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As if disagreement over the reasons why states should be allowed to ban out-of-state retailers from shipping wine to in-state consumers wasn't apparent enough in the 5 rulings issued by fed cts in the last 12 mos, one of those cts just changed its mind. What's more, the same 3-judge panel at the 9th Circuit Ct of Appeals that decided in March that Arizona's retailer shipping laws didn't discriminate against out-of-state players is still split. Two judges agreed that the law is valid because it is "an essential piece of the 'unquestionably legitimate' three-tier system," offering more than a few hat-tips to that bit of Supreme Ct lingo. But a third judge dissented, believing the case should be sent back to the district ct to seek out "concrete evidence" that the discriminatory law supports public health & safety. Set that dissent aside for the moment. The ruling that now stands aligns with a couple of other appellate rulings on the same issue, but far from all of them. Most cts agree that the Sup Ct established a 2-part test in its Tennessee Wine decision from 2019. Step 1: determine if the state law discriminates against interstate commerce. If so, move onto step 2: determine if that discrimination is justified to protect public health & safety (or "some other nonprotectionist grounds"). Here, the majority of these 9th Circuit judges decided they can skip the first step. "We need not decide whether Arizona's scheme is discriminatory," they wrote. Instead, they jump to step 2, find AZ's requirement that retailers have a physical presence in the state as "essential" to the state's 3-tier system and call it a day."By removing the physical-presence requirement, we would effectively be hacking off two of the three legs that constitute Arizona's three-tiered system," the majority figures. In-state retailers "are the third tier," they note. And allowing shipments from out-of-state retailers, who necessarily bypass the requirement to purchase supply from in-state wholesalers, "functionally eliminates Arizona's control over the wholesaler tier," they continue. And just to dig in a little bit more: "simply put, allowing direct shipment of wine to Arizona consumers from out-of-state retailers would cut so many holes in the state's 'unquestionably legitimate' three-tier system that the system would functionally cease to exist."But you can't just skip step 1, the dissenting judge wrote, determining definitively that AZ's law is, in fact, discriminatory. And the majority didn't just skip step 1, they introduced an intermediary step instead of properly completing step 2, in this judge's view. Judges can't get out of seeking "concrete evidence" by determining that an individual statute is crucial to the 3-tier system. "A regulation's central place in such a scheme may be powerful evidence of its legitimacy. But the three-tier system is ultimately a means to promote public welfare, not an end in itself," Judge Forrest wrote.Note too that the majority dismissed the plaintiffs' contention that allowing out-of-state wineries to ship directly to AZ consumers blows up the state's 3-tier system: "a limited exception does not swallow the whole," they wrote. The finding has been fairly common among appellate judges dealing with the issue, which may allay some concerns about similar 3-tier exceptions afforded to small brewers. However, Judge Forrest aligns most closely with the 4th Circuit's Judge Wilkinson, whose dissent in that ct's ruling on this issue is quoted heavily and who agreed that North Carolina had "abandoned" its 3-tier system. Then too, both of these judges seem to see the 3-tier system as primarily a means of separating ownership not as a means of controlling the flow of alc bev commerce, leading to somewhat more confusing logic in other aspects of their rulings.

9th Circuit Revises Reasons to Uphold AZ Retailer Shipping Laws; Dissent Seeks More Evidence

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