Wine News US Supreme Court Backs Off Shipping Case

US Supreme Court Backs Off Shipping Case

The court declined to grant certiorari in the Lebamoff case, to the chagrin of interstate retailers.
© Alamy | The court declined to grant certiorari in the Lebamoff case, to the chagrin of interstate retailers.
The case for interstate shipping takes a blow as the Supreme Court passes up the chance to settle it.
By W. Blake Gray | Posted Tuesday, 12-Jan-2021

In a perplexing but also predictable decision, the US Supreme Court declined Monday to hear a wine-shipping case from Michigan that now throws into question again whether or not states can discriminate against out-of-state retail stores.

The Court's decision not to hear the case of Lebamoff v. Whitmer is a big setback for enophiles who like hard-to-get wines, and undermines a 2019 Supreme Court decision that appeared to eliminate such uneven laws.

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"This is a terrible decision for retail stores," beverage alcohol attorney Sean O'Leary told Wine-Searcher. "The only ones that can afford to operate in multiple markets are Total Wine and Whole Foods. They're just handing the market over to them. Also, now you have people stuck at home by Covid-19. They want to buy wine and they can't buy wine. The states could be collecting taxes on it. There are a lot of losers. The only winners are the big chains."

The immediate result is that people in Michigan can order wine online from retail stores in their own state, but not from out-of-state.

It's not impossible that other states might look at the Supreme Court's disinterest in the Michigan law and impose their own restrictions on retail wine orders from out-of-state. Big wine distributors are powerful players in state legislatures and they spend plenty of political donation money to protect their monopolies.

But this is not the last time the Supreme Court will be asked to rule on this issue. Bob Epstein, the attorney for Lebamoff, said his firm has eight similar cases at different levels of the federal court system. Epstein said he was not surprised that SCOTUS didn't grant certiorari – the legal term for when it takes a case – in this one. The Court hears fewer than 3 percent of the petitions sent to it.

"Some of the people who have emailed me are disappointed. I anticipated this," Epstein told Wine-Searcher. "The fight goes on."

That said, for laymen, the specifics of the Lebamoff case are a bit disheartening in a week when the world has watched the American system straining at the seams.

Multi-pronged actions

Lebamoff Enteprises owns the Indiana wine shop Cap n' Cork. It wants to ship wines to Michigan residents, but Michigan has a law preventing this, though it allows in-state stores to do so.

In 2005, the Supreme Court ruled in Granholm v. Heald – another Michigan case – that a state cannot discriminate against out-of-state wineries; if it allows its own wineries to ship to its residents, it must allow wineries in California, Oregon, etc., the same privilege.

Wine wholesalers around the country claimed that the Granholm decision applied only to producers, not retail shops. It took 14 years for a case to reach the Supreme Court to test that theory: Tennessee Wine & Spirits Retailers Association v. Thomas. In that case, the state of Tennessee imposed a residency requirement on liquor shop owners that effectively prevented anyone from out of state opening a store unless they had lived in Tennessee for 10 years.

The Supreme Court struck down that law 7-2 with a forceful opinion by Justice Samuel Alito, who wrote: "Section 2 of the Twenty-first Amendment grants the States latitude with respect to the regulation of alcohol, but it does not allow the States to violate the nondiscrimination principle."

Jeffrey Sutton, a justice on the federal Sixth Circuit Court of Appeals, was on the losing side at his level on the Tennessee case. But he managed to get another judge to concur with his opinion in Lebamoff, in which he overturned a lower court's opinion that Michigan's law countermanded the Granholm and Tennessee precedents. The way Sutton wrote the decision was a slap in the face to the concept of lower courts respecting a higher court's opinion: "But the Twenty-first Amendment leaves these considerations to the people of Michigan, not to federal judges."

After watching people in Chewbacca outfits bash police in the head with American flags last week because they think American election law should not be followed, it's distressing to see a powerful appeals court judge so callously disregard precedent and get away with it.

"I don't think the denial of certiorari is in any way a commentary on the American justice system or even the case itself," said Tom Wark, executive director of the National Association of Wine Retailers. "If I had to guess, I'd say the court denied it because they didn't see a clear split in circuits."

Lebamoff has filed an identical case in the Seventh Circuit against Illinois: Lebamoff v. Rauner. In that case, when a federal district court ruling upheld Illinois' discriminatory law, the Court of Appeals remanded it to the lower court, saying, essentially, you got this one wrong, try again. If the Seventh Circuit Court of Appeals had simply overruled the lower court and said Granholm applies to retail shipping, that might have induced the Supreme Court to take this case.

O'Leary said it might take years for the Illinois Lebamoff case to work its way back to a Court of Appeals verdict that would be in conflict with Sutton's decision; a new trial may be ordered, that trial must be conducted, a new verdict must be reached, that verdict must be appealed, and the court of appeals must rule. This is why it took 14 years for the question of whether Granholm applies to retailers to reach the Supreme Court.

"For the distributors, it's just waiting out the game as long as you can," O'Leary said. "This buys them a lot of time. The other thing is it allows them to go to state legislatures and say: 'Our case keeps winning in court,' and point to this one example. If the Sixth Circuit had been decided the right way, a lot of state legislatures would have said: 'What's the use of playing this game when we're going to lose in the end?'"

Wark said the NAWR board will meet tomorrow to discuss its next moves. With eight cases at different stages of the legal system, it must decide where to devote its resources.

"If the court had taken this case, all of those would have stood still," Wark told Wine-Searcher. "Now those cases will advance. There were cases where judges didn't make rulings because they were waiting to see what would happen in this case."

The good news is that if you can currently order wine from a store out of state, this ruling will not change that.

"Nothing changes from where it is now from a logistical and practical standpoint," Wark said. "The states that allow wine shipping still allow it."

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