Alexis Bailly Vineyard, Inc. v. Harrington
| Decision Date | 31 August 2020 |
| Docket Number | Case No. 17-cv-0913 (WMW/HB) |
| Parties | ALEXIS BAILLY VINEYARD, INC., and the Next Chapter Winery, LLC, Plaintiffs, v. John HARRINGTON, in his official capacity as Commissioner of the Minnesota Department of Public Safety, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Anthony B. Sanders, Institute for Justice, Mpls, MN, Lee U. McGrath, Institute for Justice, Minneapolis, MN, for Plaintiffs.
Jason Marisam, Minnesota Attorney General's Office, St. Paul, MN, for Defendant.
ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
This matter is before the Court on the parties’ cross-motions for summary judgment. (Dkts. 49, 51.) The Court previously granted Defendant's motion for summary judgment on jurisdictional grounds for lack of standing and, therefore, did not address the merits of Plaintiffs’ claims. The United States Court of Appeals for the Eighth Circuit reversed that decision, concluding that Plaintiffs have standing to pursue their claims, and remanded the case to this Court to address the merits of Plaintiffs’ claims. Alexis Bailly Vineyard, Inc. v. Harrington , 931 F.3d 774 (8th Cir. 2019). For the reasons addressed below, Defendant's motion for summary judgment is denied and Plaintiffs’ motion for summary judgment is granted.
Minnesota employs a three-tier alcohol-distribution system. Under this system, separate licenses are required for the manufacture, wholesale distribution, and retail sale of alcoholic beverages, including wine. See Minn. Stat. § 340A.301. This system prevents businesses from holding multiple types of licenses, limiting each business's operations to either manufacturing, wholesale distribution, or retail transactions.1 See id. For example, a wine manufacturer must sell its product to wholesalers and cannot sell its product directly to retailers or consumers. See id. , subdivs. 8(a), 10.
Farm wineries are exempt from the requirements of the three-tier system under the Minnesota Farm Wineries Act (the Act), Minn. Stat. § 340A.315. A farm winery is "a winery operated by the owner of a Minnesota farm and producing table, sparkling, or fortified wines from grapes, grape juice, other fruit bases, or honey with a majority of the ingredients grown or produced in Minnesota." Minn. Stat. § 340A.101, subdiv. 11. A licensed farm winery is permitted to sell its products directly to retailers and consumers. Minn. Stat. § 340A.315, subdiv. 2. To qualify as a farm winery under the Act, a license-holder must, among other requirements, pay an annual fee, produce 75,000 or fewer gallons of wine annually, and operate on agricultural land. Minn. Stat. § 340A.315, subdivs. 1, 2, 9. In addition, the Act requires a farm winery to produce wine "with a majority of the ingredients grown or produced in Minnesota" (the in-state requirement). Minn. Stat. § 340A.101, subdiv. 11.
If Minnesota-grown or Minnesota-produced ingredients are "not available in quantities sufficient to constitute a majority" of the wine produced by a farm winery in a given year, the farm winery may apply for an exemption from the in-state requirement by submitting an affidavit to the Commissioner of the Minnesota Department of Public Safety (Commissioner). Minn. Stat. § 340A.315, subdiv. 4. If the Commissioner agrees with the applicant, the farm winery may use imported ingredients for one year, "after which time the farm winery must use the required amount of Minnesota products" unless the farm winery files a new affidavit. Id. Acceptable reasons for seeking an exemption include, but are not limited to, weather-related crop loss or the desire to produce varietals that require grapes not grown in Minnesota.
Plaintiffs Alexis Bailly Vineyard, Inc. (Alexis Bailly), and The Next Chapter Winery, LLC (Next Chapter) (collectively, Plaintiffs), are Minnesota farm wineries that seek to expand their business operations. Plaintiffs allege that they cannot consistently obtain the necessary quantity and quality of wine ingredients to support expanding their operations if 51 percent of the ingredients must originate in Minnesota. Although the Commissioner has never denied Alexis Bailly or Next Chapter a requested exemption, both wineries maintain that the Act's in-state requirement affects their business planning and wine production, including their desire to expand their operations. Plaintiffs want to produce more wine varieties, use higher-quality and lower-cost ingredients that are more reliably available from other states and countries, and increase the volume of wine they produce. For example, Next Chapter contends that, absent the Act's in-state requirement, it would immediately double the amount of grapes and grape juices that Next Chapter purchases from outside Minnesota. Plaintiffs commenced this lawsuit against the Commissioner2 seeking a declaration that the Act's in-state requirement restricts interstate and foreign commerce, in violation of the United States Constitution, and a permanent injunction against enforcement of the Act's in-state requirement.
The Court previously granted Defendant's motion for summary judgment on April 9, 2018, concluding that Plaintiffs lack standing and, therefore, this Court lacks jurisdiction. Accordingly, the Court did not consider the parties’ alternative summary-judgment arguments addressing the merits of Plaintiffs’ claims. The Eighth Circuit reversed that decision, concluding that Plaintiffs have standing to pursue their claims, and remanded the case for this Court to consider the merits of Plaintiffs’ claims. Alexis Bailly , 931 F.3d at 780. Currently before the Court are the parties’ renewed cross-motions for summary judgment.
Summary judgment is proper when the record before the district court establishes that there is "no genuine dispute as to any material fact" and the moving party is "entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine dispute as to a material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When deciding a motion for summary judgment, a district court construes the evidence in the light most favorable to the nonmoving party and draws all reasonable inferences in the nonmoving party's favor. See Windstream Corp. v. Da Gragnano , 757 F.3d 798, 802–03 (8th Cir. 2014). When asserting that a fact is genuinely disputed, the nonmoving party must "submit affidavits, depositions, answers to interrogatories, or admissions on file and designate specific facts" in support of that assertion. Gander Mountain Co. v. Cabela's, Inc. , 540 F.3d 827, 831–32 (8th Cir. 2008) ; see also Fed. R. Civ. P. 56(c)(1)(A).
Plaintiffs contend that the Act's in-state requirement violates both the interstate dormant Commerce Clause and the foreign dormant Commerce Clause. The Court addresses each argument in turn.
The Commerce Clause in Article I, Section 8, of the United States Constitution grants Congress the power to regulate interstate commerce. U.S. Const. art. I, § 8, cl. 3. In addition to granting this power to Congress, the Commerce Clause "has long been understood to have a ‘negative’ aspect that denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce." Or. Waste Sys., Inc. v. Dep't of Envtl. Quality of State of Or. , 511 U.S. 93, 98, 114 S.Ct. 1345, 128 L.Ed.2d 13 (1994) ; see also S. Dakota Farm Bureau, Inc. v. Hazeltine , 340 F.3d 583, 592 (8th Cir. 2003) (). State laws violate the dormant Commerce Clause "if they mandate ‘differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.’ " Granholm v. Heald , 544 U.S. 460, 472, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005) (quoting Or. Waste , 511 U.S. at 99, 114 S.Ct. 1345 ).
"A state law that is challenged on dormant Commerce Clause grounds is subject to a two-tiered analysis." Hazeltine , 340 F.3d at 593. First, a court must determine whether the statute "overtly discriminates against interstate commerce." R & M Oil & Supply, Inc. v. Saunders , 307 F.3d 731, 734 (8th Cir. 2002) (internal quotation marks omitted). "A statute ‘overtly discriminates’ if it is discriminatory on its face, in its purpose, or through its effects." Id. If the statute overtly discriminates, it is subject to "the strictest scrutiny" and "it is per se invalid unless the [government] can demonstrate, under rigorous scrutiny, that [it has] no other means to advance a legitimate local interest." Hazeltine , 340 F.3d at 593 (internal quotation marks omitted). If a court determines that the statute is not overtly discriminatory, the court proceeds to the second tier of the analysis, under which the statute is invalidated as unconstitutional "only if the burden [the statute] imposes on interstate commerce ‘is clearly excessive in relation to its putative local benefits.’ " Id. (quoting Pike v. Bruce Church, Inc. , 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970) ).
Plaintiffs argue that the Act's in-state requirement is per se invalid because the requirement is overtly discriminatory on its face, in its purpose, and in its effects. A statute that discriminates against interstate commerce in any one of these three ways is per se invalid. Id. The Commissioner counters that the Act's in-state requirement is not overtly discriminatory on its face, in its purpose, or in its effects.
Plaintiffs first contend that the Act's in-state requirement is facially discriminatory because it expressly applies disparate treatment to their use of in-state and out-of-state wine components. A...
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S. Glazer's Wine & Spirits, LLC v. Harrington
...agrees with Southern that the Coleman Act is unconstitutional after reviewing this Court's decision in Alexis Bailly Vineyard, Inc. v. Harrington , 482 F.Supp.3d 820 (D. Minn. 2020). In Alexis Bailly , portions of Minnesota's Farm Winery Act were found unconstitutional under the dormant Com......
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S. Glazer's Wine & Spirits, LLC v. Harrington
...after reviewing this Court's decision in Alexis Bailly Vineyard, Inc. v. Harrington, 482 F.Supp.3d 820 (D. Minn. 2020). In Alexis Bailly, portions of Minnesota's Farm Winery Act were unconstitutional under the dormant Commerce Clause for treating out-of-state products differently than their......