Tenn. Wine & Spirits Retailers Ass'n v. Thomas
| Decision Date | 26 June 2019 |
| Docket Number | No. 18-96,18-96 |
| Citation | 139 S.Ct. 2449,204 L.Ed.2d 801 |
| Parties | TENNESSEE WINE AND SPIRITS RETAILERS ASSOCIATION, Petitioner v. Russell F. THOMAS, Executive Director of the Tennessee Alcoholic Beverage Commission, et al. |
| Court | U.S. Supreme Court |
Shay Dvoretzky, Washington, DC, for the petitioner.
Solicitor General David L. Franklin for Illinois, et al., as amici curiae, by special leave of the Court, in support of petitioner.
Carter G. Phillips, Washington, DC, for the respondent.
Richard L. Colbert, Kay Griffin, PLLC, Nashville, TN, Benjamin M. Flowers, Jones Day, Columbus, OH, Shay Dvoretzky, Jeffrey R. Johnson, Jones Day, Washington, DC, Amanda K. Rice, Jones Day, Detroit, MI, for petitioner.
William J. Murphy, John J. Connolly, Zuckerman Spaeder LLP, Baltimore, MD, Carter G. Phillips, Counsel of Record, Jacqueline G. Cooper, Derek A. Webb, Sidley Austin LLP, Washington, DC, for respondent Tennessee Fine Wines and Spirits, LLC, dba Total Wine Spirits Beer & More.
Anya Bidwell, Institute for Justice, Austin, TX, Dana Berliner, Jeffrey H. Redfern, Institute for Justice, Arlington, VA, Michael E. Bindas, Institute for Justice, Seattle, WA, for respondent Affluere Investments, Inc.
The State of Tennessee imposes demanding durational-residency requirements on all individuals and businesses seeking to obtain or renew a license to operate a liquor store. One provision precludes the renewal of a license unless the applicant has resided in the State for 10 consecutive years. Another provides that a corporation cannot obtain a license unless all of its stockholders are residents. The Court of Appeals for the Sixth Circuit struck down these provisions as blatant violations of the Commerce Clause, and neither petitioner—an association of Tennessee liquor retailers—nor the State itself defends them in this Court.
The Sixth Circuit also invalidated a provision requiring applicants for an initial license to have resided in the State for the prior two years, and petitioner does challenge that decision. But while this requirement is less extreme than the others that the Sixth Circuit found to be unconstitutional, we now hold that it also violates the Commerce Clause and is not shielded by § 2 of the Twenty-first Amendment. Section 2 was adopted as part of the scheme that ended prohibition on the national level. It gives each State leeway in choosing the alcohol-related public health and safety measures that its citizens find desirable. But § 2 is not a license to impose all manner of protectionist restrictions on commerce in alcoholic beverages. Because Tennessee’s 2-year residency requirement for retail license applicants blatantly favors the State’s residents and has little relationship to public health and safety, it is unconstitutional.
Tennessee, like many other States, requires alcoholic beverages distributed in the State to pass through a specified three-tiered system.1 Acting through the Tennessee Alcoholic Beverage Commission (TABC), the State issues different types of licenses to producers, wholesalers, and retailers of alcoholic beverages. See Tenn. Code Ann. § 57–3–201 (2018). Producers may sell only to licensed wholesalers; wholesalers may sell only to licensed retailers or other wholesalers; and only licensed retailers may sell to consumers. § 57–3–404. No person may lawfully participate in the sale of alcohol without the appropriate license. See, e.g. , § 57–3–406.
Included in the Tennessee scheme are onerous durational-residency requirements for all persons and companies wishing to operate "retail package stores" that sell alcoholic beverages for off-premises consumption (hereinafter liquor stores). See § 57–3–204(a). To obtain an initial retail license, an individual must demonstrate that he or she has "been a bona fide resident" of the State for the previous two years. § 57–3–204(b)(2)(A). And to renew such a license—which Tennessee law requires after only one year of operation—an individual must show continuous residency in the State for a period of 10 consecutive years. Ibid.
The rule for corporations is also extraordinarily restrictive. A corporation cannot get a retail license unless all of its officers, directors, and owners of capital stock satisfy the durational-residency requirements applicable to individuals. § 57–3–204(b)(3). In practice, this means that no corporation whose stock is publicly traded may operate a liquor store in the State.
In 2012, the Tennessee attorney general was asked whether the State’s durational-residency requirements violate the Commerce Clause, and his answer was that the requirements constituted "trade restraints and barriers that impermissibly discriminate against interstate commerce." App. to Brief in Opposition 11a; see also id. , at 12a (citing Jelovsek v. Bredesen , 545 F.3d 431, 435 (CA6 2008) ). In light of that opinion, the TABC stopped enforcing the requirements against new applicants. See App. 51, ¶9; id. , at 76, ¶10.
The Tennessee General Assembly responded by amending the relevant laws to include a statement of legislative intent. Citing the alcohol content of the beverages sold in liquor stores, the Assembly found that protection of "the health, safety and welfare" of Tennesseans called for "a higher degree of oversight, control and accountability for individuals involved in the ownership, management and control" of such outlets. § 57–3–204(b)(4).
After the amendments became law, the attorney general was again asked about the constitutionality of the durational-residency requirements, but his answer was the same as before. See App. to Brief in Opposition 13a. Consequently, the TABC continued its practice of nonenforcement.
In 2016, respondents Tennessee Fine Wines and Spirits, LLC dba Total Wine Spirits Beer & More (Total Wine) and Affluere Investments, Inc. dba Kimbrough Fine Wine & Spirits (Affluere) applied for licenses to own and operate liquor stores in Tennessee. At the time, neither Total Wine nor Affluere satisfied the durational-residency requirements. Total Wine was formed as a Tennessee limited liability company but is owned by residents of Maryland, Brief for Respondent Total Wine 10; App. 51, ¶4–5, and Affluere was owned and controlled by two individuals who, by the time their application was considered, had only recently moved to the State, see App. 11–12, 20, 22.
TABC staff recommended approval of the applications, but petitioner Tennessee Wine and Spirits Retailers Association (the Association)—a trade association of in-state liquor stores—threatened to sue the TABC if it granted them. Id. , at 15, ¶17. The TABC’s executive director (a respondent here) filed a declaratory judgment action in state court to settle the question of the residency requirements’ constitutionality. Id. , at 17.
The case was removed to the United States District Court for the Middle District of Tennessee, and that court, relying on our decision in Granholm v. Heald , 544 U.S. 460, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005), concluded that the requirements are unconstitutional. Byrd v. Tennessee Wine and Spirits Retailers Assn. , 259 F.Supp.3d 785, 797 (2017). The State declined to appeal, and Total Wine and Affluere were issued licenses.
The Association, however, took the case to the Court of Appeals for the Sixth Circuit, where a divided panel affirmed. See Byrd v. Tennessee Wine and Spirits Retailers Assn. , 883 F.3d 608 (2018). All three judges acknowledged that the Tennessee residency requirements facially discriminate against out-of-state economic interests. See id., at 624 ; id., at 634 (Sutton, J., concurring in part and dissenting in part). And all three also agreed that neither the 10-year residency requirement for license renewals nor the 100-percent-resident shareholder requirement is constitutional under this Court’s Twenty-first Amendment and dormant Commerce Clause precedents. See id., at 625–626 ; id., at 635 (opinion of Sutton, J.).
The panel divided, however, over the constitutionality of the 2-year residency requirement for individuals seeking initial retail licenses, as well as the provision applying those requirements to officers and directors of corporate applicants. Applying standard dormant Commerce Clause scrutiny, the majority struck down the challenged restrictions, reasoning that they facially discriminate against interstate commerce and that the interests they are claimed to further can be adequately served through reasonable, nondiscriminatory alternatives. Id. , at 623–626. The dissent disagreed, reading § 2 of the Twenty-first Amendment to grant States " ‘virtually’ limitless" authority to regulate the in-state distribution of alcohol, the only exception being for laws that "serve no purpose besides ‘economic protectionism.’ " Id. , at 633 (quoting Bacchus Imports, Ltd. v. Dias , 468 U.S. 263, 276, 104 S.Ct. 3049, 82 L.Ed.2d 200 (1984) ). Applying that highly deferential standard, the dissent would have upheld the 2-year residency requirement, as well as the provision applying that requirement to all officers and directors of corporate applicants. The dissent argued that these provisions help to promote the State’s interests in "responsible consumption" of alcohol and "orderly liquor markets." 883 F.3d at 633.
The Association filed a petition for a writ of certiorari challenging the decision on the 2-year residency requirement for initial licenses. Tennessee declined to seek certiorari but filed a letter with the Court expressing agreement with the Association’s position.2 We granted certiorari, 585 U. S. ––––, 139 S.Ct. 52, 201 L.Ed.2d 1130 (2018), in light of the disagreement among the Courts of Appeals about how to reconcile our modern Twenty-first Amendment and dormant Commerce Clause precedents. See 883 F. 3d at 616 (collecting cases).
The Court of Appeals held that Tennessee’s 2-year residency requirement violates the Commerce Clause, which provides that "[t]he ...
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