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Exceptions to strict 3-tier requirements offered to in-state brewers must also be afforded to out-of-state producers, a fed judge in Maryland confirmed in a decision last week. During a 2-day bench trial earlier this mo, the state "failed" to "justify" a law restricting the ability to deliver beer directly to consumers solely to small in-state brewers, the judge wrote. Neither the broad "delivery" privilege, nor the requirement that brewers use their own employees can stand, the judge confirmed, functionally allowing small breweries nationwide to seek a permit to ship their beer to MD consumers thru common carriers. Crucially, the state started allowing direct shipments from out-of-state wineries back in 2011, the judge reminded, and "out-of-state beer producers should be permitted to do the same." Tho few other written decisions by judges state it so explicitly, this is not a surprising result. Legal experts within the industry have long understood this potential application of the landmark Granholm decision from 2 decades ago to state laws designed to ease pathways to profitability for small in-state craft brewers. But only in the last couple of yrs have challenges to those laws appeared in ct.Since 2023, at least a half-dozen similar lawsuits aimed to expand various 3-tier exceptions like self-distribution and direct shipping to out-of-state beer, wine or spirits producers. Many ended in settlements, like a recent case over NY's reciprocity rule for spirits self-distribution, which was mooted by a new law in CA. A separate lawsuit over direct beer shipments in PA could be headed to trial in mid-2026.A brief trial in MD did not turn out well for the state, which is now blocked from enforcing prior restrictions on beer delivery permits. Yet, even while appearing to cut against it, the judge saw "no evidence that Maryland has abandoned its three-tier system of alcohol regulation or intended to alter that system" by creating the "limited exception" of delivery permits for in-state brewers. As such, "extending that exception to out-of-state producers would not disrupt the three-tier system any more than the existing exception for in-state producers," the judge determined.From Pandemic Privilege to Court-Ordered Exception Notably, small MD brewers were first granted the privilege to deliver their beer directly to in-state consumers thru a pandemic-period exec order by Gov Larry Hogan back in 2020. The legislature formalized it in 2021, allowing in-state brewers to apply for a permit viewed as license enhancement. That version of the law allowed them to use common carriers. But after this lawsuit was filed in mid-2023, the legislature amended the law, framing the privilege as "delivery" exclusively by brewery employees in an attempt to distinguish it from direct shipments by out-of-state wineries.To gain a delivery permit, breweries must produce less than 45,000 bbls per yr, the judge's order explains. Delivery to any single address is limited to 12 cases/yr. Now, the state cannot enforce what the judge determined are the discriminatory provisions of the law: the direct limitation to in-state brewers and the requirement that brewers use their own employees and not common carriers.3-Tier Value and Small Brewer Difficulties Matters of Fact; "Scant" and "Skeletal" Evidence Again, even tho the judge expanded this particular 3-tier exception, the ruling repeatedly cites Supreme Ct and 4th Circuit precedents touting the value of the system, which "exists in part to promote public health and safety." That's one of facts settled by the 2-day trial this mo, the judge wrote. But so is the added expense of the system to small brewers, tied to an avg distrib markup of 21%, plus another 25% by retailers, the judge wrote citing evidence submitted at trial. "In part for this reason, smaller manufacturers may have difficulty finding and maintaining wholesale distribution."On the other hand, the judge saw "scant factual evidence" and a "skeletal evidentiary record" to suggest elements of the state's delivery law support public health & safety on its own. Instead, witnesses for the state pointed to "general economic theories" and "general concerns about underage drinking," among other issues. Arguments frequently appeared to the judge as "speculation" that could not support either the admitted facial discrimination of only granting delivery permits to in-state brewers nor the implicit discrimination of barring delivery by common carriers. And time after time the judge pointed to allowances and workarounds used to regulate and track shipments by out-of-state wineries as valid alternatives to such discrimination.

Fed Judge Strikes Down MD "Delivery" Law, Opens Up Use of Common Carriers to All Small Brewers

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