Heald v. Engler
| Citation | 342 F.3d 517 |
| Decision Date | 28 August 2003 |
| Docket Number | No. 01-2720.,01-2720. |
| Parties | Eleanor HEALD; Ray Heald; John Arundel; Karen Brown; Richard Brown; Bonnie McMinn; Gregory Stein; Michelle Morlan; William Horwath; Margaret Christina; Robert Christina; Trisha Hopkins; Jim Hopkins; Domaine Alfred, Inc., Plaintiffs-Appellants, v. John ENGLER, Governor; Jennifer M. Granholm, Attorney-General; Jacquelyn Stewart, Chairperson, Michigan Liquor Control Commission, in their Official Capacities, Defendants-Appellees, Michigan Wine & Beer Wholesalers Association, Intervening, Defendant-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
ARGUED: James A. Tanford, INDIANA UNIVERSITY SCHOOL OF LAW, Bloomington, Indiana, for Appellants.
Donald S. McGehee, OFFICE OF THE ATTORNEY GENERAL, MICHIGAN LIQUOR CONTROL COMMISSION, Lansing, Michigan, Anthony S. Kogut, WILLINGHAM & COTE, East Lansing, Michigan, for Appellees.
ON BRIEF: James A. Tanford, INDIANA UNIVERSITY SCHOOL OF LAW, Bloomington, Indiana, for Appellants.
Irene M. Mead, OFFICE OF THE ATTORNEY GENERAL, MICHIGAN LIQUOR CONTROL COMMISSION, Lansing, Michigan, Anthony S. Kogut, WILLINGHAM & COTE, East Lansing, Michigan, for Appellees.
Louis R. Cohen, WILMER, CUTLER & PICKERING, Washington, D.C., William H. Mellor, Steven M. Simpson, INSTITUTE FOR JUSTICE, Washington, D.C., Clint Bolick, INSTITUTE FOR JUSTICE, Phoenix, Arizona, for Amici Curiae.
Before GUY, BOGGS, and DAUGHTREY, Circuit Judges.
In this civil rights action brought pursuant to 42 U.S.C. § 1983, the plaintiffs raise a constitutional challenge to Michigan's alcohol distribution system, contending that state provisions differentiating between in-state and out-of-state wineries violate the Commerce Clause.1 Those regulations prohibit the direct shipment of alcoholic beverages from out-of-state wineries, while allowing in-state wineries to ship directly to consumers, provided that the in-state wineries comply with certain minimal regulatory requirements. The plaintiffs, who include wine connoisseurs, wine journalists, and one small California winery that ships its wines to customers in other states, claim that this system is unconstitutional under the dormant Commerce Clause because it interferes with the free flow of interstate commerce by discriminating against out-of-state wineries. The defendants, who include Michigan officials (referred to collectively in this opinion as "the state") and the intervening trade association, argue in response that Michigan's regulatory scheme is constitutional under the Twenty-first Amendment to the federal constitution.
The parties filed cross-motions for summary judgment, and the district court granted the state's motion and denied the plaintiffs' motion. The plaintiffs then filed a motion to reconsider, arguing that the district court should have addressed cross-motions to strike various evidence submitted by the two sides prior to the summary judgment decision.2 The district court denied the motion to reconsider, noting that it had effectively denied the cross-motions to strike as moot, because it did not consider the challenged evidence in deciding the summary judgment motions.
The plaintiffs now appeal both the grant of summary judgment and the denial of their motion to reconsider. For the reasons set out below, we conclude that the regulations in question are discriminatory in their application to out-of-state wineries, in violation of the dormant Commerce Clause, and cannot be justified as advancing the traditional "core concerns" of the Twenty-first Amendment. We therefore reverse the district court's judgment and remand the case with directions to the district court to enter judgment in favor of the plaintiffs.
Michigan regulates alcohol sales under a "three-tier system": consumers must purchase alcoholic beverages from licensed retailers; retailers must purchase them from licensed wholesalers; and wholesalers must purchase them from licensed manufacturers. This system is similar to that used by most states. See Vijay Shankar, Alcohol Direct Shipment Laws, 85 Va. L.Rev. 353, 355 (1999).
The plaintiffs allege that Michigan's system discriminates against out-of-state wineries in favor of in-state wineries because it prevents out-of-state wineries from shipping wine directly to Michigan consumers, which in-state wineries are allowed to do. As the district court correctly noted, this distinction between in-state and out-of-state wineries can only be understood by reading a number of provisions in conjunction with each other:
[The distinction] can be gleaned from various Michigan Liquor Control Commission regulations, which are codified within the Michigan Administrative Code. R436.1057 states that "[a] person shall not deliver, ship, or transport into this state beer, wine, or spirits without a license authorizing such action...." The only applicable license, an "outstate seller of wine license," may according to R436.1705(2)(d) be obtained by a "manufacturer which is located outside of this state, but in the United States, and which produces and bottles its own wine." However, under R436.1719(4) the holder of such a license may ship wine "only to a licensed wholesaler at the address of the licensed premises except upon written order of the commission." In answers to interrogatories, a representative of the Michigan Liquor Control Commission indicates that "[a]t present, there is no procedure whereby an out-of-state retailer or winery can obtain a license or approval to deliver wine directly to Michigan residents...."
In contrast, the Michigan Liquor Control Commission indicates that the "ability to deliver wine to the consumer is available to winemakers licensed in Michigan, inasmuch as under the provisions of M.C.L. § 436.1113(9) these licensees are permitted to sell at retail the wines they manufacture.... A licensed Michigan winemaker may deliver their [sic] own products to customers without an SDM [specially designated merchant] license....
The plaintiffs contend that this differential treatment of in-state and out-of-state wineries violates the dormant Commerce Clause because it gives in-state wineries a competitive advantage over out-of-state wineries. In-state wineries can, for example, bypass the price mark-ups of a wholesaler and retailer, making in-state wines relatively cheaper to the consumer and allowing them to realize more profit per bottle. In addition, the cost to an out-of-state winery of the license that enables it to sell to a Michigan wholesaler is $300, while a comparable Michigan winery must pay only a $25 license fee to qualify to ship wine directly to Michigan customers. Finally, for customers who desire home delivery, Michigan wineries have a competitive advantage over out-of-state wineries that cannot ship directly to customers. In response, the state argues that the regulations to which an in-state winery is subject "more than offset, both in costs and burden, any nominal commercial advantage given by the ability to deliver directly to customers" and characterizes the burden on out-of-state wineries as "de minimis."
In its order granting summary judgment to the state and denying summary judgment to the plaintiffs, the district court held that "Michigan's direct shipment law is a permitted exercise of state power under § 2 of the 21st Amendment" because it is not "mere economic protectionism." In reaching this conclusion, the court found that Michigan's statutory scheme was designed "to ensure the collection of taxes from out-of-state wine manufacturers and to reduce the risk of alcohol falling into the hands of minors."
After this order had issued, the plaintiffs filed a motion to reconsider, asking the district court to rule on the motions to strike before granting either side summary judgment and to "make specific findings of fact based on the record" before reaching a final decision. The plaintiffs argued that the district court's failure to rule on the motions to strike "left the record devoid of evidence supporting the court's conclusion that the direct shipment law furthers legitimate 21st Amendment purposes," and that the court had applied the incorrect legal standard in dismissing the complaint. The district court denied the plaintiffs' motion for reconsideration, saying that it had not considered the challenged evidence in ruling on the summary judgment motions and that the motions to strike were effectively denied as moot.
For the reasons set out below, we reverse the district court's judgment, vacate the order granting summary judgment in the state's favor, and remand the case for entry of summary judgment in favor of the plaintiffs.
The central question in this case is how the "dormant" Commerce Clause and the Twenty-first Amendment interact to limit the ways in which a state can control alcohol sales and distribution. Article I, Section 8, Clause 3 of the United States Constitution grants Congress the power "[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes...." The Supreme Court has long held that "this affirmative grant of authority to Congress also encompasses an implicit or `dormant' limitation on the authority of the States to enact legislation affecting interstate commerce." Healy v. The Beer Institute, 491 U.S. 324, 326 n. 1, 109 S.Ct. 2491, 105 L.Ed.2d 275 (1989) (citations omitted).
In 1933, Congress enacted the Twenty-first Amendment, which repealed the 18th Amendment, thereby ending Prohibition. 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...." Initially, the Supreme...
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...used by the district court here, in which the statute is first examined in the context of the dormant Commerce Clause. Heald v. Engler, 342 F.3d 517, 524 (6th Cir.2003); Dickerson v. Bailey, 336 F.3d 388, 400 (5th Cir.2003); Beskind v. Easley, 325 F.3d 506, 514 (4th Cir.2003); Bainbridge v.......
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Good history, good law (and by coincidence good policy too: Granholm v. Heald.
...unconstitutional a Texas statute prohibiting direct shipment of wine from out-of-state sellers to in-state buyers), Heald v. Engler, 342 F.3d 517 (6th Cir. 2003) (holding unconstitutional a Michigan statute that prohibited direct shipment of wine from out-of-state sellers to in-state consum......