Granholm v. Heald (03-1116) and order list

May 17, 2005 Supreme Court Update

Greetings, Court Fans!
Yesterday, the Court made it a little easier for the law to drive us all to drink. Coming off another two-week recess, the Court issued its opinion in Granholm v. Heald (03-1116), striking down Michigan and New York restrictions on out-of-state wine producers as violating the Commerce Clause's prohibition on state laws that discriminate against interstate commerce. The decision was 5-4, with what some might view as an odd coalition of Justices on each side: Kennedy led the majority, joined by Scalia, Souter, Ginsburg, and Breyer; and Thomas wrote the primary dissent, joined by the Chief, Stevens, and O'Connor. At the end of the day, it all came down to the Justices' views on the 21st Amendment repealing Prohibition, with the majority holding that the Amendment did not exempt state liquor laws from the nondiscrimination rule, and the dissenters strenuously disagreeing. If you want more detail, or you're a history buff, read on -- otherwise, there are two more cert grants at the end.

Under the Michigan law, Michigan wineries could sell directly to consumers, but out-of-state wineries had to sell through Michigan wholesalers and retailers. New York technically allowed out-of-state wineries to sell directly to New York customers, but only if they established in-state distribution operations. Citing its "dormant" Commerce Clause jurisprudence holding that the states cannot differentiate between in-state and out-of-state economic interests (a rule essential to avoiding "economic Balkanization" of the country), the majority easily found that these statutes discriminated against interstate commerce. Ordinarily, that would have ended the inquiry, but New York and Michigan argued that their laws were saved by the 21st Amendment, which repealed Prohibition at the federal level but provided that "[t[he transportation or importation into any State . . . of intoxication liquors, in violation of the laws thereof, is hereby prohibited." The states argued that "in violation of the laws thereof" exempted state liquor laws from the dormant Commerce Clause bar. The majority rejected this argument after a lengthy discussion of history and case law The essence is this: before Prohibition, Congress enacted two statutes (the Wilson Act and the Webb-Kenyon Act) that the Court later interpreted to allow states to regulate the shipment of liquor so long as they did not discriminate against interstate commerce. The 21st Amendment tracked the language of these statutes, thereby restoring this framework after Prohibition. Some Court decisions that came down soon after ratification of the 21st Amendment, notably State Board of Equalization of California v. Young's Market in 1936, gave the states broad powers to erect trade barriers to out-of-state liquor, but -- according to yesterday's majority -- those cases "did not take account of this history and were inconsistent with this view" -- i.e., they were wrong. The Court construed its 1984 decision in Bacchus Imports v. Dias, which invalidated a Hawaii excise tax exemption that applied only to in-state liquors, as making clear that the 21st Amendment did not abrogate the nondiscrimination principle of the Commerce Clause. Finally, the majority rejected New York's and Michigan's attempts to justify their laws as advancing legitimate local purposes that couldn't be achieved in a nondiscriminatory way: There was no evidence that Internet purchasing of wine by minors was a serious problem (the Court noted that kids generally want "beer, wine coolers and hard liquor" -- no comment as to what that says about Kennedy's clerks), or that prohibiting only out-of-state direct shipments would solve it; and their tax-collection objectives were either illusory or achievable without discrimination.
Justice Thomas wrote a hefty dissent and was joined by all the other dissenters. His dissent provides an even more extensive discussion of history, and it's impossible to do justice to his analysis in an e-mail. But the takeaway is this: The 21st Amendment and the Webb-Kenyon Act took policy choices about liquor out of the hands of judges and gave them back to the states. The Webb-Kenyon Act says nothing about nondiscrimination, and the Court's earlier jurisprudence rightly read that law as immunizing all state liquor laws from Commerce Clause restraints. The New York and Michigan statutes are also valid under the plain language of the 21st Amendment, which the Young's Market Court followed (in a decision that "was no outlier") but today's Court ignores. Thomas would limit Bacchus to its facts, which concerned a discriminatory tax exemption, not shipping regulations that the text of the 21st Amendment left to the states. Further, Thomas would resolve any conflict in the Court's precedents in favor of the cases that closely followed ratification of the 21st Amendment. Justice Stevens echoed that view in his own dissent (joined by O'Connor), writing that, while today we may think of alcohol as just like any other product in interstate commerce, we should defer to those (he mentioned Justices Black and Brandeis, who wrote Young's Market, by name) who lived through ratification of the 21st Amendment and thought it expressly authorized "Balkanization" where alcohol was concerned. Stevens pointedly noted that "the younger generations who make policy decisions" have forgotten this fact, and it is noteworthy that the Chief, Stevens, and O'Connor -- the three most senior members of the Court, and hardly traditional allies -- lined up in the dissent with the history-minded Thomas. In another interesting historical note, Stevens pointed out that the 21st Amendment was the only amendment ratified by the people in state conventions (as opposed to state legislatures), another reason why its terms should be given their ordinary meaning.
The Court's decision obviously represents a boon for wineries, for whom the Internet and direct shipment represent a significant commercial opportunity. But it may be short-lived, as the Court's decision would not bar a state from banning all direct shipment or Internet sales inside its borders (just as each state can still prohibit the sale of alcohol altogether).

In its order list, the Court granted cert in Arbaugh v. Y&H Corp. (04-944). The question presented is: Does the provision of Title VII of the 1964 Civil Rights Act that bans employment discrimination only by employers that have 15 or more employees limit subject matter jurisdiction of the federal courts, or does it only raise an issue going to the merits of a Title VII claim?

The Court also granted cert in two consolidated cases presenting similar questions relating to sovereign immunity: United States v. Georgia (04-1203) (Is Title II of the Americans with Disabilities Act a proper exercise of Congress' power under Section 5 of the 14th Amendment, as applied to the administration of prison systems?) and Goodman v. Georgia (04-1236) (Does Title II of the Americans with Disabilities Act validly abrogate state sovereign immunity for suits by prisoners with disabilities challenging discrimination by state-operated prisons and, if so, to what extent?).

That's all for the week -- the Court has gone on recess again until the 23rd. Thanks, as always, for reading!

Ken & Kim
From the Appellate Practice Group at Wiggin and Dana. For more information, contact Kim Rinehart, Ken Heath, Aaron Bayer, or Jeff Babbin at 203-498-4400