Greenspoon Marder Hospitality, Alcohol & Leisure Blog: Defining the Limits of the 21st Amendment-Broad State Authority May be in Question

Jul 10, 2019

By: Louis J Terminello, Esq.

About two weeks ago the United States Supreme Court issued an opinion in the case of Tennessee Wine and Spirits Retailers Assn. v. Russel F. Thomas, Executive Director of The Tennessee Alcoholic Beverage Commission, Et AL. The Courts ruling and its implications have been widely circulated, (including an article I wrote which was published in the Daily Business Review), but the significance of the case for alcohol beverage law practitioners, regulators and industry participants makes the Courts decision worth repeating on our blog.

The case, on its face, tested the 2-year residency requirement codified in Tennessee law as a condition precedent for the issuance of a retail liquor license to an applicant. Total Wine, whose applicants are Maryland based, brought suit against the state claiming that such legislation violated the Commerce Clause of the United States Constitution. Tennessee responded by asserting its rights under Section 2 of the 21st Amendment arguing that such action is permitted in its effort to control the sale of alcoholic beverages within its borders.

Beverage alcohol is the only commodity stated specifically in and regulated by the US Constitution. The 21st Amendment, particularly Section 2, has been interpreted to grant states broad authority in regulating the transport, sale, and consumption of alcohol within its borders. The above case pitted the 21st Amendment against Article 1, Section 8 of the Commerce Clause (and it corollary-the Dormant Commerce Clause) against each other.

In a 7 to 2 decision the Court confirmed that the Commerce Clause is paramount. At its core, the decision may narrowly define Section 2 to issues of health and public safety. The Court seemed to suggest that protectionist beverage alcohol statutes will not stand if they favor instate actors over out of state actors (much as the Granholm decision did in 2005).

The Court went on to further suggest that many state laws “may have been based on an overly expansive interpretation of Section 2 and can no longer be defended and that many state laws adopted prior to prohibition (via the 18th amendment) have never been tested by the Court.” It seems that the justices are suggesting that certain pre-prohibition state regulations may be found to be unconstitutional.

The Court left us with no clear test for determining the weight of Section 2 going forward. It does seem that it has been significantly narrowed. Current alcohol legislation, which may be interpreted as protectionist will almost certainly be challenged and may in fact make their way up to the Supreme Court. It will be future rulings that further determine the scope of Section 2 of the 21st Amendment.

On-line retailers, your rules of trade may soon be defined. For more information, please reach out to Greenspoon Marder’s Hospitality, Alcohol & Leisure Industry Group Chair and Partner, Louis J. Terminello, at [email protected] or (305) 789-2770.

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Greenspoon Marder LLP is a full-service law firm with over 225 attorneys and more than 20 office locations across the United States. With operations from Miami to New York and from Denver to Los Angeles, our firm attracts some of the nation’s top talent in key markets and innovation hubs. Our core practice areas include Real Estate, Litigation, and Transactional Services, complemented by the capabilities of a full-service firm. Greenspoon Marder has maintained a spot on The American Lawyer’s Am Law 200 as one of the top law firms in the U.S. since 2015, and our goal is to provide exceptional client service by developing a thorough understanding of each client’s business needs and objectives in order to provide strategic, cost-effective solutions.

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