WHAT'S LEFT OF THE TWENTY-FIRST
AMENDMENT?
Jonathan M. Rotter &Joshua S. Stambaugh*
INTRODUCTION
Alcohol is big business. Like any business, it wants to flow freely
across jurisdictional boundaries. However, from time to time, most jurisdictions have attempted to regulate this free flow to advantage local
commercial interests.' Historically, local economic protectionism for
the liquor industry has been more successful than similar attempts directed at other industries because courts accepted the argument that the
Twenty-first Amendment provided a carve-out from the antidiscrimination rule of the dormant commerce clause.2 However, the Supreme
Court has regularly, and with increasing vigor, reminded the states that
a major purpose of the commerce clause and its dormant relative is to
foster a common market among the states and to prevent economic balkanization in any context, and with any product moving in interstate
3
commerce-including liquor.
With a few exceptions, it is no longer the law that the Twenty-first
Amendment allows states to regulate alcohol in a discriminatory manner. The current rule, announced in Granholm v. Heald,4 is that only
the least discriminatory measures consistent with a state's "core"
Twenty-first Amendment purposes-promoting temperance, ensuring
orderly market conditions, and raising revenue 5-or certain other legitimate local purposes, are permissible. While Granholm applied this rule,
it did not fully develop it, and it is likely that the language of Granholm
and the trajectory of Twenty-first Amendment cases will continue to
support application of demanding scrutiny to discriminatory practices
alleged to fulfill a legitimate local purpose.
Mssrs. Rotter and Stambaugh are both members of the California Bar.
The authors do not argue that all state regulation of interstate liquor sales is economic
protectionism. There are legitimate social, moral, health, and welfare reasons for states to regulate the manner in which alcohol is sold and to direct shipments from out-of-state sources do
present a supervision problem, as discussed infra.
2 See infra Part III.B.
3 1 RONALD D. ROTUNDA & JOHN E. NOWAK, CONSTITUTIONAL LAW: SUBSTANCE AND
PROCEDURE § 11.9 (2007).
4 544 U.S. 460 (2005).
5
North Dakota v. U.S., 495 U.S. 423, 413-32 (1990).
602
CARDOZO PUB. LAW, POLICY & ETHICS J.
[Vol. 6:601
The adoption of "regular" dormant commerce clause law with respect to alcohol represents the apex of post-prohibition alcohol policy,
and while it may seem unremarkable to those of "the younger generations," it was possible only because of a change in the social and economic conditions of alcoholic beverage consumption in postprohibition America; a change strenuously noted in Justice Stevens'
Granholm dissent. 6 Indeed, an understanding of the way the law has
developed is impossible without remembering the tremendous social
turmoil surrounding the prohibition movement, which was second only
to that associated with the abolitionist movement-turmoil which gave
rise to the only two Constitutional Amendments outlawing a commercial practice. While there can be no comparison between the consumption of alcohol and the monstrous evil of slavery, a majority of the
population did believe alcohol to be a moral evil, and it was this vehemence that led the early post-prohibition Court to read the Twenty-first
Amendment to allow almost any restriction a state put on alcohol, discriminatory or not.
Thus, while the application of the Dormant Commerce Clause to
alcohol can seem routine at present, the current full antidiscrimination
regime was not the only possibility. However, the path that social attitudes towards alcohol have taken-an attitude reflected in the younger
members of the Court-have allowed the current approach. The trajectory of Twenty-first Amendment jurisprudence strongly suggests that
the Court will continue to open up consumer channels to liquor producers from all four corners of the country. In fact, the Authors predict
that the Court's approach to nondiscrimination under the Twenty-first
Amendment will go so far as to eliminate, in time, practices that
Granholm noted were "unquestionably legitimate."
6
Justice Stevens wrote:
Today many Americans, particularly those members of the younger generations who
make policy decisions, regard alcohol as an ordinary article of commerce, subject to
substantially the same market and legal controls as other consumer products. That was
definitely not the view of the generations that made policy in 1919 when the Eighteenth Amendment was ratified or in 1933 when it was repealed by the Twenty-first
Amendment. On the contrary, the moral condemnation of the use of alcohol as a
beverage represented not merely the convictions of our religious leaders, but the views
of a sufficiently large majority of the population to warrant the rare exercise of the
power to amend the Constitution on two occasions.
Granholm v. Heald, 544 U.S. 460, 494-95 (2005). Justice Stevens' dissent is remarkable for its
originalism, an approach with which he is not usually identified. See infra Part I.A.2.
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
603
Part I of this Article examines the language of the Twenty-First
Amendment and the arguments that have been used to support expansive and narrow readings of the Amendment's grant of a special power
to regulate commerce in liquor to the states. Part II traces the history of
federal liquor legislation prior to and after prohibition, a necessary predicate to understanding Twenty-first Amendment jurisprudence, as many
arguments deployed by courts draw on the development of the federal
approach in interpreting the Amendment. Part III describes issues that
have arisen since Granholm and are not susceptible to easy answer using
the analysis set forth in Granholm, because there is often a question of
whether a practice constitutes economic discrimination. Part IV briefly
describes a major shortcoming of the cases struggling with the question
of whether a practice discriminates against out-of-state interests, and
suggests that antitrust law provides a well-developed body of analytic
tools that can be employed to answer that question.
I.
DOES THE TWENTY-FIRST AMENDMENT AUTHORIZE STATE
LEGISLATION THAT WOULD OTHERWISE BE PROHIBITED
BY THE DORMANT COMMERCE CLAUSE?
In Granholm, out-of-state wineries challenged laws in Michigan
and New York that allowed in-state wineries to sell wine directly to consumers in those states but either prohibited out-of-state wineries from
doing so altogether or made their direct sales economically impractical. 7
The question addressed by the Court was whether those laws "violate[d]
the dormant Commerce Clause in light of section 2 of the Twenty-first
Amendment." 8 The Dormant Commerce Clause renders impermissible
"differential treatment of in-state and out-of-state economic interests
that benefits the former and burdens the latter" in "all but the narrowest
circumstances." 9
The states argued that such a narrow circumstance was established
by Section 2 of the Twenty-first Amendment, stating, "The transportation or importation into any state . . .of intoxicating liquors, in violation of the laws thereof, is hereby prohibited."'" The Court's view,
however, was that the Twenty-first Amendment did not repeal the Dor7
Granholm, 544 U.S. at 466-68.
8
Id. at 471.
Id. at 472 (citing Oregon Waste Systems, Inc. v. Department of Environmental Quality of
9
Ore., 511 U.S. 93, 99 (1994)).
10 U.S. CONST. amend. XXI, § 2.
604
CARDOZO PUB. LAW, POLICY & ETHICS J.
[Vol. 6:601
mant Commerce Clause for alcohol," and indeed, the rule stated by
Granholm is that "[s]tate policies are protected under the Twenty-first
Amendment when they treat liquor produced out of state the same as its
domestic equivalent." 2
Unfortunately, that formulation does not say much about what
policies are in fact protected. While the Court characterized the laws at
issue in Granholm as "straightforward attempts to discriminate in favor
of local producers,"' 3 it did not provide sufficient guidance for nonstraightforward attempts. Most importantly, the Court made no examination of whether the well-established three-tier system of producer,
wholesaler, and retailer treats in-state and out-of-state interests differently, instead merely stating that that system is "unquestionably legitimate." ' 4 Cases currently in the lower courts may provide an
opportunity for the Supreme Court to take a closer look at that
question.
A.
The Ambiguous Section 2?
Section 2 of the Twenty-first Amendment states, in its entirety,
that "[t]he 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."' 5 Despite
the apparent simplicity of those words, the Court's widely divergent
readings of this sentence over time merit careful unpacking and consideration of how it has been susceptible to so many interpretations.
The last clause-"is hereby prohibited"-is, grammatically speaking, what the Amendment does. The Twenty-first Amendment, like
most others, contains no statement of whom it addresses; it merely
states the rule without explaining whether it is a restraint on state or
federal power, or both. In its "prohibiting," Section 2 is most akin to
the Eighteenth Amendment-Prohibition itself. But while Congress
implemented the National Prohibition Act (generally known as, and
hereinafter, the "Volstead Act," after its lead author 6) in October
11 Granholm, 544 U.S. at 487 (citing Hostetter v. Idlewild Bon Voyage Liquor Corp., 377
U. S.324, 331-32 (1964)).
12 Id. at 489.
13 Id.
14 Id.(citing North Dakota v. United States, 495 U.S. at 423, 432 (1990)).
15 U.S. CONST. amend. XXI, § 2.
16 Andrew Volstead, a teetotaler congressman from Minnesota, served in the House of Representatives from 1903-1923, and served in the National Prohibition Enforcement Bureau until
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
605
1919,'1 ten months after the ratification of the Eighteenth Amendment,
the first implementing legislation for the Twenty-first Amendment was
enacted in 2002-sixty-nine years after the ratification of the Twentyfirst Amendment. 8 That legislation, known as the Twenty-first
Amendment Enforcement Act, creates federal jurisdiction over suits for
injunctive relief brought by state attorneys general against persons violating a state law "regulating the importation or transportation of any
intoxicating liquor."1 9 The sixty-nine years prior to the Enabling Act
were not devoid of legal action under the Twenty-first Amendment, and
the legislation is more of an ending rather than a beginning. Fortunately, the end happens to be a good place to start developing an understanding of the possible meanings of the Twenty-first Amendment.
1. The Minimalist Interpretation-Just Jurisdiction
Since the Twenty-first Amendment Enforcement Act takes no position on whether state laws pass constitutional muster,20 it presents the
minimalist interpretation of the Twenty-first Amendment. That is, the
Constitutional Amendment allows federal jurisdiction for a state to litigate violations of its laws by actors physically located beyond the state's
enforcement power. The Twenty-first Amendment Enforcement Act
was enacted after Senate Committee hearings on the subject,2 1 which
focused on Utah law enforcement's perception of the problem of minors
receiving alcohol through direct shipment internet sales. The witnesses
at the hearing, who included a Utah Assistant Attorney General, noted
that in their experience, only ten percent of alcohol obtained by minors
probcame via this online route, but they nonetheless believed that the
22
belief.
that
on
acted
Congress
and
action,
lem required federal
the passage of the Twenty-first Amendment. See Volstead, Andrew John (1860-1947), Biographical Directory of the United States Congress, http://bioguide.congress.gov/scripts/biodisplay.pl?
index=V000 114 (last visited May 1, 2008).
17 THOMAS PINNEY, A HISTORY OF WINE IN AMERICA, FROM PROHIBITION TO THE PRE1 (2005).
SENT
18 27 U.S.C. § 122a (2006).
19 Id.
20
Dickerson v. Bailey, 212 F. Supp. 2d 673 (S.D. Tex. 2002), affd, 336 F.3d 388 (5th Cir.
2003).
21
THE
Interstate Alcohol Sales and the 21st Amendment:
JUDICIARY, 106TH CONG. 37 (1999).
22
HEARING BEFORE THE
S.
COMM. ON
Id. at 28; but see Federal Trade Commission, Possible Anti-Competitive Barriers to E-
Commerce: Wine 26 (July 2003) (noting that direct wine shipments to minors were a very small
component of minors' access to alcohol); see also 145 Cong. Rec. H6, 861-62 (daily ed. Aug. 3,
1999) (statement of Rep. Thompson); id.at H6, 864-65 (statement of Rep. Radanovich).
606
CARDOZO PUB. LAW, POLICY & ETHICS J
V 6:601
[Vol.
The need for Congressional authorization for states to reach conduct that starts outside of their borders but ends up inside them is not
entirely compelling in the context of modern, post-InternationalShoe
personal jurisdiction jurisprudence.2 3 Indeed, not only does the law in
general allow such action by states, but the specific decision denying
jurisdiction which prompted the Utah Assistant Attorney General to request federal jurisdiction had been reversed even before the Senate hearing.24 It is much more plausible that such Constitutional and
Congressional authorization would have been necessary for cross-state
enforcement in the pre-InternationalShoe regime in effect at the time of
the Twenty-first Amendment's passage in 1933.25 Under that regime,
courts in the receiving jurisdiction were unable to assert jurisdiction over
out-of-state shippers if they were not physically present or served while
physically present in the state (if individuals) or "doing business within
the state" (if corporations).26
A minimalist interpretation of the Twenty-first Amendment might
go as follows: The Twenty-first Amendment provides constitutional authorization for federal (or expanded state) jurisdiction over those who
import intoxicating liquors into any state for delivery or use therein in
violation of any regulation of that state but leaves intact all other constitutional limitations upon liquor as an item of interstate commerce.
Such a jurisdictional or "minimalist" interpretation is so bare and weak
that no court has held it to be the meaning of the Amendment.
23
International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (holding jurisdiction
proper where defendant has minimum contacts with the forum such that the maintenance of the
suit does not offend "traditional notions of fair play and substantial justice").
24 INTERSTATE ALCOHOL SALES AND THE 21ST AMENDMENT:
HEARIJNG BEFORE THE S.
37 (1999).
See generally Letter from Prof. John Lynch to M. Craig Wolf, Counsel, S. Judiciary
COMM. ON THE JUDICIARY, 106TH CONG.
25
Comm., (Mar. 8, 1999) S. Hrg. 106-41, 78-82 (1999) (discussing personal jurisdiction jurisprudence and concluding that allowing for venue in the district in which the intoxicating liquor was
received would not violate constitutional limitations on the exercise of personal jurisdiction.
Such venue is provided for in the Twenty-first Amendment Enforcement Act. 27 U.S.C.
§ 122a(c)(2) (2006)).
26 See, e.g., Pennoyer v. Neff, 95 U.S. 714 (1878) (personal service within the state or voluntary appearance necessary for personal jurisdiction over nonresident individual); Green v. Chicago, Burlington & Quincy R. Co., 205 U.S. 530, 532-33 (1907) (hiring an office, the
employment of a district freight and passenger agent "to solicit and procure passengers and
freight to be transported over the defendant's line . . . [and having under his direction] several
clerks and various traveling passenger and freight agents..." is not sufficient to constitute doing
business within the state for purposes of personal jurisdiction); Philadelphia & Reading R. Co.
v. McKibbin, 243 U.S. 264, 268 (1917) (same).
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
607
It could be argued that this interpretation is perhaps too minimal,
even within the framework of the Twenty-first Amendment Enforcement Act, because that Act expressly states that it "shall be construed
only to extend the jurisdiction of Federal courts in connection with
State law that is a valid exercise of power vested in the States ...under
the [Twenty-first amendment as] interpreted by the Supreme Court."27
Even the minimalist position proposed above presupposes some guidance by the Supreme Court of what passes muster under the Twentyfirst Amendment; the question cannot be merely jurisdictional because
the state laws must still survive Commerce Clause scrutiny.
This objection, however, does not defeat the minimalist interpretation. The Twenty-first Amendment Enforcement Act leaves open the
question of what the Supreme Court will pronounce regarding the
meaning of the Amendment. A future Supreme Court decision holding
that the Twenty-first Amendment contains no more than is contained in
the Twenty-first Amendment Enforcement Act would therefore be consistent with the Twenty-first Amendment Enforcement Act. The
Twenty-first Amendment really could be merely jurisdictional, and the
fact that state laws regulating liquor must pass constitutional muster
makes them no different from laws concerning any other subject; state
laws would need to comply with the normal Dormant Commerce
Clause jurisprudence applicable to all interstate commerce, regardless of
the nature of the product. Again, while a jurisdictional amendment
seems minor, it was not so minor prior to InternationalShoe, and even
the United States Congress thought that mere jurisdictional concerns
were significant enough in 2002 to pass the Enabling Act. 8
Another objection to the minimalist interpretation is the grammar
of the Amendment. The Amendment prohibits transportation and importation in violation of state law, as opposed to merely allowing states
to prohibit transportation and importation as they see fit. 2 9 Therefore,
the objection is that as the Amendment is on its face self-enforcing it
must not be a mere grant of power to the states, and it must have inde-
27 U.S.C. § 122a(e), (e)(1) (2006).
On the other hand, the passage of so much time in between the passage of the Twentyfirst Amendment and its enabling act might indicate that the Amendment had, at least in the
past, significant meaning apart from jurisdictional concerns, and of course, the Amendment was
at various times read to allow many practices since disallowed. See infra Part III.
29 See U.S. CONST. amend. XXI, § 2.
27
28
608
CARD OZO PUB. LAW, POLICY & ETHICS J
[Vol.
6:601
[
pendent content. 3 0 The minimalist response to this critique would be
that, notwithstanding the scope or lack of limitations on state power
implied in the Amendment and the interplay of state alcohol regulations
with other constitutional provisions, whatever content the Amendment
has is directly dependent on the existence of state laws regulating the
transportation and importation of liquor.3 ' This dependence for content on state law is unique among constitutional amendments.
The minimalist interpretation, therefore, merely allows states to
enforce their laws in circumstances that would have prevented the exercise of jurisdiction against out-of-state entities due to lack of presence in
the state in the era prior to InternationalShoe. Under this interpretation, the states have no dispensation to violate Dormant Commerce
Clause doctrine (or other constitutional principles) in the name of regulating intoxicating liquors but can only enforce Commerce Clause-neutral laws governing intoxicating liquors against out-of-state entities that
send liquor into the state.
Importantly, if liquor is subject to all of the constraints of the Dormant Commerce Clause, the minimalist interpretation is consistent with
an all-or-nothing choice for the states regarding liquor-a state can
choose either (1) to be dry, and permit no liquor, imported or domestically produced, or (2) to allow all alcohol without respect to its geographic origin. A minimalist clarification of Section 2 of the
Amendment would read: "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,
IF THE LAWS OF THAT STATE PROHIBIT THE POSSESSION
OF ALL ALCOHOL" (deletions from text of the
Amendment in strikethrough, additions in bold). This view is in line
with one of the views ascribed to the Senate Judiciary Committee at the
time of the Amendment's passage by Senator Blaine, the Senate sponsor
AND CONSUMPTION
30
Compare the actual language of U.S. CONST. amend. XXI,
§
2 ("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.") with the
possible alternative: "Nothing herein shall prevent any State, Territory, or possession of the
United States from prohibiting the transportation or importation for delivery or use therein of
intoxicating liquors, in violation of the laws thereof."
31 This results from the fact that, if a state's laws do not regulate liquor, there are no "laws
thereof' to violate, and section 2 of the Amendment has no effect. It is only when a state
attempts to impose some limitation on the transportation or consumption of alcohol that confrontations with other constitutional provisions arise.
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
609
of the Twenty-first Amendment resolution: "So to assure the so-called
dry States against the importation of intoxicating liquor into those
States, it is proposed to write permanently into the Constitution a pro32
hibition along that line."
Interestingly, this statement was at odds with a "maximalist" statement that Senator Blaine made in the same report, saying the purpose
was "to restore to the States ... absolute control in effect over interstate
commerce affecting intoxicating liquors . . . . 33 With the Amendment's sponsor espousing such confusion, it is no surprise that the
Amendment is amenable to such a range of interpretation. The following section addresses this "maximalist" view that the Senator's latter
statement promoted.
2.
The Maximalist Interpretation-Absolute Autonomy
The maximalist interpretation focuses on the unqualified endorsement of state law in the Amendment: "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." 34 The maximalist position is that this
provision exempts state laws regulating the transportation or importation of intoxicating liquors from all Dormant Commerce Clause scrutiny. The reasoning for the maximalist position is essentially as follows:
(1) The Amendment does not say "in violation of the laws thereof, so
long as those laws do not violate the Dormant Commerce Clause,"
(2) the Amendment post-dates the Commerce Clause, (3) the Commerce Clause rules were well established by the time of the Amendment,
and (4) Congress exempted intoxicating liquors from the Dormant
Commerce Clause prior to Prohibition."
The Court's initial choice soon after the passage of the Amendment to adopt the maximalist interpretation heavily supports its
originalist credentials. Justice Stevens' dissent in Granholm v. Heald expresses this originalist position: "The views of judges who lived through
the debates that led to the ratification of [the Eighteenth and Twentyfirst] Amendments are entitled to special deference." 36 Justice Stevens
32
33
76 CONG. REC. 4141 (1933).
Id. at 4143 (emphasis added).
34 U.S. CONST. amend. XXI (emphasig added).
35
36
See infra Part II.A-B (discussing the Wilson and Webb-Kenyon Acts).
544 U.S. 460, 495 (2005).
610
CARDOZO PUB. LAW, POLICY 6- ETHICS j
[
[Vol.
6:601
also cites a dissenting opinion of Justice Black, "who participated in the
passage of the Twenty-first Amendment in the Senate, [and claimed
that] § 2 was intended to return absolute control of liquor traffic to the
States, free of all restrictions which the Commerce Clause might before
37
that time have imposed.
In the 1933 case State Board of Equalization v. Young's Market
Co.,38 Justice Brandeis dismissed the "minimalist" interpretation of the
Amendment, which suggested that if a state permitted the manufacture
and sale of intoxicating liquors, it had to allow imported liquors to compete with domestic liquors on the same terms. 39 Brandeis, the champion of social regulatory laws, believed that this interpretation "would
involve not a construction of the amendment, but a rewriting of it."4 °
The maximalist position was also followed in two 1939 cases: Ziffrin,
Inc. v. Reeves, which stated that "the Twenty-first Amendment sanctions
the right of a State to legislate concerning intoxicating liquors brought
from without, unfettered by the Commerce Clause[,]"4 1 and Finch & Co.
v. McKittrick, which said: "Since that amendment, the right of a State to
prohibit or regulate the importation of intoxicating liquor is not limited
by the commerce clause. "42
There are reasons besides temporal proximity to the amendment
that recommend the maximalist interpretation. Some feel that the maximalist position is supported on strictly textual grounds: "This case pits
the twenty-first amendment, which appears in the Constitution, against
the 'dormant commerce clause,' which does not," Judge Easterbrook
stated in a decision upholding certain regulatory liquor laws in Indiana. 43 Despite the rhetorical flourish, Judge Easterbrook, bound by Supreme Court precedent, did not put the maximalist interpretation into
practice.
The maximalist position and derision of the non-textual nature of
the Dormant Commerce Clause is also expressed in Justice Thomas'
Granholm dissent. Thomas argued that the balance between state regulatory and federal Commerce Clause interests had been thoroughly de37 Id. at 495 n.2, (citing Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 338
(1964) (Black, J.,dissenting)).
38 299 U.S. 59 (1933).
39
40
Id. at 62.
Id. at 63.
41 308 U.S. 132, 138 (1939) (emphasis added).
42 305 U.S. 395, 398 (1939).
43 Bridenbaugh v. Freeman-Wilson, 227 F.3d 848, 849 (7th Cir. 2000).
2008] WHATS LEFT OF THE TWENTY-FIRST AMENDMENT?
611
cided through a back-and-forth between Congress and the Supreme
Court prior to Prohibition, and that the Twenty-first Amendment
merely returned the pre-Prohibition status quo. Justice Thomas argued
that, although the Granholm majority reached the opposite conclusion,
the status quo was the maximalist interpretation, stating, "I would follow Young's Market and the language of both the statute that Congress
enacted and the Amendment that the Nation ratified, rather than the
Court's questionable reading of history and the 'negative implications'
of the Commerce Clause ....
3.
The Middle Ground-Liquor Like Everything Else
Between the minimalist and maximalist interpretations of the
Amendment is a middle ground-that the Amendment allows state regulation to have certain discriminatory effects, but only when "core concerns" of the Twenty-first Amendment are implicated, and even then
only under certain circumstances. The extent of the allowable discriminatory outcome depends on the possibility of achieving legitimate state
purposes through less discriminatory means. In the practice of state and
federal courts, it is often the case that a stated goal is found achievable
with less impact on Commerce Clause policy than the state's chosen
method.
The law has been somewhere between the minimalist and maximalist camps since Bacchus Imports, Ltd., v. Dias.45 In Bacchus, the state
of Hawaii imposed an excise tax on sales of liquor at wholesale. To
encourage the development of Hawaiian liquor production, the state
exempted from the tax a brandy distilled from the root of a shrub indigenous to Hawaii as well as fruit wine manufactured in the state.4 6 Hawaii argued that the exemption was nondiscriminatory because the
indigenous products did not compete with imported products, but the
Court held that the factual record did not support that argument.47
Hawaii also argued that, if the exemption was discriminatory, the
Twenty-first Amendment authorized the discrimination.4 8 The Court
44 544 U.S. 460, 497 (2005) (Thomas, J., Dissenting). Whether the pre-prohibition status
quo in fact allowed any discrimination was the subject of considerable debate between the majority opinion and Justice Thomas' dissent in Granholm, and is also beyond the scope of this
article.
45 468 U.S. 263 (1984).
46 Id. at 265.
47 Id. at 269.
48 Id. at 274.
612
CARDOZO PUB. LAW, POLICY & ETHICS J.
[Vol. 6:601
noted that precedent supported some enhanced ability to act in favor of
local interests where alcohol is concerned, but that "[t]o draw a conclusion . .. that the Twenty-first Amendment has somehow operated to
'repeal' the Commerce Clause wherever regulation of intoxicating liquors is concerned would be an absurd oversimplification. ' 49 Instead,
the Amendment required a "pragmatic effort to harmonize state and
federal powers." 50
The Bacchus Court set out the current balancing test for evaluation
of state liquor regulation: "[Wihether the principles underlying the
Twenty-first Amendment are sufficiently implicated by the exemption
for [the local products] to outweigh the Commerce Clause principles
that would otherwise be offended."5 1 The Bacchus Court did not undertake a complete enumeration of the "principles underlying the
Twenty-first Amendment. '52 Rather, it merely offered up the combating of "the perceived evils of an unrestricted traffic in liquor" and the
promotion of temperance as two examples of such underlying principles. 53 The boundaries of those examples are not well demarcated, and
they can be employed to argue in support of many discriminatory restrictions on the liquor trade.
While the Court did not, and perhaps was unable to, detail much
of an affirmative description of allowable Twenty-first Amendment purposes justifying regulation that would otherwise run afoul of the Commerce Clause, it found the Hawaiian scheme to fall clearly outside of
those purposes: "Doubts about the scope of the Amendment's authorization notwithstanding, one thing is certain: The central purpose of the
provision was not to empower States to favor local liquor industries by
erecting barriers to competition." 54 This was a particularly easy rule to
apply in Bacchus because the Hawaii legislature had been insensitive to
the possibility of Commerce Clause review when it declared promotion
55
of Hawaiian industry as the purpose of the law.
49 Id. at 275 (citing Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 331-32
(1964)).
50 Id. (citing California Retail Liquor Dealers Ass'n. v. Midcal Aluminum, Inc., 445 U.S.
97, 109 (1980)).
51 Id. at 275.
52 Id.
53 Id. at 276.
54 Id.
55 Id. at 270.
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
613
Granholm v. Heald56 reaffirmed the Bacchus approach, rejecting the
request of the states with discriminatory direct-shipment laws to overrule Bacchus or limit it to its facts. 5 7 Granholm reiterated the Bacchus
rule, stating, "State policies are protected under the Twenty-first
Amendment when they treat liquor produced out of state the same as its
' 58
domestic equivalent."
In Granholm, the states also attempted to argue that there were two
"legitimate local purpose[s] that cannot be adequately served by reasonable nondiscriminatory alternatives . . . keeping alcohol out of the hands
of minors and facilitating tax collection." 59 The Court rejected the
"protecting minors" justification on evidentiary and logical grounds,
noting that: (1) The states provided little evidence that the purchase of
wine over the Internet by minors is a problem, and to the contrary
noted that a recent FTC report found that the twenty-six states currently allowing direct shipments reported no problems with minors' increased access to wine; and (2) if direct shipment was a problem, it was a
problem whether the winery was in-state or out-of state. 60 The Court
also rejected the tax collection rationale, finding that the mechanisms in
place already facilitated tax collection,6 1 and that if other measures were
62
necessary, they could be nondiscriminatory.
Notably, in the Court's discussion of the purported state rationales
in Granholm, it did not bother to examine whether each was a "core"
Twenty-first Amendment purpose. The Court could skip that exercise
because the standard for whether a discriminatory effect is permissible
seems now to be exactly the same in the Twenty-first Amendment context as it is in all other areas of the law. Pike v. Bruce Church, Inc.,6 3 a
case about whether Arizona could require a cantaloupe farm to package
its cantaloupes in Arizona rather than sending them to a packing plant
in California, stated the rule:
56
544 U.S. 460 (2005).
57 Granholm, 544 U.S. at 489.
58
Id.
59 Id.
60
Id. at 490.
61 Id. at 491-92 (noting the provision of the Twenty-first Amendment Enforcement Act that
"gives state attorneys general the power to sue wineries in federal court to enjoin violations of
state law."(citing 27 U.S.C. 122a(b)).
62 Id. at 491-92.
63
397 U.S. 137 (1970).
CARDOZO PUB. LAW, POLICY & ETHICS I
614
[Vol.
6:601
[
Although the criteria for determining the validity of state statutes affecting interstate commerce have been variously stated, the general
rule that emerges can be phrased as follows: Where the statute regulates evenhandedly to effectuate a legitimate local public interest, and
its effects on interstate commerce are only incidental, it will be upheld
unless the burden imposed on such commerce is clearly excessive in
relation to the putative local benefits. If a legitimate local purpose is
found, then the question becomes one of degree. And the extent of
the burden that will be tolerated will of course depend on the nature
of the local interest involved, and on whether it could be promoted as
well with a lesser impact on interstate activities."
In Granholm, the Court appears to have assumed, quite reasonably, that
preventing access to alcohol by minors was an acceptable Twenty-first
Amendment purpose, although it is unlikely that the Amendment is
necessary to provide states with the police power to prevent access to
alcohol by minors. Granholm, therefore, sheds no additional light on
"core purposes" of the Amendment, other than to affirm Bacchus' understanding that economic protectionism was not such a purpose. It is
therefore possible that the only core purpose for regulation under the
Twenty-first Amendment that is not available under the rubric of otherwise-classifiable legitimate local purposes is outright prohibition.
To the extent that liquor has unique dangers, general principles
under which the harm attendant to a product affects whether a state can
prohibit interstate commerce with respect to that product may adequately account for, and protect against, those dangers. Even outside of
65
the Twenty-first Amendment context, if the danger "far outweigh[s]
the commercial worth of the product, the state can prohibit its transportation, notwithstanding the impact on interstate commerce. However,
the mere harmful nature of the substance does not give a state carte
blanche to discriminate; the regulation affecting commerce must be
evenhanded. Thus, in Philadelphia v. New Jersey,66 the Court rejected
New Jersey's attempt to prevent waste from being shipped into the state
for disposal in landfills operated in the state because New Jersey imposed no such limitation on waste generated within the state.6 7 The
Court distinguished a true quarantine regulation banning the import of
64
65
66
67
Id. at 142 (internal citations omitted).
Philadelphia v. New Jersey, 437 U. S. 617, 622 (1978).
437 U.S. 617 (1978).
Id. at 628-29.
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
615
harmful material, stating that such "quarantine laws banned the importation of articles such as diseased livestock that required destruction as
soon as possible because their very movement risked contagion and
other evils. Those laws thus did not discriminate against interstate commerce as such but simply prevented traffic in noxious articles, whatever
their origin. "68 Much as the harm from alcohol generally arises after it
arrives in the hands of its imbiber, "the harms caused by waste are said
to arise after its disposal in landfill sites, and at that point, as New Jersey
concedes, there is no basis to distinguish out-of-state waste from domes69
tic waste."1
Comparing liquor regulation to the waste restriction at issue in
Philadelphia v. New Jersey, it is clear that the harm caused by liquor
arises after its importation into the state. The promotion of temperance
is a core Twenty-first Amendment purpose, the goal of which is the
reduction in consumption of liquor, much like New Jersey's goal of
reducing landfill use. Thus, Granholm and cases like it appear to advocate that the promotion of temperance must be performed by nondiscriminatory means when possible. Just as a quarantine law can ban
imports (which is a discriminatory measure), so too can a temperance
law discriminate, if it is consistent with Dormant Commerce Clause
jurisprudence insofar as such discrimination is only permissible where
no other measures will accomplish the goal. If the goal of temperance
can be achieved in a nondiscriminatory fashion, states must implement
those nondiscriminatory means in its regulation of alcohol, just as it
7°
does when attempting to mitigate non-alcohol-related harms.
II.
THE PATH
To
THE MIDDLE
The road towards the current middle ground of the Twenty-First
Amendment's meaning described above was neither straight nor well
marked. Instead, as is often the case, it was paved in small increments,
as the Supreme Court and lower courts responded to developing social
and economic conditions in their opinions. The courts also genuinely
worked towards a viable marriage between the Twenty-first Amendment
68
Id.
69 Id.
at 629.
70 See, e.g., Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456 (1981)
(holding that
Minnesota may ban retail sale of milk in plastic non-refillable containers in order to conserve
energy and resources, as the statute does not discriminate, and the incidental burden on interstate commerce is not excessive in relation to the local benefits).
616
CARDOZO PUB. LAW, POLICY & ETHICS J
[Vol.
6:601
[
and the Commerce Clause. 7' The doctrinal journey began before the
Amendment itself was passed and includes a wide range of legal opinions struggling to harmonize the Amendment's plain language and the
Commerce Clause's sweeping coverage. 72
A.
Wilson Act-Take It Out Of The Box
Prior to an effective movement aimed at the federal regulation/
deregulation of liquor, or the presence of constitutional amendments
addressing the issue, "[t]he temperance movement fought to curb the
sale of alcoholic beverages one State at a time."73 The movement began
by successfully pressing for the enactment of state laws banning the production and sale of alcoholic beverages within the state, laws which were
met with favor in the Supreme Court. 74 However, the Court also ruled
that states could not ban the sale of imported liquor in its "original
package" or require all liquor importers to have a permit. 75 This result
was a natural extension of the original package doctrine as it had been
applied up until that time. The original package doctrine defined the
applicability of the Article I, Section 10 prohibition on states imposing
import taxes during the chain of distribution. 76 In May v. New Orleans,77 the Court explained:
71 The story of the origins of the Amendment and its legal history is recounted twice in the
Granholm decision itself, once by the majority and once by Justice Thomas' dissent. Granholm
v. Heald, 544 U.S. 460, 476-84, 498-511 (2005). These two recitations represent the divergent
views on the meaning of the Amendment itself.
72 See generally Daniel A. Klein, Annotation: Supreme Court's Views as to Extent of States'
Regulatory Powers Concerning or Affecting Intoxicating Liquors, Under Federal Constitution's
Twenty-First Amendment, 134 L. Ed. 2d 1015 (2006).
73 Granholm, 544 U.S. at 460.
74 See Mugler v. Kansas, 123 U.S. 623, 624 (1887) (upholding a Kansas criminal statute
prohibiting the manufacture and sale of intoxicating liquors within the state, "except for medical, scientific, and mechanical purposes," and to regulate the manufacture and sale thereof for
such excepted purposes).
75 Bowman v. Chicago & Northwestern R. Co., 125 U.S. 465, 499 (1888); accord Leisy v.
Hardin, 135 U.S. 100 (1890).
76 Brown v. Maryland, 25 U.S. 419, 441-42 (1827). The Court also stated the following:
[W]hen the importer has so acted upon the thing imported, that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps, lost
its distinctive character as an import, and has become subject to the taxing power of
the State; but while remaining the property of the importer, in his warehouse, in the
original form or package in which it was imported, a tax upon it is too plainly a duty
on imports, to escape the prohibition in the constitution.
Id.
77 178 U.S. 496 (1900).
617
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
[A] box, case, or bale in which the separate parcels [of goods] were
placed by the foreign seller ... was to be regarded as the original
package, and that upon the opening of such box, bale, or case for the
purpose of using or exposing to sale such separate parcels . . .each
parcel .. .lost its distinctive character as an import and became subject to local taxation.7 8
In response to this doctrine as it applied to intoxicating liquors, the
temperance movement persuaded Congress to pass the Wilson Act, also
known as the "Original Packages Act," in 1890.79 The Wilson Act,
which still remains in effect, states that all intoxicating liquors transported into any state or territory for "use, consumption, sale or storage
therein" shall be subject to the operation and effect of that state's laws
"to the same extent and in the same manner as though such liquids or
liquors had been produced in such State," and that they are not exempt
"by reason of being introduced therein in original packages or
otherwise.""
Thus, before the Wilson Act, states could not control disposition
of imported intoxicating liquors so long as they remained in their original package or until arrival in the hands of the consignee.8 ' The purpose of the Wilson Act was to make imported liquor subject to state
regulation regardless of whether it remained in its original packaging
when it arrived at the end user's address.8 2 The Supreme Court was
quick to uphold the statute's purpose,8 3 that of placing both imported
liquor and domestic liquor under control of the states, but this remedy
for the states did not solve the problem of "direct shipments," because
state regulations did not attach until after the liquor reached the hands
78
Id. at 502.
79
Act of Aug. 8, 1890, ch. 728, 26 Stat. 313 (1890) (currently codified at 27 U.S.C.
§
121
(2006)).
80 27 U.S.C. § 121 (2006).
81 See Taylor v. Commonwealth, 85 S.E. 499 (Va. 1915).
82
See United States v. Colo. Wholesale Wine & Liquor Dealers Ass'n., 47 F. Supp. 160 (D.
Colo. 1942), rev'don other grounds, 144 F.2d 824 (1945), rev'd, 324 U.S. 293 (1945).
83 In re Rahrer, 140 U.S. 545, 564 (1891). The Court also stated the following:
Congress did not use terms of permission to the State to act, but simply removed an
impediment to the enforcement of the state laws in respect to imported packages in
their original condition, created by the absence of a specific utterance on its part. It
imparted no power to the State not then possessed, but allowed imported property to
fall at once upon arrival within the local jurisdiction.
618
CARDOZO PUB. LAW, POLICY & ETHICS J.
[Vol. 6:601
of the customer. 84 Thus, prior to the passage of the Webb-Kenyon Act,
discussed below, "[t]ransportation [of liquor was] not complete until
delivery to the consignee or the expiration of a reasonable time therefore
and prior thereto the provisions of the . .. Wilson Act . . .have no
application." 85 That limitation frustrated enforcement efforts, primarily
because liquor could not be seized in bulk at warehouses. The Wilson
Act allowed states to regulate only after the individual bottle reached the
end consumer. States required more expansive legislation from Congress in order to keep out unwanted intoxicating spirits from their borders. The states found a partial but ultimately ineffective answer to their
problems in the Webb-Kenyon Act.
B.
Webb-Kenyon Act-Demi-sec
Congress passed the Webb-Kenyon Act on March 1, 1913, which
prohibited the shipment or transportation of any liquor "from one
State . ..into any other State . ..intended, by any person interested
therein, to be received, possessed, sold, or in any manner used, either in
the original package or otherwise, in violation of any law of such
'86 Perhaps the best exposition of the meaning and purpose
State .
of the Webb-Kenyon Act is found in Clark Distilling Co. v. Western M.
R. Co., which analyzed the law's effect on a West Virginia statute that
forbade "the manufacture, sale, keeping or storing for sale in this state,
or offering or exposing for sale [intoxicating liquors]." 8 7 West Virginia
sued some carriers for transporting liquors from Maryland into West
Virginia in violation of this law, and in turn, the Clark Distilling Co.
sued to compel the carriers to ship its liquor, which was ordered for
personal use, into the state.88 Facing an argument that the Webb-Ken84
See Rhodes v. Iowa, 170 U.S. 412 (1898). The Court also stated the following:
[T]he law of the state of Iowa can be made to apply to a shipment from the state of
Illinois,
before the arrival and delivery of the merchandise, without causing the Iowa
law to be repugnant to the constitution of the United States.... [M]oving the goods
from the platform to the freight warehouse, was a part of the interstate commerce
transportation, and was done before the law of Iowa could constitutionally attach to
the goods ....
Id. at 414, 426.
85 Kirmeyer v. Kansas, 236 U.S. 568, 572 (1915) (holding that the transportation of beer
from Missouri into the dry state of Kansas on the opposite side of the river was protected activity
under the Commerce Clause).
86 Act of March 1, 1913, ch. 90, § 1,37 Star. 699 (reenacted inAct of Aug. 27, 1935, ch.
740, § 202(b), 49 Star. 877, and codified at 27 U.S.C. § 122 (2006)).
87 242 U.S. 311, 316 (1917).
88
Id. at 316-17:
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
619
yon Act merely forbade shipment into a state of intoxicating liquors for
a "forbidden use," and that the state statute at issue did not explicitly
forbid "personal use," the Court embarked on a four-prong mission to
discover the interplay between the West Virginia statute and the newly
enacted Webb-Kenyon Act.
First, the Court held that the West Virginia statute did "forbid all
shipments, whether for personal use or otherwise."8 9 Next, the Court
found that the state indeed had a right to enact such a law as West
Virginia's, and that it did not run afoul of the Due Process Clause of the
Fourteenth Amendment because "clearly there would be power [in the
states], as an incident to the right to forbid manufacture and sale, to
restrict the means by which intoxicants for personal use could be obtained, even if such use was permitted." 90 Thus, the carriers could not
prevent West Virginia from asserting control over the liquors by claiming that the shipments were for personal use only.
The Court's third inquiry was into the "true meaning" and "operation" of the Webb-Kenyon Act "upon the prohibitions contained in the
West Virginia law." 9 ' It noted that even after passage of the Wilson Act,
the right to receive liquor and "the possession following from it and the
resulting right to use remained protected by the commerce
"92 The Webb-Kenyon Act, however, expressly covered all
clause ...
liquor commodities that entered a state, "intended, by any person interested therein, to be received, possessed, sold, or in any manner used." The
Act, therefore, was intended to remove any prior protections given to
In substance it was charged that very many shipments had been taken by the carriers
contrary to the law both as to solicitations and as to the use for which the liquor was
intended. Preliminary injunctions were issued restraining the carrying of liquor into
the State subject to many conditions as to investigation, etc., etc. With these injunctions in force, these suits were commenced by the Clark Distilling Company to compel the carriers to take a shipment of liquor which it was asserted was ordered for
personal use and deliver it in West Virginia, on the ground that the Act of Congress to
Regulate Commerce imposed the duty to receive and carry and that besides the West
Virginia prohibition law when rightly construed did not forbid it.
89 Id. at 318. While not critical to the holding in Clark Distilling, it is interesting for purposes of this Article to note that the state statute forbade all shipments of liquor for personal use
or otherwise "whether from within or without the State." Id. Thus, the case cannot be readily
used as support for Justice Thomas' dissent in Granholm, which stated that the Webb-Kenyon
Act itself condoned discriminatory regulation of intoxicating liquors. See Granholm v. Heald,
544 U.S. 460, 514 (2005).
90 Clark Distilling, 242 U.S. at 320.
91 Id. at 320-21.
92 Id. at 323.
CARDOZO PUB. LAW, POLICY & ETHICS J.
620
[Vol. 6:601
liquor carriers that imported or shipped liquor commodities for personal
use. It is no surprise, then, that the title of the bill was "An Act Divesting Intoxicating Liquors of Their Interstate Character in Certain
Cases." 93 The Court held that the legislation could be used to prohibit
shipment into the state for any use explicitly prohibited by state law:
Reading the Webb-Kenyon Law in the light thus thrown upon it by
the Wilson Act and the decisions of this court which sustained and
applied it, there is no room for doubt that it was enacted simply to
extend that which was done by the Wilson Act; that is to say, its purpose was to prevent the immunity characteristicof interstate commerce
from being used to permit the receipt of liquor through such commerce in
a means by subterstates contrary to their laws, and thus in effect afford
94
naught.
at
laws
such
set
to
fuge and indirection
The Court thus concluded that there was "no room for doubt that the
prohibitions of the state law were made applicable by the Webb-Kenyon
[Act]." 95 Particularly noteworthy was the Court's declaration that the
Act "did not simply forbid the introduction of liquor into a State for a
prohibited use, but took the protection of interstate commerce away
from all receipt and possession of liquor prohibited by state law." 96
Lastly, the plaintiff in Clark DistillingCo. argued that Congress did
not have the authority to pass the Webb-Kenyon Act "because it submitted liquors to the control of the States by subjecting interstate commerce
in such liquors to present and future state prohibitions, and hence in the
nature of things was wanting in uniformity." 97 The Court rejected this
argument of seeking "uniformity" because the contention was really "a
Id. at 321.
94 Id. at 323-24 (emphasis added).
93
95
Id at 322. The Court also stated the following:
In this light it is clear that the Webb-Kenyon Act, if effect is to be given to its text, but
operated so as to cause the prohibitions of the West Virginia law against shipment,
receipt, and possession to be applicable and controlling irrespective of whether the
state law did or did not prohibit the individual use of liquor.
Id. at 324.
96 Id. at 325. Such statements may have laid the groundwork for Justice Thomas' belief that
the Webb-Kenyon Act itself "authorizes the discriminatory laws" that were before the Court in
Granholm, even before the passage of the Twenty-first Amendment. Granholm v. Heald, 544
U.S. 460, 514 (2005). See also Brennen v. Southern Express Co., 90 S.E. 402, 405 (1916) ("[Ilt
is but reasonable to conclude that Congress intended to supply an effective remedy, and that the
Webb-Kenyon law is applicable to shipments intended only for personal use, provided such
shipments and the receipt, possession, or use of the liquor be in violation of State law.").
97 Clark Distilling, 242 U.S. at 326. The Court also stated the following:
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
621
complaint as to the want of uniform existence of things to which the act
'
In the
applies and not to an absence of uniformity in the act itself."98
Court's view, "the argument [sought] to engraft upon the Constitution
a restriction not found in it, that is, that the power to regulate conferred
upon Congress obtains subject to the requirement that regulations enacted shall be uniform throughout the United States." 99 The carriers
argued that liquor was in the category of items "free from all interference by state control in the absence of regulation by Congress," but the
Court was quick to note that "the power of Congress to regulate interstate commerce in intoxicants embrace[s] the right to subject such movement to state prohibitions."'0° Because Congress retained the power to
prohibit the interstate movement of all intoxicating liquors, it had the
authority to recognize restrictions enacted in one state which prohibit
any shipment of liquor into its boundaries from another state.'"'
The Court in Clark Distilling Co. made another pertinent finding,
in responding to the plaintiff carriers' slippery slope argument. The
It is not in the slightest degree disputed that if Congress had prohibited the shipment
of all intoxicants in the channels of interstate commerce and therefore had prevented
all movement between the several States, such action would have been lawful because
[it is] within the power to regulate which the Constitution conferred.
See also Lottery Case, 188 U.S. 321 (1903); Hoke v. United States, 227 U.S. 308 (1913). "The
issue, therefore, is not one of an absence of authority to accomplish in substance a more extended result than that brought about by the Webb-Kenyon Law, but of a want of power to
reach the result accomplished because of the method resorted to for that purpose." Clark Distilling, 242 U.S. at 326.
98 Clark Distilling, 242 U.S. at 327.
99 Id. at 327.
100 Id. at 328 (emphasis added).
101 Id. at 330-31. The Court also stated the following:
[W]e can see no reason for saying that although Congress in view of the nature and
character of intoxicants had a power to forbid their movement in interstate commerce,
it had not the authority to so deal with the subject as to establish a regulation [which
is what was done by the Webb-Kenyon law] making it impossible for one State to
violate the prohibitions of the laws of another through the channels of interstate
commerce.
Id. at 331. The Court's confidence in this conclusion was not shared by all who were involved
in the passing of the Act. See 30 Op. Arty. Gen. 88, 1913 U.S. AG LEXIS 38, at *3 ("In the
Senate, Senators Root and Sutherland, among others, expressed in careful and forceful reasoning
their conviction that the act was wholly beyond the constitutional powers of Congress, in which
view Representative Brantley and other lawyers of high standing in the House of Representatives
concurred."). Attorney General George W. Wickersham commented that he was "compelled to
the conclusion that [the Webb-Kenyon Act] is not only of doubtful constitutionality, but that
unless the Supreme Court shall recede from a well-settled line of decisions extending over a long
period of years, it would most certainly declare this legislation to be without constitutional
powers of Congress." 30 Op. Atty. Gen. 88, 1913 U.S. AG LEXIS 38, at *42.
622
CARDOZO PUB. LAW, POLICY & ETHICS J.
[Vol. 6:601
carriers argued that the allowance of state prohibitions "to attach to the
movement of intoxicants lays the basis for subjecting interstate commerce in all articles to state control and therefore destroys the Constitution."'10 2 The Court did not subscribe to this logic due to the nature of
the particular subject being regulated (intoxicating liquors), and "[t]he
fact that regulations of liquor have been upheld in numberless instances
which would have been repugnant to the great guaranties of the Constitution but for the enlarged right possessed by government to regulate
liquor ....
,
It was therefore the "exceptional nature of the subject
here regulated [that] is the basis upon which the exceptional power exThis finding is notable because the "excep-
erted must rest . .".1.",4
tional nature" of intoxicating liquors was a recurring theme in
discussion of the Commerce Clause and the regulation of liquor.
Because the Webb-Kenyon Act took the protection of interstate
commerce away from all receipt and possession of liquor prohibited by
state law, it "close[ed] the direct-shipment gap left open by the Wilson
Act.' 10 5 The Webb-Kenyon Act allowed states "to forbid shipments of
alcohol to consumers for personal use," and thus allowed dry states to be
06
truly dry. 1
C.
Eighteenth Amendment-Brut
Whether intoxicating liquors have retained their "exceptional nature" in the realm of interstate commerce remains to be seen, 10 7 but they
were certainly exceptional enough to the American people in 1919 that
their manufacture, sales and transportation within the U.S. was outlawed by the Eighteenth Amendment to the U.S. Constitution. 0 8
102
103
Clark Distilling,242 U.S. at 332 (1917) (emphasis added).
Id.
104 Id.
105
Granholm, 544 U.S. at 481.
106 Id.
107
See id. at 494 (Stevens, J., dissenting) ("[E]ver since the adoption of the Eighteenth
Amendment and the Twenty-first Amendment, our Constitution has placed commerce in alcoholic beverages in a special category.").
108 U.S. CONST. amend. XVIII, § 1. ("After one year from the ratification of this article the
manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into,
or the exportation thereof from the United States and all territory subject to the jurisdiction
thereof for beverage purposes is hereby prohibited."). The Eighteenth Amendment was proposed to the legislatures of the states by the Sixty-fifth Congress on December 18, 1917, and
ratification was completed on January 16, 1919. The Amendment was declared in a proclamation of the Secretary of State on January 29, 1919 to have been ratified. Rhode Island was the
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
623
Headed by temperance societies and religious groups,' 0 9 and applying
maximum political pressure," 0 the "Dry" movement rapidly spread
throughout the states. Despite the state-by-state progress, the movement looked for a national solution because "'[d]ry' was almost always a
relative rather than an absolute term; large exceptions might be permitted, and special cases allowed, that made it possible for people to continue drinking in some fashion." '' Thus, "the goal ...became to base
prohibition, not on state and local laws, but on a constitutional amendment, first in the states and then in the nation.""' 2 This strategy eventually succeeded, and "the most important practical element ... was the
Anti-Saloon League's policy of supporting any candidate, regardless of
party, who was friendly to prohibition or could be scared into voting for
it."113 In 1914, a proposed Eighteenth Amendment was introduced in
only state to reject and not subsequently ratify the Eighteenth Amendment. U.S.C.A. Const.
Amend. XVIII.
109 The organizations with the most significant involvement in the temperance movement
were the Woman's Christian Temperance Union (WCTU) and the Anti-Saloon League.
THOMAS PINNEY, A HISTORY OF WINE IN AMERICA: FROM THE BEGINNINGS TO PROHIBITION (1989) 433 ("The last, successful phase of the Dry campaign, culminating in national
Prohibition, may be said to have been carried out by the Anti-Saloon League.").
110 Prohibition, OHIO HISTORY CENTRAL, http://www.ohiohistorycentral.org/entry.php?
rec=544. Ohio History Central also provides the following:
The Anti-Saloon League of America and its state organizations inundated the U.S.
Congress with letters and petitions, demanding the prohibition of alcohol. With the
outbreak of World War I, the League also used anti-German sentiment to fight for
Prohibition. Many brewers in the United States were of German extraction. Utilizing
patriotism and morality, the Anti-Saloon League succeeded in getting the Eighteenth
Amendment passed by the Congress and ratified by the necessary number of states in
1919.
Id.
111 PINNEY, supra note 109, at 433.
112 Id. ("The Drys did not abandon the work of getting state and local laws passed in their
interest-indeed, they remained busy at that without interruption: but the new goal had been
perceived and the policy of pursuing it became more and more distinct.").
113 PINNEY, supra note 109, at 434. Pinney also states the following:
[T]he Drys found themselves, in no very long time, in control of state legislatures
throughout the South, the Midwest, and the West. And then began a desiccation of
states in rapid fashion. Georgia went Dry in 1907, Mississippi and North Carolina in
1908, Tennessee in 1909, West Virginia in 1912, Virginia in 1914. The process accelerated, so that by the time that the national prohibition amendment was passed in
1919, thirty-three of the forry-eight states were already Dry.
Id.
In 1913, the League sponsored a parade in Washington, and when it was over "the League's
superintendent, Purley Baker, presented an amendment to the United States Congress and to
the House of Representatives. This amendment would be the basis for the Eighteenth Amendment to the United States Constitution." Prohibition,OHIO HISTORY CENTRAL, supra note 110.
624
CARDOZO PUB. LAW, POLICY & ETHICS j
[Vol. 6:601
the House but failed to pass by two-thirds. In 1916, "a resolution to
submit a prohibition amendment to the states passed the Senate in August 1917 and the House in December."' 1 4 Just over a year later, ratification had been completed, and prohibition was constitutionally
enforced." 5 Prohibition brought about a lull in the discussion of a suitable and co-habitable relationship between alcohol and the Commerce
Clause. This lull would continue until the passing of the Twenty-first
Amendment, or "Repeal" Amendment, in 1933.
D.
Twenty-First Amendment-Individualized Insights into Intoxicants
America's brief experiment with national prohibition yielded a
number of unfavorable results. Organized crime associated with bootlegging, 1 6 as well as "the effects on overdoses and accidental poisonings, 1''7 caused concern that the benefits of prohibition were
outweighed by its detriments:"' "The two key factors usually credited
with precipitating Prohibition's demise are the Great Depression, which
114 PINNEY,
supra note 109, at 434.
115 See id.
116 Jeffrey A. Miron, Boston University, Alcohol Prohibition, available at http://eh.net/encyclopedia/article/miron.prohibition.alcohol. Miron also stated the following:
Roughly speaking, therefore, there have been two periods with high homicide rates in
U.S. history, the 1920-1934 period and the 1970-1990 period .. .Both before the
first episode and between these two episodes, homicide rates were relatively low or
clearly declining. Prima facie, this pattern is consistent with the hypothesis that alcohol prohibition increased violent crime: homicide rates are high in the 1920-1933
period, when constitutional prohibition of alcohol was in effect; the homicide rate
drops quickly after 1933, when Prohibition was repealed; and the homicide rate remains low for a substantial period thereafter.
Id. (citing Milton Friedman, The War We Are Losing, in SEARCHING FOR ALTERNATIVES:
DRUG-CONTROL POLICY IN THE UNITED STATES 53 (M. B. Krauss and E. P. Lazear eds.,
1991).
117 Miron, supra note 116 (citing CLARK WARBURTON, THE ECONOMIC RESULTS OF PROHIBITION
(1932).
118 Id. Miron also stated the following:
Because suppliers in a prohibited market must hide their activities from the authorities, they have a strong incentive to produce and ship the good in the most concentrated and hence most easily concealed form . . .This implies that prohibitions help
make the potent forms of a good more readily available or even help create more
potent forms of a prohibited substance. By itself this effect does not necessarily change
the manner in which consumption takes place; consumers can potentially redilute
[sic] the commodity in question to achieve their desired degree of potency. But in
practice such redilution [sic] is imperfect, suggesting increased overdoses under
prohibitions.
Id. (citing
1991)).
MARK THORNTON, THE ECONOMICS OF PROHIBITION
(University of Utah Press
2008] WHATS LEFT OF THE TWENTY-FIRST AMENDMENT? 625
invalidated dry claims that Prohibition promoted prosperity and produced a need for tax revenue, and the increasing violence associated with
Prohibition."" 9 Thus, towards the end of the prohibition period, the
nation's social and political consensus changed, and it was clear that the
Eighteenth Amendment had not been the panacea the nation needed for
alcohol use or abuse. The Twenty-first Amendment was proposed by
the Seventy-second Congress on February 20, 1933, signaling the end of
the nationwide ban on the sale and distribution of alcohol. 120 It was
fully ratified on December 5, 1933.121
Immediately after the Twenty-first Amendment was ratified, the
Supreme Court adopted a "maximalist" position, discussed supra, Section I.A.2. The Court summarized this position in State Bd. of Equalization v. Young's Market Co., 122 holding that the words of Section 2 of
the amendment "are apt to confer upon the State the power to forbid all
importations which do not comply with the conditions which it
123
prescribes," notwithstanding any discrimination in such conditions.
During this early post-Prohibition period, the Court also noted that
Section 2 reserves to the states "power to impose burdens on interstate
commerce in intoxicating liquor that, absent the Amendment, would
clearly be invalid under the Commerce Clause."' 124 This reasoning was
abandoned incrementally over the next eighty years and replaced by
other key language or legal terms of art that the Court utilized to justify
state regulation under the Twenty-first Amendment. The most notable
of these developments was the Court's position in Bacchus that states
may regulate the use and transportation of alcohol within their borders
(even if these regulations would be otherwise disallowed) if the regula-
119 Id. (citing Harry G. Levine & Craig Reinarman, From Prohibition to Regulation: Lessons
from Alcohol Policy for Drug Policy, 69 THE MILBANK QUARTERLY 461-94 (1991)).
120 See U.S. CONST. Amend. XXI. The vote was 63 to 23 in the Senate, 76 Cong. Rec. 4231
(1933), and 289 to 121 in the House. 76 Cong. Rec. 4516 (1933).
121 Other than the initial ratification of the original Constitution, the Twenty-first Amendment is the only Amendment so far to have been ratified by state conventions rather than state
legislatures. See discussion of ratification for all constitutional amendments at http://origin.
www.gpoaccess.gov/constitution/pdf2002/007.pdf (last visited May 1, 2008).
122 299 U.S. 59 (1936). The Young's Market Court, however, stopped short of holding that
the Amendment "freed the States from all restrictions upon the police power to be found in
other provisions of the Constitution." Id. at 64.
123 Id. at 62.
124 Capital Cities Cable v. Crisp, 467 U.S. 691, 712 (1984) (citing Hostetter v. Idlewild Bon
Voyage Liquor Corp., 377 U.S. 324 (1964) (emphasis added)).
626
CARDOZO PUB. LAW, POLICY & ETHICS J6
[Vol. 6:601
tions are consistent with the "core concerns" of the Twenty-first
Amendment.
125
The concept that "core concerns" underlie the Twenty-first
1 26
Amendment was first explicated in Capital Cities Cable v. Crisp,
where the Court measured the Amendment against express federal regulation which preempted state regulation of cable signal carriage, and
noted that "the central question presented . . . [is] whether the interests
implicated by a state regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail,
notwithstanding that its requirements directly conflict with express fed27
eral policies." 1
Bacchus and Granholm, discussed in section I.A, supra, eviscerated
much of the earlier jurisprudence that had carved out a substantial space
for the Twenty-first Amendment. Indeed, Justice Steven's Granholm
dissent bemoaned the fact that now liquor was on no different footing
than any other product, and argued that the equal treatment of liquor is
at odds with the history of regulation under the Twenty-first Amendment. 128 Justice Stevens' position certainly finds support in prior case
law; less than ten years earlier, the Court affirmed the principles of
Young's Market and other cases, which held that the Twenty-first
Amendment was "unfettered" by the Commerce Clause. 1 29 Justice Ste125
Bacchus Imports, Ltd. v. Dias, 468 U. S. 263, 276 (1984).
126
467 U.S. 691 (1984).
127
Id. at 714; accord 324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987) (quoting Capital
Cities, 467 U.S. 691).
128
Granholm, 544 U.S. at 494-95.
129
See 44 Liquormart v. Rhode Island, 517 U.S. 484, 514-15 (1996). The Court stated the
following:
From 1919 until 1933, the Eighteenth Amendment to the Constitution totally prohibited 'the manufacture, sale, or transportation of intoxicating liquors' in the United
States and its territories. Section 1 of the Twenty-first Amendment repealed that prohibition, and § 2 delegated to the several States the power to prohibit commerce in, or
the use of, alcoholic beverages. The States' regulatory power over this segment of
commerce is therefore largely unfettered by the Commerce Clause.
Id. (internal quotations omitted). See also State Bd. Of Equalization v. Young's Market Co., 299
U.S. 59 (1936) (ruling the Commerce Clause did not apply). Although 44 Liquormart's ruling
was not specifically related to the Commerce Clause, the Court used this pronouncement to
contrast the effect of the Twenty-first Amendment on other constitutional provisions and the
First Amendment in particular. The Court stated the following: "As is clear, the text of the
Twenty-first Amendment supports the view that, while it grants the States authority over commerce that might otherwise be reserved to the Federal Government, it places no limit whatsoever
on other constitutionalprovisions." 44 Liquormart, 517 U.S. at 515 (emphasis added).
20081 WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
627
vens' arguments notwithstanding, we are now clearly in a "post-maximalist" world.
III.
POST-GRANHOLM HARVEST
Granholm was a nadir of the Twenty-first Amendment's ability to
override Dormant Commerce Clause restrictions on state discrimination
and opened the lucrative direct-to-consumer market to out-of-state wineries on the same terms as in-state wineries. However, it is possible for
the Twenty-first Amendment's power to ebb even further. The requirement of "equal access" for out-of-state liquor producers may, when fully
developed, outlaw a number of practices initially thought to survive
Granholm. The recent cases below concerned challenges to some of
those practices, the discriminatory nature of which is the subject of dispute. The decisions highlight the determination of the judiciary to look
past the strict form of equal access and examine the actual effects on
market access, with various levels of deference to other objectives.
A.
Brooks v. Vassar-Local Liquor Is Quicker
In Brooks v. Vassar,131 plaintiffs challenged three aspects of Virginia's liquor regulation. The first challenged portion of the regulation,
which allowed in-state wineries and breweries to sell directly to Virginia
retailers and consumers but denied the same right to out-of-state wineries, was mooted by the Virginia legislature's repeal of those sections after
the Granholm decision. 13' The second and third portions of the challenged legislation were upheld against a Dormant Commerce Clause
challenge. These upheld provisions were those restricting Virginia residents from importing any more than one gallon of alcoholic beverages
for personal use, and the policy of Virginia state liquor stores, the only
132
source of spirits in the state, to sell only Virginia wine.
In upholding the importation restriction, the Fourth Circuit held
that the rule actually benefited out-of-state producers because it only
prohibited in-state producers, not out-of-state producers, from selling
directly to consumers. 33 The Fourth Circuit also rejected plaintiffs' argument that the statute was unconstitutional because out-of-state retailers would be disadvantaged by the rule. While they certainly were
130
131
132
133
462 F.3d 341 (4th Cir. 2006).
Id. at 345.
Id.
Id. at 352.
CARDOZO PUB. LAW, POLICY & ETHICS j
628
[Vol.
6:601
[
disadvantaged, the court held that an argument for equalizing the status
of in-state and out-of-state retailers was "nothing different than an argument challenging the three-tier system itself," a system, the court noted,
that was upheld as "'unquestionably legitimate'" in Granholm.' 34 Indeed, the court wrote that "an argument that compares . . . the status of
any other in-state entity under the three-tier system with its out-of-state
counterpart" was an attack on the three-tier system itself and thus, fore35
closed by Granholm.1
It is difficult to square the court's lack of concern for out-of-state
retailerswith the court's own comparison of the way the import restriction affects in-state and out-of-state producers. The court was clearly
concerned with the possibility that out-of-state producers might be disadvantaged. The reason that equalizing the treatment of producers is
less problematic for the three-tier system is that a product could be run
through the three-tier system only once whether it is in-state or out-ofstate, whereas an out-of-state retailer would have to put its product back
in the stream of commerce at the wholesaler level, resulting in two extra
levels of mark-up. The court ignored this functional difference, and
noted that there are no limits on imports so long as they are funneled
through a Virginia wholesaler and retailer. 136 Thus, it is easy to see that
if a producer's target market is Virginia consumers, selling to a Virginia
wholesaler is more attractive than selling to an out-of-state wholesaler, as
the product will then incur another mark-up when imported into Virginia by a Virginia wholesaler.
Nonetheless, the court merely noted that out-of-state sales were
treated exactly the same as in-state sales, and the same importation regu137
lations applied regardless of the source of the out-of-state product.
This hard-line rule, while analytically artificial as applied to an out-ofstate retailer or wholesaler, may be necessary for the maintenance of
some control over the importation of liquor into a wet state. While
practically necessary for control, perhaps from a doctrinal perspective,
disadvantaging out-of-state retailers is equally unacceptable. A state may
have every right to insist that liquor purchased within its borders passes
through the three-tier system, but it may not have power to regulate
134
135
Id.
Id.
136 Id. at
137 See
353.
id.
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT? 629
liquor that is purchased in other states and subsequently brought into
the state by the consumer.
With respect to the Virginia policy of allowing in-state liquor
stores to sell only Virginia wine, the court affirmed the lower court's
holding in favor of the state based on the market participant exception
to the Dormant Commerce Clause.13 8 Under the market participant
exception, when a state acts as a participant in the market, rather than as
a regulator, discrimination is permissible because "the prospect that
States will use custom duties, exclusionary trade regulations, and other
exercises of governmental power (as opposed to the expenditure of state
resources) to favor their own citizens . .. is entirely absent where the
States are buying and selling in the market."' 1 39 Virginia's state liquor
stores were in competition with 10,000 private retailers in Virginia that
sold both Virginia and non-Virginia wine and, like any other wine retailers, were free to choose the wine they stocked. 4 0 Thus, the state as a
market participant was allowed to discriminate in favor of Virginia
wine.
Judge Goodwin's dissent, however, would have found both the
personal import exception and the Virginia state liquor store policy violative of the Dormant Commerce Clause. 4 ' Judge Goodwin read
Granholm to require normal application of Dormant Commerce Clause
analysis to liquor sales but because the majority found that the personal
import exception did not discriminate, noted that the majority would
have reached their conclusion regarding the import clause, even under
his reading of Granholm.4 2 While Judge Goodwin was correct about
the ultimate determination made by the majority, this statement fails to
account for the majority's reliance on the "unquestionabl[e] legitima[cy]" of the three-tier system that foreclosed inquiry into whether
in-state and out-of-state retailers were treated identically under the law
even though the majority acknowledged that they were not.14 3 Judge
138 Id. at 355, 357.
139 Id.at 355-56 (quoting College Say. Bank v. Florida Prepaid Postsecondary Educ. Expense
Bd., 527 U.S. 666, 685 (1999)).
140 Id. at 357.
141 See id.at 361 (Goodwin, J.,dissenting).
142 Id. at 361. The dissent did not note it, but the majority's decision about the state liquor
store policy of selling only Virginia wine would have come out the same way using the dissent's
reading of Granholm as well, because the majority relied on the market participant exception-a
normal Dormant Commerce Clause doctrine-and not any Twenty-first Amendment purpose.
See id.at 355, 357.
143 See id.at 352 (quoting Granholm v. Heald, 544 U.S. 460, 489 (2005)).
630
CARD OZO PUB. LAW, POLICY & ETHICS J
[[Vol. 6:601
Goodwin argued that while the Virginia three-tier system was permissible, impermissible discrimination arises after liquor has passed through
that system and is sitting on shelves in Virginia.144 Here, the consumer
is barred from meaningfully accessing the out-of-state retailer on the
same terms.' 4 5 For example, the consumer would be able to buy an
unlimited quantity of liquor from a Virginia retailer and go home with
it. By contrast, if she wanted to purchase from the out-of-state retailer,
she would have to either discard or drink a sufficient quantity to bring
the amount of liquor she will import into the state under the one gallon
limit. 14 6
Judge Goodwin would have held that "[t]he Personal Import Exception can be saved only if the regulation 'advances a legitimate local
purpose that cannot be adequately served by reasonable nondiscriminatory alternatives. 1111 7 Virginia had argued that the law advances two
purposes: facilitating tax collection and controlling the importation of
bootleg liquor."4 ' Judge Goodwin would have held both of these interests to be inadequate justification, as he argued that they could be adequately served by reasonable nondiscriminatory alternatives.1 4 9
With respect to the Virginia state liquor store policy, Judge Goodwin would have held that the relevant market was the one for liquor and
wine at the same location and that rather than a competitive player in
that market, the state of Virginia was a regulatory monopolist, rendering
any discrimination impermissible. 15 ' The dissent did not examine market definition outside of appealing to common sense about convenience
or availability of alternatives.11 The appropriate market definition
ought to govern the permissibility of this regulation. If liquor plus wine
at a single location is indeed a single market, then Virginia is using its
regulatory power to advantage Virginia wine in that market. The peti152
tion for certiorari filed in Brooks was denied.
144
Id. at 362 (Goodwin, J., dissenting).
145 See
146
id.
Id.
147 Id. at 363 (citing New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 278 (1988)).
148 Id.
149 Id.
150
Id.
151 But see id.at 359-60 for the majority's analysis of the market participant exception. See
also discussion of antitrust doctrine of market definition, infra Part IV.
152
127 S. Ct. 2251 (2007).
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
631
B. Cherry Hill Vineyard, LLC v. Baldacci,153 Beau v. Moore,' 54 and
5
Jelovsek v. Bresden,1 55 on one hand, and Huber Winery v. Wilcher1 1
on the other- "PracticalEffects" Of Traveling To Wine Country
At issue in Cherry Hill and Huber was whether placing both instate and out-of-state wineries on the same regulatory footing, yet requiring both to make only on-the-premises direct sales, actually discrim57
inates against out-of-state wineries due to their geographical distance.1
This would represent a sort of de facto discrimination. Although both
cases were decided prior to the Brooks decision discussed above,' 58 they
do not fall as neatly into the Granholm-Brooks mold, and both address a
unique issue.
First, in Cherry Hill, Maine enacted a regulatory scheme wherein
all in-state or out-of-state wineries producing fifty thousand gallons or
fewer of wine a year could obtain a "farm winery license," which allowed them to sell directly to consumers on the premises of the farm
winery.' 59 The scheme prohibited the direct delivery of wine. 161 Thus,
"if an out-of-state licensed farm winery does not have an in-state location, then its customers must travel to its out-of-state location to directly purchase wine from the farm winery because farm wineries are
only authorized to sell wine directly to customers on their premises . .. ",161 All farm wineries, including out-of-state farm wineries,
could "sell or deliver the product to licensed retailers," thereby bypassing
the usual method of importation through wholesalers. 162 The Maine
statute also restricted any importation of wine into Maine in excess of
four quarts.1 63 Customers who purchased from farm wineries within
the state were not subject to this four-quart limit, "but . . . customers
153
154
No. 05-153-B-W, 2006 U.S. Dist. LEXIS 51657 (D. Me. July 27, 2006).
No. 4:05CV000903 SSW, 2007 U.S. Dist. LEXIS 83659 (E.D. Ark. 2007).
155 482 F. Supp. 2d 1013 (E.D. Tenn. 2007).
156 488 F. Supp. 2d 592 (W.D. Ky. 2006).
157 See Cherry Hill, 2006 U.S. Dist. LEXIS 51657, at *1. The issue in Huber was not exactly
the same, but similar: The case assessed the validity of a Kentucky law that "allegedly discriminate[d] against interstate commerce by prohibiting out-of-state wineries from selling and shipping wine directly to consumers and retailers while allowing in-state wineries to do so on a
limited basis." Huber, 488 F. Supp. 2d at 594.
158 Supra Section III.A.
159 2006 U.S. Dist. LEXIS 51657, at *3.
160 Id. at *2.
162
Id. at *4.
Id. at *5 (quoting 28-A ME. REV.
163
Id.
161
STAT. §
1355(3)(D) (Supp. 2005)).
632
CARDOZO PUB. LAW, POLICY & ETHICS J.
[Vol. 6:601
who wish to purchase wine at out-of-state locations and bring it back to
Maine for personal use would apparently be subject to the four-quart
limit."' 64
One of the plaintiffs, Cherry Hill Vineyard, was a family-owned
winery located in Oregon. 6 5 The winery argued that the statutory
scheme excluded out-of-state wineries from the Maine marketplace "as a
practical matter," unless "it is brought to market through a licensed
wholesaler."' 6 6 The decision quickly pointed out that this contention
was "entirely at odds with the stipulated record," which indicated that if
Cherry Hill obtained a Maine farm winery license, "it would be allowed
to sell and deliver its wine to licensed wholesalers and retailers (including restaurants) in the State of Maine." 16 7 The plaintiffs then made
their main argument, that the "on-premises" sales restriction was "protectionist" and violated the principles outlined in Granholm.168 The decision summarized the plaintiffs' argument:
According to the plaintiffs, this practical consequence of Cherry Hill's
remoteness from Maine means that, if Maine is going to permit farm
wineries to make on-premises direct sales to consumers, then it is unconstitutional for the State to prohibit or fail to authorize out-of-state
farm wineries to sell directly to Maine consumers from out-of-state
169
locations by means of mail order.
The Court disagreed with this assertion and held that the scheme did
not discriminate against out-of-state farm wineries "because the onpremises or 'face-to-face' restriction applies equally to in-state and outof-state farm wineries and because the plaintiffs fail to present evidence
of any situation in which an in-state farm winery could lawfully ship its
164 Id at *5-6. Another section of the relevant statute allowed an individual to apply for a
permit to import a greater quantity of wine or other liquors for personal use. Id.
165 Id. at *6.
166
Id. at *24. Notably, the plaintiffs did not challenge the four-quart limit placed on the
importation of out-of-state wine by consumers. Thus, there was no as-applied challenge
in which an individual consumer was frustrated in an attempt to import into or ship
into Maine more than four quarts of wine for personal consumption ... or a situation
in which an out-of-state licensed farm winery was denied any practical means of shipping to a Maine address . . . a large order of wine purchased by a customer on its
premises.
Id. at *23 (emphasis added).
167 Id. at *24.
168 Id. at *25-28.
169 Id. at *25-26.
20081 WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT? 633
product by mail to a Maine consumer. "170 In the view of the Cherry
Hill court, all wineries licensed by Maine as "farm wineries" were afforded the same benefits, whether in-state or out-of-state, and their geographical discrepancy made no difference under the law. Thus, the
court held that "[u]nlike the records compiled regarding the statutory
schemes at issue in Granholm, the plaintiffs in this case have failed to
demonstrate the existence in Maine of any mail order local market that
is afforded to in-state wineries and denied to out-of-state farm
17
wineries." 1
Even though the court ruled that the statute in Cherry Hill was not
discriminatory (and thus strict scrutiny was not required under a Commerce Clause analysis),' 1 72 the court found that the statute would withstand heightened scrutiny. 73 The court allotted special deference to the
Maine legislature's decision to require on-premises sales of liquor from
all wineries.17 4 Maine concluded that mail order transactions could not
be adequately safeguarded from purchases by minors, and the court
chose not "to second-guess that policy determination in favor of the
plaintiffs' free market perspective."' 75 Because the state had chosen to
require all farm wineries to make only on-premises sales, and it "had not
authorized any local retailers to fill orders for wine that are not made on
the retailer's premises by individuals of legal drinking age," the Maine
176
statute would not run afoul of the Commerce Clause.
The case was appealed to the First Circuit, which upheld the District Court's ruling. 77 The First Circuit labeled the action a "rifle-shot
appeal," because the plaintiffs did not challenge the Maine scheme
under the Commerce Clause balancing test applied to regulations that
only incidentally burden interstate commerce. 78 Nor did the plaintiffs
argue that the regulatory scheme was discriminatory on its face or in its
purpose. Instead, plaintiffs argued that the scheme had the "practical
effect of benefiting Maine wineries at the expense of their out-of-state
170
Id.
171
Id. at *26.
Id. at *27-29.
172
173
174
175
176
177
178
Id.
Id.
Id
Id.
at *29-30.
at *30-31.
at *30.
at *30-31.
See Cherry Hill Vineyard, LLC v. Baldacci, 505 F.3d 28 (1st Cir. 2007).
Id. at 33.
634
CARDOZO PUB. LAW, POLICY & ETHICS J.
[Vol. 6:601
competitors."' 79 In other words, plaintiffs argued that the on-premises
sale requirement "prevents out-of-state wineries, many of which are geographically distant, from enjoying any real opportunity of selling directly to consumers. ' 180 Of course, if any out-of-state winery wanted to
access Maine consumers in any meaningful way, they would "be burdened with opening off-site locations within the Maine market," which
would "further escalate costs. '
The First Circuit succinctly stated that plaintiffs had not met their
burden in showing that Maine's statutory scheme was discriminatory in
effect.' 82 The court first noted that "the Twenty-First Amendment is
only peripherally involved" in the case, and therefore, Granholm did not
decide the matter. 18 3 This is because Granholm "provides less than complete guidance, and virtually no new elaboration, with respect to what
does-or does not-constitute discrimination against interstate
184
commerce."
Nevertheless, the court had no trouble distinguishing the regulatory schemes that were outlawed in Granholm (which allowed in-state
wineries access to a direct shipping market that was denied to out-ofstate wineries) from the Maine statutory scheme, by stating, "Maine
flatly outlaws any and all direct shipping of wine. Consequently, there
is no direct-shipping market; neither in-state nor out-of-state wineries
may direct-ship. Hence, while well-established legal rules demanded the
invalidation of both [schemes at issue in Granholm], those rules do not
demand any such ukase here."' 8 5 Thus, echoing the lower court, the
appellate panel held that "[f1arm winery licenses are available on equal
terms to in-state and out-of-state vineyards alike, and Maine's ban on
86
the direct shipping of wine applies evenhandedly across the board."'
While the First Circuit panel believed that the Supreme Court had not
"directly spoken to the question of what showing is required to prove
discriminatory effect where .
.
. a statute is evenhanded on its face and
wholesome in its purpose," they believed this showing must be substan179
Id (emphasis added).
180 Id.
181 Id at 34. Plaintiffs again did not challenge the four-quart personal importation limit, but
complained that "their disadvantage is compounded by that limit." Id. at n.4.
182 See id. at 36.
183 Id. at 35.
184
Id.
185
Id.
186
Id. at 36.
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
635
tial. 187 Plaintiffs had simply not made a showing that the Maine scheme
acts to protect Maine vineyards or that Maine consumers would forego
wines purchased elsewhere in favor of wine produced at Maine vineyards
in light of the statute. 188 The court pointed out further failures of the
plaintiffs' challenge:
[P]laintiffs have adduced no evidence that would in any way undermine the plausible impression that Maine consumers (like imbibers
everywhere) view trips to a winery as a distinct experience incommensurate with - and, therefore, unlikely to be replaced by - a trip to either
a mailbox or a retail liquor store ....
Nor have they offered evidence
to impeach the suggestion, made in one of the cases on which they
rely, that bottles of wine are unique and, thus, unlikely to be perceived
by consumers as interchangeable. 18 9
Rather, the court made explicit what was unspoken by the lower court:
"[W]hatever minimal benefits might be inferred from the structure of
the scheme itself seem largely to be dispersed on the basis of geography."'1 90 In sum, the plaintiffs could not show a discriminatory effect,
and thus, their constitutional challenge failed.
A similar result was reached in Beau v. Moore, in which the court
held that allowing in-person sales at in-state farm wineries, while forbidding both direct shipment and personal importation by consumers who
purchased in-person at out-of-state wineries, did not violate the Dormant Commerce Clause.1 9 The court rejected plaintiffs
187
Id.
188
Id.
189 Id. at 37. This latter criticism from the court, that individual wines are not perceived as
interchangeable, introduces an interesting element to the court's analysis. While it is true that a
law may not invidiously discriminate in effect between two dissimilar products, this distinction
between individual wines also highlights the cry from the plaintiffs that the regulatory scheme
has, in fact, closed off certain distinct markets that would otherwise be available to Maine consumers in the absence of the legislation (e.g., markets for unique wines that come from one area
of the country) because of the practical difficulties in bringing that market within reach of the
consumers. Of course, this raises further questions about suitable and reliable "market" definitions when it comes to wine and liquor. See infra Part IV.
190 See Cherry Hill, 505 F.3d at 38. "Distance is not congruent with state lines, and the
effects of geography alone do not constitute impermissible discrimination. An effect is not
discriminatory, in violation of the dormant commerce clause, if it results from natural conditions." Id. at n.7.
191 No: 4:05CV000903 SWW, 2007 U.S. Dist. LEXIS 83659 (E.D. Ark. 2007).
636
CARDOZO PUB. LAW, POLICY & ETHICS.
V 6:601
[Vol.
attempt to equate two distinct commercial activities: selling small farm
winery wine in over-the-counter transactions on the premises of any
winery located in Arkansas and selling any wine, from any place, for
direct-shipment delivery. A market in which consumers must travel to
a winery to purchase wine is distinct from a market in which a consumer may order wine on the Internet for home delivery.' 92
The only support offered for this market definition, as well as the Eastern District of Tennessee's similar holding in Jelovsek v. Bresden, 193 was
the sense that "the market for on-site wine purchases, requiring the effort (or pleasure) of a trip to the winery, is different in kind and reach
from the convenience-oriented market that would be created and facilitated by a law allowing direct-shipping."'' 94 This rather perfunctory
market analysis does not explain why the market defined is not for the
product itself-the bottle of wine-as opposed to the purchasing
experience. 195
Beau does not answer an important question about the personal
importation prohibition in the Arkansas wine regulations-a question
also left unanswered in the Cherry Hill litigation. Plaintiff argued that a
consumer may buy small farm wine at an Arkansas winery and take it
home for "off-premises" consumption but cannot travel to an out-ofstate winery, purchase wine, and take it home to Arkansas.' 96 The court
refused to consider this argument, because the plaintiff only alleged that
he wanted to purchase wine from out-of-state wineries and have it
shipped to his home, not that he wanted to personally import the outof-state wine back to Arkansas.' 97 This question was also not raised by
the plaintiffs in Jelovsek. Thus, the personal importation restrictions in
Maine, Arkansas, and Tennessee remain legally untested. 198
192
Id. at *12.
'93
482 F. Supp. 2d 1013, 1021 (E.D. Tenn. 2007).
194 Id.; see also Beau v. Moore, 2007 U.S. Dist. LEXIS 83659 at *12.
195 Proper market analysis is treated in Part IV, infra.
196
Beau., supra note 196, at *14, n.6.
197
Id.
198 The First Circuit in
Cherry Hill also noted that the stipulated record indicated that indi-
viduals could make special requests to obtain relief from Maine's import limitation, that such
requests were evaluated on a case-by-case basis, and that such permission was "generally
granted." Cherry Hill Vineyard, LLC v. Baldacci, 505 F.3d 28, 31 (1st Cir. 2007). Thus, it is
not clear to what degree the personal import limitation could and would be successfully challenged on its face. However, as noted above, the plaintiffs did not choose to challenge this
statutory limitation. Id. at 32, n.2.
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
637
Though faced with a similar set of circumstances, a district court in
Kentucky came to a different conclusion.' 9 9 The Kentucky regulatory
scheme at issue in Huber included a few elements that were challenged
by the plaintiff first on a Motion for Judgment on the Pleadings.20 0 The
first involved a simple application of the rule set forth in Granholm.
Kentucky granted "small winery" and "farm winery" licenses that allowed each small or farm winery to ship up to two cases of wine to a
consumer who purchased the wine in-person at the winery.2 0 ' Small and
farm wineries could only sell directly to consumers on the premises but
could also sell directly to retailers at wholesale prices if their wine had
been offered to wholesalers.20 2 Thus, Kentucky had created an exception to the three-tier system in place in Kentucky (by which producers
could only sell directly to wholesalers who in turn could only sell to
licensed retailers). However, under the statute, "farm" wineries had to
be located in Kentucky, and "small" wineries had to make their wine
from grapes, fruit or honey grown in Kentucky.20 3 The court ruled that
these special benefits afforded to small and farm wineries were not applied evenhandedly to in-state and out-of-state wineries, were discriminatory, and were, thus, "infirm" under Granholm.2 4 The court then
looked to whether the statute advanced a legitimate local purpose that
could not be served by non-discriminatory purposes. The court rejected
the state's legitimate purpose of "temperance," and the state's argument
that this temperance was a "core value" of the Twenty-first Amendment:
The state defendants . . . have failed to demonstrate that restricting
small and farm winery licenses to in-state wineries serves the "core
value" of temperance or preserves the integrity of the dry counties or
precincts in Kentucky .... Allowing in-state wineries to ship directly
to consumers in certain circumstances while prohibiting out-of-state
wineries from doing the same has no differential effect on the shipment of wine into dry territories because the challenged statutory
scheme discriminates5 based upon where the wine originates, not upon
20
where it ends up.
199 Huber Winery v. Wilcher, 488 F. Supp. 2d 592 (W.D. Ky. 2006).
200
201
202
203
204
205
See id. at 594.
Id. at 595 (citing Ky. REV. STAT. § 243.155(1)(0, Ky. REV. STAT. § 243.156(1)(h)).
Id. (citing Ky. REV. STAT. 342.155(1)(d), 243.156 (1)(d)).
Id. (citing Ky. REV. STAT. 241.010(22) and Ky. REV. STAT. 241.010(45)).
Id. at 596.
Id at 596-97.
CARDOZO PUB. LAW, POLICY & ETHICS J.
638
[Vol. 6:601
The court held that extending the same applicability and privileges of
small and farm winery licenses to out-of-state wineries was the proper
remedy. 20 6 Out-of-state wineries that obtained such a license could
therefore ship directly to consumers on the same basis as in-state
wineries.
The second challenge to the Kentucky statute in Huber was the
same argument used to attack the Maine regulatory scheme in Cherry
Hill.20 7 Even if the court granted the same rights to out-of-state wineries who obtained a small or farm winery license, the plaintiff argued, the
in-person requirement discriminated "in practical effect" against out-ofstate interests and deprived Kentucky residents of "meaningful access to
out-of-state wineries. ' 20 8 The state defendants argued that the in-person requirement had nothing more than an "incidental effect" on interstate commerce and said that wineries located in border states could be
closer to some Kentucky residents than other more distant Kentucky
wineries. 20 9 The court was not persuaded, however, and stated that the
argument "fails to consider .. .that wineries exist in states other than
those neighboring Kentucky, that each winery's products are distinctive,
and that many of the highly desirable wines come not from Tennessee
and Indiana, but from California, Oregon and Washington."2 1 The
court therefore held that the effect of the "in-person" purchasing requirement, even if applied equally to in-state and out-of-state wineries,
was "not de minimus" and constituted "differential treatment of in-state
and out-of-state economic interests that benefits the former and burdens
2 11
the latter."
206
Id
at 597. The court also stated the following:
While Kentucky has a well-established three-tier system in place, the General Assembly has clearly expressed its intent to allow wineries of a certain size to bypass that
system. We are not to evaluate the wisdom of such policy decisions; but, under the
mandate of Granholm, we must ensure that such exceptions apply evenhandedly.
Id.
207
The opinions were handed down less than a month apart, and it is therefore not surpris-
ing that Huber did not cite to the Cherry Hill decision. See Cherry Hill Vineyard, LLC v.
Baldacci, Civ. No. 05-153-B-W, 2006 U.S. Dist. LEXIS 51657 (2006).
208 Huber, 488 F. Supp. 2d at 598.
209
Id.
210
Id.at 598. The court later stated: "We note that wine is a unique product. Accordingly,
we agree with the plaintiffs that 'it is false to presume that a wine consumer would purchase
from the closest winery all things being equal."' Id. at 599 (citation omitted).
211 Id. at 599 (citing in part Oregon Waste Systems, Inc. v. Department of Environmental
Quality, 511 U.S. 93, 99 (1994)). This language merits comparison to the opinion of the Cherry
Hill court on the "in-person" restriction:
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
639
Finding that the "in-person" requirement was discriminatory
under a Commerce Clause analysis, the Huber court applied strict scrutiny and rejected the state's "core values" of temperance, protecting
against underage drinking, and concerns for tax revenue.2 1 2 As for temperance, the court found that nothing in the small or farm winery licenses allowed wineries to violate local "dry" laws, and the in-person
requirement could not guarantee that the dry counties would stay
dry.2 13 Even if the in-person requirement furthered the goal of temperance, a more narrowly tailored way of furthering that goal would be to
specifically identify to small or farm wineries which counties, cities or
zip codes prohibited shipments.2 1 4 Following Granholm, the court rejected the "risk of underage drinking" justification, because it was not
narrowly tailored.21 5 The state could simply require an adult signature
on each delivery of alcohol. Finally, the court held that internet wine
sales would not take place without restriction. "Only properly licensed
small and farm wineries would be permitted to ship directly to consumers."216 Presumably, the states could address their tax worries by requiring licensees to submit sales reports and remit taxes.217
The same issues came before the Huber court a second time on a
motion for summary judgment. 21 8 Although the Kentucky legislature
had already amended the applicable statute to comply with most of the
Although it seems highly peculiar, [the plaintiffs] actually appear to be arguing that,
because consumers can readily walk into licensed retailers in the State of Maine, outof-state retailers, licensed or not, must be permitted equal access through the Internet
or telephone. . . . In other words, if local retailers can make direct sales that are
readily feasible, as a practical matter, then out-of-state retailers must be afforded a
similarly practical means of entering into direct transactions with Maine consumers. . . . I do not think this proposition really deserves any protracted discussion.
Cherry Hill, 2006 U.S. LEXIS 51657, at *29-30.
212 Huber, 488 F. Supp. 2d at 599-601.
213 Id. at 599-600.
214 Id.
215 Id. at 600.
216 Id.
217 Id. The court also pointed out that Granholm had refuted a similar tax argument, stating
that defendants had "not shown that tax evasion from out-of-state wineries pose[d] such a
unique threat that it justifie[d] their discriminatory regimes." Id. (quoting Granholm v. Heald,
544 U.S 460, 492 (2005)).
218 See Cherry Hill Vineyards, LLC v. Hudgins, 488 F. Supp. 2d 601 (W.D. Ky. 2006).
After the Court's ruling on the Motion to Dismiss discussed above, the lead plaintiff, Huber
Winery, dismissed its claims. The plaintiff Cherry Hill Vineyards was substituted as the lead
plaintiff. For ease of reference, and to avoid confusion, we will refer to this later decision as the
"Hudgins case," and the two will be referred collectively as the "Huber cases."
640
CARDOZO PUB. LAW, POLICY & ETHICS J
[[Vol. 6:601
court's rulings on the Motion to Dismiss, the court found the issues ripe
for review.2 19 Unfortunately for the state of Kentucky, the court did not
change its mind. The court did, however, elaborate in more detail on
some of the other provisions in the revised statute (other than the "in22 °
person" requirement) and upheld their validity.
First, the revised statute only allowed Kentucky to issue a "farm
winery license" to wineries that produced 50,000 gallons or fewer per
year. 2 2' Plaintiffs argued that this limitation "afford[ed] licensing rights
to all Kentucky wineries, as no Kentucky wineries produce[d] in excess
of 50,000 gallons per year. '' 2 22 Thus, the practical effect of this limitation was to offer the "farm winery" license benefits to every Kentucky
winery, whereas only select out-of-state wineries (those producing fewer
than 50,000 gallons per year) would be eligible for the same benefits.
The court rejected this argument, because the statute was not discriminatory on its face and, furthermore, the law only required equal treatment of in-state and out-of-state interests that were "similarly
situated. ' 223 Thus, "[t]o argue that all wineries are created equal regardless of size" was to ignore this analysis: 224 "By legislative design, the class
of advantaged wineries are those that produce 50,000 gallons of wine or
less per year," and the court held that no justification had to be given for
this limit, "as it simply does not give Kentucky wineries a competitive
225
advantage over similarly situated out-of-state producers.
Next, the Plaintiffs argued that Kentucky's two-case limit on the
amount of wine that a small farm winery could ship to any one customer per visit was unconstitutional.2 26 As revised, the statute allowed
any Kentucky resident to visit an out-of-state winery and personally
transport as much wine as possible back to their Kentucky residence,
but the same resident could only ship back two cases. 227 Plaintiffs argued that this limit discriminated in practical effect, because "[i]t is obvious that the greater the distance between the winery and the Kentucky
consumer, the greater the probability that such Kentucky consumer will
219
Id. at 606-09.
220
Id. at 613-15 (discussing the "50,000 Gallon Limit" and the "Two Case Limit").
Id. at 613.
221
222
223
224
Id.
Id.
Id.
226
Id. (emphasis added).
Id at 614.
227
Id.
225
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
641
use shipping versus direct transport, and the less likely the consumer
will be to visit there at all." '22 8 The court also rejected this argument and
upheld the two-case limit, because "Kentucky customers are free to
transport home as much wine from a small farm winery as they wish to
purchase. It is only when the customer seeks the convenience of having
the winery ship the wine to Kentucky that the two-case limit comes into
play. '229 The two-case limit applied to shipments from any Kentucky
farm winery (including those in-state), and there was no advantage afforded to in-state wineries by virtue of the limit. 23° The court held that
"[t]he Commerce Clause does not require that customers be con23
venienced," and thus upheld the two-case shipping limit. '
Turning to the in-person requirement that the Court had previously struck down as discriminatory, the Plaintiffs made the same arguments they had made on their Motion to Dismiss and relied primarily
on the fact that "out-of-state wineries w[ould] have to incur a substantial cost in order to meaningfully penetrate the Kentucky market. They
suggest[ed] that out-of-state wineries w[ould] have to establish a physical presence in Kentucky or simply wait and hope that Kentucky consumers visit their locations while traveling. ' 232 Although the in-person
requirement (like the 50,000 gallon limit and the two-case shipping
limit) also applied "evenly" to in-state and out-of-state wineries who
obtained a Kentucky small farm winery license, the court once again
struck down this provision as imposing a more-than de minimus effect
on interstate commerce. This time, the court provided some explanation, stating, "We must view the application of the statutes in the real
world.... [T]he in-person requirement applied in the real world renders [any small farm winery benefits] a nullity for virtually all of the
market outside of Kentucky. '2 33 While Kentucky had carved out some
special treatment to small farm wineries across the country, the in-person requirement made it "economically unfeasible and in some instances
impossible for [out-of-state] wineries to utilize that benefit. ' 234 Furthermore, the particular market to which the statute was addressed was the
national small farm winery market, "[t]he vast majority of... which ...
228
229
Id.
Id.
230 Id.
231
232
233
234
Id.
Id. at 616.
Id. at 619.
Id.
642
CARDOZO PUB. LAW, POLICY & ETHICS J
[Vol.
6:601
[
is on the West Coast of the United States. '235 Thus, the in-person requirement was "protectionist," and the court "reject[ed] the contention
236
that this is a matter of mere geographic happenstance.
The court again noted that it left the three-tier system undisturbed
in any meaningful way: "Striking the in-person requirement merely ensures that the legislatively created exception granted to small and farm
wineries applies evenhandedly to both in-state and out-of-state producers." 237 Thus, the court applied strict scrutiny and found that the statute did not pass muster. Once again, the purported state interests and
concerns about temperance, underage drinking, and tax revenue did not
carry the day.2 38 Once again, the court followed Granholms lead in
holding that the in-person requirement did not and could not legitimately solve the social ills of alcohol abuse and underage drinking or
ensure that the state collected appropriate taxes (that might be avoided
via online wine sales). Once again, the court found that even if the inperson requirement had some measured effect on these state interests,
239
the same result could be achieved through less discriminatory means.
The different outcomes in the Cherry Hill and Huber cases set the
stage for a fascinating future inquiry and cast a long shadow over the
explicit holding in Granholm. Granholm seemingly settled the question
of whether, at least in the context of interstate wine shipments, the
Twenty-first Amendment allows discriminatory regulations which favor
in-state wineries and disfavor out-of-state wineries. Cherry Hill and Huber present the nebulous question of what constitutes discrimination in
the context of interstate wine sales from individual wineries. Is it discriminatory to make a blanket requirement that all sales from state-licensed wineries (whether in-state or out-of-state) must be made on the
premises? Cherry Hill answered no, because given the unique aspects of
intoxicating liquors, "the on-premises restriction on sales simply does
not impose any cognizable burden on interstate commerce that could
possibly outweigh the putative local benefit of regulating minors' access
236
Id.
Id.
237
Id. at 618. This time, the Huber court did note the earlier Cherry Hill decision from the
235
District of Maine, but noted that the statutory scheme in Maine differed in significant respects
from the Kentucky scheme. The recommended decision had not been adopted by the district
court, and thus, "[n]o further discussion is warranted here." Id. at 619.
238 Id at 619-22.
239
Id.
20081 WHATS LEFT OF THE TWENTY-FIRST AMENDMENT?
643
to alcohol. '24 ° The Huber cases said yes, because the in-person restriction discriminated against out-of-state wineries "in practical effect" and
denied local residents "meaningful access" to those out-of-state wineries,
while the purported goals cited in justification for the rule could have
been achieved by less discriminatory means. 24 '
Whether the Commerce Clause requires this additional "meaningful access" to out-of-state liquor interests (which in the context of wine
means quick access to "desirable wines" hundreds or thousands of miles
away) or requires only evenhanded regulations that apply equally to outof-state producers, remains to be seen. This inquiry is particularly interesting given that the Huber court allowed the two-case shipping limitation but struck down the in-person purchasing requirement.
Limiting one state's residents from shipping more than two cases
back to their home state after having visited their preferred out-of-state
wineries certainly has some conceivable effect-even if very small-on
interstate commerce. Limiting the amount of wine they can legally
transport by common carrier will certainly determine, in some respects,
how many out-of-state wineries they visit, and how much wine they will
buy in-person at those wineries. However, the Huber court put the
onus on travelers with small vehicles, stating that the Commerce Clause
24 2
"does not require that customers be convenienced.
Even so, the same court ruled that a requirement that any such
wine shipped to residents must be purchased in-person at the winery
was not de minimus and was discriminatory in practical effect. Thus,
the court found that Kentucky could not require its residents to travel
great distances to purchase unique wines unavailable elsewhere. However, if Kentucky residents did make these long trips and decided to
make the most of their travel expenses by purchasing substantial quantities of unique wines unavailable anywhere else, the court was content to
make them personally carry the wine back to their home state.2 43
Thus, we have seen the progression from what may be called the
"maximalist" perspective on the Amendment (as discussed supra, Sec-
240
2006 U.S. Dist. LEXIS 51657, at *31.
241
Huber Winery v. Wilcher, 488 F. Supp. 2d 592, 598 (W.D. Ky. 2006).
242
Id. at 614.
See id. at 619. This dichotomous ruling from the court raises an additional issue about
viewing statutes in the "real world," as it had suggested in its own opinion. Id.
243
644
CARDOZO PUB. LAW, POLICY & ETHICS J
[
[Vol.
6:601
tion I.A.2) to a more balanced middle ground. 24 4 To date, this middle
ground has left some room for states to regulate liquor in a way that is
unique among products (i.e., through the three-tier system), but nevertheless appears to cover the states' regulatory power over liquor with the
full blanket protection of the Commerce Clause and its strict standards.
The question, then, is whether courts are moving in the direction of the
"minimalist" position (as described supra, Section I.A. 1). Now that the
Supreme Court has clearly departed from its broad grant of authority to
states in regulating liquor, will the Amendment be written out of existence? Similarly, will the three-tier system be the only remaining mark
of the years of political turmoil that preceded the passage of the Twentyfirst Amendment?
C.
Challenges Facing Individual Wineries-Strong [Political] Spirits v.
Strange [and Unknown] Brew
The impediment to shipping its products into any state is not the
only difficulty facing a small winery. A current state-by-state analysis of
the myriad regulations, standards, and taxes shows an unwieldy array of
hoops to jump through. 24 5 Navigating through so many commercial
hurdles as a cost of doing business would require significant compliance
244
See Elizabeth D. Lauzon, Interplay Between Twenty-FirstAmendment and Commerce Clause
Concerning State Regulation of Intoxicating Liquors, 116 A.L.R.5th 149, 165 (2004). Lauzon
notes that:
Interpretations by the courts of § 2 of the Twenty-first Amendment range from the
broad interpretation, which states that the Twenty-first Amendment provides the state
with broad powers over commerce involving intoxicating liquors, unrestrained by
other constitutional provisions, such as the Commerce Clause, to the modern interpretation, which states that the Twenty-first Amendment does not entirely remove
state regulation of intoxicating liquors from the reach of the Commerce Clause and
other constitutional provisions, but rather, the Twenty-first Amendment and the
Commerce Clause each must be considered in light of the other and in the context of
the issues and interests at stake in any concrete case.
Id.
245
A comprehensive compilation of these varying restrictions and tax burdens facing wineries
shipping to other states can be found at the website of the "Wine Institute," a "public policy
advocacy association of California wineries."
Wine Institute, About Us, http://
www.wineinstitute.org/company. The Wine Institute "brings together the resources of 1000
wineries and associated businesses to support legislative and regulatory advocacy, international
market development, media relations, scientific research, and education programs that benefit
the entire California wine industry." Id.
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
645
costs by a major corporation, and it certainly makes it less likely for a
family-owned winery to expand beyond its state's borders.24 6
This widespread variance in liquor regulation among the states,
however, is not just a recent phenomenon:24 7 "In the seventy years since
Repeal there has been some rationalization of state laws, but not much:
the situation now is not essentially different from that which formed so
rapidly and bewilderingly immediately following the death of Prohibition. '24 8 Beginning with a wide range of taxes imposed on liquor, including wine, "[t]he states were evidently in no mood to give up their
right to do as they pleased with the liquor trade within their own borders-or to share any revenues from it," and what resulted was "a chaos
of uncoordinated and arbitrary practices. ' 24 9 Therefore, "[l]ike the regulations for the sale and service of liquor, the taxes varied wildly from
state to state ....
Although the wine industry might effectively lobby
against federal taxes[,] . .. there was no quick way for it to do so against
the manifold state taxes. "250
Responses to these challenges have appeared through traditional
avenues used by big businesses concerned about restrictions on their
operations. Between 2004 and 2006, contributions to state-level political campaigns from beer, wine, and spirits concerns totaled
$21,362,727.251 A large part of this money "comes from distributors
and wholesalers of alcohol.... [because they] have more to protect in
246
Cf
shipwine/.
247 See
Wine
PINNEY,
Institute,
State Shipping
Laws,
http://www.wineinstitute.orglprogramsl
supra note 17, at 49 (2005). Pinney notes that:
This fantastic balkanization of liquor regulation is beyond question the most powerful
and enduring effect of Prohibition in America. The process had begun long before the
passage of the Eighteenth Amendment, for the country had seen many towns, counties and states go Dry or impose restrictive legislation on liquor well before 1919.
When national Prohibition was imperfectly cleared away, the old, long-planted seeds,
now favored by the climate of states' rights, sprang into growth and flourished like
weeds. And they could not be eradicated.
Id.
249
Id.
Id.
250
Id. One is reminded of the outcry from the plaintiff common carriers in Clark Distilling
248
Co., which had challenged a broad interpretation of the Webb-Kenyon Act (one which upheld
varying state prohibitions on the importation and transportation of liquor within each state's
borders) on the grounds that "the recognition of state power under such circumstances would be
to bring about a want of uniformity." Clark Distilling Co. v. Western M. R. Co., 242 U.S. 311,
328 (1917) (emphasis added).
251 Tom Wark, State of the States: Money, Wine 6&Politics, http://fermentation.typepad.com/
fermentation/2006/03/state of the st.html (citing The Institute on Money and State Politics).
646
CARDOZO PUB. LAW, POLICY & ETHICS J
[Vol.
6:601
[
terms of wealth related to alcohol than any other industry, including
producers."2 5' 2 In addition, they are concerned with protecting the
structure of the three-tier system, which in most states mandates that
"nearly all alcohol sales, including wine, go through the hands of a
wholesaler. '2 5 3 Unsurprisingly, the biggest contributors come from California, where American wine has its biggest business.2 54
IV.
WHERE
To Go
FROM HERE-A BITTER FINISH?
One disappointing feature of recent Twenty-first Amendment jurisprudence is that it has for the most part ignored the sophisticated
approach to problems of market analysis developed in antitrust law.
The majority and the dissent in Brooks disagreed over whether wineplus-liquor sold at the same location constituted a different market than
wine and liquor sold at two different locations. Indeed, the case turned
on that very issue, and yet neither the majority nor the dissent cited a
single antitrust case-an omission that is hard to understand given the
prominence of market definition in antitrust cases and the vast case law
and secondary literature that has been developed in that area.
Under the principles of antitrust law, "a product grouping constitutes a market if a hypothetical defendant controlling its output could
maximize profits by charging significantly more than the competitive
price for a significant period. '2 55 In the context of Brooks, the majority
held that Virginia was just one of many competitors in the wine market,
whereas the dissent argued that Virginia was a monopolist in the wineplus-liquor market.2 56 To determine whether wine-plus-liquor in fact
constituted a separate market under an antitrust analysis, the question
would be whether the Virginia state liquor stores could charge significantly more for the wine that it sold (wine sold in the same location as
hard liquor) than could be charged for the wine sold by other retailers
(which by state law are forbidden to sell hard liquor).
The majority rejected the dissent's argument, stating:
252
Id.
253
Id.
California liquor businesses contributed a total of $5,772,894, an equivalent of approxi-
254
mately $0.16 per person, and California has the largest population of any U.S. state. See id.
The only states whose liquor concerns contributed more per capita were Delaware (at approximately $0.17 per person) and Oregon (at approximately $0.35 per person). Id.
255 AREEDA, ANTITRUST LAw 1 560 (1995).
256 See discussion supra III.A.
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
647
[C]onsumers demanding a bottle of whiskey or vodka will fulfill that
demand by buying a bottle of wine or that consumers demanding a
bottle of wine will fulfill that demand by buying a bottle of whiskey or
vodka. Common sense compels a conclusion that there simply is no
cross-elasticity of demand to justify concluding that there is a single
2 57
market consisting of wine and liquor.
This totally misapprehended the dissent's argument that "[a] consumer's
demand for purchasing both a bottle of liquor and a bottle of wine at
the same time may be satisfied only in ABC Stores. The relevant market
is not the market for wine, but the market for wine and liquor. ' 258 So
defined, Virginia would be held to monopolize the entire market and,
therefore, to discriminate as a regulator insofar as it only sells Virginia
wine. However, the dissent offered no data in favor of this market definition, other than an intuition of convenience.
Neither the Brooks majority nor the dissent asked the proper question-each gave a definition that answered the question without the
need for any economic analysis. The correct approach does not give an
automatic victory to either argument. Rather, it requires an analysis of
whether the state liquor stores could sell wine for more than other retailers. This method is what tells us whether wine-plus-liquor is a separate
market. Under this approach, the relevant question is how much of a
price increase can the Virginia state liquor store impose on wine before
consumers forego the convenience or other desirability of purchasing
wine at the same time as liquor and decide to instead purchase wine
elsewhere? That question seeks to find the relevant cross-elasticity of
demand, or "the rate at which people will substitute one item in response to a price increase in a different item. "259
Indeed, while the Brooks majority and dissent made passing references to the market definition issue, the leading antitrust treatise devotes
an entire section to the definition of "cluster" markets-where only one
seller offers a grouping of products that are separately available.26 °
257
Brooks v. Vassar, 462 F.3d 341, 359-60 (4th Cir. 2006).
258
Id. at 363 (Goodwin, J., dissenting).
259 AREEDA, supra note 255, at
565a (supp.) (citing United States v. Brown Shoe Co., 370
U.S. 294, 325 (1962) ("[T]he outer boundaries of a product market are determined by the
reasonable interchangeability of use or the cross-elasticity of demand between the product itself
and substitutes for it.")).
260 Id. at
565c (supp.).
648
CARDOZO PUB. LAW, POLICY & ETHICS J.
[Vol.
6:601
[
While the presumption is against the existence of a separate cluster market, Areeda writes that cluster markets can exist where
(1) most customers would be willing to pay monopoly prices for the
convenience of receiving the defendant's grouping of products, or (2)
economies of joint provision (economies of scope) make distribution
of the cluster cheaper per good than distribution of each separately,
and (3) the firms supplying one 2of
the products in the cluster could
61
not easily add the others as well.
Clearly, the state of Virginia's legal monopoly on the sale of spirits
makes it impossible for other firms supplying wine to add hard liquor as
well. While this only indicates the need for an inquiry into prong (2),
the existence of a cluster market might also be shown by prong (1).
There are many arguments that can be marshaled for and against
the existence of a cluster market in Brooks, and more importantly, there
is a need for evidence to be gathered to address the factual inquiries.
The reader is directed to the antitrust literature 26 2 for a discussion of the
relevant cases, but it will suffice to say that Brooks ignored quite a lot of
material that was directly on point. It may be profitable for courts to
incorporate jurisprudential models that are readily available in other areas of the law into the analysis of Twenty-first Amendment cases and
state regulation of alcohol.26 3
CONCLUSION
Only one solid constitutional principle can be surmised from the
wreckage of Twenty-first Amendment jurisprudence: States may not argue that the Twenty-first Amendment allows them to regulate alcohol in
a discriminatory manner. What "discrimination" means under this
principle is now the subject of lower court opinions that have already
262
Id.
See, e.g., id. at n.9.
263
One small glimmer of light showing a court's attempt to face these market realities is the
261
Hudgins court's willingness to view the Kentucky statutory scheme in "the real world." Cherry
Hill Vineyards, LLC v. Hudgins, 488 F. Supp. 2d 601, 619 (W.D. Ky. 2006). The court
explicitly held that the market for which the statutes were enacted was the "national small farm
winery market," and noted that the vast majority of this market was found on the West Coast.
Id. Thus, the court gave at least lip service to viewing liquor regulations under a market analysis, which could be one step closer to a fair appraisal of the effects of those regulations on
interstate commerce but perhaps failed to dig deeper into the available literature or statistics
outlining the definition of a "market" or interchangeable markets as discussed above.
2008] WHAT'S LEFT OF THE TWENTY-FIRST AMENDMENT?
649
parted ways on significant issues. Furthermore, there is at least a valid
question of whether the backbone of state regulation under the Twentyfirst Amendment, the so-called "three-tier system," can withstand the
recent judicial onslaught on the states' abilities to regulate imported liquor as they see fit. While the three-tier system is universally considered
"unquestionably legitimate" to this day, that status may be vulnerable in
light of courts' increasing reluctance to leave state liquor regulatory systems untouched.
If a statute or regulation is found to be discriminatory under the
Granholm principle, the states have essentially lost every battle in which
they attempted to find a suitable justification for such discriminatory
laws facing strict scrutiny. Promoting temperance and curbing underage
drinking could have at one time been considered "core concerns" underlying the Twenty-first Amendment. Under recent case law, however,
these state interests are insufficient to justify a regulation which seemingly benefits in-state liquor interests over similar out-of-state interests.
The third oft-cited state interest in support of discriminatory liquor regulations (particularly those interested in direct shipment to a states' residents), that of collecting tax revenue, has faired no better. Courts
continue to have reservations about any of these asserted state interests
when it appears that a state is simply using them as a facade behind
which it can promote local liquor manufacturers, distributors, or
retailers.
As it currently stands, the Amendment has not been written out of
existence. However, given the increasing popularity of wine in America,
as well as the uneven distribution of the most sought-after wines in particular geographic areas of the country, states may fear that they will lose
even more autonomy over the sale and importation of liquor in their
state. Judicial recognition of this increasing popularity, the prominence
of individual wine markets (e.g., a small farm winery market or premium wines' coastal locations), and the necessary territoriality of those
markets, make it harder for courts to cut off U.S. residents from those
markets based upon one state's purported concern over teenage binge
drinking in its local communities. Courts will continue to require more
from the states in support of these regulations and demand less from the
individual wineries that wish to compete in this growing national
market.