Bridenbaugh et al v. Karen Freeman-Wilson et al

• Decision Date: 13 September 2000
• Docket Number: Nos. 00-1044,s. 00-1044
• Citation: 227 F.3d 848
• Parties: (7th Cir. 2000) Russell Bridenbaugh, et al., Plaintiffs-Appellees, v. Karen Freeman-Wilson, Attorney General of Indiana, et al., Defendants-Appellants. & 00-1046
• Court: U.S. Court of Appeals — Seventh Circuit

Page 848

227 F.3d 848 (7th Cir. 2000)

Russell Bridenbaugh, et al., Plaintiffs-Appellees, v. Karen Freeman-Wilson, Attorney General of Indiana, et al., Defendants-Appellants.

Nos. 00-1044 & 00-1046

In the United States Court of Appeals For the Seventh Circuit

Argued June 8, 2000

Decided September 13, 2000

Appeals from the United States District Court for the Northern District of Indiana, South Bend Division. No. 398cv0464AS--Allen Sharp, Judge.

Before Easterbrook and Williams, Circuit Judges.^*

Easterbrook, Circuit Judge.

This case pits the twenty-first amendment, which appears in the Constitution, against the "dormant commerce clause," which does not. Section 2 of the twenty- first amendment provides: "The 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, is hereby prohibited." This directly authorizes state control over imports, while the premise of dormant commerce clause jurisprudence is an inference that the grant of power to Congress in Art. I sec.8 cl. 3 implies a limitation on state authority over the same subject. We must decide how the combination of express grant and implied withdrawal of state power applies to I.C. sec.7.1-5-11-1.5(a), which makes unlawful all direct shipments from out of state to Indiana consumers by any "person in the business of selling alcoholic beverages in another state or country". Several Indiana nophiles brought suit, arguing that because the statute restricts only those sellers engaged in selling "in another state or country", it runs afoul of the dormant commerce clause. The district court held sec.7.1-5-11-1.5 unconstitutional, 78 F. Supp. 2d 828 (N.D. Ind. 1999), and the state officials responsible for enforcing that statute (sued on the theory of Ex parte Young, 209 U.S. 123 (1908)), joined by intervening defendant Wine & Spirit Wholesalers of Indiana, now appeal.

Before taking up the merits, we must first decide whether the plaintiffs have standing. Indiana (as we call the state defendants) points out that the only law plaintiffs challenge regulates sellers, not consumers. Section 7.1-5- 11-1.5 provides:

(a) It is unlawful for a person in the business of selling alcoholic beverages in another state or country to ship or cause to be shipped an alcoholic beverage directly to an Indiana resident who does not hold a valid wholesaler permit under this title. This includes the ordering and selling of alcoholic beverages over a computer network (as defined by IC 35-43-2-3 (a)).

(b) Upon a determination by the commission that a person has violated subsection (a), a wholesaler may not accept a shipment of alcoholic beverages from the person for a period of up to one (1) year as determined by the commission.

Plaintiffs are not "in the business of selling alcoholic beverages" and therefore could not violate sec.7.1-5-11-1.5(a) if they tried. Indiana contends that the only proper plaintiffs are out-of-state sellers, none of which has sued. Consumers might be able to invoke the interests of third parties if the targets of the statute would have difficulty vindicating their own rights, see Craig v. Boren, 429 U.S. 190, 192-94 (1976), but enterprises in the liquor business could challenge Indiana law without impediment. Moreover, Indiana observes, other laws do target the consumer side of transactions with unauthorized sellers, and plaintiffs have chosen not to challenge those. See I.C. sec.sec. 7.1-5- 10-5, 7.1-5-10-7. As Indiana sees things, sec.7.1-5-11-1.5 causes these plaintiffs no redressable harm, because, even if it is invalid, other laws that are not subject to any plausible constitutional challenge still would prevent plaintiffs from receiving the beverages they crave from out-of-state sellers.

Let us start with injury in fact. Before Indiana enacted sec.7.1-5-11-1.5 many vintners shipped wine direct to the plaintiffs from California and other states, and they stopped as soon as sec.7.1-5-11-1.5 took effect. Some of the wines plaintiffs want to drink are not carried by Indiana resellers. That establishes injury in fact. Anyone who has held a bottle of Grange Hermitage in one hand and a broken corkscrew in the other knows this to be a palpable injury. Moreover, Indiana dealers collect state excise taxes on wines that pass through their hands, while the shippers with which plaintiffs used to deal do not; this difference in price is another source of injury. Plaintiffs need not be the immediate target of a statute to challenge it. See Allen v. Wright, 468 U.S. 737, 758 (1984); Lujan v. Defenders of Wildlife, 504 U.S. 555, 562 (1992). Plaintiffs' claim, moreover, is direct rather than derivative: every interstate sale has two parties, and entitlement to transact in alcoholic beverages across state lines is as much a constitutional right of consumers as it is of shippers--if it is a constitutional right at all.

Redressability is trickier. Plaintiffs wish to purchase wine directly from out-of-state sellers. These vendors do not have Indiana permits, yet Indiana makes holding a permit a condition to the sale of liquor to its residents. I.C. sec.sec. 7.1-3-21-3, 7.1-3-21-5. (It is questionable whether out-of-state businesses are eligible for permits, but what matters now is that the sellers neither hold nor want permits, and plaintiffs have conceded that they would lack standing to challenge sec.sec. 7.1-3-21-3 and 7.1-3-21-5.) Purchasing alcoholic beverages from a vendor that the consumer knows to be unlicensed by Indiana is not only a civil infraction, I.C. sec.7.1-5-10-7, but also a criminal misdemeanor, I.C. sec.sec. 7.1-5-10-5, 7.1-5-1-8. So the purchases these plaintiffs wish to make are unlawful, under statutes that they do not challenge. How, then, could a declaration that sec.7.1-5-11-1.5 is invalid solve their problem?

At oral argument, plaintiffs' counsel insisted that the unchallenged sections are ambiguous, and that his clients could continue to order wine from out-of-state sellers without violating state law. That is untenable; the statutes we have cited are plain, and plaintiffs have filed affidavits demonstrating not only purchases from unlicensed sellers but also knowledge that the sellers lack Indiana permits. Their objective in this suit is to get rid of sec.7.1-5-11-1.5 so they can get back to violating sec.sec. 7.1-5-10- 5 and 7.1-5-10-7. Laws forbidding purchases from sellers that lack Indiana permits are devilishly difficult to enforce, however, for the same reason states have insuperable problems collecting their use taxes when people buy from out-of-state vendors that do not collect sales taxes. Noncompliance is almost impossible to detect, and rampant civil disobedience ensures that a handful of prosecutions would not be effective. Private gains from violating the laws vastly exceed the anticipated legal penalties. Sellers and shippers of alcohol are fewer in number, facilitating enforcement. What is puzzling is that Indiana appears unwilling to enforce its purchaser-side laws even against consumers who proclaim and revel in their violations, as our plaintiffs do. When a state has two statutes, one effective and one ineffective, the existence of the second cannot preclude a challenge to the first, for an injunction against the first would redress the injury. See Larson v. Valente, 456 U.S. 228, 239- 40 (1982). Imagine that sec.A punished importing California wine with a $50 fine, while sec.B punished the same deed with imprisonment. Potential customers would have standing to challenge sec.B even though sec.A remained on the books, because sec.A would have much less effect on their conduct. This would be clear if the $50 were called a tax; it is equally so if the $50 is called a fine. Likewise, Indiana's unwillingness to enforce laws penalizing consumers who buy from unlicensed sellers means that plaintiffs have standing to challenge sec.7.1-5-11-1.5(a), because it is the latter section alone that effectively blocks their purchases, which will resume if sec.7.1-5-11-1.5(a) is held invalid. Plaintiffs therefore have standing. Whether it would be sound to issue an injunction designed to help scofflaws violate state statutes is doubtful, but the proper use of equitable discretion is unrelated to the requirements of Article III. Indiana does not contend that a judge should deny relief even if sec.7.1-5-11- 1.5(a) is unconstitutional, so we turn to the merits.

Title 7.1 of the Indiana Code establishes an elaborate regulatory regime for the distribution of alcohol. Like most states, Indiana has chosen a three-tiered system of alcohol distribution, with different classes of permits for manufacturers, distributors, and retailers. This facilitates what appellants call "orderly market conditions"--a euphemism for reducing competition and facilitating tax collection. Direct shipments from other states undermine both of these objectives. If the product were cheese rather than wine, Indiana would not be able either to close its borders to imports or to insist that the shippers collect its taxes, despite the effect on its treasury, e.g., Quill Corp. v. North Dakota, 504 U.S. 298 (1992), though it might be able to enforce its preferred system of distribution in other ways. See, e.g., Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978). For more than a century the Supreme Court has treated the grant of commerce power to Congress as a prohibition against border-closing laws and other efforts by states to discriminate against interstate commerce. See, e.g., Cooley v. Board of Port Wardens, 53 U.S. (12 How.) 299, 319 (1851); Welton v. Missouri, 91 U.S. 275, 280 (1875); General Motors Corp. v. Tracy, 519 U.S. 278, 287 (1997). Indiana permits local wineries, but not wineries "in the business of selling . . . in another state or country", to ship directly to Indiana consumers. The district court concluded that this violates the...