State Liquor Laws Barring Internet Wine Sales Held to Violate Commerce Clause

(September 8, 2000) A federal court decision on September 5 in Swedenburg v. Kelly was part of a year long string of decisions that have gone against states which maintain laws that seek to protect in state liquor distributors from outside competitors, including small Internet wineries which sell over the Internet, or by direct mail sales.

U.S. District Court Judge Richard Berman issued a 23 page Decision and Order on Tuesday, September 5, denying a Motion to Dismiss that had been filed New York State liquor authorities and distributors.

Juanita Swedenburg is a partner is a small winery in Northern Virginia. Another plaintiff owns a small winery in California. They wish to sell wine directly into New York State, but are barred by a New York statute. Three other plaintiffs are wine consumers in New York who wish to buy their products.

The decision did not strike down the statute. Rather, the Court simply denied defendants' motion to dismiss. They had argued that the 21st Amendment to the Constitution sustains the statute in question. 

The Court rejected defendants' argument, stating that state bans on direct sales of alcohol, if "mere economic protectionism", are unconstitutional under the Commerce.

This decision was just one in a series of setbacks  in the last year for the states, and the liquor distributors who enjoy monopolies or favored positions under state laws.

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 of redressability (212 F.3d 995, 998 (7th Cir. 2000)). The state did not appeal, and hence, even if the injunction had been removed as to the distributors, it still would have bound the state.

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.