SCOTUS Hears Historic Challenge To State Control Over Alcohol Sales

By Neat Pour Staff |

In 1933, the 21st Amendment to the U.S. Constitution was ratified ending prohibition. However, in the process of allowing Americans to drink legally again, the amendment also shifted booze regulation to the states and created the notorious ‘three tier system.’ On Wednesday (1.17), the Supreme Court heard arguments in a case that seeks to chip away at the state’s absolute power.

Tennessee Wine and Spirits Retailers Association v. Blair, No. 18-96’ challenged a TN state law that requires an individual (and/or corporations and their “officers, directors and stockholders”) to live in-state for at least two years before they can receive a one-year sales license from the TN Alcoholic Beverage Commission. In a confusing twist, to renew the license, the applicant must have logged ten years living in state.

A pair of retailers argued before the court that the state does not have the right to impose any residency requirement.

If the SCOTUS were to rule the regulation unconstitutional, the precedent could open the path to future challenges to state alcohol regulation (including several pending cases attacking the three tier system.

The case was bought by Kimbrough Fine Wine & Spirits, a small mom n’ pop operation, along with Total Wine & Spirits, a large national retailer. Their attorney Carter Phillips argued, “The sole purpose of this statute was, as my friend here who represents the retailers association proves beyond any question, what this is designed to do is be exclusively protectionist.”

Jutice Elena Kagan noted the potential significance of a precedent. She stated, “Well, we’re leaving a lot of things for another day, but they all seem to be demanded by the principles that you’re asking us to adopt.”

The association referenced by Phillips is the Tennessee Wine and Spirits Retailers Association, a trade organization joined by 35 states in the defense. Notably, the state of TN, itself, chose not file a brief after losing in Federal District Court and then the Court of Appeals.

The defendants argued that the law is not protectionist, rather it simply empowers locals to use their unique small town smarts. “The longtime resident who attends football games on Fridays is less likely to be duped by the drum major’s fake ID on Saturdays,” the trade group posited in their brief to the SCOTUS. “She is also less likely to do business with the town drunk if she knows he will drive around on the same streets that her family and friends use.”

The court seemed unconvinced by this rationale. Justice Samuel A. Alito Jr. asked the defense, “Can a state enact a 10-year residency requirement?” He then questioned, “Suppose if it was … a grandparents requirement. So you can’t — you can’t get a liquor license in Tennessee unless your grandparents were Tennessee residents. That would not create a dormant Commerce Clause problem?” The justice then asked about the constitutionality of a law whose only purpose was “economic protectionism.”

However, Justice Neil M. Gorsuch raised the potential that overruling the law would open a floodgate to large digital retailers. “Why isn’t this just the camel’s nose under the tent?” he asked. “Isn’t the next business model just to try and operate as the Amazon of liquor?”

Still, Kimbrough’s owners (who invested their life savings into the enterprise) left the courtroom feeling optimistic. Plaintiff Mary Ketchum told The Daily Memphian, “Oh yeah, we won. I hate to be so … but I’m pretty sure. Doug and I both agreed, we’re not lawyers, but we agreed we’d be really surprised if they kept any kind of residency requirement at all.”

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