Granholm v. Heald

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

Background

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

Arguments

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

The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.

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

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

In turn, the Dormant Commerce Clause (or "DCC") has been inferred from the Commerce Clause. The DCC is a doctrine, evolved over many decisions of the U.S. Supreme Court, that the states do not have the power to enact anticompetitive laws that discriminate against sellers in other states without the permission of Congress.

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

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

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

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

Consequences

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

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

Since the ruling, many more states have allowed direct shipping from wineries. According to the Wine Institute (a public policy advocacy association of California wineries) 37 states permit at least some form of direct shipping from wineries to consumers (as of July 2010).^[1] Different states have enacted different regulations. An editorial article on the commercial wine selling web site Appelation America says that many of the conditions in these regulations are either so complex or so expensive as to discourage wineries from complying.^[2]

In March 2011, a bill was introduced in the U.S. House of Representatives that would explicitly allow states to regulate alcohol products from outside of the state differently from those produced within the state.^[3]

See also

• List of United States Supreme Court cases, volume 544
• List of United States Supreme Court cases
• Twenty-first Amendment to the United States Constitution

References

External links

• Web page on the case, including evidence and briefs, by Alex Tanford, an attorney involved in the litigation
• Article on the case (while it was still underway) from the Medill School of Journalism
• Law Journal article published prior to the Supreme Court argument