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Tennessee Wine & Spirits Retailers Ass’n v. Thomas: Local Protectionism Loses Out

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02 Jul 2019
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July 2, 2019

Tennessee Wine & Spirits Retailers Association v. Thomas, 588 U.S. ___ (2019) (Alito, J.).
Response by Alan B. Morrison
Geo. Wash. L. Rev. On the Docket (Oct. Term 2018)
Slip Opinion | SCOTUSblog

Tennessee Wine & Spirits Retailers Ass’n v. Thomas: Local Protectionism Loses Out

Tennessee has very restrictive statutes on obtaining a retail liquor license. Until challenged by two applicants in this case, they required that all applicants, which includes all of its shareholders, must be Tennessee residents for two years prior to applying. In addition, licenses are valid for only one year, and to obtain a renewal, the same durational residence rules apply, but the time is extended to 10 years.

All of the Justices and the parties agreed that, if those requirements applied to any other business, they would be unconstitutional under the Dormant Commerce Clause because they plainly discriminate against out-of-staters. However, the State and the local retailers who defended the law claimed that section 2 of the Twenty-first Amendment, which provides that “[t]he transportation or importation into any State . . . for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited,” saved the law from unconstitutionality.1 A seven-Justice majority in Tennessee Wine & Spirits Retailers Ass’n v. Thomas, in an opinion written by Justice Alito, disagreed, finding that section 2 “is not a license to impose all manner of protectionist restrictions on commerce in alcoholic beverages.”2 In his dissent, Justice Gorsuch, joined by Justice Thomas, read section 2 as part of “a classically federal compromise: Nationwide prohibition ended, but States gained broad discretion to calibrate alcohol regulations to local preferences.”3 The Tennessee laws at issue had been under pressure for some time. As the majority relates, the State Attorney General gave an opinion saying that these provisions were unconstitutional, to which the legislature responded by enacting a preamble explaining why the laws were proper measures to assist the state in carrying out its Twenty-first Amendment right to assure temperance, but without changing any of the requirements. Once again, the Attorney General said no, and in response, the licensing authority was prepared to disregard those residence requirements and grant licenses to two applicants, until the local retailers complained.4

At that point, the authority filed a declaratory judgment action in state court asking the court for guidance as to what it must do, naming the local retailers’ association and the applicants as defendants. The case was then removed to the District Court for the Middle District of Tennessee, which ruled against the retailers on Commerce Clause grounds and therefore did not reach the alternative basis under the Privileges and Immunities Clause of Article IV, section 2, under which “[t]he Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.”5 A majority of the Sixth Circuit agreed that all of the provisions were unconstitutional, but Judge Sutton would have sustained the two-year durational residence requirement. The retailers then sought and obtained Supreme Court review, but only with respect to the two-year rule.6

The Court was not writing on a blank slate when it addressed this issue, including Commerce Clause cases and statutes running from well before Prohibition until the ruling in Granholm v. Heald,7 which set aside state laws that discriminated against out-of-state sellers of wine. The path of those decisions was not, as the majority related, entirely in one direction, including with respect to the interpretation of statutes that Congress enacted to overturn some aspects of some of the Court’s rulings.8 However, one conclusion was clear: other provisions in the Constitution, running from the First Amendment, to Equal Protection, to Due Process, to the Import-Export Clause, were not affected by section 2.9 Therefore, the only issue was the impact of section 2 on Dormant Commerce Clause objections. The answer to that question depended in part on how the Court read the prior decisions and of the import of the laws that Congress enacted, on which the dissent took a much broader view in its reading of section 2 and what it authorized.10

One argument made by the retailers, and embraced by the dissent,11 was that Granholm only subjected to Commerce Clause scrutiny discrimination against out-of-state liquor products or producers, and did not extend to residence requirements for retail establishments within the state. Justice Alito responded as follows:

The Association and the dissent point out that Granholm repeatedly spoke of discrimination against out-of-state products and producers, but there is an obvious explanation: The state laws at issue in Granholm discriminated against out-of-state producers.12

Moreover, had that argument been accepted, it would have validated the 10 year and 100% shareholder requirements that the retailers did not challenge in the Supreme Court and that the dissent in the Sixth Circuit also rejected. Indeed, if the dissent is correct in its reading of the prior history, it would have had to sustain those provisions, even though their discriminatory effect could hardly be in question.

The final issue that the majority discussed was whether the State could justify its residence requirements. That presented a problem for the State, which had simply allowed the retailers to defend its laws, although eventually agreeing with them, and for the retailers, who offered no evidence in the District Court because they took the absolutist position that the Commerce Clause did not apply at all to regulation of in-state liquor stores.13 Nonetheless, the Court responded to the arguments made in the retailers’ briefs and gave the two-year rule more than full consideration, while finding the justifications offered to fall “far short” of what was needed to validate them, concluding that “the predominant effect of the 2-year residency requirement is simply to protect the Association’s members from out-of-state competition.”14

It is hard to imagine that Tennessee Wine will be the last case in which states are challenged over their liquor licensing laws. On behalf of 34 other States and the District of Columbia, Illinois filed an amicus brief in this case supporting the retailers.15 Illinois, like a number of its amici, does not have residence rules like Tennessee, but was concerned about the impact of the case to the point where it obtained permission for its Solicitor General to present oral argument on behalf of the states, with only the retailers speaking for Tennessee. Reading between the lines, their major concern appears to be the three-tier distribution system of separating producers, wholesalers, and retailers, which is common in many States and which the majority stated was not at issue in this case.16 Depending on how those laws are structured, they could be seen as discriminatory against out-of-state businesses and hence subject to a similar challenge. During oral argument, the Justices raised a number of hypotheticals, pressing counsel for the applicants on how far his position would go, but in his opinion, Justice Alito limited his ruling to these quite onerous residence requirements.

But suppose the next case involves a nondurational residence requirement, which is continuing, and is claimed to be needed to assure connection with the mores of the locality. In that case, the response might be, as the majority responded here to the durational residence requirement, “[t]he Association cannot explain why a proprietor who lives in Bristol, Virginia, will be less knowledgeable about the needs of his neighbors right across the border in Bristol, Tennessee, than someone who lives 500 miles away in Memphis.”17 There is another answer found in the Privileges and Immunities Clause of Article IV that I featured in my amicus brief and that sets up an almost unsurmountable barrier to states imposing residence requirements to carry on a trade or business within a state. After all, if states may not require applicants to take the bar to be in-state residents,18 it is almost inconceivable that a state could require an owner of a liquor store, the manager, or a salesperson to be a state resident either. And, unlike the Dormant Commerce Clause, the Privileges and Immunities Clause is actually in the Constitution and so would be on a par with the First Amendment and the Equal Protection Clause, which even the dissenters agree are not affected by section 2.19 And that Clause also draws a clear line: if the differing treatment is based on the residence of the party challenging the law, it is almost certainly forbidden where it relates to the right to engage in an occupation. Perhaps when the next round of cases comes before the Court, the challenger will move the Privileges and Immunities argument from an afterthought to a position front and center.20

Dean Alan B. Morrison is the Lerner Family Associate Dean for Public Interest & Public Service Law, The George Washington University Law School, where he teaches constitutional law. He filed an amicus brief in this case, in support of the out-of-state applicant, which focused on the Privileges & Immunities Clause rather than the Dormant Commerce Clause as the basis on which to overturn the state’s residence requirements to obtain a retail liquor license.

    1. U.S. Const. amend. XXI, § 2.
    2. Tennessee Wine & Spirits Retailers Ass’n v. Thomas, No. 18-96, slip op. at 2 (U.S. June 26, 2019).
    3. Id. at 2 (Gorsuch, J., dissenting).
    4. Id. at 3–4 (majority opinion).
    5. U.S. Const. art. IV, § 2, cl. 1.
    6. Tennessee Wine, slip op. at 4–6.
    7. 544 U.S. 460 (2005).
    8. See Tennessee Wine, slip op. at 11–26.
    9. Id. at 22–23.
    10. Id. at 3–14 (Gorsuch, J., dissenting).
    11. See id. at 13.
    12. Id. at 27 (majority opinion).
    13. Id. at 33.
    14. Id. at 36.
    15. See Brief for Illinois, et. al as Amici Curiae in Support of Petitioner, Tennessee Wine (No. 18-96, Nov. 20, 2018).
    16. Tennessee Wine, slip op. at 28.
    17. Id. at 35.
    18. Supreme Court of N.H. v. Piper, 470 U.S. 274 (1985).
    19. See Tennessee Wine, slip op. at 2 (Gorsuch, J., dissenting).
    20. The majority mentioned the Privileges and Immunities Clause as a possible basis for protecting the applicants here, but declined to pursue that avenue because the clause has been interpreted not to protect corporations, see id. at 8, although none of the applicants here were corporations, id. at 4, and the laws focused on the residence of the owners of the applicants, who were all individuals. As my amicus brief observed, the limitation of the clause to individuals is presumably based on its application to “citizens,” which might be read to exclude corporations, although Article III’s grant of diversity jurisdiction also applies only to “citizens,” and the Court has held that corporations are within its ambit. See Brief Amicus Curiae of Alan B. Morrison Urging Affirmance at 7–9, Tennessee Wine (No. 18-96, Dec. 12, 2018).

Recommended Citation
Alan B. Morrison, Response, Tennessee Wine & Spirits Retailers Ass’n v. Thomas: Local Protectionism Loses Out, Geo. Wash. L. Rev. On the Docket (July 2, 2019), https://www.gwlr.org/tennessee-wine-spirits-retailers-assn-v-thomas-local-protectionism-loses-out/.

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