Granholm v. Heald

SCOTUSCase
Litigants=Granholm v. Heald
ArgueDate=December 7
ArgueYear=2004
DecideDate=May 16
DecideYear=2005
FullName=Jennifer M. Granholm, Governor of Michigan, et al., Petitioners v. Eleanor Heald, et al.; Michigan Beer & Wine Wholesalers Association, Petitioner v. Eleanor Heald, et al.; Juanita Swedenburg, et al., Petitioners v. Edward D. Kelly, Chairman, New York Division of Alcoholic Beverage Control, State Liquor Authority, et al.
USVol=544
USPage=460
Citation=125 S. Ct. 1885; 161 L. Ed. 2d 796; 73 U.S.L.W. 4321; 05 Cal. Daily Op. Serv. 4068; 2005 Daily Journal D.A.R. 5561; 18 Fla. L. Weekly Fed. S 263; 2005 U.S. LEXIS 4174
Prior="Heald v. Engler", 342 F.3d 517 (6th Cir. 2003); rehearing and suggestion for rehearing en banc denied (Nov. 4, 2003); cert. granted, 541 U.S. 1062 (2004). "Swedenburg v. Kelly", 358 F.3d 223 (2d Cir. 2004); cert. granted, 541 U.S. 1062 (2004).
Subsequent=
Holding=The Court ruled that laws in New York and Michigan that permitted in-state wineries to ship wine directly to consumers, but prohibited out-of-state wineries from doing the same are unconstitutional.
SCOTUS=1994-2005
Majority=Kennedy
JoinMajority=Scalia, Souter, Ginsburg, Breyer
Dissent=Stevens
JoinDissent=O'Connor
Dissent2=Thomas
JoinDissent2=Rehnquist, Stevens, O'Connor
LawsApplied=Dormant Commerce Clause; U.S. Const. amend. XXI

"Granholm v. Heald", 544 U.S. 460 (2005), is a court case finally decided by the Supreme Court of the United States, unusual because the arguments centered around the rarely-invoked 21st Amendment to the Constitution ratified in 1933. (This amendment ended Prohibition, the ban on alcoholic beverages throughout the U.S.) The 5-4 decision ruled that laws in New York and Michigan that permitted in-state wineries to ship wine directly to consumers, but prohibited out-of-state wineries from doing the same are unconstitutional.

Background

"Granholm v. Heald" was the conclusion of an eight-year fight by small wineries against these laws. Although direct shipments to consumers constituted only about 2% of wine sales in the United States (whose total sales were US$21.6 billion in 2003), direct sales were thought to be an opportunity for growth. Laws in the eight states varied, but typically a winery could only distribute wine by selling it to a wholesaler in the state. The wholesaler could then distribute the wine to retailers or sell directly to consumers. This made the large wholesalers very powerful in the wine industry; if wholesalers in New York decided not to purchase wine from a particular winery, then that winery would be completely shut out of the New York market.

Arguments

The court case, which was a consolidation of two separate lawsuits, pitted the Dormant Commerce Clause doctrine, inferred from the Constitution's Article I, against Section Two of the 21st Amendment.

Section Two of the 21st Amendment reads:

:"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."

The Commerce Clause of Article One of the Constitution grants Congress the power:

:"To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes."

In turn, the Dormant Commerce Clause (or "DCC") has been inferred from the Commerce Clause. The DCC is a doctrine, evolved over many decisions of the U.S. Supreme Court, that the states do not have the power to enact anticompetitive laws that discriminate against sellers in other states.

Eleanor Heald, a wine collector, and eleven other plaintiffs, argued that Michigan's Liquor Control Code violated the DCC by making it a misdemeanor for an out-of-state winery to ship wine directly to a Michigan resident. (In-state wineries were allowed to do so.) The same argument was made in a separate case against the government of the state of New York by Juanita Swedenburg and other owners of out-of-state wineries.

In each of these two cases, the state governments of Michigan and New York had argued that Section 2 of the 21st Amendment granted them "carte blanche" to regulate liquor. One of their justifications for the laws was that by regulating out-of-state wineries in this way, they might be able to hinder the shipment of alcohol to underage minors; this would serve a valid state purpose.

The government of New York had won in the federal Second Circuit Court, and the government of Michigan had lost in the Sixth Circuit. The cases were consolidated and heard at once by the U.S. Supreme Court.

In a 5-4 decision, the Supreme Court decided the states' laws were unconstitutional. The context of the 21st Amendment, they wrote, was to return to the "status quo" that existed before Prohibition, making it clear that the states had the power to regulate alcohol however they wished, including banning alcoholic beverages entirely within the state if desired. Before Prohibition, the states did not have the power to violate the Dormant Commerce Clause, and the 21st Amendment was not intended to grant them this power.

Consequences

Michigan's liquor control board announced it would recommend to the state government that it ban "all" direct wine sales to consumers, joining the 15 other states currently banning all such sales.

New York governor George Pataki unveiled a bill that would limit each winery's direct sales to consumers to 2 cases per month. As a "Wall Street Journal" editorial noted, two cases per month sounds like a lot of wine, but the measure was intended to reduce competition for New York alcohol distributors.

After the ruling, industry experts generally opined that small wineries would benefit greatly, as the ruling not only threw out laws banning discriminatory direct sales to consumers, but also implicitly ruled unconstitutional laws that would prohibit retailers from ordering wine directly from their favorite out-of-state vineyards.Fact|date=May 2007

Over the past few years since the ruling, many more states have opened to direct shipping from wineries. As of April 2008, 35 states permitted at least some form of direct shipping from wineries to consumers [ [http://wi.shipcompliant.com/Home.aspx?SaleTypeID=1 Direct Shipping Map - The Wine Institute ] ] . However, states have enacted different regulations, many of whose conditions are either so complex or so expensive as to discourage wineries from complying. [ [http://wine.appellationamerica.com/wine-review/378/Wine-Direct-Shipping-Review.html Wine Direct Shipping Review - America ] ]

ee also

* List of United States Supreme Court cases, volume 544

References

* [http://www.law.indiana.edu/webinit/tanford/wine/mihome.html Web page] on the case, including evidence and briefs, by Alex Tanford, an attorney involved in the litigation
* [http://www.medill.northwestern.edu/~secure/docket/mt/archives/000867.php Article] on the case (while it was still underway) from the Medill School of Journalism
* [http://wi.shipcompliant.com/Home.aspx?SaleTypeID=1 Map showing states' shipping status] from the Wine Institute
* [http://wine.appellationamerica.com/wine-review/378/Wine-Direct-Shipping-Review.html Article] on the case's impacts between 2005 and 2007 on Appellation America

Additional Reading

* [http://tablascreek.typepad.com/tablas/2007/04/direct_shipping_1.html Blog post analyzing] the case's impact on wineries and consumers from Tablas Creek Vineyard