Wholesalers Praise 2d Circuit Ruling Upholding 3-Tier System

Yesterday’s Second Circuit decision upholding New York State’s three-tier system against challenges by out-of-state retailers “could have significant ramifications” on a similar case pending before the Fifth Circuit Court of Appeals, Craig Wolf, president, Wine & Spirits Wholesalers of America, said.

“This unanimous opinion clearly and forcefully reinforces WSWA’s view that the landmark 2005 Supreme Court decision in Granholm v. Heald preserved a state’s right to control the distribution of alcohol,” he said, adding:

“States not only have the right under the 21st Amendment, but also the responsibility, to require all alcohol be distributed through a controlled and regulated system designed to prevent underage access and ensure product integrity. This decision is a strong affirmation of state power and will cast a long shadow over other pending cases, particularly the Texas Siesta Village case currently before the Fifth Circuit.”

Beer wholesalers were equally pleased.  Craig Purser, president, National Beer Wholesalers Assocation, said the decision “upholds the current state-based system of alcohol regulation and validates the three-tier system. It is unfortunate that plaintiffs’ attorneys continue to pursue profits ahead of the public’s interest by attempting to strike down effective laws that provide a balance between the consumer’s interest in choice, variety and selection in a competitive environment and the public’s interest in regulation within an orderly marketplace.”

Purser noted the Second Circuit decision “comes on the heels of a ruling in Washington State that determined the State of Washington should repay Costco for approximately $1.9 million of legal fees despite the fact that the Ninth District Court of Appeals ultimately upheld the vast majority of Washington’s challenged laws and ruled against Costco.

“States must continue to defend their laws as special interests work to undermine effective alcohol regulation,” he said.

In the New York decision, Plaintiffs, led by Prof. Alex Tanford, sought to “mimic the concerns addressed in Granholm by contending that the New York law is invalid because it grants in-state retailers benefits not afforded to out-of-state retailers,” the court observed.

It rejected Tanford’s argument for at least two reasons.  First, that argument is directly foreclosed by Granholm’s express affirmation of the legality of the three-tier system. New York can require wholesalers and retailers to be both present and licensed in the state.

Second, New York’s law treats in-state and out-of-state liquor evenhandedly under the state’s three-tier system, and thus complies with Granholm’s nondiscrimination principle. “Because New York’s laws evenhandedly regulate the importation and distribution of liquor within the state, we hold that they do not run afoul of the Commerce Clause,” the court said.