, for Appellant. James Alexander Tanford, Indiana University School of Law, Bloomington, Indiana, for Appellees.

ON BRIEF: Kenneth S. Handmaker, Kevin L. Chlarson, Middleton & Reutlinger, Louisville, Kentucky, Daniel R. Meyer, Louisville, Kentucky, for Appellant. James Alexander Tanford, Indiana University School of Law, Bloomington, Indiana, for Appellees. Carter G. Phillips, Sidley Austin LLP, Washington, D.C., Robert S. Jones, Office of the Attorney General, Frankfort, Kentucky, for Amici Curiae.

Before: CLAY and GRIFFIN, Circuit Judges; STAFFORD, Senior District Judge.^*

OPINION

CLAY, Circuit Judge.

Intervenor Wine and Spirits Wholesalers of Kentucky, Inc., appeals the district court's grant of partial summary judgment to Plaintiffs Cherry Hill Vineyards, LLC, William G. Schneider, Jr., and John D. Reilly, Jr. Plaintiffs filed suit pursuant to 42 U.S.C. § 1983, successfully challenging the constitutionality of certain provisions of Kentucky's laws regulating small farm wineries. The district court ruled, pursuant to the Supreme Court's decision in Granholm v. Heald, 544 U.S. 460, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005), that the in-person purchase requirement in portions of Kentucky's statutory scheme discriminated against interstate commerce by limiting the ability of out-of-state small farm wineries to sell and ship wine to Kentucky consumers. For the reasons that follow, we AFFIRM the judgment of the district court.

BACKGROUND

I. Procedural History

In deciding Granholm, the Supreme Court held that state laws permitting in-state wineries to directly ship their products to customers and restricting out-of-state wineries' ability to do so violate the dormant Commerce Clause. On May 16, 2005, the same day that Granholm was decided, Huber Winery, Schneider, and Reilly ("Plaintiffs") filed a complaint in United States District Court for the Western District of Kentucky against Defendant Lajuana S. Wilcher, in her official capacity as Secretary of the Kentucky Environmental and Public Protection Cabinet, and Lavoyed Hudgins,¹ in his official capacity as Executive Director of the Kentucky Department of Alcoholic Beverage Control ("Defendants").

Plaintiffs filed a claim pursuant to 42 U.S.C. § 1983, alleging that Kentucky statutes violated the Commerce Clause by discriminating against out-of-state wineries with respect to wine sales to customers and to licensed retailers. Plaintiffs' complaint explained that Huber Winery owns and operates a winery located in Starlight, Indiana and would sell and deliver wine directly to Kentucky residents but for Kentucky's restrictions on the direct shipping of wine by out-of-state wineries. Plaintiffs Schneider and Reilly, residents of Kentucky, are regular wine purchasers who would have out-of-state wine shipped directly to them if not for Kentucky's direct shipping restrictions.

On July 7, 2005, Wine and Spirits Wholesalers of Kentucky Inc ("the Wholesalers"), a non-profit corporation whose members are licensed Kentucky wholesalers, filed a motion to intervene which was granted by the district court. After Plaintiffs filed a motion for judgment on the pleadings, the case was held in abeyance in anticipation of pending legislation. Plaintiffs amended their complaint on February 7, 2006, adding Cherry Hill Vineyards, LLC, an Oregon winery, as a plaintiff.²

In April 2006, the Kentucky legislature responded to Granholm by enacting Senate Bill 82 ("SB 82"), 2006 Ky. Act, Ch. 179, revising its regulation of wine. On May 18, 2006, Plaintiffs filed a second amended complaint, addressing the amended statutory language contained in SB 82. Because the bill would not come into effect until January 1, 2007, the district court ruled on Plaintiffs' July 21, 2005 motion for judgment on the pleadings on August 22, 2006, holding portions of the Kentucky statutory scheme unconstitutional.³ Defendants and the Wholesalers appealed the district court's order to this Court, but on January 1, 2007 when SB 82 came into effect, the appeals became moot and were dismissed.

On May 18, 2006, Plaintiffs filed a second amended complaint for declaratory relief pursuant to 42 U.S.C. § 1983. Plaintiffs claimed that Kentucky's statutory scheme violated the Commerce Clause by discriminating against out-of-state wineries with respect to sales to consumers and to licensed retail wine sellers, and requested a judgment "declaring Kentucky's statutory scheme that restricts the ability of out-of-state wineries to sell and ship wine directly to consumers and retail license holders within the Commonwealth of Kentucky unconstitutional." In their second amended complaint, Plaintiffs also requested a permanent injunction prohibiting from enforcing provisions of KRS §§ 244.165, 243.020, 243.032, 243.100(f), 243.200, and 243.155 "that prohibit out-of-state wineries from selling and shipping wine directly to consumers and retail package and retail drink license holders in Kentucky and requiring them to permit such direct sales and shipment."

The parties then filed cross-motions for summary judgment, which were granted in part and denied in part on December 26, 2006. The district court upheld the constitutionality of the challenged sections of the revised statutes, but declared the in-person purchase requirement of KRS §§ 243.155 and 244.165 unconstitutional "as it discriminates in practical effect against out-of-state small farm wineries, and has not been shown to advance the legitimate local purposes asserted that cannot be adequately served by reasonable nondiscriminatory alternatives." Cherry Hill Vineyards v. Hudgins, 488 F.Supp.2d 601, 625 (W.D.Ky.2006). Pursuant to this holding, the district court ordered the in-person requirement stricken from both statutes and enjoined Defendants from enforcing the requirement. Defendants did not appeal the district court's judgment.

On January 19, 2007, the intervening Wholesalers filed a timely notice of appeal. Plaintiffs subsequently filed a motion to dismiss, claiming that the Wholesalers lacked standing to appeal because Defendants abandoned the suit. This motion has not been ruled on and has been sent to a merits panel for disposition.

II. Statutory Framework

As part of its overall regulation of alcohol manufacturing and distribution, Kentucky regulates the sale of wine from "small farm wineries," which are defined as wineries producing no more than 50,000 gallons of wine per year. KRS § 241.010(46). Any in-state or out-of-state small farm winery may apply for a small farm winery license. KRS § 243.155(1). This license allows a winery to ship its wine to a Kentucky customer if: "1.) The wine is purchased by the customer in person at the small farm winery; 2.) The wine is shipped by licensed common carrier; and 3.) The amount of wine shipped is limited to two (2) cases per customer per visit." KRS § 243.155(2)(g); KRS § 244.165(2) (explicitly listing the same conditions on shipping to Kentucky customers for out-of-state small farm wineries). If an out-of-state small farm winery ships wine directly to Kentucky customers in violation of these conditions, the winery faces criminal penalties. KRS § 244.165.

DISCUSSION

I. An Intervenor's Standing to Appeal

Plaintiffs claim that the Wholesalers lack standing to appeal the district court's judgment because Defendants declined to appeal the decision.

As this Court has explained, "[a]n intervenor need not have the same standing necessary to initiate a lawsuit in order to intervene in an existing district court suit where the plaintiff has standing." Associated Builders & Contractors v. Perry, 16 F.3d 688, 690 (6th Cir.1994) (citing Trbovich v. United Mine Workers, 404 U.S. 528, 536-39, 92 S.Ct. 630, 30 L.Ed.2d 686 (1972)). The intervenor normally has the right to appeal an adverse final judgment by a trial court, just as any other party can. Stringfellow v. Concerned Neighbors in Action, 480 U.S. 370, 375-76, 107 S.Ct. 1177, 94 L.Ed.2d 389 (1987).

Nonetheless, an intervenor seeking to appeal, like any other party, must fulfill the requirements of Article III of the Constitution before it can continue to pursue an action in the absence of the party on whose side intervention was permitted. Diamond v. Charles, 476 U.S. 54, 68, 106 S.Ct. 1697, 90 L.Ed.2d 48 (1986). Accordingly, the standing requirement may bar an appeal even though an intervenor had standing before the district court. United States v. Van, 931 F.2d 384, 387 (6th Cir. 1991).

Article III of the Constitution confines federal courts to adjudicating actual cases or controversies. Allen v. Wright, 468 U.S. 737, 750, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984). The plaintiff "must allege personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief." Id. at 751, 104 S.Ct. 3315. To establish injury in fact, a party must allege "`such a personal stake in the outcome of the controversy' as to warrant his invocation of federal-court jurisdiction." Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) (quoting Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962)). Although the type of injury that conveys standing has not been precisely defined, the alleged injury must be "distinct and palpable," and "not `abstract' or `conjectural' or `hypothetical.'" Perry, 16 F.3d at 691 (quoting Allen, 468 U.S. at 751, 104 S.Ct. 3315). Palpable economic...