By James J. Barney
Associate Professor of Legal Studies, School of Security and Global Studies, American Military University
On January 16, the Supreme Court heard oral arguments in the case of Tennessee Wine and Spirits Retailers Association versus Blair. This case addresses a challenge to a Tennessee law that imposed a two-year residency requirement for applicants seeking a license to sell alcohol in the state as well as a 10-year residency requirement to renew the license.
The decision, which is expected in the spring, may provide additional insight into the Court’s interpretation of the Twenty-First Amendment. That amendment repealed the Eighteenth Amendment of 1919. One year later, Congress passed the Volstead Act, which ushered in the Prohibition era from 1920 to 1933.
Since its ratification in 1933, the Twenty-first Amendment has been reviewed by the Supreme Court only a handful of times. While seemingly of little impact, the Supreme Court’s interpretation of the Twenty-first Amendment potentially affects hundreds of state laws that regulate the intrastate sale and distribution of alcohol.
Supreme Court Reviews Licensing Laws Struck Down by Federal District Court in Tennessee
Previously, a federal district court in Tennessee struck down these residency requirements as violations of the dormant commerce clause, which prohibits states from enacting laws that discriminate against out-of-state producers of goods. The Sixth Circuit Court of Appeals affirmed the district court’s decision.
On appeal to the Supreme Court, Tennessee opted not to defend its residency requirements for licenses and renewals of alcohol sales licenses. Instead, a coalition of various alcohol retailers associations defended Tennessee’s residency requirements and the laws of other states that establish such residency requirements for in-state sellers of alcohol, arguing that the Twenty-first Amendment permits such regulations.
During oral arguments, several of the Supreme Court Justices focused their questions on the Twenty-first Amendment. But a separate focus was on Granholm v. Heald, one of a handful of cases that had previously interpreted the relationship between the dormant commerce clause and the Twenty-first Amendment.
In a 5-4 decision in 2005, the Supreme Court in Granholm struck down state laws enacted by Michigan and New York. These laws had allowed in-state wineries to ship wine directly to customers, while prohibiting out-of-state wine retailers from doing the same.
According to the majority in Granholm, the Twenty-first Amendment did not allow the states to violate the dormant commerce clause. Instead, the Amendment intended only to return to the state of the law that existed before Prohibition. In the pre-Prohibition era, the interpretation of the dormant commerce clause prohibited states from discriminating against out-of-state producers of products including alcohol.
The four dissenting justices in Granholm described how the Twenty-first Amendment’s clear language carved out an exception to the dormant commerce clause. This exception allowed states to regulate the intrastate sale of alcohol and to treat out-of-state sellers of alcohol differently from in-state sellers.
States to Continue Regulating the Intrastate Sale of Alcohol
Several commentators have argued that the Supreme Court’s questioning demonstrated a deep skepticism of Tennessee’s residency requirements. Specifically, several justices focused on the term “economic protectionism” during the oral arguments.
However, some of the justices also hinted at a general misinterpretation of Granholm and its effects. Specifically, Justice Brett Kavanaugh and others, focused on Section 2 of the Twenty-first Amendment. That section states in part: “The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.”
In their questioning, Justices Samuel Alito and Kavanaugh described how the drafters of the Twenty-first Amendment sought to treat alcohol differently from other articles of commerce. Justice Kavanaugh alluded to how a reading of Section 2 of the Twenty-first Amendment not only allows states to treat out-of-state sellers of alcohol differently from in-state sellers, it also allowed states to ban the importation of all alcohol completely if they chose to do so.
Some commentators, including Amy Howe from the Supreme Court of the United States blog, have argued that “this is a hard case to handicap: Justice Ruth Bader Ginsburg was absent, Chief Justice John Roberts said very little, and Justice Clarence Thomas did not say anything at all. Throw in the fact that Tennessee has made only a half-hearted attempt to defend the residency requirements, and it becomes even more difficult to predict exactly what the justices are likely to do.”
Reading too much into the questioning of Supreme Court Justices during oral argument is often an exercise in futility. Several justices, including Justice Kavanaugh, hinted by their questioning that they might adopt the dissenting opinion of Justice Jeffrey Sutton of the Sixth Circuit Court of Appeals.
Justice Sutton stated that the clear language of Section 2 of the Twenty-first Amendment created a very narrow exception to the dormant commerce clause that allowed states to regulate the intrastate sale and distribution of alcohol and that the majority in Granholm did nothing to alter that exception. In his dissenting opinion, Justice Sutton also described how Tennessee’s two-year residency requirement was part of such a regulatory scheme.
The dormant commerce clause should survive constitutional review because the states provided a rational basis for the requirement. In other words, the states need time to review an applicant’s in-state activities and background before issuing a license to sell alcohol.
However, Justice Sutton noted how Tennessee failed to justify the much-longer 10-year requirement for renewal. The focus on Justice Sutton’s dissenting opinion during oral arguments, as well as the extended discussion of the legislative history of the Twenty-first Amendment, hints at a potential future Supreme Court decision that clarifies the scope of Granholm.
Those Challenging Tennessee’s Residency Requirements Seek to Nullify Section 2 of Twenty-first Amendment
Specifically, Supreme Court Justice Neil Gorsuch hinted that an interpretation of the Twenty-first Amendment as advocated by those who challenged Tennessee’s residency requirement would, in effect, nullify Section 2. That change would allow companies like Amazon and other nationwide online retailers to enter the alcohol marketplace. However, that result is not likely given that the current majority of the Court is focused on ascertaining and applying the intent of the framers of the Twenty-first Amendment.
Instead, following Justice Sutton’s dissenting opinion, the majority of the Supreme Court will likely hold that the Twenty-first Amendment sought to treat alcohol differently from other products and that the states can establish laws to regulate the intrastate sale and distribution of alcohol. That includes the establishment of rational residency requirements for sellers of alcohol.
It is likely the Supreme Court will also hold that Tennessee, which did not defend the two-year residency requirements on appeal, failed to provide a rational explanation for the 10-year renewal period. Such a minimalist decision would reconcile the Supreme Court’s existing dormant commerce clause jurisprudence with the clear wording of Section 2 of the Twenty-first Amendment.
Such a decision would also have only a minimally disruptive effect on the hundreds of state laws that regulate the intrastate sale and distribution of alcohol across the United States. Moreover, the Supreme Court will likely hold that Section 2 of the Twenty-first Amendment does not allow states to discriminate against out-of-state producers of alcohol like the wineries — the parties in the Granholm case — because such discrimination was not allowed in the pre-Prohibition era. Such a decision would provide much-needed clarity to Granholm and its effects.
Decision Will Provide Insight into Justice Kavanaugh’s Interpretation of the Constitution
At first glance, Tennessee Wine and Spirits Retailers Association appears to be a case of limited importance because it focuses solely on the interpretation of an obscure Prohibition-era amendment and the licensing requirements of a single state. However, the decision will provide legal scholars with valuable insight into Justice Kavanaugh’s Supreme Court’s decision-making and his interpretation of the Constitution.
Furthermore, this case will offer inroads into the Supreme Court’s interpretation of the scope of the dormant commerce clause and the states’ ability to regulate the intrastate sale and regulation of alcohol. The case will definitely have implications for the complex web of state laws that regulate in the sale of alcohol across the United States.
About the Author
James Barney is an Associate Professor of Legal Studies in the School of Security and Global Studies. In addition to possessing a J.D., James has several master’s degrees, including in American foreign policy. He is currently completing his Ph.D. in History. James serves as one of the faculty advisors of the Phi Alpha Delta law fraternity as well as the Model United Nations Club and the pre-law advisor at APU. Currently, he is working on a year-long research project that focuses on Justice Kavanaugh’s impact on the Supreme Court.
James is licensed to practice law in New York, New Jersey, Alabama and the District of Columbia. Over the past several years, he has served in various roles at debating and moot trial competitions in New York and Washington, D.C. In 2018, James coached the APUS mock trial team and was one of the faculty advisors for the school’s Model UN delegation to the National Model United Nations conference in Washington, D.C. in early November 2018