Wine Dealer Claims NY|Regulators Overreached

ALBANY, N.Y. (CN) - New York's liquor regulator lacks the authority to block the shipment of wine across states, an Albany-area spirits retailer claims in court.

Bradley Junco, owner of Empire Wine & Spirits in suburban Colonie, says the State Liquor Authority cited him for "improper conduct" and threatened to revoke his license because he sells and ships wine to customers in other states.

"Although there is no New York statute or regulation expressly prohibiting the shipment of wine to customers in other states, and although the SLA expressly allows New York wine retailers to sell and ship wine directly to customers within the State of New York, SLA is regulating Empire's shipment of wine to customers in other states, because, in its 'discretion,' it has decided that it is 'improper' for Empire to ship wine to customers outside the State of New York," the complaint filed on Sept. 23 in Albany County Supreme Court states.

Junco contends the agency's actions violate the U.S. Constitution's Commerce Clause by interfering with interstate commerce, and the 21st Amendment, which allows states to regulate the sale and distribution of alcohol only within their own borders.

Internet sales are "a substantial part" of Empire's business, Junco says. The retailer primarily uses United Parcel Service to ship orders to customers, according to its website.

"Empire wants nothing more than to be the preferred wine retail outlet for all 50 states," the website says in a Frequently Asked Questions section. "Unfortunately some state laws prevent us from being able to ship everywhere."

The shipping section of the site lists 13 states where Empire cannot ship orders.

Junco's complaint says the State Liquor Authority filed Notices of Pleading against his company on Aug. 1 for selling and shipping wine to 16 states.

Each of the 16 violations allegedly cites an agency rule, 9 NYCRR 53.1(n), that allows licenses to be revoked or suspended based on the conduct of the holder.

But Junco says the rule fails to clearly state what conduct is prohibited and is thus unconstitutionally vague.

Instead, the rule describes conduct "of such nature that if known to the authority, the authority, in its discretion, could properly deny the issuance of a permit or license or any renewal thereof because of the unsatisfactory character and/or fitness of such person," according to the complaint.

"Under that rule, SLA asserts an unfettered right to cancel or revoke a liquor license for any conduct that SLA deems, in its own discretion to be 'improper,'" Junco says.

Empire "does not dispute" that it sold wine over the Internet and shipped the bottles directly to customers living in the 16 states named by the agency, according to the complaint.

Junco says the agency "is interfering with interstate commerce even though there is no local state interest to be served in regulating the shipment of wine to customers outside the state of New York."

The Wine Speculator Online recently reported that there is little state or federal enforcement of direct-to-consumer sales laws in the U.S. "laissez-faire wine-shipping economy."

U.S. wine consumption totaled 892 million gallons last year, versus 639 million gallons a decade earlier, according to data from the Wine Institute, a California-based advocacy group.

Junco says his attorneys contacted the State Liquor Authority 10 days after he received the violation notices to contest the agency's authority in issuing them and to seek withdrawal of the license-revocation threat.

The agency allegedly disagreed it lacked authority and said Empire "faced the suspension or revocation of its license if it contested the charges against it."

"This controversy is immediately ripe for judicial review and no fact-finding hearing before an SLA administrative law judge is necessary, as there are no factual issues in dispute to be resolved through such a hearing, and the SLA has already articulated its position as to its jurisdiction, power and authority, through its general counsel," Junco's complaint states.

Junco wants the court to say that the agency lacks the authority to regulate the out-of-state wine shipments, and that agency rule 9 NYCRR 53.1(n) is unconstitutionally vague.

He also wants the agency blocked from pursuing the "improper conduct" charges against Empire.

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