A three-judge panel found Missouri’s requirement for retailers to have an in-state presence to sell wine to its residents does not violate the commerce clause.
ST. LOUIS (CN) — The Eighth Circuit on Tuesday rejected a Florida wine distributor’s challenge to Missouri’s liquor license residency laws, affirming a federal judge’s dismissal based on Supreme Court precedent.
Florida-based Sarasota Wine Market and two Missouri consumers, who state law has blocked from becoming Sarasota customers, filed the lawsuit challenging the state’s requirement that those seeking a liquor license must be a qualified voter and a taxpaying citizen of the state. They claim Missouri’s ban violates the Constitution’s commerce clause by protecting in-state businesses over out-of-state ones.
The state countered in a September hearing before the St. Louis-based appeals court that the lawsuit was simply an attack on the three-tier system governing alcohol sales set up by the 21st Amendment. The three-tier system of regulating alcohol producers, distributors and retailers was put into place following Prohibition as a sort of check and balance to ensure safety measures were in place.
Two recent precedents were at the heart of the arguments: Tennessee Wine and Spirits v. Thomas, a 2019 Supreme Court ruling that found Tennessee’s two-year waiting period to establish a presence within the state to secure a liquor license was unfair, and Granholm v. Heald, in which the Supreme Court ruled in 2005 that it was impermissible for Michigan and New York to prohibit out-of-state wineries to ship directly to the consumer while allowing in-state wineries to do so.
But in writing for the Eighth Circuit majority Tuesday, U.S. Circuit Judge James B. Loken, a George H.W. Bush appointee, found that Sarasota’s challenge was materially different than the dispute in Tennessee Wine because Sarasota and its potential Missouri customers are not challenging the state’s three-year residency requirement.
“Rather, they challenge Missouri’s requirements that licensed liquor retailers be residents of Missouri, have a physical presence in the state, and purchase liquor sold in the state from licensed in-state wholesalers,” Loken wrote.
He added, “The licensing requirements and restrictions at issue have been consistently upheld, before and after Granholm and Tennessee Wine, as essential to a three-tiered system that is ‘unquestionably legitimate.’”
Loken wrote that the Tennessee Wine ruling may “forecast” a future challenge to residential requirements, because those requirements may impose greater costs to out-of-state retailers, but that doesn’t apply to Missouri since the licensing requirements for in-state and out-of-state retailers are the same.
U.S. Circuit Judges Bobby E. Shepherd, a George W. Bush appointee, and Ralph R. Erickson, a Donald Trump appointee, joined Loken in the unanimous decision.
Neither a lawyer for Sarasota nor a state spokesman immediately responded to a request for comment.
The case is part of a nationwide trend as the proliferation of internet sales have changed the alcohol marketplace.
Matthew Bodie, a law professor at Saint Louis University who specializes in alcohol regulation, said the decision is in line with precedent, including the Tennessee Wine and Granholm decisions.
“I’m not surprised by the court’s opinion just because, as they point out, if they allowed out-of-state retailers to be able to sell directly to consumers without a license and without an in-state presence and that sort of thing, then you would be kind of undoing the three-tier system in a sense,” Bodie said in an interview.
Previous rulings throughout the country have upheld the three-tier system and some type of physical presence requirement for retailers.
“I think if Sarasota had said, ‘hey we’re going to do a physical presence, we want to apply for license,’ I think that three-year requirement will be out the window,” Bodie said. “The Eight Circuit reflects that in its opinion basically, but says that’s not what Sarasota did here. They wanted to be able to sell as a non-licensed out of state retailer, rather than a licensed state retailer.”
Bodie believes this is an issue that will continue to be contested throughout the country. Just as the internet has opened new sales avenues, safety concerns such as verifying the age of the buyer remain.
He said this is a rare type of case where constitutional law is tied in with commercial questions.
“I think there will definitely be pressure to kind of change how this stuff is regulated and at this point it’s going to be fought out within the Legislature,” Bodie said. “But at some point, it might go back up again to the Supreme Court to kind of reset the requirements.”