Smokey and the Bandit in cyberspace: the dormant commerce clause, the Twenty-First Amendment, and state regulation of Internet alcohol sales.

Author:Denning, Brannon P.
 
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Recently, some federal judges have given oenophiles everywhere reason to rejoice by striking down, under the dormant Commerce Clause doctrine, venerable state laws that limit the import and sale of alcoholic beverages to customers directly. (1) Such laws had presented a considerable obstacle to the sale of alcohol, wines in particular, over the Internet. (2) For the most part, only parents concerned about sales to minors and in-state liquor distributors have voiced concern. Many commentators approve of federal court application of the dormant Commerce Clause doctrine--the long-standing guarantee that parochial barriers will not be allowed to inhibit the free-flow of goods throughout our national market--to invalidate these laws. (3)

But one might ask, glancing at a copy of the Constitution, what of the Twenty-first Amendment? (4) Section Two of that amendment, after all, reads: "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." (5) The plain text of that section suggests that these recent court decisions are mistaken. (6) Yet the courts tell us that the Twenty-first Amendment is not to be read literally or invoked as a shield for protectionist legislation. Only laws designed to promote "temperance," they say, are protected by the Amendment from dormant Commerce Clause scrutiny. (7)

Where did the district courts get the idea for this distinction-between "good" alcohol legislation, which furthers the state's legitimate "core" interest in temperance, and is protected under the Twenty-first Amendment, and "bad" legislation motivated by simple economic protectionism and thus constitutionally impermissible? Certainly not from the text of the Amendment, whose wording makes no such distinction. Not from the Framers of the Twenty-first Amendment, whom the recent court decisions barely discuss. (8) Not from Congress, which recently opened the federal courts to state attorneys general to enforce state legislation against out-of-state alcohol shippers. (9) Rather, it is the Supreme Court, in a series of decisions beginning over thirty years ago, that has constrained the operation of the Amendment to such a degree that it has become an "'almost' forgotten clause of the Constitution." (10) Yet, shortly after the Amendment's ratification, when the Court was first called upon to interpret it, no less a gray eminence than Mr. Justice Brandeis turned aside a number of challenges to allegedly protectionist state liquor legislation, arguing that to make the distinctions made by recent lower courts, would be to effect not a "construction" of the Amendment, but a "rewriting" of it." (11)

To put it plainly, recent lower court decisions have indulged in broad applications of the Supreme Court's own narrow interpretations of the Twenty-first Amendment--fashioned in cases whose facts went beyond the explicit text of the Amendment--American and have erroneously concluded that those decisions dictate the invalidation of state liquor importation laws. That courts continue to construe narrowly--nearly to the vanishing point--a specific reservation of state power at federalism's high tide of judicial enforceability, seems particularly worthy of attention. The growing market for interstate shipment of alcohol, and the near unanimity of federal courts in their continued assertions of the Twenty-first Amendment's irrelevance, makes this an appropriate time for a reexamination of the Amendment and the Supreme Court's interpretation of it.

In this essay, I will do three things. First, I will summarize the history of the framing and ratification of the Twenty-first Amendment. Its purposes were well understood to go beyond merely allowing states to pursue temperance policies. At the time, the question was understood to be whether the states or the federal government would control the liquor trade. Second, I will chart the evolution of the Supreme Court's Twenty-first Amendment jurisprudence and describe the Court's move from rules to standards in applying the Amendment. The adoption of the more flexible approach, I will show, has resulted in a dramatic reduction of state power over alcohol. Finally, I will critique the district court decisions that limit states in the one area in which their power remained largely unquestioned by the Supreme Court--the regulation of liquor imports from out-of-state. If these recent decisions are affirmed, the result will be the functional repeal of the Twenty-first Amendment. In hopes of averting this, I offer suggestions to lower courts and to the Supreme Court for applying the Amendment in future cases.

  1. FEDERAL REGULATION OF ALCOHOL BEFORE PROHIBITION

    States began to regulate the sale of alcohol in the nineteenth century, sometimes prohibiting it altogether, under their police power. (12) Many states exempted "personal users" from their liquor laws, which tended to restrict only wholesalers and retailers. But when states attempted to expand their laws and prohibit importation of out-of-state liquor for in-state delivery, the Supreme Court struck down the import bans as direct regulations of interstate commerce. (13) "The absence of any law of Congress on the subject is equivalent to its declaration that commerce in that matter shall be free," held the Court in Leisy v. Hardin. (14) Alarmed, states pressed Congress for permission to freely regulate alcohol. Congress responded with the Wilson Act of 1890, (15) which gave states the right to regulate liquor the moment it arrived in the state "to the same extent and in the same manner as though such.., liquor had been produced" there, regardless whether such liquor was in its "original package" or not. (16) A year later, In re Rahrer (17) blessed this "reconveyance" of regulatory power by Congress to the states. Through the exercise of its commerce power, the Court reasoned, Congress was free to "divest" an article of commerce of its interstate characteristics. (18)

    Despite the Wilson Act, the Court later struck down more state laws restricting the importation of liquor for personal use, again prompting congressional action. In 1898, the Court invalidated a South Carolina law that prohibited the shipment of liquor into the state, as applied to consignment shipments to individuals for personal use. (19) Congress eventually responded with the Webb-Kenyon Act of 1913, (20) which prohibited the "shipment or transportation, in any manner or by any means whatsoever" of liquor "from one State, Territory, or District of the United States" into another "in violation of any law" of the State, Territory, or District. (21) The Court upheld the Webb-Kenyon Act in Clark Distilling Co. v. Western Maryland Railway Co., relying in part on the assertion in In Re Rahrer that Congress could "divest" commodities of their interstate character, so as to permit state regulation otherwise forbidden by the dormant Commerce Clause doctrine. (22)

    Two years after Clark Distilling Co., the Eighteenth Amendment was ratified, and nationwide prohibition became the law of the land. (23) Proposed in part as a sop to "drys" around the country and partly as a "war measure necessary for the saving of food and man power," (24) this social experiment soon ran into problems of widespread noncompliance, the rise of criminal rackets to satisfy the demand for alcohol, and the unwillingness of legislatures to appropriate resources for a real attempt to force nationwide compliance. (25) It took the Great Depression, however, to effect the repeal of the Eighteenth Amendment and bring an end to the "noble experiment" of Prohibition. (26)

  2. THE FRAMING AND RATIFICATION OF THE TWENTY-FIRST AMENDMENT

    The election of 1932 was a mandate for radical reform of America's experiment with prohibition; both the GOP and Democratic Party platforms had called for its repeal. The Senate Judiciary Committee went to work; and by February, 1933, it reported out Senate Joint Resolution 211, which would have repealed prohibition, prohibited the importation of alcohol into states in violation of state law, and allowed for concurrent federal power "to regulate or prohibit the sale of intoxicating liquor to be drunk on the premises where sold"--a provision squarely aimed at ensuring that, no matter what, the Nation would be spared the return of the dreaded "saloon." It was this provision, then Section Three of the proposed Amendment, that proved to be the most controversial. The reasons for its eventual abandonment refute the notion that the Amendment was concerned only with promoting temperance or constitutionalizing the Webb-Kenyon Act. (27)

    Two things are clear from the Senate debates on the proposed amendment. First, supporters of Section Two intended the Amendment to return control over shipment and importation of alcohol to the states, and to insulate that state control from either congressional second-thoughts about the Webb-Kenyon Act or a hostile Supreme Court decision striking down the Act. (28) In other words, with regard to the importation of alcohol, the dormant Commerce Clause doctrine was to be inoperative. As S.J. 211's sponsor, Senator John J. Blaine, explained it:

    When our government was organized and the Constitution of the United States was adopted, the States surrendered control over and regulation of interstate commerce. This proposal is restoring to the States ... the right to regulate commerce respecting a single commodity--namely, intoxicating liquor.... [B]y reason of this provision, [the State] in effect acquires powers that it has not at this time. Second, the section purporting to grant concurrent power to the states and the Federal Government to regulate the "saloon" was eliminated because of fears that it would invite congressional encroachment onto the states' regulatory prerogatives that Section Two was supposed to secure. (30)...

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