06/16/2011

Government Solutions Alert: Laws on Direct Shipment of Wine Persistent Legislative Battleground

The U.S. Supreme Court’s decision in Granholm v. Heald, 544 U.S. 460 (2005), is now six years old, and legislative efforts addressing shipment of wine directly to the consumer continue to arise in the U.S. Congress and in many state legislatures. In 2005, the Supreme Court ruled that New York and Michigan laws permitting in-state wineries to ship wine directly to consumers, but prohibitting out-of-state wineries from doing the same, were unconstitutional. The ruling made a number of states’ regulatory schemes unlawful, and we have seen a wildfire of legislation in response. Currently, 13 states prohibit direct shipment of wine. The rest of the states vary broadly in their permissions (e.g., Alabama residents must receive written approval from the Beverage Control Board to receive out-of-state shipments, and Indiana and Delaware wineries are only permitted to ship to consumers who have visited the winery and made a purchase in person). This year, a number of states saw the introduction of legislation to legalize winery direct shipping, while the wholesaler/distributor lobby responded in Congress and a number of other state legislatures saw efforts to restrict or prohibit it.

• The Comprehensive Alcohol Regulatory Effectiveness Act of 2011 (H.R. 1161) is currently pending in the U.S. House and is a slightly different version of a 2010 bill. The CARE Act would allow discriminatory restrictions on out-of-state producers and retailers if such restrictions advance “a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.” Said another way, it would allow states to pass discriminatory alcohol laws in all instances except for those that facially or “intentionally” discriminate against producers. The bill continues to gain traction in the House, with 81 co-sponsors as of June 3rd, but has no companion bill in the Senate.
• Maryland will join the states that allow some type of direct wine shipment when HB 1175 takes effect July 1. The new law will allow residents to have up to 18 cases of wine shipped to their homes per year. The original bill contemplated allowing wineries and retailers to ship wine to Maryland residents, but the final bill left retailers out.
• New Mexico stepped into compliance with the Granholm case when SB 445 was signed into law in April. New Mexico was the last so-called reciprocal state that permitted its residents to receive wine shipments only from states that also allowed New Mexico wineries to ship to its residents. For an annual $50 fee, wineries will now be able to obtain a permit allowing them to ship up to two cases of wine per month to a New Mexico resident. Similar to the Maryland law, the new law only applies to wineries, and shipments from retailers are only allowed from certain reciprocal states.
• New Jersey appeared to be following suit with the trend to broadly allow direct shipments from wineries, but the ultimate outcome is now uncertain. A Senate bill that made its way out of the chamber was tabled and a new bill (SB 2782) was introduced that would allow direct shipment of wine to New Jersey residents, but only so long as the winery’s production does not exceed 250,000 gallons of wine per year. The cap limit would prohibit most sizable wineries in the U.S. from shipping into the state.
• Pennsylvania, one of the few states where alcohol sales are controlled by the state, also appears to be moving toward direct shipment. Several bills are pending in the state legislature, and direct shipment, at least in concept, appears to have the support of the Pennsylvania Liquor Control Board.
• Possibly following New Jersey’s lead, Florida saw two bills get introduced (SB 854 and HB 837) that would cap the production volume of wineries permitted to sell to Florida residents and add more onerous reporting requirements. Wineries that sell more than 250,000 gallons of wine per year would be prohibited from direct shipment. In addition, eligible wineries desiring to ship directly to Florida residents would have to pay a $250 licensing fee and file a monthly report with the state disclosing the winery’s brands, quantity and price of wines direct-shipped within the state.

The foregoing is just a sampling of the direct shipment and other alcohol-related legislative initiatives occurring around the country. Stinson Morrison Hecker LLP's attorneys are closely monitoring these issues and are prepared to assist you in participating in the legislative process, staying compliant with evolving laws, and finding creative ways to protect your interests.

For more information on this alert, contact Tom Smallwood or any of our Real Estate attorneys.