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The Supreme Court gave a cork-popping victory to the wine industry Monday, striking down state laws that barred consumers from receiving direct shipment of wines from out-of-state wineries. “This is the best day for wine-lovers since the invention of the corkscrew,” said Clint Bolick, the strategic litigation counsel for the Institute for Justice, who argued before the Court on behalf of Virginia winemaker Juanita Swedenburg. Swedenburg was barred from shipping her wines to New York customers because of that state’s law�similar to the laws of more than 20 other states�that allows only in-state wineries to ship wines to New Yorkers. The U.S. Court of Appeals for the 2nd Circuit upheld the New York law, while the 6th Circuit struck down a similar Michigan law. The Supreme Court ruled in both cases under the title Granholm v. Heald. The 5-4 decision caps a 20-year campaign by the wine industry to overturn the protective laws passed by states that barred out-of-state winery imports to consumers. Such laws, said Justice Anthony Kennedy for the majority, amount to “straightforward attempts to discriminate in favor of local producers” in violation of the commerce clause of the Constitution. For the majority, the commerce-clause argument trumped the post-Prohibition 21st Amendment, which handed states explicit power to regulate imports. That amendment gives states “broad power,” Kennedy said, but “does not supersede other provisions of the Constitution and, in particular, does not displace the rule that states may not give a discriminatory preference to their own producers.” Kennedy was careful to say that Monday’s ruling does not upset the three-tier distribution system for alcohol�producer to wholesaler to retailer�that governs sales nationwide. But the ruling will likely rearrange aspects of the wine-and-liquor marketplace and give a sharp boost to Internet wine sales, which have been hampered by a patchwork of state laws. But even the advocates of interstate sales cautioned that much work remains in adjusting state laws to Monday’s ruling, and not all states may respond by throwing open their borders. The ruling demands equal treatment for in-state and out-of-state producers seeking to ship directly to consumers�a mandate that could also be met by forbidding direct sales by both. “Discriminatory laws were eliminated with one fell swoop, but what the ruling doesn’t decide is what the landscape will look like afterward,” said former Stanford Law School Dean Kathleen Sullivan, now of counsel at Quinn Emanuel Urquhart Oliver & Hedges in Silicon Valley. She also argued on behalf of the wine industry before the high court. “Will they level up or level down? Our guess is that the horse is out of the barn and consumers will want these shipments.” Miguel Estrada, D.C. partner at Gibson, Dunn & Crutcher, sharply disagreed, predicting that most states will respond by barring all shipments to in-state consumers. “I find it hard to believe that states will now let everything in, instead of making everyone go through the wholesaler and the three-tier system,” said Estrada, who represented New York liquor wholesalers and retailers in support of the state law. James Seff, partner at Pillsbury Winthrop Shaw Pittman in San Francisco, who wrote a brief in the case for the Wine Institute, also predicted a wide range of legal issues will flow from the ruling. “What would prevent a California distributor from shipping to a New York retailer?” asked Seff. “This ruling by no means denies job security for people who work on these issues.” Another issue Monday’s ruling leaves open for the future, says Seff: direct shipment to U.S. customers by foreign wineries. The Court made short shrift of the main justifications offered by the states in defending their restrictions on direct shipment, namely curbing sales to minors and guaranteeing effective state regulation and taxation of producers. Kennedy said states had offered no evidence that pointed toward endangerment of minors, who, he said, “are less likely to consume wine, as opposed to beer, wine coolers, and hard liquor.” Even if the argument were valid, Kennedy said, it would not justify allowing shipment by in-state wineries while forbidding out-of-state wine shipments. Kennedy’s opinion won an unusual array of supporters on the Court�Justices Antonin Scalia, David Souter, Ruth Bader Ginsburg, and Stephen Breyer. Dissenting were Justices John Paul Stevens, Sandra Day O’Connor, Clarence Thomas, and Chief Justice William Rehnquist. Reviewing the history of the 21st Amendment, the dissenters argued that the amendment, combined with subsequent federal legislation, in the words of Thomas, “took those policy choices away from judges and returned them to the states.” Tony Mauro can be contacted at [email protected]

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