December 24, 2008 – Kentucky Wine Restrictions Ruled Unconstitutional

On this day in history, the US Court of Appeals for the Sixth Circuit Wednesday upheld a district court ruling that two Kentucky statutes regulating interstate wine sales were unconstitutional. The district court had ruled that the in-person purchase requirement in portions of Kentucky’s statutory scheme discriminated against interstate commerce by limiting the ability of out-of-state small farm wineries to sell and ship wine to Kentucky consumers.

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The plaintiffs (wineries) filed suit after the U.S. Supreme Court, in Granholm v. Heald (544 U.S. 460, 2005) invalidated wine-related laws that allowed only in-state wineries to sell and ship wine directly to consumers, and requiring that sales by out-of-state wineries had to made “in person.” As Oyez reported:

In a 5-4 opinion delivered by Justice Anthony Kennedy, the Court held that both states’ laws violated the commerce clause by favoring in-state wineries at the expense of out-of-state wineries and did so without the authorization of the 21st Amendment. State authority to engage in such economic discrimination was not the purpose the 21st Amendment. Moreover, in modern cases, that amendment did not save state laws violating other provisions of the Constitution.”

The real defendants (and appellants) in the Sixth Circuit case were the Kentucky based wholesalers, who stood to lose the profits on sales made directly to consumers and retailers by out-of-state wineries.

Circuit Court Judge Eric L. Clay wrote:

Because of the economic and logistical barriers caused by the in-person requirement, small Kentucky wineries benefit from less competition from out-of-state wineries. … Kentucky’s wholesalers receive benefits that are even more direct: based upon the evidence presented by Plaintiffs, [they and similar wineries] would bypass Kentucky’s wholesalers altogether if the in-person purchase requirement were lifted.” [Meanwhile,]… the majority of wineries who do not have a wholesaler are foreclosed from the Kentucky market altogether unless they can take orders directly from Kentucky.”

The court’s reasoning was generally sound, albeit a bit overdramatic. The court noted that with the statutes in place, out-of-state wineries are either forced to incur the added cost of paying a wholesaler or they must wait for Kentucky consumers to travel up to 4800 miles (round trip) (presumably on an artisanal wine-country tour) to purchase out-of-state wine.

Read the Sixth Circuit opinion here, or you can celebrate by ordering wine from one of the successful plaintiffs, the Cherry Hill Winery in Oregon.

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