Liquor Store War

• Author: Mark Walsh
• Pages: 20-21

In June, a new wine and liquor superstore

called Total Wine Spirits Beer & More opened

in the upscale Turkey Creek shopping area in

Knoxville, Tennessee, o ering some 8,000

wines, 3,000 spirits and more than 2,500

beers, as well as a wine-tasting bar, a classroom and a

walk-in cigar humidor.

The Docket

20 || ABA JOURNAL JANUARY-FEBRUARY 2019

Supreme

Court

Report

Liquor Store War

Should a giant wine and spirits retailer be subject to

state residency requirements? By Mark Walsh

“I think we’re unlike any ot her

retail liquor store in Tennessee,”

Edward Cooper, the vice president

of public a airs and community

relations for the retailer, told the

Knoxville News Sent inel when the

nationwide chain of more than 19 0

stores opened its fi rst outlet in the

state. “I think t hat customers will be

happy with our interest and de sire in

giving them what they des erve, and

that’s price, serv ice, selection and a

great customer ex perience.”

Whatever else might be said about

a proud corporate executive’s boast,

Cooper was right about one thing:

Total Wine is unlike any other reta il

liquor store in Tennessee in that it

was the fi rst superstore operated

by an out-of-state corporat ion to

receive a liquor license despite the

state’s longtime law requiring th at

licensees satisf y a two-year residency

requirement.

Total Wine received its license af ter

a federal distric t court in 2017 struck

down Tennessee’s residency require-

ments for liquor wholesalers and

retailers as a v iolation of the dormant

commerce clause, the principle that

the states may not enact laws d is-

criminating against interstate com-

merce. A panel of the 6th U.S. Circuit

Court of Appeals i n Cincinnati

a rmed the d istrict court in a 2-1

decision last Februar y; and a few

months later, the Total Wine store in

Knoxvil le opened its doors.

But the U.S. Supreme Court has

agreed to hear a n appeal by the

Tennessee Wine and Spirits Retai lers

Association, which is defend ing the

state’s residency requirement. If the

court rules for the a ssociation and

revives the residency requ irement, the

Total Wine superstore in Knoxv ille

may become just one giant purve yor

of cigars, soft dr inks and snacks—but

no liquor, assuming it could stay open

at all.

THE ‘THREE-TIER SYSTEM ’

The state retailers’ a ssociation

argues that the 21st A mendment, rat-

ifi ed in 1933 to end prohibition, gives

the states “broa d latitude to regulate

the retail sale of a lcohol free from the

constraints of the dorma nt commerce

clause.”

“Tennessee’s durat ional-residency

requirement is not subject to the dor-

mant commerce clause bec ause it is

authorized by the [21st Amendment’s]

core Section 2 power ‘directly to r eg-

ulate the sale ... of liquor withi n’ the

state,” the retailers a ssociation argues

in a brief.

Because of ambivalence by the

state, the Nashvi lle-based associa-

tion, which represents more than 500

liquor store ow ners across Tennessee,

is carry ing the ball in Tennessee Wine

and Spirits Retail ers Association v.

Blair, which is scheduled for argu-

ment Jan. 16. The Tennessee Attor ney

General’s O ce had issued t wo opin-

ions in recent years concluding that

the state’s residency requirements

for liquor licenses likely violated the

commerce clause. However, the o ce

fi led a letter with the Supreme Court

in the case stati ng that the Tennessee

Alcoholic Be verage Commission

believes its residency requir ements do

not violate the commerce clause, but

that the commission would not fi le its

own merits br ief.

The main requirement says that

applicants must have resided in

Tennessee for two years before

applying. In addition, the state

imposes a 10-year residency requi re-

ment to renew a license (which is

good for just one year). For corpo-

rations, state law require s all of a

company’s stock to be held by indi-

viduals who meet the residency

requirements.

When Total Wine and another

out-of-state applicant, the new ow n-

ers of a longtime Memphis liquor

store called K imbrough Fine Wine &

Spirits, sought licenses in 2016, the

state retailer s association informed

the Alcoholic Beverage Commission

that if the agency gra nted the

licenses, the assoc iation “would

immediately fi le suit … asking a

court to make a Tennessee agency

follow current Tennessee law passed

by the Tennessee legislature elected

by Tennessee citizens.”

The commis sion’s then-di rector

fi led his own suit, seeking a declara-

tion regarding the legalit y of Tennes-

see’s requirements. After t he state

association removed the suit to fed-

eral court, t he district court struck

down the durational-residency

requirements.

The 6th Circuit panel agre ed 2-1

that Tennessee’s two-year residency

requirement violated the dorma nt

commerce clause. The court c on-

sidered the requirement in light

of the Supreme Court’s 2005 deci-

sion in Granholm v. Heald, which

struck down Michigan a nd New York

laws that barred out-of-st ate win-

eries from maki ng direct sales to

consumers.

The high court had said t hat

because those stat es’ laws involved

“straightforward at tempts to dis-

criminate in favor of loca l producers

… the discrimin ation [was] contrary

to the commerce clause and [was]

not saved by the 21st Amendment.”

But the justices also rea sserted that

the “three-tier sy stem” of alcohol

regulation by the state s, in which

there is separate licensu re for pro-

ducers, wholesalers and retai lers, is

“unquestionably legitimate.”

The 6th Circuit said Tennessee