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Beer Insights Extras

Extra beer business news, thoughts and insights from the publishers of Beer Marketer’s Insights, Insights Express, Craft Brew News, Beverage Business Insights and Alcohol Issues Insights.

#TBT - Beer Wholesalers Have a Friend in Judge Sotomayor (5/29/09)

Beer Marketer’s INSIGHTS and our sister pubs have included scads of articles about the 21st Amendment over the years.  Most have probed whether this or that legal or policy decision supports or weakens states’ rights to regulate alc bev biz under the 21st Amendment, which ended Prohibition.  Modern debate got kicked off by vintner’s/consumers pursuit of direct shipping the product to consumers’ homes, bypassing wholesalers and retailers.  Many in industry viewed this as weakening states’ regulatory authority/oversight of the biz.  Over the years, debate over scope of states’ rights under 21st Amendment has occurred in US Supreme Court and other federal and state courts, not to mention numerous industry panels on deregulation, different business models and other policy questions.

In honor of Repeal Day, on this 80th anniversary of the end of Prohibiton and the ratification of the 21st Amendment, here's an article from a 2009 edition of Insights Express that re-examined a 2004 US Court of Appeal decision (later overturned by Granholm case) on the occasion of Judge Sotomayor's nomination to the Supreme Court.  Enjoy.

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Beer Wholesalers Have A Friend in Judge Sotomayor (published May 29, 2009)

Her views on the 21st Amendment vs. Commerce Clause may not be the hottest topic surrounding the nomination of Judge Sotomayor to the US Sup Ct, but distribs gotta remember she’s a fan of states’ rights under 21st Amendment.  A big fan.  Judge Sotomayor was part of 3-judge panel in US Ct of Appeals for 2d Circuit that upheld NY restrictions limiting direct shipments from out-of-state shippers.  That decision later reversed by US Sup Ct in Granholm, but it included some of the strongest language on record in favor of 21st Amendment’s grant of states’ rights to regulate alc bevs.  From beginning to end, judges embraced uniqueness of alcohol’s legal status in US.   Second paragraph of decision starts: “The 21st Amendment is unequaled in our constitutional experience – it repeals one constitutional provision and creates an exception to another.  The Amendment was not a narrow legislative delegation of federal authority; it was the will of a nation speaking through its constitutional process.”

The judges questioned analysis of other circuit courts in direct shipping cases that first determined whether laws violated dormant Commerce Clause, then whether 21st Amendment “saved” them.  This approach “is flawed because it has the effect of unnecessarily limiting the authority delegated to the states through the clear and unambiguous language” of 21A, 2d Circuit wrote.  Inquiry in these cases, judges wrote, “should not allow” Commerce Clause to “subordinate the plain language” of 21A.

As distrib advocates have argued for yrs, panel acknowledged that those who drafted 21A did so specifically “to allow states authority to circumvent dormant Commerce Clause protections, providing that they were regulating the intrastate flow of alcohol.”  That’s why they decided that NY’s law -- recall it forced out-of-state wineries who wanted to ship direct to set up bricks and mortar within the state – “falls squarely within the ambit of section 2’s grant of authority.”  Regarding that requirement, the panel concluded succinctly: “Presence ensures accountability.”  That presence requirement raises costs, they acknowledged and would “create substantial… problems” if it involved any product “other than alcohol.”  Here’s the kicker: “But business efficiency must give way to valid regulatory concerns in this unique area of commerce.”   A final hug: “Changes in marketing techniques or national consumer demand for a product do not alter the meaning of a constitutional amendment.”

This is the kind of language that distrib advocates would love to resurrect in legal strategies going forward.  Having someone on the US Sup Ct who has already signed off on it (Judge Sotomayor did not write the opinion) can’t hurt their cause.  Note: INSIGHTS was prompted to return to the 2d Circuit’s 2004 opinion after reading about Judge’s Sotomayor’s involvement in the case in Mark Brown’s Daily Industry News update this morning.  His source: www.fermentation.typepad.com, a pro-direct shipping site.

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