Summary of Swedenburg v. Kelly
(Challenge to N.Y. Statute Affecting Internet Alcohol Sales)

Juanita Swedenburg, in her own capacity and as proprietor of Swedenburg Winery, a Virginia partnership; David Lucas, in his own capacity and as proprietor of The Lucas Winery, a California sole proprietorship; Patrick Fitzgerald; Cortes DeRussy; and Robin  Brooks v. Edward F. Kelly, Chairman, and Lawrence J. Gedda and Joseph Zarriello, Commissioners, of the State Liquor Authority, Division of Alcoholic Beverage Control, State of New York, in their official capacities

Nature of the Case. Wineries and wine consumers challenge the constitutionality of a New York state liquor control law, which prohibits out of state wineries from selling directly to New York residents.

Plaintiffs. Two of the five plaintiffs are winery owners in Virginia and California who want to sell to consumers in New York. Three are residents of New York who want to buy directly from them. Attorneys: Institute for Justice and Friedman, Kaplan and Seiler.

Defendants. The three defendants are the members of the New York State's Division of  Alcoholic Beverage Control, the agency responsible for enforcing New York State's liquor regulation laws.

Facts. The Lucas Winery, located in Lodi, California, produces Zinfandel wine with "silky texture and intriguing fruit flavors". Its web site advertises its product, but does not facilitate electronic sales. The Swedenburg Winery (no web site) is located in Middleburg Virginia, just beyond the outer suburbs of Washington DC. It produces Cabernet Sauvignon, Pinot Noir, Chardonnay, Riesling, and Chantilly.

They have prospective customers in New York state, to whom they cannot sell over the Internet, or by direct mail, because of New York state statutes.

New York Alco. Bev. Cont. Law § 102(1)(c) provides in part:

"No alcoholic beverages shall be shipped into the state unless the same shall be consigned to a person duly licensed hereunder to traffic in alcoholic beverages. This prohibition shall apply to all shipments of alcoholic beverages into New York state and includes importation or distribution for commercial purposes, for personal use, or otherwise, and irrespective of whether such alcoholic beverages were purchased within or without the state. . . ."

New York Alco. Bev. Cont. Law § 102(1)(d) provides in part:

"No common carrier or other person shall bring or carry into the state any alcoholic beverages, unless the same shall be consigned to a person duly licensed hereunder to traffic in alcoholic beverages. . . ."

New York Alco. Bev. Cont. Law § 102(1)(a) provides that:

"No person shall send or cause to be sent into the state any letter, postcard, circular, newspaper, pamphlet, order kit, order form, invitation to order, price list, or publication of any kind containing an advertisement or a solicitation of any order for any alcoholic beverages, irrespective of whether the purchase is made or to be made within or without the state, or whether intended for commercial or personal use or otherwise, unless such person shall be duly licensed hereunder to traffic in alcoholic beverages."

The plaintiff wineries cannot sell directly into New York state or mail advertising material to New York. Moreover, the plaintiff customers cannot purchase from these wineries.

Legal Issues. The original Complaint pleads three counts. First, it alleges that the New York statute violates the interstate commerce clause of the U.S. Constitution by discriminating against out of state businesses. Second, it alleges that the statute violates the privileges and immunities clause of the U.S. Constitution by preventing the winery owners from pursuing their livelihood. Third, it alleges that the statute violates the freedom of speech clause of the U.S. Constitution by preventing them from advertising their wineries in New York.

Status. The original Complaint was filed in U.S. District Court for the Southern District of New York (New York City) on February 3, 2000. Defendants filed a Motion to Dismiss, which was denied on September 5, 2000. The case will proceed to trial.

Decision and Order (denying Defendants' Motion to Dismiss). Judge Berman released a 23 page Decision and Order on September 5, 2000 which denied the Defendants' F.R.C.P. 12(b)(6) Motion to Dismiss, and ordered that the case proceed to trial. Judge Berman's explanation indicates that after presentation of the facts, he may rule that the New York State statutes in question are economic protectionism in violation of the Commerce Clause.

Background. This is one in a series of recent cases which have challenged, or are in the process of challenging, state liquor laws which discriminate against out of state producers, including Internet wine sellers. Other relevant cases include:

• In Dickerson v. Bailey, Texas wine consumers sued the Texas Alcohol Beverage Commission claiming that Texas Alcoholic Beverage Code violates the dormant Commerce Clause. The U.S. District Court granted summary judgment for Plaintiffs (at 87 F. Supp.2d 691 (S.D. Tex. 2000)). However, the Court has not entered final judgment.
• In Kendall-Jackson v. Branson, several wineries filed suit against the Illinois Liquor Control Commission and three wholesale distributors of alcoholic beverages claiming that the Illinois Wine and Spirits Industry Fair Dealing Act violates the dormant Commerce Clause. The U.S. District Court issued a preliminary injunction of enforcement of the statute (at 82 F. Supp.2d 844 (N.D. Ill. 2000)). The distributor Defendants appealed, but the U.S. Court of Appeals for the 7th Circuit dismissed the appeal for lack a redressability (212 F.3d 995, 998 (7th Cir. 2000)).
• In Bridenbaugh v. O'Bannon, plaintiffs challenged the constitutionality of Indiana Statute which made it unlawful for persons in another state to ship an alcoholic beverage directly to an Indiana residence. The U.S. District Court held that the Indiana direct shipment regulation was unconstitutional under the Commerce Clause, and granted the plaintiffs' summary judgment motion (at 78 F. Supp.2d 828 (N.D. Ind. 1999)). This case is currently on appeal to the U.S. Court of Appeals for the 7th Circuit.

Case Chronology with Links to Related Materials.

• 2/3/00. Original Complaint filed in U.S. District Court, SDNY.
• 5/11/00. Defendants filed a Motion to Dismiss.
• 7/21/00. Judge Berman heard oral argument on Defendants' Motion to Dismiss.
• 9/5/00. Judge Berman issued his Decision and Order denying Defendants' Motion to Dismiss. See, TLJ story on the Decision and Order and TLJ story on related cases.

Plaintiffs.

• Swedenburg Winery, Winery Lane, Middleburg, Virginia, 22117, 540-687-5219.
• Lucas Winery, 18196 N. Davis Road, Lodi, California, 209-368-2006.

Plaintiffs' Attorneys.

• INSTITUTE FOR JUSTICE, Clint Bolick, William H. Mellor III,  and Deborah Simpson, 1717 Pennsylvania Ave., NW, Suite 200, Washington, DC 20006, 202-955-1300.
• FRIEDMAN KAPLAN & SEILER, Lance J. Gotko, 875 Third Avenue, New York, NY 10022-6225, 212-833-1100.

Interest Groups Representing or Supported by Distributors (Pro Protectionist Statutes).

• Wine & Spirits Wholesalers Association. This groups represents distributors, and lobbies state and federal legislators for protectionist legislation.
• Americans for Responsible Alcohol Access.

Interest Groups Representing or Supported by Wineries (Pro Direct Sales).

	FreeTheGrapes.org

• Wine Institute. This groups represents California wineries, and lobbies state and federal legislators for opening up states to direct sales.
• Free the Grapes!.
• American Vintners Association.
• Coalition for Free Trade.
• Institute for Justice. This group is a broad based civil rights litigation group with a property rights and conservative orientation.