Alcoholic BeveragesConstitutional Law – Whether Non-Durational Residency Requirements for Alcoholic Beverages Licensees in Harford County are Permissible Under the Commerce Clause of the United States Constitution

82 [106 Op. Att’y
ALCOHOLIC BEVERAGES
CONSTITUTIONAL LAW – WHETHER NON-DURATIONAL
RESIDENCY REQUIREMENTS FOR ALCOHOLIC BEVERAGES
LICENSEES IN HARFORD COUNTY ARE PERMISSIBLE
UNDER THE COMMERCE CLAUSE OF THE UNITED STATES
CONSTITUTION
May 4, 2021
The Honorable Walter A. Tilley, III
Chair, Liquor Control Board for Harford County
On behalf of the Liquor Control Board for Harford County
(“Harford County Board”), you have requested our opinion on the
constitutionality of the non-durational residency requirements for
alcoholic beverages licenses in Harford County, as amended by
Chapter 462 of 2020. 1 Chapter 462 abolished durational residency
requirements for alcoholic beverages licenses, which had required
licensees to reside in the relevant county (or, for some licenses, in
the State) for a certain period of time before applying for a license.
The stated purpose of that change, see 2020 Md. Laws, ch. 462,
§ 2, was to bring Maryland law into compliance with the decision
of the United States Supreme Court in Tennessee Wine & Spirits
Retailers Ass’n v. Thomas, 139 S. Ct. 2449 (2019) (“Thomas”),
which had held that Tennessee’s durational residency requirement
for alcoholic beverages licenses—requiring the applicant to have
resided in the state for a period of two years prior to the
application—violated the Commerce Clause of the U.S.
Constitution by discriminating against nonresidents of the state
and was not saved by the Twenty-First Amendment’s reservation
of state authority to regulate alcohol. 2
1
The Liquor Control Board for Harford County is formally named the
Board of License Commissioners for Harford County, Md. Code Ann.,
Alc. Bev. (“AB”) §§ 22-201, 22-301, and performs the usual functions
of a Board of License Commissioners: the licensing and regulation of
retail sellers of alcoholic beverages in Harford County, see 99 Opinions
of the Attorney General 31, 32, 35 n.6 (2014).
2
The conclusion that durational residency provisions violate the
dormant Commerce Clause was not a dramatic break with prior law.
Other courts had reached the same conclusion, Cooper v. McBeath, 11
F.3d 547, 548 (5th Cir. 1994); Southern Wine and Spirits of Texas, Inc.
v. Steen, 486 F. Supp. 2d 626, 628 (W.D. Tex. 2007); Glazer’s Wholesale
Gen. 82] 83
At the same time, however, the General Assembly in enacting
Chapter 462 also retained non-durational residency requirements
for alcoholic beverages licenses issued in Harford County and
many other counties in Maryland, as well as for certain alcoholic
beverages licenses issued by the State. See 2020 Md. Laws, ch.
462. Under those non-durational residency requirements, licensees—
or, in some cases, at least one licensee—must reside in the relevant
jurisdiction at the time of the license application, and in many
jurisdictions, including Harford County, the licensee is also
required to remain a resident throughout the term of the license.
See, e.g., AB §§ 4-103(b), 22-1401(a)(2), 22-1402(a), 22-1405(a)(2),
(3). The question you have asked is whether the non-durational
residency requirements applicable in Harford County can survive
under the Commerce Clause in light of Thomas. 3
As we will explain, it is our view that Harford County’s non-
durational residency requirements would likely also fail under the
reasoning of Thomas. The Supreme Court’s analysis in Thomas
did not distinguish between durational and non-durational
residency requirements. In finding the durational requirements
there to be unconstitutional, the Court rejected several justifications
for a durational residency requirement under the Commerce
Clause, reasoning that nondiscriminatory alternatives could
advance the same objectives. And those nondiscriminatory
alternatives could just as easily advance the objectives of a non-
durational residency requirement. Thus, we think that a court
applying Thomas would likely invalidate the current non-
durational residency requirements for alcoholic beverages licenses
in Harford County. Although we recognize that much of this
analysis may apply to the other non-durational residency
requirements in Chapter 462, we have not separately analyzed each
residency requirement in the Alcoholic Beverages Article and do
not specifically address whether any of those other requirements
are constitutional.
Drug Co., Inc. v. Kansas, 145 F. Supp. 2d 1234, 1244 (D. Kan. 2001),
as had attorneys general in at least two states, Tenn. Op. Att’y Gen. 14-
83, 2014 WL 4664826 (Sept. 12, 2014); Tenn. Op. Att’y Gen. 12-59,
2012 WL 2153491 (June 6, 2012), Kan. Op. Att’y Gen. 06-12, 2006 WL
1722435 (June 21, 2006).
3
To be clear, when we refer to residency requirements in this opinion,
we mean the residency requirements for alcoholic beverages licensees.
We do not address restrictions that require the licensed business itself to
be located in or have a physical presence in the State or the relevant local
jurisdiction within the State.
84 [106 Op. Att’y
I
Background
Thomas considered the interaction of two provisions of the
United States Constitution: Congress’s power “[t]o regulate
Commerce . . . among the several States,” U.S. Const. art. I, § 8, cl.
3 (the “Commerce Clause”), and the Twenty-First Amendment’s
reservation of state authority to regulate the alcohol trade, id.
amend. XXI, § 2. The Commerce Clause has long been understood
not only as an affirmative grant to Congress of power to regulate
interstate commerce, but also as a restriction on states’ ability to
adopt “protectionist” legislation that “unduly restrict[s] interstate
commerce.” Thomas, 139 S. Ct. at 2459. That implied “negative
command” is typically referred to as “the dormant Commerce
Clause.” Oklahoma Tax Comm’n v. Jefferson Lines, Inc., 514 U.S.
175, 179 (1995).
The dormant Commerce Clause’s limitation on state authority
is in some tension with the Twenty-First Amendment, ratified in
1933, which ended nationwide alcohol prohibition but also
provided:
The transportation or importation into any
State, Territory, or possession of the United
States for delivery or use therein of
intoxicating liquors, in violation of the laws
thereof, is hereby prohibited.
U.S. Const. amend. XXI, § 2 (“Section 2”). Section 2 was intended
“to give each State the authority to address alcohol-related public
health and safety issues in accordance with the preferences of its
citizens.” Thomas, 139 S. Ct. at 2474. It was left unclear, however,
whether Section 2 superseded other constitutional limitations on
state regulatory authority, such as the Commerce Clause, and
authorized state alcohol regulations that the federal Constitution
would otherwise prohibit, such as provisions favoring the state’s
own residents over nonresidents.
A. Procedural History in Thomas
Thomas involved a provision of Tennessee law that required
applicants for an initial license to have resided in the State for the
prior two years. The Tennessee Attorney General had twice opined
that this statute was unconstitutional. In the first opinion, Tenn.
Op. Att’y Gen. 12-59, 2012 WL 2153491 (June 6, 2012), the
Attorney General concluded that the two-year residency requirement
Gen. 82] 85
for a retail liquor license violated the Commerce Clause in light of
the Sixth Circuit’s decision in Jelovsek v. Bredesen, 545 F.3d 431,
439 (6th Cir. 2008), which had concluded that Tennessee’s two-
year residency requirement for a winery license was facially
discriminatory against out-of-state wineries. In the second opinion,
Tenn. Op. Att’y Gen. 14-83, 2014 WL 4664826 (Sept. 12, 2014),
the Attorney General concluded that an amended version of the law
that retained the two-year residency requirement also violated the
Commerce Clause. As a result, the Tennessee Alcoholic Beverage
Commission (“TABC”) stopped enforcing the provision. Thomas,
139 S. Ct. at 2458.
Two years later, two companies—one formed as a limited
liability company but owned by residents of Maryland and one
owned and controlled by two individuals who had only recently
moved to Tennessee—applied for retail licenses. Neither met the
two-year residency requirement. In line with the Attorney
General’s opinions, TABC staff recommended approval of the
applications, Byrd v. Tennessee Wine & Spirits Retailers Ass’n, 259
F. Supp. 3d 785, 788 (M.D. Tenn. 2017), but the Tennessee Wine
and Spirits Retailers Association (“the Association”) heard of the
recommendation and threatened to sue. The Executive Director of
the TABC responded by filing an action for declaratory judgment
in Tennessee state court, which was subsequently removed to
federal district court. Thomas, 139 S. Ct. at 2458. 4 The Executive
Director asked the court to determine the validity of three
provisions of Tennessee law: the two-year durational residency
requirement for initial retail license applicants, Tenn. Code Ann.
§ 57-3-204(b)(2)(A); a requirement that a person seeking renewal
of a retail license have resided in the state for at least 10
consecutive years, id.; and a requirement that all officers, directors,
and stockholders of a corporate applicant meet the two-year
durational residency requirement for initial applications and the 10-
year residency requirement for renewal applications. Tenn. Code
Ann. § 57-3-204(b)(3)(A)-(B).
The district court found that all three of these residency
requirements violated the Commerce Clause. Byrd, 259 F. Supp.
4The Executive Director, represented by the Attorney General,
apparently took inconsistent positions about the validity of the provision
over the course of the litigation. Byrd v. Tennessee Wine & Spirits
Retailers Ass’n, 883 F.3d 608, 613 n.1 (6th Cir. 2018).
86 [106 Op. Att’y
3d at 797. 5 The Sixth Circuit affirmed, Byrd v. Tennessee Wine &
Spirits Retailers Ass’n, 883 F.3d 608, 612 (6th Cir. 2018), although
one member of the panel dissented in part, and would have held
that the two-year residency requirement was reasonably related to
Tennessee’s interest in “[p]romoting responsible consumption and
orderly liquor markets,” id. at 633 (Sutton, J., concurring in part
and dissenting in part).
The Association then filed a petition for certiorari with the
Supreme Court, arguing that the two-year durational residency
requirement for initial retail license applicants (and officers and
directors of corporate applicants) was consistent with the
Commerce Clause. 6 The Association no longer sought to defend
the ten-year residency requirement for renewals or the residency
requirements for shareholders of applicant corporations. Thomas,
139 S. Ct. at 2457; Brief for Petitioner, Tennessee Wine & Spirits
Retailers Ass’n v. Thomas, 139 S. Ct. 2449 (2019) (No. 18-96), 2018
WL 5962887, at *17.7 The Association also did not argue that a
two-year durational residency requirement could be upheld against
a Commerce Clause challenge if any commodity other than alcohol
5
The court did not address the plaintiffs’ alternative challenge under
the federal Privileges and Immunities Clause. That challenge would
likely have been unsuccessful. It has long been held that selling
alcoholic beverages is not a privilege of citizens of the United States and
thus state laws requiring state residence for that purpose do not violate
the Privileges and Immunities Clause. Mugler v. Kansas, 123 U.S. 623,
657, 675 (1887); Bartemeyer v. Iowa, 85 U.S. 129, 133 (1873); Trageser
v. Gray, 73 Md. 250, 255 (1890). More modern courts have reached the
same conclusion, Lebamoff Enters., Inc. v. Whitmer, 956 F.3d 863, 875
(6th Cir. 2020); Glicker v. Michigan Liquor Control Comm’n, 160 F.2d
96, 98 (6th Cir. 1947), which is not surprising in light of the fact that the
Twenty-First Amendment gives the states the right to ban the sale of
alcohol altogether.
6
The Executive Director did not appeal the district court’s decision
and did not join the Association’s petition for certiorari, which formally
identified the Executive Director as a respondent rather than a petitioner.
After the Court granted certiorari, however, the Attorney General of
Tennessee filed a letter on behalf of the Executive Director supporting
the Association’s position. Thomas, 139 S. Ct. at 2458-59.
7
The Supreme Court addressed this failure in dicta, saying these other
provisions were “so plainly based on unalloyed protectionism that
neither the Association nor the State [wa]s willing to come to their
defense.” Thomas, 139 S. Ct. at 2474. The Court later described the
challenged durational residency requirement as being “like the other
discriminatory residency requirements that the Association is unwilling
to defend,” in that the predominant effect was “simply to protect the
Association’s members from out-of-state competition.” Id. at 2476.
Gen. 82] 87
was involved. Thomas, 139 S. Ct. at 2462. Thus, the sole issue
before the Supreme Court was whether Section 2 of the Twenty-
First Amendment protected the action of the State in imposing a
residency requirement that would clearly violate the Commerce
Clause in any other context.
B. The Supreme Court’s Decision in Thomas
After a long discussion of the history of state attempts to
regulate alcoholic beverages and congressional efforts to shield
that regulation from Commerce Clause and other challenges in the
years leading up to the adoption of the Eighteenth Amendment, the
Thomas Court stated its view that Section 2 was meant to
“‘constitutionaliz[e]’ the basic understanding of the extent of the
States’ power to regulate alcohol that prevailed before
Prohibition.” Thomas, 139 S. Ct. at 2467-68 (citing Craig v. Boren,
429 U.S. 190, 206 (1976); Granholm v. Heald, 544 U.S. 460, 484
(2005)). The Court further concluded that this “basic
understanding” did not permit states “to impose protectionist
measures clothed as police-power regulations.” Thomas, 139 S. Ct.
at 2468. In other words, the pre-1933 understanding of the
Commerce Clause constrained states’ regulatory authority under
Section 2.
The Court recognized that early cases under Section 2 seemed
to rely on the theory that Section 2 overrode all other provisions of
the Constitution, id. at 2468, but explained that subsequent cases
showed that the Court ultimately “saw that [Section] 2 cannot be
read that way.” Id. at 2469. The Court noted, for instance, that it
had previously scrutinized laws regulating alcoholic beverages for
compliance with other portions of the Constitution including the
Free Speech and Establishment Clauses of the First Amendment,
the Equal Protection and Due Process Clauses of the Fourteenth
Amendment, and the Import-Export Clause. Id.The Court further explained that the latter approach had also
been applied in cases raising Commerce Clause objections to
alcoholic beverages laws. Id. at 2470. In Bacchus Imports, Ltd. v.
Dias, 468 U.S. 263, 273, 276 (1984), for example, the Court
invalidated a discriminatory tax that applied to all out-of-state
liquor but exempted certain Hawai’i products. Similarly, in Healy
v. Beer Institute, 491 U.S. 324, 340-41 (1989), the Court found that
a requirement that out-of-state shippers of beer affirm that their
wholesale price for products sold in Connecticut was no higher
than the prices they charged to wholesalers in bordering states
88 [106 Op. Att’y
violated the Commerce Clause because it discriminated against
brewers and shippers of beer engaged in interstate commerce. And
in Granholm v. Heald, the Court struck down a set of
discriminatory direct-shipment laws that favored in-state wineries
over out-of-state competitors. 8 544 U.S. at 492-93. Thus, the
Court concluded that, while it had “acknowledged that [Section] 2
grants States latitude with respect to the regulation of alcohol,” it
had also “repeatedly declined to read [Section] 2 as allowing the
States to violate the ‘nondiscrimination principle’ that was a central
feature of the regulatory regime that the provision was meant to
constitutionalize.” Thomas, 139 S. Ct. at 2470.
The Court went on to reject the Association’s arguments
about how the line between Section 2 and the Commerce Clause
should be drawn. Specifically, the Court rejected the argument that
the nondiscrimination principle applied only to discrimination
against out-of-state products and not to laws regulating in-state
alcohol distribution. Id. at 2470-71. Although the Court had
previously suggested in Granholm that Section 2 protects the
traditional “three tier system” of alcohol distribution, under which
manufacturers, wholesalers, and retailers must obtain state
licenses, the Thomas Court opined that durational residency
requirements could not be considered an essential feature of that
system, given that many states with three-tiered systems do not
impose durational residency requirements and some do not impose
residency requirements at all. Id. at 2471-72. The Court also held
that the long history of durational residency requirements did not
mean that they were constitutional. Id. at 2472-73.
In sum, the Court concluded that Section 2 “allows each State
leeway to enact the measures that its citizens believe are
appropriate to address the public health and safety effects of
alcohol use and to serve other legitimate interests, but it does not
license the States to adopt protectionist measures with no
demonstrable connection to those interests.” Id. at 2474. Thus, the
court crafted an “inquiry” that would apply specifically to alcoholic
beverage regulations, in an effort to balance the interests of Section
2 and the Commerce Clause. Id.8
See also Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 716
(1984) (invalidating ban on TV wine ads emanating from other states);
California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445
U.S. 97, 114 (1980) (invalidating wine-related resale price maintenance
and price posting statutes); Hostetter v. Idlewild Bon Voyage Liquor
Corp., 377 U.S. 324, 331-32 (1964) (invalidating regulation of alcohol
passing through JFK Airport that would not be used until arrival at
international destination).
Gen. 82] 89
In conducting that inquiry, the Court looked to “whether the
challenged requirement can be justified as a public health or safety
measure or on some other legitimate nonprotectionist ground.” Id.
at 2474. The Court also identified two relevant factors to help
determine whether that was the case: (1) whether the requirement
“actually promotes public health or safety” and (2) whether
“nondiscriminatory alternatives would be insufficient to further
those interests.” Id. If consideration of these factors demonstrates
that “the predominant effect of a law is protectionism, not the
protection of public health or safety, it is not shielded by [Section]
2” and is instead subject to ordinary Commerce Clause scrutiny.
Id. 9 The Court placed the burden on the defender of the law to
provide “concrete evidence” in support of the law’s nonprotectionist
justifications, stating that “‘mere speculation’ or ‘unsupported
assertions’ are insufficient to sustain a law that would otherwise
violate the Commerce Clause.” Id.
Because the Association had relied on its argument that the
Commerce Clause did not apply (and the State offered no
independent argument), the Court found the record “devoid of any
‘concrete evidence’ showing that the 2-year residency requirement
actually promotes public health or safety,” nor was there “evidence
that nondiscriminatory alternatives would be insufficient to further
those interests.” Id. The Court then considered and rejected all of
the nonprotectionist justifications for the requirement that had been
suggested in the arguments before the Court and found that “the
Association has fallen far short of showing that the 2-year
durational-residency requirement for license applicants is valid.”
Id. at 2475-76.
For example, in response to the Association’s argument that
the residency requirements were justified because resident retailers
are “amenable to the direct process of state courts,” the Court
suggested that problem could easily be addressed by requiring
nonresident licensees to designate an agent to receive process or to
consent to suits in Tennessee courts. Id. at 2475 (citing Cooper v.
McBeath, 11 F.3d 547, 554 (5th Cir. 1994)).
9
Under ordinary Commerce Clause scrutiny a provision that
discriminates against interstate commerce is “virtually per se . . .
invalid[],” City of Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978),
and will be upheld only if the state is able to show that it is “narrowly
tailored to ‘advanc[e] a legitimate local purpose,’” Thomas, 139 S. Ct. at2461 (citing Department of Revenue of Ky. v. Davis, 553 U.S. 328, 338
(2008)).
90 [106 Op. Att’y
Similarly, in response to the Association’s argument that the
two-year requirement improved the ability of the State of
Tennessee to determine the fitness of applicants, the Court pointed
out that state law already required criminal background checks and
that more searching checks could be ordered if necessary,
concluding that “if the State desires to scrutinize its applicants
thoroughly . . . it can devise nondiscriminatory means short of
saddling applicants with the burden of residing in the State.” Id.(internal quotation marks and alterations omitted). The Court went
on to explain that the residency requirement was not well-designed
to serve the goal of judging the fitness of applicants because, if a
person were to move to the state with the intent to apply for a
license in two years, the state would have no reason to begin an
investigation until the person actually applied for a license at the
end of the two-year period. Id. Moreover, a prospective applicant
would not be obliged “to be educated about liquor sales, submit to
inspections, or report to the State” during the two-year waiting
period. Id.The Court also rejected the argument that the residency
requirement was necessary to maintain oversight over liquor store
operators. The Court pointed out that the retail stores in question
were located in the state, allowing the state to monitor their
operations through on-site inspections and audits and to address
violations of the law with penalties up to and including revocation
of the license. Id.Finally, in response to the argument that the two-year
residency requirement would promote responsible alcohol
consumption, the Court found that it was “very poorly designed”
to accomplish this purpose because it applied to the license holder
rather than the person who would actually be making the sales,
because it required residence in the state generally rather than in
the community where the store would be located, and because a
license holder who lived right over the border might actually be
closer to the community in question than a license holder in a
distant part of the same state. Id. at 2476. The Court also pointed
to other nondiscriminatory alternatives that could promote
responsible consumption, including limiting the number of licenses
in an area, placing volume limits on sales to individuals, mandating
more extensive training for managers and employees, requiring
managers and employees to show familiarity with the
neighborhood, or requiring managers of liquor stores to obtain
permits, satisfy background checks, and undergo “alcohol
awareness” training. Id.
Gen. 82] 91
C. Residency Requirements in Harford County
After the Supreme Court’s decision in Thomas, the General
Assembly repealed Maryland’s durational residency requirements
for alcoholic beverages licenses and replaced them with non-
durational residency requirements. See 2020 Md. Laws, ch. 462.
As relevant here, under the law as amended in Chapter 462,
individuals applying to the Harford County Board for an alcoholic
beverages license must reside in the county at the time of the
application and during the license term. AB § 22-1402. An
alcoholic beverages license may only be issued for the use of a
partnership if all partners meet the same residency requirement. Id.
§ 22-1401(a)(2) (incorporating AB § 4-103). And the Harford
County Board may issue a license for the use of another type of
legal entity, such as a corporation or limited liability company, only
if at least one officer and shareholder of the entity is a resident of
the county and acts as a day-to-day manager of the business. Id.
§ 22-1405. These requirements apply to all classes of licenses
issued by the Harford County Board. See id. §§ 22-1402, 22-1405.
II
Analysis
We now turn to your question of whether the non-durational
residency requirements for licensees that were retained in Chapter
462 for Harford County are unconstitutional under the Supreme
Court’s decision in Thomas.
A. The Attorney General’s Role in Assessing the
Constitutionality of a Statute
When our Office is asked to advise on the constitutionality of
a Maryland law, we must be “mindful of the obligation of the
Attorney General to defend, in litigation, the constitutionality of
statutes enacted by the Legislature.” 93 Opinions of the Attorney
General 154, 160 (2008) (citing State v. Burning Tree Club, Inc.,
301 Md. 9, 36-37 (1984)). However, we also have an obligation,
at least when there is “neither pending nor imminent litigation,” to
provide an opinion with “our best legal analysis” on the
constitutionality of the law at issue so as to help our clients avoid
constitutional liability and “administer statutes in compliance with
constitutional provisions.” Id. at 160-61; see also, e.g., 71
Opinions of the Attorney General 266, 269-70 (1986) (concluding
that statute debarring certain labor-law violators from state
contracts was preempted pursuant to the federal Supremacy Clause,
92 [106 Op. Att’y
in light of Supreme Court decision invalidating a similar Wisconsin
statute); 70 Opinions of the Attorney General 3, 12, 15, 17-18
(1985) (concluding that various abortion laws were
unconstitutional pursuant to then-recent Supreme Court authority);
Letter from Kathryn M. Rowe, Assistant Attorney General, to the
Hon. Edward R. Reilly (Dec. 12, 2019) (advising that a citizenship
requirement for liquor license holders is likely unconstitutional);
Letter from Gerald Langbaum, Assistant Attorney General, to
Joseph P. Oates & Joseph Val Collom (July 19, 1976) (same). 10
To be clear, “even if we conclude that the statute is
constitutionally deficient, an Attorney General opinion cannot
itself invalidate an act of the General Assembly.” 93 Opinions of
the Attorney General at 161. It is, after all, not the role of the
Attorney General to “declare” laws unconstitutional. 63 Opinions
of the Attorney General 644, 645 (1978). “Only a court has the
power to declare a statute invalid because it does not comply with
constitutional requirements.” First Cont’l Sav. & Loan Ass’n v.
Director, State Dep’t of Assessments & Taxation, 229 Md. 293, 301
(1962). But, with those limitations in mind, we will provide our
“best legal analysis,” employing “all of the presumptions in favor
of, and against, the statute that a court would consider,” 93
Opinions of the Attorney General at 160, to determine whether
Harford County’s non-durational residency requirements are likely
to be found unconstitutional.
B. The Application of Thomas to Harford County’s Non-
Durational Residency Requirements
The residency requirement at issue in Thomas, like the ones
in effect in Harford County prior to the passage of Chapter 462,
required that the applicant be a resident of the jurisdiction for a
certain period of time prior to filing an application for a license.
But in holding that Tennessee’s durational residency requirement
10
When reviewing bills that have been passed by the Legislature prior
to their approval or veto by the Governor, this Office applies what we
call a “not clearly unconstitutional” standard. 93 Opinions of the
Attorney General at 161 n.12 (citing 71 Opinions of the Attorney General
266, 272 n.12 (1986)). Because Chapter 462 has already been enacted,
we need not consider in this opinion whether it was “clearly
unconstitutional” under that standard. But even if Chapter 462 were
clearly unconstitutional, we would not have recommended that the
Governor veto it because the bill was, at the very least, less
constitutionally problematic than the law as it existed at the time, in that
it eliminated the type of durational residency requirements that the
Supreme Court had expressly struck down in Thomas.
Gen. 82] 93
violated the Commerce Clause, the Thomas Court never suggested
that a non-durational residency requirement—i.e., that the licensee
be a resident of the jurisdiction only at the time of the application
or from the time of the application through the end of the license
period—would merit different treatment. Although the Court’s
opinion primarily spoke in terms of durational residency
requirements because that was the nature of the licensing regime
before it, Thomas’s reasoning strongly suggests that non-durational
residency requirements will likely be difficult to defend. Cf. 139
S. Ct. at 2471 (rejecting Association’s effort to limit Granholm to
the regulatory regime at issue in that case).
As an initial matter, Tennessee’s durational residency
requirement triggered Commerce Clause scrutiny because it
“discriminate[d] on its face against nonresidents.” Id. at 2474. A
non-durational residency requirement does the same; it expressly
bars nonresidents from applying for or retaining an alcoholic
beverages license, whereas residents may do so. And although the
residency requirements at issue here require licensees to reside in
Harford County (meaning that residents of other Maryland
jurisdictions are also ineligible), it seems clear based on Supreme
Court precedent that a requirement of residency in the county still
facially discriminates against interstate commerce. See, e.g., Fort
Gratiot Sanitary Landfill, Inc. v. Michigan Dep’t of Natural Res.,
504 U.S. 353, 361-63 (1992) (invalidating Michigan statute
preventing landfills from accepting out-of-county waste, reasoning
that allowing such measures at the county level, when they are not
permissible at the state level, would enable a state to “avoid the
strictures of the Commerce Clause”); C&A Carbone, Inc. v. Town
of Clarkstown, 511 U.S. 383, 392 (1994) (observing that an
ordinance excluding out-of-locality as well as out-of-state
competition “just makes the protectionist effect of the ordinance
more acute”).
Accordingly, a court confronted with a non-durational
residency requirement like the ones applicable in Harford County
would apply the test developed in Thomas, arising from the
intersection of the Commerce Clause and the Twenty-First
Amendment. That test, in turn, asks whether “the challenged
requirement can be justified as a public health or safety measure or
on some other legitimate nonprotectionist ground” and, in
answering that question, examines whether the requirement
“actually promotes public health or safety” and whether
94 [106 Op. Att’y
“nondiscriminatory alternatives would be insufficient to further
those interests.” Thomas, 139 S. Ct. at 2474. 11
The Association and its amici raised several health and safety
justifications for Tennessee’s durational residency requirement,
each of which the Court rejected as “implausible on its face.” Id.
at 2475. Critically, several of the justifications the Court
considered and rejected are best understood not as justifications for
requiring a licensee to have two years of residency prior to the
application, but as arguments for requiring residency at the time of
the application and/or during the period of the license—that is, as
arguments that would support non-durational residency
requirements like Harford County’s.
For example, the Association argued in Thomas that a
residency requirement was needed to ensure that licensees would
be amenable to service of process in Tennessee. Id. at 2475. It
11
The Supreme Court did not fully explain how the test it established
in Thomas for alcoholic beverage regulations differs from the standard
dormant Commerce Clause analysis. The Thomas Court indicated that
Section 2 gives states more “leeway” to regulate alcohol than they would
otherwise have under the Commerce Clause. 139 S. Ct. at 2457-74. But
both the Thomas test and the standard Commerce Clause test require that
the law be supported by nonprotectionist justifications and that a
reviewing court examine whether nondiscriminatory alternatives would
advance the same purpose. See, e.g., Maine v. Taylor, 477 U.S. 131, 138
(1986). As one possible distinction, Thomas did suggest that Section 2
protects the “essential feature[s]” of traditional state “three-tiered
alcohol distribution systems.” 139 S. Ct. at 2471. Such systems require
alcoholic beverage producers to sell to state-regulated wholesalers,
wholesalers to sell only to state-regulated retailers, and only state-
regulated retailers to sell to consumers. Id. at 2457. Thus, the Twenty-
First Amendment may allow a state, in the interest of maintaining the
integrity of its three-tier system, to require alcohol retailers (as contrasted
from their owners) to be physically located in the state—a requirement
which might be questionable under the ordinary Commerce Clause
framework. See Sarasota Wine Mkt., LLC v. Schmitt, 987 F.3d 1171,
1182-84 (8th Cir. 2021) (upholding Missouri requirement that “retail
liquor stores be physically located within the State” as a “core
provision[] of Missouri’s three-tiered system”); Lebamoff Enters., Inc.,
956 F.3d at 870, 875-76 (same in Michigan). However, the Thomas
Court was clear that it did not consider residency requirements for liquor
store owners—whether durational or not—to be an essential feature of
the traditional three-tier system. See 139 S. Ct. at 2471-72. In any event,
we do not decide here the exact contours of how the Court’s test in
Thomas differs from its ordinary dormant Commerce Clause test.
Gen. 82] 95
would make little sense to require that individuals be amenable to
service of process prior to their application for a license, so this
argument makes the most sense as a justification for requiring
residency after issuance of the license. Similarly, the Association
argued that residency requirements would make it easier for the
state to oversee the operators of liquor stores. Id. This argument,
too, seems to be a defense of requiring licensees to maintain
residency during the license term, when the business is actually
operating. The Court rejected both of these justifications for a
residency mandate, noting that nondiscriminatory means were
available to pursue each objective. Id. And more to the point, the
alternatives the Court suggested, such as requiring applicants to
appoint an in-state agent for service of process or mandating that
retail staff undergo alcohol-awareness training, would function
equally well as substitutes for a non-durational residency
requirement. See id. at 2475-76.
The Court’s analysis thus suggests that it did not merely
consider the durational aspect of Tennessee’s residency
requirement—that is, the requirement that applicants reside in the
state for two years before applying—but instead evaluated and
rejected the purported benefits of residency requirements for
license applicants more generally. 12 Indeed, it is unclear what
health or safety interests would be advanced by a non-durational
residency requirement like Harford County’s that would not also
be advanced by a durational residency requirement. In other
words, it does not appear that a non-durational requirement would
have any additional advantages that the Thomas Court did not
consider.
In fact, in some ways, the justification for a non-durational
residency requirement is weaker than the justification for a
durational residency requirement. For example, if residency
requirements promote responsible sales practices by ensuring
retailers have a stake in the community, then a durational residency
requirement is superior to a non-durational requirement because it
12
The dissenting opinion in Thomas also appeared to assume that the
majority opinion’s analysis would govern all residency requirements, not
just durational residency requirements. See 139 S. Ct. at 2484 (Gorsuch,
J., dissenting) (wondering whether, “if residency requirements are
problematic,” a state may require a retailer to have a physical presence
in the state).
96 [106 Op. Att’y
ensures stronger community ties. 13 Given that it is unclear what, if
any, health or safety advantages a non-durational residency
requirement would have over a durational requirement, we think
the Court would likely reject a non-durational residency
requirement similar to Harford County’s if one were before it.
Attorneys general in other states have reached similar
conclusions. The Attorney General of Oklahoma, for instance, has
opined that “the inescapable conclusion from [Thomas] is that the
U.S. Supreme Court would strike down all residency
requirements” for alcoholic beverage retailers or wholesalers,
because “the Court's logic extends to non-durational residency
requirements and those outside the retail context.” Okla. Op. Att’y
Gen. 2019-13, 2019 WL 7424693, at *3-4 (Dec. 31, 2019).
Similarly, the Attorney General of Kansas recently concluded that,
in light of Thomas, a “constitutional challenge to . . . a ‘non-
durational’ residency requirement” would “likely be successful,”
because Thomas’s reasoning offers no basis for distinguishing
between durational and non-durational requirements. Kan. Op.
Att’y Gen. 2020-11, 2020 WL 7422704, at *2 (Dec. 10, 2020). 14
13
See Byrd, 883 F.3d at 633 (Sutton, J., concurring in part and
dissenting in part) (“Requiring individual retailers to reside in one place
for a sustained, two-year period ensures that they will be knowledgeable
about the community's needs and committed to its welfare.”); see also,
e.g., Brief for U.S. Alcohol Policy Alliance et al. as Amici Curiae
Supporting Petitioner, Tennessee Wine & Spirits Retailers Ass’n v.
Thomas, 139 S. Ct. 2449 (2019) (No. 18-96), 2018 WL 6168786, at *15
(“[R]equiring two years of residency, rather than something nominal,
like days or weeks, enhances the prospects that retailers are firmly
anchored in the state and have meaningful communal relationships that
matter to them.”).
14
We are not aware of any federal or state court decision that has
directly addressed this question after Thomas. One federal appeals court,
in concluding that a state may require alcohol retailers to be physically
located in the state, did characterize the Missouri licensing scheme at
issue as involving a separate “residency” requirement and did not reject
that requirement as unconstitutional. Sarasota Wine Mkt., LLC, 987 F.3d
at 1177. However, the focus of the court’s opinion was on a different
question, namely, the combined effect of the Missouri provisions—
especially the physical-presence requirement—that prevented out-of-
state alcoholic beverage retailers from shipping directly to Missouri
consumers. See id. at 1182-84. And it also appears that the plaintiff in
Sarasota could have satisfied the Missouri residency requirement simply
by appointing a Missouri resident as the manager of a physical retail
location in Missouri. See id. at 1178-79 & n.6. Sarasota thus did not
decide the validity of a non-durational residency requirement imposed
Gen. 82] 97
To be sure, a non-durational residency requirement imposes
less of a burden on nonresidents than a durational residency
requirement. But that distinction would have little relevance under
Thomas’s framework. Thomas indicates that whenever a state
alcoholic beverages law facially discriminates against
nonresidents, the burden shifts to the state to justify it; there is no
threshold inquiry into whether the law imposes an undue or
excessive burden on nonresidents. See 139 S. Ct. at 2474. 15
We also recognize that the justification for Harford County’s
non-durational residency requirements may be at least marginally
stronger than the justification for the Tennessee residency
requirement in light of certain differences between the two
statutory schemes. See Thomas, 139 S. Ct. at 2472 (“[E]ach
variation must be judged based on its own features.”). The Thomas
Court recognized that a state has a legitimate interest in promoting
“responsible sales and consumption practices” and considered the
argument that a residency requirement promotes that interest by
making it “more likely that retailers will be familiar with the
communities served by their stores.” Id. at 2475-76. This was the
health-and-safety justification that the dissenting opinions in the
Supreme Court and the Sixth Circuit appeared to find most
plausible. See id. at 2482 (Gorsuch, J., dissenting); Byrd, 883 F.3d
at 633 (Sutton, J., concurring in part and dissenting in part). The
Court rejected that justification, though, because Tennessee’s
requirement (1) mandated only that licensees live in the state, not
directly on the owner and licensee of an alcohol retail business. Instead,
the court was focused on the constitutionality of a physical presence
requirement for retailers. See id. at 1182-84. Of course, if one or more
courts were ultimately to conclude that non-durational residency
requirements are constitutional under Thomas, that would improve the
chances that the Harford County requirements would be upheld.
15
The Thomas Court also referred to the lack of record evidence
supporting Tennessee’s health and safety justifications for its durational
residency requirement as one reason for rejecting those justifications.
See 139 S. Ct. at 2474. But the Court’s treatment of those justifications
as facially implausible, in part because of the existence of “obvious”
nondiscriminatory alternatives, suggests that it is unlikely that additional
evidence would have altered the Court’s conclusion. See id. at 2474-76;
see also Kan. Op. Att’y Gen. 2020-11, 2020 WL 7422704, at *2 (“[W]e
do not consider it likely that the State could make a showing of a
legitimate local purpose that would satisfy constitutional muster, given
the Supreme Court's unsympathetic attitude toward the public health and
safety justifications put forth by Tennessee.”).
98 [106 Op. Att’y
in the particular community where the business operates; (2) did
not apply to bars and other businesses that serve alcohol for on-
premises consumption; and (3) governed license holders rather
than the individuals who actually make sales. Thomas, 139 S. Ct.
at 2476 (majority op.).
Harford County’s residency requirements, unlike Tennessee’s,
require the resident applicant to reside not just in the State but in
the county, AB §§ 22-1402, 22-1405; do not distinguish between
licenses for on-premises and off-premises consumption for
purposes of the residency requirement; and, for applications on
behalf of legal entities like corporations, require the resident
applicant to be a “manager or supervisor” and to be “physically
present on the premises for a substantial amount of time on a daily
basis,” AB § 22-1405(a)(4). 16 Thus, Harford County’s residency
requirements arguably better serve the objective of having locally
rooted licensees promote responsible consumption.
Ultimately, however, we believe that a court applying Thomas
would probably find these distinctions insufficient to produce a
different result. The Thomas Court placed great weight on the
availability of nondiscriminatory alternatives that would allow the
state to pursue the same objectives. 139 S. Ct. at 2474-76. As to
the community-knowledge justification specifically, the Court held
that states could achieve the goal of promoting responsible
consumption without discriminating against nonresidents in
several ways, including by placing limits on sales or by requiring
more extensive training for sales managers and employees. Id. at
2476. The same would presumably be true here. What is more, a
requirement of residency in the county, like a requirement of
residency in the State, still raises the concern, noted by the Court
in Thomas, that a person who lives close to the community at issue
but who happens to fall on the wrong side of a state or county
border could be excluded from the market, while someone who
lives farther away from the community, but within the same
county, could qualify for a license. See id. In other words, a
person’s jurisdiction of legal residence will often be a poor proxy
for their knowledge of a particular community.
Thus, even if Harford County’s residency requirements more
effectively “promote[] public health or safety” through community
knowledge by licensees than the residency requirement in Thomas,
id. at 2474, we suspect that a reviewing court would probably hold
16
We need not decide whether the General Assembly could require a
license holder to be physically present on the premises on a daily basis,
without also requiring that the license holder reside in the State or county.
Gen. 82] 99
that the nondiscriminatory alternatives suggested in Thomas (e.g.,
requiring more extensive training) remain available and would
serve the same interest “without discriminating against
nonresidents,” id. at 2476. That is, under the test set forth in
Thomas, a court would still be likely to conclude that the Harford
County residency requirements cannot be justified on “legitimate
nonprotectionist ground[s]” and that, instead, the requirements are
predominantly protectionist measures. Id. at 2474.
III
Conclusion
In our opinion, the non-durational residency requirements
imposed on alcoholic beverages license applicants in Harford
County likely violate the Commerce Clause of the United States
Constitution as interpreted by the Supreme Court in Thomas and
would not be saved by Section 2 of the Twenty-First Amendment.
That is, the reasoning in Thomas seems to extend to Harford
County’s non-durational residency requirements, even after the
enactment of Chapter 462. Although we recognize that much of
this analysis may apply to the other non-durational residency
requirements for licensees in Chapter 462 as well, we did not
separately analyze each residency requirement in the Alcoholic
Beverages Article and therefore do not specifically address
whether or not any of them would be upheld under Thomas.
Brian E. Frosh
Attorney General of Maryland
Kathryn M. Rowe
Assistant Attorney General
Patrick B. Hughes
Chief Counsel, Opinions & Advice
*Thomas S. Chapman, Assistant Attorney General, contributed
significantly to the preparation of this opinion.