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During December oral arguments, the U.S. Supreme Court appeared hostile toward state barriers that impede interstate wine sales, likely foreshadowing a win for small wineries in their long battle against the system that controls sales of alcoholic beverages nationwide. The case is made up of a series of consolidated suits from Michigan and New York in which wineries pressed for the legal right to sell wine across state lines using the mail and the Web. In it the Court was confronted with a classic clash between two seemingly irreconcilable constitutional doctrines: the so-called dormant commerce clause, which bars state trade barriers even in areas of commerce in which Congress has not legislated, and the Prohibition-ending Twenty-first Amendment, which gave states broad power to regulate the importation of alcohol. Before the hour-long arguments began, few experts were willing to guess which part of the Constitution would hold sway. But as the questioning of four skilled advocates developed, it seemed at nearly every turn that the justices were placing the commerce clause above the Twenty-first Amendment. New York solicitor general Caitlin Halligan, who was defending that state’s ban on direct shipment of wine by out-of-state wineries, came under especially heavy attack. At one point she almost pleaded with the Court to recognize that the case “goes to what is at the core of the Twenty-first Amendment,” which she said represented “a consensus in this country that alcohol is unique.” Justice Anthony Kennedy countered, “This case goes to the very core of the commerce clause.” Most of the justices also seemed skeptical of the states’ main policy defense for allowing states to prevent direct shipment of wines: that it would make it easier to control sales to minors and to collect tax revenue for the states. Justices noted that even those states that bar sales from out-of-state wineries permit in-state wineries to sell directly to consumers, which would pose the same risk of sales to minors. When Halligan acknowledged that states cannot prevent sales to minors “100 percent,” Justice Antonin Scalia shot back, “You can’t prevent it at all.” Justice David Souter repeatedly suggested that, through the Internet and other modern technologies, states could also solve the problems of revenue and licensing. “I am thrilled the way it unfolded,” says wine industry lawyer James Seff of Pillsbury Winthrop, who authored a brief for the Wine Institute representing 800 California wineries. “At the end of the day, I think the antidiscrimination notions of the dormant commerce clause outweighed the jurisprudence of the Twenty-first Amendment.” The Court was filled December 7 with top lawyers who had been hired by powerful groups on both sides: the wineries and liquor wholesalers and distributors. The latter two fear that the post-Prohibition three-tiered regime of liquor sales — comprised of producers, wholesalers, and retailers — will be toppled if the wineries carry the day. Arguing for the wineries was Clint Bolick, of the libertarian group Institute for Justice, and Kathleen Sullivan, former Stanford Law School dean. Bolick began with an appeal for unrestricted trade, describing the current system of alcohol sales as the “distributors’ oligopoly” that has no justification except “economic protectionism.” But he stopped short of saying that the entire system must fall, stating that as long as states do not discriminate against out-of-state businesses, they might be able to defend other aspects of the current licensing and regulation system. “Nothing requires you to take on the three-tiered system,” added Sullivan. She pressed the Court not to allow the current system to trump the antidiscrimination principles of the commerce clause. In addition to New York’s Halligan, Michigan solicitor general Thomas Casey also defended state prohibitions, asserting that it is impossible for states to effectively regulate out-of-state wineries. In-state licensees can be punished, he argued, although Souter said there was little evidence that actually happened. Justice Sandra Day O’Connor also said out-of-state wineries could be required to obtain licenses to sell within a given state, giving states some leverage over producers. More fundamentally, Casey said, “the purpose of the Twenty-first Amendment was to remove alcohol from the commerce clause as a constitutional matter.” A version of this story originally appeared in Legal Times, a sibling publication of Corporate Counsel.

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