S.L. Thomas Family v. Bredesen ( 2008 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 08a0386p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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X
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FREDERICK JELOVSEK (07-5443); S.L. THOMAS
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FAMILY WINERY, INC. dba Thomas Family Winery;
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MARTIN REDDISH (07-5524),
Plaintiffs-Appellants, -
Nos. 07-5443/5524
,
>
v. -
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PHIL BREDESEN, in his official capacity as Governor -
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of the State of Tennessee; PAUL SUMMERS, in his
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official capacity as Attorney General of the State of
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Tennessee; SHARI ELKS, in her official capacity as
Executive Director, Tennessee Alcoholic Beverage -
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Defendants - Appellees, -
Commission,
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WINE AND SPIRITS WHOLESALERS OF TENNESSEE,
Intervening Defendant - Appellee. N
Appeal from the United States District Court
for the Eastern District of Tennessee at Greeneville.
Nos. 05-00181; 06-00149—Curtis L. Collier, Chief District Judge.
Argued: April 29, 2008
Decided and Filed: October 24, 2008
Before: NORRIS, GIBBONS, and GRIFFIN, Circuit Judges.
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COUNSEL
ARGUED: Sandra B. Jelovsek, Johnson City, Tennessee, James A. Tanford, INDIANA
UNIVERSITY SCHOOL OF LAW, Bloomington, Indiana, for Appellants. Lyndsay Fuller,
OFFICE OF THE ATTORNEY GENERAL, Nashville, Tennessee, Andrew L. Colocotronis,
BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, Knoxville, Tennessee, for
Appellees. ON BRIEF: Sandra B. Jelovsek, Johnson City, Tennessee, James A. Tanford,
INDIANA UNIVERSITY SCHOOL OF LAW, Bloomington, Indiana, for Appellants. Lyndsay
Fuller, OFFICE OF THE ATTORNEY GENERAL, Nashville, Tennessee, Andrew L. Colocotronis,
BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, Knoxville, Tennessee, J.
Forrest Hinton, Jr., BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ,
Birmingham, Alabama, Michael A. Meyer, TENNESSEE ATTORNEY GENERAL & REPORTER,
Nashville, Tennessee, Henry E. Hildebrand III, LASSITER TIDWELL DAVIS KELLER &
1
Nos. 07-5443/5524 Jelovsek, et al. v. Bredesen, et al. Page 2
HOGAN PLLC, Nashville, Tennessee, for Appellees. Carter G. Phillips, SIDLEY AUSTIN,
Washington, D.C., for Amici Curiae.
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OPINION
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ALAN E. NORRIS, Circuit Judge. These consolidated cases ask the question whether
Tennessee laws governing the wine industry violate the dormant commerce clause of the
Constitution. This is one of several lawsuits filed across the country after the Supreme Court
invalidated wine-related laws in Michigan and New York which allowed only in-state wineries to
sell and ship wine directly to consumers. Granholm v. Heald, 544 U.S. 460 (2005).
The plaintiffs-appellants include Tennessee residents Frederick Jelovsek and Martin Reddish,
individual oenophiles who would like better access to wine produced outside of Tennessee, and a
winery based in the state of Indiana, S.L. Thomas Family Winery, Inc., which would like to sell
directly to Tennessee residents. Plaintiffs sued the Governor, Attorney General, and Executive
Director of the Tennessee Alcoholic Beverage Commission, in their official capacities. In addition,
the Wine and Spirits Wholesalers of Tennessee (“WSWT”) successfully intervened as a defendant.
For convenience sake, as the Court did in Granholm, the appellants will collectively be referred to
as “the wineries,” unless distinguishing them is appropriate, and the appellees will be referred to as
“the state.”
The district court granted defendants’ Fed. R. Civ. P. 12(c) motion for judgment on the
pleadings. Jelovsek v. Bresden, 482 F. Supp. 2d 1013, 1023 (E.D. Tenn. 2007).1 The district court
concluded that since both in- and out-of-state wineries are prohibited from selling and shipping wine
directly to Tennessee consumers, this case is distinguishable from Granholm. The invalidated laws
in Granholm denied only out-of-state wineries the ability to ship to consumers, a disparate treatment
that the Supreme Court ruled unconstitutional.
We agree with the district court that the Tennessee shipping restrictions are distinguishable
from those struck down in Granholm and affirm the district court’s judgment as to the Tennessee
ban on the direct shipment of alcohol to consumers, including wine. However, the wineries make
a broader challenge to the Tennessee regulatory scheme for alcohol, specifically wine. As discussed
below, we conclude that certain other challenged laws are discriminatory on their face, and thus
vacate the district court judgment as to those laws, and remand for further proceedings.
I.
Tennessee employs what is commonly referred to as a three-tier system of alcohol regulation.
The Tennessee Alcoholic Beverage Commission (“TABC”) issues separate classes of licenses to
manufacturers and distillers, wholesalers, and liquor retailers. Tenn. Code Ann. § 57-3-201.
Unlicensed sales of alcohol are not permitted. Id. § 404(a). Manufacturers are limited to selling to
wholesalers; wholesalers may sell to retailers, or in some cases other wholesalers; consumers are
required to buy only from retailers. Id. § 404(b)-(d).
Statutes curtail the importation of alcoholic beverages, including wine, into the state, as well
as the transportation of alcoholic beverages by individuals who are not licensees. These statutes
seem to contradict each other, which creates a confusing web of seemingly applicable laws, and in
1
It appears the Tennessee governor’s name is misspelled in the style of the case. It is Phil Bredesen, not
“Bresden.”
Nos. 07-5443/5524 Jelovsek, et al. v. Bredesen, et al. Page 3
its briefing and argument to the court the state did little to unravel the mystery.2 The district court
found, and the state concedes, that a Tennessee resident may transport a greater quantity of wine
purchased from a Tennessee winery as compared to wine purchased in another state.
Tennessee wineries are also subject to the three-tier system, and have their own class of
license. Id. § 201(4). However, wineries are subject to further regulation, as well as being afforded
some exceptions from the general liquor control statutes, through Tennessee’s Grape and Wine Law.
Id. § 207. The Grape and Wine Law, inter alia, restricts winery licenses to individuals who have
been Tennessee residents for at least two years, or to corporations whose stock is wholly owned by
Tennessee residents of at least two years; and permits Tennessee wineries which use a sufficient
percentage of Tennessee-grown grapes in their wine production to serve complimentary samples to
patrons, and to sell at retail directly to customers without any additional license. Id. § 207(d), (f).
The Grape and Wine Law also provides that, notwithstanding the transportation restrictions in other
statutes, wine purchased at a Tennessee winery may be transported within the state of Tennessee.
Id. § 207(i).
II.
“We review a district court’s grant of a motion for judgment on the pleadings de novo.”
Roger Miller Music, Inc. v. Sony/ATV Publ’g, LLC, 477 F.3d 383, 389 (6th Cir. 2007) (citing EEOC
v. J.H. Routh Packing Co., 246 F.3d 850, 851 (6th Cir. 2001)). “The manner of review under [Fed.
R. Civ. P.] 12(c) is the same as a review under Rule 12(b)(6); we must ‘construe the complaint in
the light most favorable to the plaintiff, accept all of the complaint’s factual allegations as true, and
determine whether the plaintiff undoubtedly can prove no set of facts in support of the claims that
would entitle relief.’” Vickers v. Fairfield Med. Ctr., 453 F.3d 757, 761 (6th Cir. 2006) (quoting
Grindstaff v. Green, 133 F.3d 416, 421 (6th Cir. 1998)).
Plantiffs allege that the challenged statutes impermissibly discriminate against out-of-state
wineries, and favor in-state wineries, in violation of the Commerce Clause. The scope of the
Commerce Clause, which grants the exclusive power to Congress to regulate interstate commerce,
recently has been summarized by the Supreme Court:
The Commerce Clause empowers Congress “[t]o regulate Commerce . . .
among the several States,” Art. I, § 8, cl. 3, and although its terms do not expressly
restrain “the several States” in any way, we have sensed a negative implication in the
provision since the early days, see, e.g., Cooley v. Board of Wardens of Port of
Philadelphia ex rel. Soc. for Relief of Distressed Pilots, 53 U.S. 299, 12 How. 299,
318-319, 13 L. Ed. 996 (1852); cf. Gibbons v. Ogden, 22 U.S. 1, 9 Wheat. 1, 209, 6
L. Ed. 23 (1824) (Marshall, C. J.) (dictum). The modern law of what has come to be
called the dormant Commerce Clause is driven by concern about “economic
protectionism – that is, regulatory measures designed to benefit in-state economic
interests by burdening out-of-state competitors.” New Energy Co. of Ind. v. Limbach,
486 U.S. 269, 273-274, 108 S. Ct. 1803, 100 L. Ed. 2d 302 (1988). The point is to
“effectuat[e] the Framers’ purpose to ‘prevent a State from retreating into [the]
economic isolation,’” Fulton Corp. v. Faulkner, 516 U.S. 325, 330, 116 S. Ct. 848,
2
Tenn. Code Ann. § 57-3-401(a) prohibits the transportation or possession of more than three gallons of
untaxed alcoholic beverage. Subsection (b) prohibits the importation, shipment, or delivery of untaxed alcoholic
beverages in excess of one gallon. Elsewhere, there appears to be a flat ban on the importation or transportation of
alcoholic beverages, unless destined for a Tennessee license holder. See Tenn. Code Ann. § 57-3-402(b) (“No common
carrier or other person shall bring or carry into this state for delivery or use in this state any alcoholic beverages unless
the same shall be consigned to a manufacturer or wholesaler duly licensed . . . .”); id. § 402(c) (“It is unlawful for any
person, railroad company or other common carrier, to transport or accept delivery of alcoholic beverages, consigned to
any person except those duly authorized and holding a wholesaler’s license.”).
Nos. 07-5443/5524 Jelovsek, et al. v. Bredesen, et al. Page 4
133 L. Ed. 2d 796 (1996) (quoting Oklahoma Tax Comm’n v. Jefferson Lines, Inc.,
514 U.S. 175, 180, 115 S. Ct. 1331, 131 L. Ed. 2d 261 (1995); brackets omitted),
“that had plagued relations among the Colonies and later among the States under the
Articles of Confederation,” Hughes v. Oklahoma, 441 U.S. 322, 325-326, 99 S. Ct.
1727, 60 L. Ed. 2d 250 (1979).
....
Under the resulting protocol for dormant Commerce Clause analysis, we ask
whether a challenged law discriminates against interstate commerce. See Oregon
Waste Systems, Inc. v. Department of Environmental Quality of Ore., 511 U.S. 93,
99, 114 S. Ct. 1345, 128 L. Ed. 2d 13 (1994). A discriminatory law is “virtually per
se invalid,” ibid.; see also Philadelphia v. New Jersey, 437 U.S. 617, 624, 98 S. Ct.
2531, 57 L. Ed. 2d 475 (1978), and will survive only if it “advances a legitimate
local purpose that cannot be adequately served by reasonable nondiscriminatory
alternatives,” Oregon Waste Systems, supra, at 101, 114 S. Ct. 1345, 128 L. Ed. 2d
13 (internal quotation marks omitted); see also Maine v. Taylor, 477 U.S. 131, 138,
106 S. Ct. 2440, 91 L. Ed. 2d 110 (1986).
Dep’t of Revenue v. Davis, 128 S. Ct. 1801, 1808 (2008).
Applying this constitutional principle to the regulation of alcohol at times has been
problematic for courts, due in part to the existence of the Twenty-first Amendment to the
Constitution, which repealed prohibition and grants broad authority to the states to regulate alcohol
importation and distribution. There was a period following ratification of the Twenty-first3
Amendment when the states’ power to regulate alcohol was thought to be virtually limitless.
However, more recent case law has concluded that “[t]he aim of the Twenty-first Amendment was
to allow States to maintain an effective and uniform system for controlling liquor by regulating its
transportation, importation, and use. The Amendment did not give States the authority to pass
nonuniform laws in order to discriminate against out-of-state goods, a privilege they had not enjoyed
at any earlier time.” Granholm, 544 U.S. at 484-85. Similarly, “the Twenty-first Amendment . . .
does not displace the rule that States may not give a discriminatory preference to their own
producers.” Id. at 486; accord Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 275-76(1984). A statute
may be shown to violate the Commerce Clause based either upon its discriminatory purpose, or
discriminatory effect. Bacchus, 468 U.S. at 270.
A. Direct Shipping and Tennessee’s Three-Tier System
The Federal Trade Commission (“FTC”) recently drafted a report strongly in favor of
permitting online wine sales, and direct shipping from wineries to consumers. Federal Trade
Commission, Possible Anticompetitive Barriers to E-Commerce (2003), available at
http://www.ftc.gov/os/2003/07/winereport2.pdf. In it, the FTC extolls the many benefits to
consumers by allowing internet sales and direct shipping, including a much greater variety of wines
available, and lower prices. Id. at 18-19. It also goes on to address the most common concerns with
such programs, preventing underage drinking and collecting state tax revenue. Id. at 26-39.
3
The Twenty-first Amendment states: “The transportation or importation into any State . . . of intoxicating
liquors, in violation of the laws thereof, is hereby prohibited.” U.S. Const. amend. XXI, § 2. For a thorough discussion
of the history and evolution of jurisprudence as it relates to the tension between the dormant Commerce Clause and the
Twenty-first Amendment, see Granholm, 544 U.S. at 476-87. See also Thomas E. Rutledge & Micah C. Daniels, Who’s
Selling the Next Round: Wines, State Lines, the Twenty-first Amendment and the Commerce Clause, 33 N. Ky. L. Rev
1, 8-22 (2006).
Nos. 07-5443/5524 Jelovsek, et al. v. Bredesen, et al. Page 5
Despite the FTC conclusion that states should allow the direct shipping of wine, Tennessee’s
refusal to do so presents no constitutional problem. The Commerce Clause does not require that
states optimize commerce, only that “[i]f a State chooses to allow direct shipment of wine, it must
do so on evenhanded terms.” Granholm, 544 U.S. at 493. As the district court noted, “[t]he logical
corollary to evenhanded permissiveness is evenhanded restrictiveness – a State may choose to ban
direct shipment of wine.” Jelovsek, 482 F. Supp. 2d at 1019. We agree and affirm the judgment of
the district court with respect to upholding Tennessee’s ban on direct shipment of alcoholic
beverages, including wine, to consumers, as it applied equally to in-state and out-of-state wineries.
Likewise, Tennessee’s decision to adhere to a three-tier distribution system is immune from
direct challenge on Commerce Clause grounds. See Granholm, 544 U.S. at 489 (“States may . . .
funnel sales through the three-tier system. We have previously recognized that the three-tier system
itself is ‘unquestionably legitimate.’”) (quoting North Dakota v. United States, 495 U.S. 423, 432
(1990)).
B. Grape and Wine Law
Turning to Tennessee’s Grape and Wine Law, appellants assert that the state has already
decided to eschew the three-tier system through the multitude of exceptions offered to Tennessee
wineries as part of the Grape and Wine law, exceptions which impermissibly favor in-state economic
interests.
The district court reasoned that purchasing wine at a winery in person “is different . . . from
the convenience-oriented market that would be created and facilitated by a law allowing direct
shipping.” Jelovsek, 482 F. Supp. 2d at 1021. The court went on to rule that “[p]laintiffs have failed
to demonstrate that the Grape and Wine Law discriminates against interstate commerce by practical
effect,” id., and noted that the distinctions that are present “would have a de minimis impact on
interstate commerce.” Id. at 1021 n.8.
We discern two problems with the court’s analysis. The first is that there is no de minimis
exception when evaluating whether a law is discriminatory on its face. “Where [a] statute regulates
even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce
are only incidental, it will be upheld unless the burden imposed on such commerce is clearly
excessive in relation to the putative local benefits.” Pike v. Bruce Church, Inc., 397 U.S. 137, 142
(1970) (citing Huron Portland Cement Co. v. Detroit, 362 U.S. 440, 443 (1960)) (emphasis added).
However, only when a statute passes this initial scrutiny is a state afforded “a more flexible approach
permitting inquiry into the balance between local benefits and the burden on interstate commerce.”
Bacchus, 468 U.S. at 270 (citing Pike, 397 U.S. at 142). It is not appropriate to conclude that a
statute regulates evenhandedly because its clear facial discrimination has only a de minimis effect
on interstate commerce.
Second, while the district court focused on whether the Grape and Wine Law has the
practical effect of discriminating in favor of in-state interests, it appears that the very purpose behind
the Grape and Wine Law was to discriminate in favor of in-state wineries, especially those that use
grapes grown in-state. “A finding that state legislation constitutes ‘economic protectionism’ may
be made on the basis of . . . discriminatory purpose . . . .” Id. (citing Hunt v. Washington Apple
Advertising Comm’n, 432 U.S. 333, 352-53 (1977)).
The parties, as well as the district court, spent a great deal of effort examining whether, and
to what extent, Granholm applies to the cases before us. We believe Bacchus is also instructive in
this case. In Bacchus, the state adopted a law favoring fruit wine produced from products grown in
the state. Bacchus, 468 U.S. at 265. The legislature’s stated purpose when enacting the law “was to
encourage and promote the establishment of a new industry” and that granting benefits to “fruit wine
Nos. 07-5443/5524 Jelovsek, et al. v. Bredesen, et al. Page 6
manufactured in the State from products grown in the State was intended to help in stimulating the
local fruit wine industry.” Id. at 270-71 (citation omitted). Thus, the Court concluded that it “need
not guess at the legislature’s motivation, for it is undisputed that the purpose . . . was to aid [in-state]
industry. Likewise, the effect . . . is clearly discriminatory, in that it applies only to locally produced
beverages . . . .” Id. at 271. The Court rejected the reasoning of the state supreme court that the low
sales volume of the benefitted local wine meant those “products pose[d] no competitive threat to
other liquors produced elsewhere and consumed in [state].” Id. at 269 (citation omitted).
Nor do we need to guess the legislature’s purpose here. Included in the statement of purpose
for Tennessee’s Grape and Wine Law is the following:
WHEREAS, It is recognized that development of an additional cash crop would
benefit the rural areas and the general economy of the State of Tennessee; and
WHEREAS, It appears that many areas of Tennessee are especially suitable for
growing grapes but are unsuitable or less suitable for growing any other cash crops;
and
WHEREAS, Under existing law no persons have ever been licensed to operate a
winery and stimulate grape growing in Tennessee by providing an initial and
minimum market for native grapes;
1977 Tenn. Pub. Acts 255 (emphasis added).
This stated purpose is difficult to distinguish from the stated purpose of the law struck down
in Bacchus. Compare Bacchus, 468 U.S. at 270 (stating the explicit purpose was to to benefit in-
state industry). Another telling comparison between Tennessee’s Grape and Wine Law and the tax
exemption for locally-produced alcohol law struck down in Bacchus is the following provision of
the law:
Wine produced in Tennessee from agricultural products produced in
Tennessee shall be taxed at the same rate as wine produced out-of-state. It is hereby
provided, however, that should the United States Constitution, as authoritatively
interpreted by the final decision of a federal or Tennessee court, permit a lesser tax
to be imposed on wine produced in Tennessee from agricultural products produced
in Tennessee than on wine produced out-of-state, then there shall be levied a tax of
five cents (5 cent(s)) per gallon on wine produced in Tennessee from agricultural
products produced in Tennessee. Such wine from Tennessee products shall then be
exempt from all other alcoholic beverage taxes and fees.
Tenn. Code Ann. § 57-3-207(l) (emphasis added). The constitutional caveat was added later; the
original Act exempted in-state wine from all taxes save for the five-cent per-gallon tax. 1977 Tenn.
Pub. Acts 256. We do not cite this particular provision as especially egregious in its current form,
but rather as an illustration of the discriminatory intent behind passage of Tennessee’s Grape and
Wine Law and its similarity to the statute struck down in Bacchus. Compare id. with Bacchus, 408
U.S. at 265 (stating that the Hawaii statute at issue exempted locally produced fruit wine from the
otherwise mandatory 20% excise tax).
Other provisions of the Grape and Wine Law are discriminatory on their face, and in their
purpose. For example, the Grape and Wine Law requires a two-year Tennessee residency before a
winery license may be obtained and, if the applicant is a corporation, all of the capital stock must
be owned by two-year Tennessee residents. Tenn. Code Ann. § 57-3-207(d). Only if 75% of the
agricultural products used in producing its wine are grown in Tennessee may a Tennessee winery
serve samples of the wine without charge at its facility, and sell wine at retail directly to consumers.
Nos. 07-5443/5524 Jelovsek, et al. v. Bredesen, et al. Page 7
Id. § 207(f). In addition, “any nonprofit association organized to encourage and support grape
growing and winemaking in [Tennessee] with ten (10) or more Tennessee licensed wineries as
members” is permitted to hold festivals and “transport, serve and offer complimentary samples” of
Tennessee wine, id. § 207(o), and wineries using at least 75% agricultural products from Tennessee
may “donate wine without charge to nonprofit religious, educational or charitable institutions or
associations.” Id. § 207(f)(5). Each of these provisions impermissibly favor Tennessee interests at
the expense of interstate commerce.
The Thomas plaintiff in particular also complains that, under the Grape and Wine Law,
consumers may lawfully transport “any amount [of wine] which the customer may legally purchase
from a Tennessee licensed winery,” id. § 207(i), while a consumer purchasing wine in person from
an out-of-state winery appears to be prohibited from transporting the wine to his home in Tennessee.
Id. § 402(a).
Finding that a law “directly regulates or discriminates against interstate commerce, or when
its effect is to favor in-state economic interests over out-of-state interests, [the Supreme Court] has
generally struck down the statute without further inquiry.” Granholm, 544 U.S. at 487 (quoting
Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579 (1986)). Even so, as
the Granholm Court did, a court must still “consider whether [the] state’s regime ‘advances a
legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory
alternatives.’” Id. at 489 (quoting New Energy Co. v. Limbach, 486 U.S. 269, 278 (1988)).
In Granholm, the states advanced two obvious arguments—that the restriction on shipping
helped keep alcoholic beverages out of the hands of minors and facilitated tax collection. Id. Both
justifications were rejected, as the Court found nondiscriminatory alternatives existed to serve the
states’ proffered concerns. Id. at 490-93. The state in this cases has yet to offer justification for the
challenged laws, but rather has steadfastly maintained that they are not discriminatory.
III.
Our conclusion that the Grape and Wine Law is facially discriminatory does not end the
inquiry. We must decide what is to be done about it. The Grape and Wine Law does not act to
directly burden out-of-state wineries, but rather to favor in-state wineries. Thus, striking the law as
written or surgically excising offending provisions would, while remedying the constitutional
infirmities, serve to hurt in-state Tennessee wineries, none of which are parties to this action. And,
it would not benefit out-of-state wineries or any plaintiff in this case. The state defendant does not
express an opinion as to an appropriate remedy, while the intervening defendant WSWT argues in
the alternative that if the scheme is found to be discriminatory, the appropriate remedy would be to
strip the law’s benefits from in-state wineries rather than extending direct-sale benefits to out-of-
state wineries.
In support of their argument, WSWT cites Beskind v. Easley, 325 F.3d 506, 519 (4th Cir.
2003), for the proposition that “[the state] would wish us to take the course that least destroys the
regulatory scheme that it has put into place pursuant to its powers under the Twenty-first
Amendment.” In Beskind the district court “declar[ed] unconstitutional the core statutes that
prohibit such direct shipment and enjoin[ed] their enforcement.” Id. at 517. The court of appeals
upheld the district court’s judgment that the law was unconstitutional, but reversed the remedy,
noting that “it causes less disruption to [the state’s alcoholic beverage] laws to strike the single
provision . . . creating the local preference.” Id. at 519.
The Fifth Circuit reached a different result. It noted that the “Supreme Court has held that
‘when the right invoked is that of equal treatment, the appropriate remedy is a mandate of equal
treatment, a result that can be accomplished by withdrawal of benefits from the favored class as well
Nos. 07-5443/5524 Jelovsek, et al. v. Bredesen, et al. Page 8
as by extension of benefits to the excluded class.’” Dickerson v. Bailey, 336 F.3d 388, 407 (5th Cir.
2003) (quoting Heckler v. Mathews, 465 U.S. 728, 740 (1984)) (emphasis in original). The Fifth
Circuit found the Supreme Court’s remedy in Bacchus to be analogous, striking down the
discriminatory tax on out-of-state entities rather than extending the excise tax to in-state entities. Id.
at 408. The court concluded that “it is not the function of litigants seeking redress for violations of
their constitutional rights under the Commerce Clause to seek the imposition of affirmative burdens
on other parties competing in the marketplace. The constitutional right the Plaintiffs here seek to
protect is their right to participate in interstate commerce that is unimpeded by protectionist state
policies.” Id. at 408.
Both decisions are well reasoned, but neither is perfectly analogous to the cases before us.
The district court acknowledged that “the record in this case is not as detailed as it could be.”
Jelovsek, 482 F. Supp. 2d at 1015. The court also found “the State’s response to be particularly
inadequate in addressing the more substantive issues as it . . . failed to provide a justification for
Tennessee’s alcoholic beverage restrictions.” Id. at 1016 n.3. As a result, we conclude the best
course of action is to remand the case to the district court for further consideration consistent with
this opinion. The state should be afforded the opportunity to justify the facially discriminatory Grape
and Wine Law as serving a legitimate local purpose and establish that no non-discriminatory
alternatives exist. If the state is unable to do so, the court should devise a remedy that treats in-state
and out-of-state wineries equally. In addition, because striking down the Grape and Wine Law
would affect in-state wineries, it may be that they will wish to seek intervention on remand.
IV.
We affirm the district court’s judgment upholding the Tennessee law banning the direct
shipment of alcoholic beverages to consumers, including wine. However, we conclude that
Tennessee’s Grape and Wine Law is discriminatory on its face. We therefore vacate the district
court judgment to the contrary, and remand for further proceedings consistent with this opinion.