Wine shipping to Kentucky legal, appeals court rules

[Robin Garr]

Business First of Louisville story:
http://louisville.bizjournals.com/louis ... a=e_du_pub

Wednesday, December 24, 2008, 12:59pm EST
Appeals court rules on wine shipments
Business First of Louisville

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Kentucky officials will be required to allow out-of-state wineries to ship their product to consumers in Kentucky who order wine on the Internet or by phone, according to the U.S. 6th Circuit Court of Appeals.

The court, which oversees Kentucky, Ohio, Michigan and Tennessee, upheld a 2006 ruling by Judge Charles R. Simpson III of the U.S. District Court in Louisville that ruled that Kentucky’s ban on out-of-state wine shipments is illegal, according to a court document.

According to the appeals court ruling, which follows several similar rulings in courts in Michigan and Texas, Kentucky’s requirement that wine be purchased in-person is a violation of the interstate commerce clause of the Constitution.

In October, a federal court in Michigan had ruled that consumers in that state also have the right to buy wine shipped to them from out-of-state retailers.

That court also ruled that the commerce clause of the U.S. Constitution prohibits blocking out-of-state retailers from selling, delivering and shipping wine directly to consumers.

Good for you guys!

Live operators standing by to take your orders!!!

[Robin Garr]

Good for you guys!

For the record, the appeals court merely upheld a district court action taken last year, so shipment has been legal all along. But apparently some key players (including UPS and FedEx) weren't taking the chance until the appeals court rung in. This should be final: The Supremes wouldn't even listen to an appeal challenging their own ruling.

But I wouldn't put it past the wholesalers to try a different approach in the next legislative session: Bar shipment by ALL wineries - in-state and out of it. That would work, if they bought the votes. Must think of the children, you know ... and those taxes.

Score one for the Dormant Commerce Clause.

Robin, I agree with your assessment as to the wholesalers' next logical move. They will seek to have all direct shipments banned--in-state or out-of-state. That has happened in some other states.

I have heard that in Massachusetts UPS has acquired a wholesale shipping license. If true, that places them on the 2nd tier of the 3-tier system, and it means that they can facilitate shipments from out-of-state wineries to consumers.

At present, it's ironic that I, in New Hampshire, where there is direct state control of all liquor commerce, can receive direct shipment from wineries (provided that they register with the state and pay the appropriate excise taxes), whereas in Massachusetts, a three-tier state, direct shipment is completely prohibited.

-Paul W.

Quick question: Does this now also mean that wine can be legally shipped to Michigan from out-of-state (e.g. Missouri)? I see Michigan is overseen by the court, but your post mentions KY specifically.

P.S. Merry Christmas!

[Robin Garr]

your post mentions KY specifically.

The ruling overturned a specific Kentucky law and thus has effect only in Kentucky, Paul.

In my non-lawyer's opinion, it's one more nail in the coffin of the wholesalers' attempt to get states to craft draconian measures to work around Granholm. The courts are blowing the whistle on that one, and in my opinion, the idea was so obviously flawed that it can only be read as a delaying tactic by the wholesalers.

Their next move, as noted, will be to try to get states to ban shipping by ALL wineries, out-of-state and in. That would never work in strong winery states like California or even New York, but in states with no major wine industry, chances are that wholesaler dollars will speak a language that the legislators understand.