In a classic Granholm v. Heald situation involving a lack of parity between in-state and out-of-state distilleries, Washington State grants in-state distilleries the privileges of selling and shipping their spirits directly to residents of the state and prohibits out-of-state distilleries from doing the same. .

Under Washington's laws governing the production and sale of alcohol, Washington distilleries can act as a retailer of their products (and those of other distilleries) if they follow the rules for retailers – primarily – by maintaining a physical presence in the state. Distilleries that have a physical point of sale can ship Internet orders directly to customers. The in-state physical presence requirement prevents out-of-state distilleries from making direct shipments to Washington consumers.

A New York distillery and some Washington residents filed a complaint on the discriminatory impact of the legal drop-shipping system, alleging (you guessed it) that the law violates the principles of Supreme Court jurisprudence on the Dormant Commerce Clause by providing a favorable advantage to distilleries in the state and negatively treating out-of-state distilleries.

The state proposed to dismiss the complaint arguing that a “undoubtedly legitimate“A three-tier system allowed for variation between privileges and restrictions granted in-state and imposed on out-of-state distilleries under Washington law. By allowing distilleries to operate as retailers, Washington keeps alcohol within its state system and regulatory regime and by allowing out-of-state distilleries to ship directly as Washington distilleries can, this would allow these out-of-state distilleries to bypass Washington's regulatory system.

You will see right away that the gist of the argument that “we treat them like retailers” is a pretext intended to try to frame the discrimination in terms of a dormant commerce clause dispute at the retailer level and not a dispute regarding the dormant commercial clause at the retailer level. Granholm-Top-tier style manufacturing and direct shipping. The fallacious distinction would swallow Granholm and completely overturn the decision. In this case, the Court did not believe it either.

In deny the motion to dismissthe court ruled:

In Granholm v. Healdthe Court considered a challenge to a regulatory regime similar to that at issue. 544 US 460, 472, 125 S.Ct. 1885, 161 L. Ed. 2d 796 (2005). There, producers and consumers challenged Michigan and New York's restrictions on out-of-state wine shipments. Identifier. at 465-66. Both states, which had adopted a three-tier structure similar to Washington's, allowed direct shipments from in-state wine producers to in-state consumers, but barred out-of-state wineries to make similar direct shipments. Identifier. at 469-70. Michigan completely banned direct out-of-state shipments, while New York State required out-of-state wineries to establish an in-state distribution operation before they could ship directly to state consumers. Identifier. at 473-74.

THE Granholm The Court had no difficulty finding that Michigan's total ban as well as New York's physical presence requirement discriminated against interstate commerce. Identifier. at 475 (“The New York State presence requirement flies in the face of our warning that states cannot require an out-of-state business to 'become a resident in order to compete on an equal footing' equality.”) (quoting Halliburton Oil Well Cementing Co. v. Reily, 373 US 64, 72, 83 S.Ct. 1201, 10 L. Ed. 2d 202 (1963)). States emphasized that the laws were permissible despite their discriminatory nature because they furthered legitimate goals of preventing minors from obtaining alcohol and making it easier to collect taxes. Identifier. at 490. The Court rejected these rationalizations, concluding that the Commerce Clause “require(s) more than mere speculation to support discrimination against out-of-state products.” . . Michigan and New York have failed to meet this demanding standard. Identifier. at 492-93.

More recently, in Tennessee Wine & Spirits Retailers AssnThe Court accepted a challenge to Tennessee's two-year residency requirement for companies seeking to sell alcoholic beverages to consumers in the state. 139 S.Ct. 2449, 204 L. Ed. 2d 801. In striking down the law as a violation of the outstanding Commerce Clause, the Court looked closely at the history of the Twenty-First Amendment and the Commerce Clause, explaining:

Recognizing that § 2 was adopted to give each State the authority to address alcohol-related public health and safety issues consistent with the preferences of its citizens, we question whether the challenged requirement can be justified as as a public health or safety measure or other legitimate non-protectionist reason. Section 2 gives states regulatory power they would not otherwise enjoy, but as we pointed out in Granholm, “mere speculation” or “unsupported assertions” are not enough to support a law that would otherwise violate the commercial clause. When the predominant effect of a law is protectionism and not the protection of public health or safety, it is not protected by section 2.

Identifier. at 2474 (internal citation omitted).

Defendant cites Granholm to assert that “the three-tier system itself is 'unquestionably legitimate'” and contends that plaintiff's challenge poses a threat to Washington's three-tier system “by allowing foreign distillers to circumvent the market.” regulated in Washington. 544 US at 489 (internal citation and citation omitted); But as in Michigan, New York and Tennessee, the legitimacy of Washington's three-tier system is not challenged by a system that allows distributors in the state to avoid the standard three-tier system requirements and selling directly to consumers while refusing access to them. State distributors benefit from the same privilege. At this point, in light of Supreme Court precedent regarding similar state bans, defendant's proposed justifications do not appear to support Washington's discrimination against out-of-state distributors.

The case is now progressing with the development of evidence in the manner Tennessee wine destined.