High Court Wallops Liquor Store Residency Requirements

WASHINGTON (CN) – Invoking the so-called dormant commerce clause, the Supreme Court on Wednesday struck down a Tennessee law that imposed residency requirements on companies seeking a liquor license.

Tennessee grants liquor licenses only to people who have been residents of the state for at least two years and to companies whose leadership meets the same requirement. Total Wine Spirits Beer and More and Kimbrough Fine Wine and Spirits, two entities that did not meet the state’s strict residency requirements, incurred the wrath of competing retailers when they tried to open stores in Tennessee.

Ultimately Tennessee dropped out of the case, leaving just the companies to duke out the constitutionality of the law before the Supreme Court.

The high court ruled 7-2 Wednesday to invalidate the state law.

“Because Tennessee’s 2-year residency requirement for retail license applicants blatantly favors the state’s residents and has little relationship to public health and safety, it is unconstitutional,” Justice Samuel Alito wrote for the majority.

Alito said the 21st Amendment, which repealed Prohibition and left it to the states to regulate how alcohol is distributed within their borders, does not allow states to violate the “nondiscriminatory principal” that is central to the regulatory framework.

“Under our dormant commerce clause cases, if a state law discriminates against out-of-state goods or nonresident economic actors, the law can be sustained only on a showing that it is narrowly tailored to ‘advanc[e] a legitimate local purpose,’” the ruling states. “Tennessee’s 2-year durational-residency requirement plainly favors Tennesseans over nonresidents.”

Before Prohibition was enacted on a national level, some states passed laws to prohibit the sale and production of alcohol within their borders, but that didn’t stop residents from drinking alcohol that was imported from other states.

The states with alcohol bans then tried to bar the importation of alcohol, which quickly drew successful legal challenges.

“By the late 19th century, the court was firmly of the view that the commerce clause by its own force restricts state regulation of interstate commerce,” Alito wrote.

When the national Prohibition was ended in 1933, the framework established by the 21st Amendment did not give states “limitless authority to regulate the alcohol trade,” the ruling states.

“Because Tennessee’s 2-year residency requirement for retail license applicants blatantly favors the state’s residents and has little relationship to public health and safety, it is unconstitutional,” Alito said.

Justice Neil Gorsuch, who was joined in his dissent by Justice Clarence Thomas, noted alcohol’s “complicated place in this country’s history,” including the adoption of two constitutional amendments “to adjust and then readjust alcohol’s role in our society.”

“But through it all, one thing has always held true: states may impose residency requirements on those who seek to sell alcohol within their borders to ensure that retailers comply with local laws and norms,” the dissent states. “Today and for the first time, the court claims to have discovered a duty and power to strike down laws like these as unconstitutional. Respectfully, I do not see it.”

Gorsuch concluded, “Like it or not, those who adopted the 21st Amendment took the view that reasonable people can disagree about the costs and benefits of free trade in alcohol… If the people wish to alter this arrangement, that is their sovereign right. But until then, I would enforce the 21st Amendment as they wrote and originally understood it.”

Tom Wark, executive director of the National Association of Wine Retailers, called the court’s ruling “a historic win for both free trade and wine consumers across the country.”

“With this decision, the effort to modernize and bring fairness to the distribution and wine shipping laws of the states begins in earnest,” he said. “While we expect the opponents of free trade and supporters of protectionism to fight this evolution in the American marketplace, we are equally confident that this Supreme Court decision will lead to greater access to the hundreds of thousands of wines many consumers do not currently have access to due to protectionist wine shipping laws.”

Carter Phillips, an attorney with the firm Sidley Austin who represented two alcohol realtors in the case, was not available for comment Wednesday. Neither were Shay Dvoretzky, a Jones Day attorney who argued for the retailers association, and former Illinois Solicitor General David Franklin, who argued as a friend of the court on behalf of a collection of other states.

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