Jelovsek v. Bresden

• Decision Date: 30 March 2007
• Docket Number: No. 2:05-CV-181.,No. 2:06-CV-149.,2:05-CV-181.,2:06-CV-149.
• Citation: 482 F.Supp.2d 1013
• Parties: Frederick JELOVSEK, Plaintiff, v. Phil BRESDEN, Paul Summers, and Shari Elks, Defendants, and Wine & Spirits Wholesalers of Tennessee, Intervenor. S.L. Thomas Family Winery, Inc., d/b/a Thomas Family Winery, and Martin Redish, Plaintiffs, v. Phil Bresden, Paul Summers, and Shari Elks, Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

482 F.Supp.2d 1013

Frederick JELOVSEK, Plaintiff, v. Phil BRESDEN, Paul Summers, and Shari Elks, Defendants, and Wine & Spirits Wholesalers of Tennessee, Intervenor.

S.L. Thomas Family Winery, Inc., d/b/a Thomas Family Winery, and Martin Redish, Plaintiffs, v. Phil Bresden, Paul Summers, and Shari Elks, Defendants.

No. 2:05-CV-181.

No. 2:06-CV-149.

United States District Court, E.D. Tennessee, at Greeneville.

March 30, 2007.

Sandra B. Jelovsek, Johnson City, TN, for Plaintiff.

Lyndsay Fuller, Tennessee Attorney General's Office, Nashville, TN, for Defendants.

Andrew L. Colocotronis, Baker, Donelson, Bearman & Caldwell, Knoxville, TN, Henry E. Hildebrand, III, Lassister, Tidwell & Hildebrand, PLLC, Nashville, TN, J. Forrest Hinton, Jr., Baker, Donelson, Bearman, Caldwell & Berkowitz, Birmingham, AL, for Intervenor.

MEMORANDUM

CURTIS L. COLLIER, United States Chief District Judge.

I. INTRODUCTION AND PROCEDURAL HISTORY

Before the Court are two consolidated cases¹ challenging the State of Tennessee's statutory scheme for regulating wine licensing, distribution, and shipping. Tenn.Code Ann. §§ 57-3-207(f)(1), 303(e)(1), 402 & 404(a) & (c). Tennessee is one of a decreasing number of States which currently prohibit the direct shipment of wine from out-of-state wineries to in-state consumers. See Wine Inst., Direct Shipment Laws By State (as of Jan. 2007); Linda Greenhouse, Court Lifts Ban on Wine Shipping, N.Y. Times, May 17, 2005.

Plaintiffs Jelovsek and Redish are oenophiles who allege they would purchase wine directly from out-of-state wineries and have such wine shipped in-state, if the law permitted (Court File No. 1, ¶¶ 7-8). Plaintiff S.L. Thomas Family Winery, Inc., d/b/a Thomas Family Winery (collectively, "Plaintiffs") is an Indiana-based commercial winery which alleges it would ship wine directly to instate consumers (Case 2:06-CV-149, Court File No. 1). Plaintiffs bring their claim under 42 U.S.C. § 1983, and allege that Tennessee's Grape and Wine Law and laws prohibiting the shipping of alcoholic beverages deprive them of their rights under the Commerce Clause of the U.S. Constitution, art. I, § 8, cl. 3 (id. at ¶ 1). Plaintiffs seek a declaratory judgment to such effect and an injunction against enforcement of these laws. Plaintiffs cite Granholm v. Heald, 544 U.S. 460, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005), in support of this position. In Granholm, the United States Supreme Court overturned wine direct-shipping laws in Michigan and New York, finding such State laws impermissibly burdened interstate commerce. Plaintiffs request the Court apply Granholm to overturn the "licensing, residency, payment of tax, direct shipping, criminal and civil penalties, and other prohibitive and discriminatory requirements of Tennessee laws pertaining to the direct sale and shipment of wine ..." (Court File No. 1, p. 16).

Defendants are sued in their capacities as State officials (id. at ¶ 18). The defendants include Tennessee's Governor, Attorney General, and the Executive Director of the Alcoholic Beverage Commission (the "Commission"), the agency charged with enforcing state liquor laws (id. at ¶¶ 14-18). The Court also granted the Intervenor petition (Court File No. 19) of Wine & Spirits Whole-salers of Tennessee ("WSWT"; collectively, "Defendants") (Court File No. 30). Defendants argue that Tennessee's wine licensing, distribution and shipping laws are constitutional because such laws are equally as restrictive on in-state wineries as they are on out-of-state wineries (Court File No. 17, p. 1-2). Defendants rely on the Twenty-First Amendment, which gives States great discretion in regulating alcoholic beverages, including wine (Court File No. 31, p. 10; No. 32, p. 5).

The Court has already denied (Court File No. 16) Defendant's prior motion to dismiss for lack of standing (Court File No. 7). The Court determined (1) Plaintiffs had standing to assert their claims and (2) Plaintiffs had sufficiently alleged a claim to avoid dismissal under Fed.R.Civ.P. 12(b)(6) (Court File No. 16, p. 5). The question currently before the Court, based on Plaintiff's complaint and the parties' cross-motions, is: are the challenged statutes facially discriminatory in favor of in-state wineries and against out-of-state wineries. If so, following the analysis in Granholm the Court will need to ask whether Tennessee's laws are narrowly tailored to advance a legitimate local purpose.

Plaintiffs and the state officials filed cross-motions for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) (Case No. 2:06-CV-149, Court File Nos. 2 & 5). WSWT responded to both motions, asking the Court to deny both motions as premature (Court File No. 37, p. 2; hereinafter "WSWT Resp.").² WSWT would prefer to develop a full factual record; WSWT feels there is little development on the record as to the (1) impact of the challenged statutes on interstate commerce and (2) the "legitimate local purpose(s)" which underlie such statutes (id. at 7-9). Again, the Court must weigh the purpose behind the statutes against their impact on interstate commerce if the Court finds the statutes are facially discriminatory.

The Court fully agrees with WWST, the record in this case is not as detailed as it could be. The parties have failed to litigate a "full, fact-intensive Commerce Clause analysis." The Court did consider whether to require Plaintiffs and the State Defendants to supplement and support their motions.³ However, after careful review of the motions and pleadings, the Court determined that the challenged statutes, in particular the Grape and Wine Law and the prohibition on the import and transport of alcoholic beverages such as wine, is constitutionally permissible. This case is factually and legally distinguishable from Granholm. Therefore, the Court need not review the challenges statutes under strict scrutiny and has not required the parties to supplement the record.

By Order attached to this Memorandum, and for the reasons set forth below, this Court will GRANT Defendants' motion to dismiss (Court File No. 2).⁴ Accordingly, the Court will DENY Plaintiffs' motion to dismiss (Court File No. 5), and will also DENY the request of WSWT to permit the case to go forward to discovery.

II. STANDARD OF REVIEW UNDER FED.R CIV.P. 12(c)

The standard of review for a Fed. R.Civ.P. 12(c) motion for judgment on the pleadings is the same standard of review as a motion to dismiss under Fed.R.Civ.P. 12(b)(6). Grindstaff v. Green, 133 F.3d 416, 421 (6th Cir.1998); Morgan v. Church's Fried Chicken, 829 F.2d 10, 11 (6th Cir.1987). The Court must (1) construe the complaint in the light most favorable to Plaintiff, (2) accept as true all factual allegations in the complaint, and (3) determine if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle [the plaintiff] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Tritent Int'l Corp. v. Kentucky, 467 F.3d 547, 553-54 (6th Cir.2006); Bloch v. Ribar, 156 F.3d 673, 677 (6th Cir.1998). The Court accepts factual allegations as true but is not required to accept legal conclusions or "unwarranted factual inferences." Tritent Int'l Corp., 467 F.3d at 554 (citations omitted); Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988).

III. BACKGROUND ON TENNESSEE'S REGULATION OF WINE

Like many States, Tennessee has established a three-tiered system of required licenses to regulate the sale and distribution of wine and other alcoholic beverages. With reference to wine, the tiers include: (1) wineries, (2) wholesalers, and (3) retailers. Tenn.Code Ann. § 57-3-201. Wine is generally included in the definition of "alcoholic beverage," id. § 101(a)(1)(A), and is also governed specifically by the Grape and Wine Law, which permits the manufacture and bottling of "alcoholic vinous beverages," id. § 207(b). Winery licenses are restricted to Tennessee residents of two years or more or corporations owned by such residents. Id. § 207(c)-(d). Wineries are prohibited from selling directly to retailers; all alcoholic beverages must pass through wholesalers before reaching retailers and consumers. Id. § 404(a)-(c). The Grape and Wine Law does include one exception. Any winery whose wine is made using at least 75% Tennessee-grown agricultural products may, on the winery's premises, serve complimentary samples and sell a limited quantity of its own wine at retail. Id. 207(f)(3).⁵

Customers may possess and transport such wine anywhere in the state in quantities not in excess of that allowed by other state law, but such wine must be accompanied by a bill of sale ...

. . .

A Tennessee licensed winery may sell no more than five (5) cases or sixty (60) liters of wine to any single customer in one (1) day. Any other section of the law to the contrary notwithstanding, it shall be legal for any such purchaser to transport within the state of. Tennessee any amount which the customer may legally purchase from a Tennessee winery.

Id. §§ 207(f)(3) & (i).

Tennessee authorizes the Alcoholic Beverage Commission to promulgate regulations, to enforce compliance, and to license retailers, wholesalers, manufacturers of alcoholic beverages, and wineries. Id. § 207(m). Tennessee has made criminal the importation or transportation of wine and other alcoholic beverages from any other State, territory, or country. Id. § 402(a). Common carriers and "other persons" may not bring or carry wine (or other alcohol) into the State, and may not accept delivery or transport of alcohol unless the sender or intended recipient is a licensed manufacturer or wholesaler of alcoholic beverages. Id. § 402(b). Out-of-state wineries interested in marketing their wine in-state must contract with a licensed wholesaler. "No more than one wholesaler may sell such brand in any specified area." Id. § 301(e)(1). Similarly, in-state wineries must sell wine through...