May 18, 2004

Direct Shipping Issue May Go to US Supreme Court

Michael Brill Newman

With February's decision by the 2nd Circuit Court of Appeals upholding New York’s prohibition on interstate wine shipments, the debate over direct shipping may be headed for the Supreme Court. Two circuits have now upheld direct shipment prohibitions (7th Circuit upheld Indiana's law), while four circuits (Texas, North Carolina, Virginia, and Michigan) have struck them down.

The latest development is disagreement over whether the time is right for review by the Supreme Court. The Institute for Justice, a Washington, D.C.-based interest group representing consumers and wineries in the New York case, recently filed a Petition for Certiorari asking the Supreme Court to review the 2nd Circuit's decision.   Additionally, the State of Michigan which last year lost before the 6th Circuit when that circuit struck down Michigan’s ban, also filed a petition in January seeking review of its case.  Also, Attorneys General in 36 states filed petitions last month as amici curia (“friends of the court”) asking the Supreme Court to review the issue of their right to ban shipments. (California’s Attorney General has refused to participate.)

The Coalition for Free Trade (CFT), however, a wine industry association supporting shipping, opposes these petitions.  CFT believes it would be better, in states allowing direct shipments, for the industry to develop a positive track record of collecting taxes, preventing sales to minors, and meeting other requirements.

If the Supreme Court accepts one or more of the petitions, the fundamental issue will be whether state shipping bans violate the U.S. Constitution’s Commerce Clause (because several states' laws allow in-state, but not out-of-state, companies to ship).  Shipping proponents argue such state laws discriminate unconstitutionally against out-of-state suppliers.  Shipping opponents argue the 21st Amendment and each state's police powers to control alcohol shipments into their state authorize direct shipping prohibitions.

The U.S. Supreme Court likely will decide by this summer whether it will grant any of the petitions.  The Court grants less than 2% of  certiorari petitions.  However, these cases are just begging to be heard by the Court because of their substantial constitutional issues.  If the cases are accepted, they are sure to make history for our generation.

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