Gourt Home::Gourt :: Granholm v. Heald
Granholm v. Heald, 544 U.S. 460 (2005), is a court case finally decided by the Supreme Court of the United States, unusual because the arguments centered around the rarely-invoked 21 Amendment to the Constitution ratified in 1933. (This amendment ended Prohibition, the ban on alcoholic beverages throughout the U.S.) The 5-4 decision ruled that laws in New York and Michigan that permitted in-state wineries to ship wine directly to consumers, but prohibited out-of-state wineries from doing the same are unconstitutional.
Background
Granholm v. Heald was the conclusion of an eight-year fight by small wineries against these laws. Although direct shipments to consumers constituted only about 2% of wine sales in the United States (whose total sales were dollar|US$" target="_blank" >*21.6 billion in 2003), direct sales were thought to be an opportunity for growth. Laws in the eight states varied, but typically a winery could only distribute wine by selling it to a wholesaler in the state. The wholesaler could then distribute the wine to retailers or sell directly to consumers. This made the large wholesalers very powerful in the wine industry; if wholesalers in New York decided not to purchase wine from a particular winery, then that winery would be completely shut out of the New York market.
Arguments
The court case, which was a consolidation of two separate lawsuits, pitted the Dormant Commerce Clause doctrine, inferred from the Constitution's Article I, against Section Two of the 21st Amendment.
Section Two of the 21st Amendment reads:
- 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.
The Commerce Clause of Article One of the Constitution grants Congress the power:
- To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.
In turn, the Dormant Commerce Clause (or "DCC") has been inferred from the Commerce Clause. The DCC is a doctrine, evolved over many decisions of the U.S. Supreme Court, that the states do not have the power to enact anticompetitive laws that discriminate against sellers in other states.
Eleanor Heald, a wine collector, and eleven other plaintiffs, argued that Michigan's Liquor Control Code violated the DCC by making it a misdemeanor for an out-of-state winery to ship wine directly to a Michigan resident. (In-state wineries were allowed to do so.) The same argument was made in a separate case against the government of the state of New York by Juanita Swedenburg and other owners of out-of-state wineries.
In each of these two cases, the state governments of Michigan and New York had argued that Section 2 of the 21st Amendment granted them carte blanche to regulate liquor. One of their justifications for the laws was that by regulating out-of-state wineries in this way, they might be able to hinder the shipment of alcohol to underage minors; this would serve a valid state purpose.
The government of New York had won in the federal court of appeals, and the government of Michigan had lost. Both cases were consolidated and heard at once by the U.S. Supreme Court.
In a 5-4 decision, the Supreme Court decided the states' laws were unconstitutional. The context of the 21st Amendment, they wrote, was to return to the status quo that existed before Prohibition, making it clear that the states had the power to regulate alcohol however they wished, including banning alcoholic beverages entirely within the state if desired. Before Prohibition, the states did not have the power to violate the Dormant Commerce Clause, and the 21st Amendment was not intended to grant them this power.
Consequences
Michigan's liquor control board announced it would recommend to the state government that it ban all direct wine sales to consumers, joining the 15 other states currently banning all such sales.
New York governor George Pataki unveiled a bill that would limit each winery's direct sales to consumers to 2 cases per month. As a Wall Street Journal editorial noted, two cases per month sounds like a lot of wine, but the measure was intended to reduce competition for New York alcohol distributors.
After the ruling, industry experts generally opined that small wineries would benefit greatly, as the ruling not only threw out laws banning discriminatory direct sales to consumers, but also implicitly ruled unconstitutional laws that would prohibit retailers from ordering wine directly from their favorite out-of-state vineyards.
References
"Granholm v. Heald"