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Shaky Reception at 8th Circuit for Missouri Liquor Licensing Rules

Thwarted in his quest to acquire a wine from his birth year, a lawyer fighting Missouri’s ban on out-of-state liquor sales appeared to strike a chord Thursday with the Eighth Circuit.

ST. LOUIS (CN) — Thwarted in his quest to acquire a wine from his birth year, a lawyer fighting Missouri’s ban on out-of-state liquor sales appeared to strike a chord Thursday with the Eighth Circuit.

Robert D. Epstein described the frustration of his internet search this morning in oral arguments. He found the wine in specialty brands throughout the country, abroad and even in Illinois, but not Missouri.

“This points out the conundrum that my consumer clients find themselves in,” said the lawyer, who is with the Indianapolis firm Epstein Cohen. “It applies not only to the consumer plaintiffs, but also to Missourians that live in small towns outside of the major cities, because even in the largest cities in Missouri you will find a very limited supply of wine available to the wine consumer.”

Epstein represents the Florida-based Sarasota Wine Market and three Missouri consumers whom state law has blocked from becoming Sarasota Wine customers. Specifically, Missouri requires retailers seeking a liquor license to be a qualified voter and a taxpaying citizen of the state.

The group seeks an Eight Circuit reversal after a federal judge dismissed their suit, which contends that Missouri’s ban violates the Commerce Clause by protecting in-state interests over out-state interests.

Zachary Bluestone, representing the state, began his argument Thursday by claiming the lawsuit was simply an attack on the three-tier system governing alcohol sales set up by the 21st Amendment.

He was quickly rebuked by the three-judge panel consisting of George H.W. Bush appointee James B. Loken, George W. Bush appointee Bobby E. Shepherd and Ralph R. Erickson, a Donald Trump appointee.

“I frankly don’t care about the three-tier system,” one of the judges said. “I care about how I view the 21st Amendment commerce clause.” The hearing was conducted by teleconference due to Covid-19 restrictions, so it was unclear which judge made the statement.

Bluestone meanwhile was quick to pivot.

“The Supreme Court and this court have all recognized that the 21st Amendment indisputably gives more leeway to the states to regulate the liquor industry compared to other industries,” he responded.

In its brief and arguments, Sarasota Wine has extensively cited the recent precedent of 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 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.

“Missouri has the same residency rule as the one that was struck down in Tennessee Wine, so it must be remanded at least on that issue,” Epstein said Thursday.

He continued: “Physical presence rules are unconstitutional under GranholmGranholm says states cannot require physical presence. It discriminates against interstate commerce.”

Matthew Bodie, a law professor at Saint Louis University who specializes in alcohol regulation, said this case is part of a nationwide trend after the Tennessee Wine decision.

“It's not a surprise that this comes as the internet has made things much easier to buy remotely and to buy from the comfort of your own home,” Bodie said in an interview. “The prohibition left in its wake this three-tier system of producers, distributors and retailers, which is kind of cumbersome and admittedly inefficient.”

Bodie said the argument for the system is that each tier has their own level of accountability, a sort of checks and balances, to make sure alcohol is sold safely.

“I think that's butting up against the notion from consumers that, ‘Hey, if I can buy this, that and the other thing on Amazon, but I can't buy a nice bottle of wine that I'm going to consume responsibly in my house?’ That seems strange for a lot of people.”

It boils down to interpretation of the 21st Amendment, which has a clause allowing states to regulate alcohol sales.

“And that's been interpreted to say if states want to do things like favor in-state folks over out-of-state folks they can do that,” Bodie said. “And the main reason is for health and safety reasons. So, the concern is if you have someone who's not in state, you don't have the same accountability.”

Sarasota Wine’s attorney Epstein said his client is willing to pay out-of-state taxes but is unwilling to open a location in Missouri.

He told the court that national trends favor his client, with 15 states now allowing direct shipping to customers from out-of-state wine retailers.

For the state’s Bluestone, however, that some out-of-state wine retailers such as Total Wine already operate in Missouri is telling.

“Unlike the Tennessee case, there are many nonresident retailers that currently operate in the state of Missouri, and they are able to operate from a storefront and deliver to customers because they comply with the Missouri alcohol licensing requirements,” Bluestone told the panel.

Bluestone told the panel to focus on the point that Sarasota Wine wants to run a pure internet-only company in Missouri, which is prohibited.

“The dormant commerce clause (in the Constitution) does not protect the chosen way to run a business,” Bluestone said. “It doesn't allow Sarasota Wine to run an internet business if that same opportunity is not available to Missouri retailers. It would actually, if the court grants relief, would put out-of-state retailers and advance it over Missouri retailers.”

The court took the matter under advisement. There is no timetable for a decision.

Professor Bodie could not predict how the case will go. “I think this makes sense on both sides,” Bodie said. “Basically, it makes sense for Missouri to think that they have a reasonable rule related to health and safety. And I think it makes sense for Sarasota to challenge and say, hey, this is unfair.”

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