Courthouse Steps Oral Argument: Tennessee Wine and Spirits Retailers Association v. Byrd

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Federalism & Separation of Powers Practice Group, was recorded on Wednesday, January 9, 2019, during a live teleforum conference call held exclusively for Federalist Society members.     

 

Micah Wallen:  Welcome to the Federalist Society’s teleforum conference call. Your telephone has been muted until the question and answer portion of the call. This afternoon’s topic is a Courthouse Steps Oral Argument preview on Tennessee Wine & Spirits Retailers Association v. Byrd. My name is Micah Wallen, and I’m the Assistant Director of Practice Groups at the Federalist Society.

 

As always, please note that all expressions of opinion are those of the experts on today’s call.

 

Today, we are fortunate to have with us Ilya Shapiro, who is the Director of the Robert A. Levy Center for Constitutional Studies at the Cato Institute, and Professor Todd Zwicki, who is a George Mason University Foundation Professor of Law for the Antonin Scalia Law School and is a Senior Fellow at the Cato Institute. After our speakers give their remarks, we will then go to audience Q&A. Thank you for sharing with us today. Ilya, the floor is yours.

 

Ilya Shapiro:  Well, thanks very much for that. It’s kind of an oddly titled teleforum in that I don’t think anyone’s lining up on the courthouse steps for next Wednesday’s argument. This is at 11:00 a.m. on the 16^th when we’ll hear argument in this case. But nevertheless, this will be a preview of what the case is about and what we can expect to hear next Wednesday. This is an interesting case for many reasons. It’s the intersection of two of my favorite subjects: the Commerce Clause and alcohol. Also, it serves as a vehicle for clarifying the difference between the Privileges and Immunities Clause of Article IV and the Privileges or Immunities Clause of the 14^th Amendment and how they interrelate in certain circumstances.

 

In this case, Tennessee Wine & Spirits v. Blare, for the first time in over a decade, we’ll present to the Supreme Court a case that could fundamentally alter the way that alcohol is regulated in this country. It is versus Blare. When it was granted, it was versus Byrd, but that is the now former Executive Director of the Tennessee Alcoholic Beverage Association. So we’ve had a substitution of parties in their official capacity. The Court is going to determine whether Tennessee’s durational residency requirements for retail liquor licenses are unconstitutional because they effectively impose a nine-year waiting period on out-of-state individuals and corporations seeking to get a retail liquor license. I’ll get into how all that works.

 

It could have far reaching effects on shipping by out-of-state retailers as well. In that, almost 15 years ago, 2005, the Court ruled in Granholm v. Heald that the Commerce Clause prevents states from allowing in-state wineries to ship wine directly to consumers while prohibiting out-of-state wineries from doing so. It basically said that you have to apply the same rule to in- and out-of-state businesses. But that only applied to producers. It did not reach the question of treatment of out-of-state retailers, or would-be retailers, versus in state. So bear with me as I describe somewhat complicated factual and procedural posture here.

 

Tennessee has a three-tier system for the distribution of alcoholic beverages, as many states do. Through the Tennessee Alcohol Beverage Commission, there are separate classes of licenses for manufacturers and distillers. That’s one class. Wholesalers, that’s a second class, and retailers is the third class in that three-tier system. Each of these tiers, or each of these licenses, allows you to sell to only one group. So retailers can only sell to consumers. Manufacturers can only sell the wholesalers, etc. To obtain licenses to operate retail stores in Tennessee, individuals have to establish residency in the state and maintain it for at least nine years.

 

The law doesn’t say nine, but here’s how it works. An individual has to be resident for two years to get an initial license, but that license, which is only valid for one year, can’t be renewed unless the individual is resident for ten years. So you can get a one-year license, but then you can’t renew it again for another eight years after that, or nine years after that. Similarly, a business entity, or a corporation, can’t obtain a license unless every single officer, director, and stockholder in that business has established the same level of Tennessee residency, that nine years prior the two years, followed by you can’t renew until you establish the ten year, that sort of thing. So these requirements render ineligible large, national, specialty stores.

 

Here, Total Wine, and I guess I should disclose that I’m a Reserve Member at Total Wine. I frequent the store in McClain, Virginia. I think it’s a great disrupter of the market, if you will. But anyway, large stores that are owned by out-of-state residents and the stockholder requirement further insures that no publicly held corporation could ever obtain a Tennessee retail liquor store license. So anyway, Total Wine applied for a license knowing that it didn’t satisfy the residency requirement but noted that it had designated a general manager who planned to relocate and become a resident. And it noted that all of the prospective employees would be residents.

 

Then there’s another respondent, Affluere Investments, which is a corporation organized and existing under Tennessee law. Its sole owners, directors, officers, are a married couple with a disabled adult daughter who became Tennessee residents in 2016 because of the daughter’s medical needs. And they sought a retail liquor license to open a small business to support themselves while providing care for their daughter. Now, the Commission, the Alcoholic Beverage Commission staff initially recommended that Total Wine’s license be approved. But the Tennessee Wine & Spirits Retailers Association, the industry group, threatened to sue the state commission if it approved the licenses.

 

So the Commission basically hemmed and hawed, twice deferring the action on the licensing applications, and eventually filing an action in state court seeking a declaratory judgment, a resolution of whether the residency requirement was constitutional or not before they started to proceed and got sued by one side or the other. The Wine & Spirits Retailers removed that case to the federal district court, based on the federal question of the 21^st Amendment and the Commerce Clause. And the court ended up realigning Total Wine and Affluere as plaintiffs alongside the state commission. So basically here it is the private plaintiffs plus the state commission against the state retailer’s association.

 

Total Wine moved for a summary judgment. The district court granted it, declaring the residency requirements were unconstitutional under the Dormant Commerce Clause. And enjoining their enforcement, the Retailers Association appealed. The state did not. It was perfectly happy abiding by -- it finally got its ruling. We can proceed, but the Retailers are the ones who are appealed. The Sixth Circuit affirmed that the licensing requirements were in violation of the Dormant Commerce Clause, concluding that the 21^st Amendment does not immunize this durational residency requirement from scrutiny.

 

Then, the Supreme Court granted the Retailers cert petition. So what will the Retailers be arguing next week? Based on their briefs, they say that the 21^st Amendment, of course, which was ratified in 1933 to end Prohibition, gives the states essentially limitless power to regulate the retail sale of alcohol. And Supreme Court precedent does indeed confirm that the 21^st Amendment leaves states with virtually complete control over the structure of their in-state alcohol distribution systems, the three-tier system or whatever you want to do in terms of in-state regulation. I said "virtually” because the amendment, the Supreme Court has held, does not permit laws that discriminate against out-of-state goods.

 

You can have whatever kind of crazy regulatory scheme you want, as long as you treat in-staters and out-of-staters the same. But the Retailers are arguing that this durational residency requirement is not subject to the Dormant Commerce Clause because it directly regulates the sale of liquor within the state. It doesn’t claim to regulate outside retailers or sales across state lines or anything like that. And, furthermore, it’s a reasonable exercise of legislative judgment. That is state and local officials are the ones that have an opportunity to determine an applicant’s fitness, and it increases the odds that retailers will sell responsibly because they tend to be more knowledgeable, residents are, about the community’s needs and welfare. As two state legislators recognized in passing the law, it’s a good thing that these laws make it harder to open a liquor store because reducing supply can prevent alcohol abuse.

 

Now, in response, Total Wine says that, in fact, the residency requirements do discriminate against interstate commerce by preventing out-of-state residence from obtaining retail licenses to protect the in-state market, to not disturb it. This is a classic form of discrimination condemned by the Dormant Commerce Clause. They are, per se, invalid, and the state says the 21^st Amendment doesn’t apply to discrimination between in state and out of state. That has to fall, and there’s no other justification.

 

There’s no other defense or legal argument made by the Retailers, other than ones based ultimately in the 21^st Amendment. Moreover, Total Wine says the constitutional amendment ending Prohibition, the 21^st does save the requirements because, as the Court said in Granholm, the 2005 case, modern case has established "that state regulation of alcohol is limited by the . . . nondiscrimination principle" and was not intended to save laws that have no purpose other than protecting in-state, existing businesses. The state even acknowledged in recent Attorney General opinions that it had never articulated, much less created a record to support any non-protectionist purpose for the residency requirements.

 

And so in the briefing, that’s why the Retailers kind of tried to backfill with these legislator’s statements. In fact, the Tennessee Attorney General twice opined that the residency requirements are unconstitutional and don’t serve any conceivable local regulatory purpose. So you have this liquor fight within the state before we even get to these private plaintiffs. And Total Wine, also, suggests that, if the Court vacate the lower court’s ruling under the Dormant Commerce Clause, it still should remand for further proceedings under the Privileges and Immunities Clause that all citizens are equal under Article IV.

 

The other respondents, Affluere Investments, the couple with the disabled daughter, they talk about the Privileges or Immunities Clause of the 14^th Amendment, saying that is was designed to prohibit states from making or enforcing laws that abridge the privileges or immunities of citizens of the United States. And among those is the right to travel freely. That’s the principle one that’s been successfully invoked at the Supreme Court to add some teeth in reviewing state laws. Under this clause, once you reside in a certain state, you should be able to exercise the same rights as any other citizen of that state, which is what the Ketchums, the couple here, sought to do.

 

And they say the requirements also violate the Commerce Clause, which was, at base, enacted to prevent trade wars between the states. And the Clause, in relevant part, prohibits treating in-state economic interests more favorably than out-of-state ones for parochial protectionist reasons that the framers were precisely worried about when they designed the Commerce Clause. And before I turn it over the Todd, I’ll quickly mention my own brief, Cato’s brief, supporting the respondents, and we talk both about the Dormant Commerce Clause and the Privileges or Immunities Clause, about how these are mutually reinforcing ensuring that citizens have the right to access the markets of other states on equal terms and free from discriminatory and protectionist state regulations.

 

While the 21^st Amendment affords states greater flexibility in devising regulations for alcohol than for essentially any other good or service, it does not save state laws that are blatantly discriminatory and protectionist. And by effectively imposing a nine-year residency requirement preventing non-resident citizens from competing on the same terms as resident Tennesseans, this law falls afoul of the interplay of the Dormant Commerce Clause and the Privilege or Immunities Clause. The only plausible purpose of this rule is to exclude or delay the inclusion of non-residents from Tennessee markets, thereby protecting in-state retailers from competition. And there are a host of amici on both sides, frankly flushing out all of those arguments that I just sketched.

 

Now, I’m happy to turn it over to Todd, and I should mention that I didn’t realize that Todd was, in addition to all of his other excellent scholarship, a legal historian. He has a prescient piece in the 2005 NYU Journal of Law and Liberty called "Wine, Commerce, and the Constitution,” going into the original meaning of the 21^st Amendment and related issues. And this is before the Granholm decision, but obviously the history here -- and without change in subsequent rulings.

 

Prof. Todd J. Zwicki:  Thanks, Ilya, and thanks for mentioning that. Yes, you can find my article from the journal, NYU Journal of Law and Liberty, online on my webpage. In many ways, that’s what I think this case is about is that Granholm was decided in 2006 and was a very unusual coalition at the time. It was a 5-4 opinion: Scalia, Kennedy, Souter, Ginsberg, and Breyer. There’s been, to some extent, a rear-guard action by some of the circuit courts. Perhaps a rear guard. Perhaps, they’re trying to make sense of how Granholm fits against the background of historical Commerce Clause jurisprudence related to alcohol, especially as it relates to the 21^st Amendment.

 

That’s what this issue comes back to, again and again, is how do you relate to Commerce Clause to the Dormant Commerce Clause to the 21^st Amendment? And one of the reasons I wrote that article, and fortunately Kennedy largely for the majority in Granholm adopted the reasoning, not expressly, but followed a lot of the reasoning, is that there’s a fundamental misunderstanding, often, of the 21^st Amendment. It matters in this case for reasons I’ll talk about in a second because of a concurrence/dissent by Judge Sutton in the Sixth Circuit.

 

Basically, the way to understand the relationship between -- so as we know, Prohibition was enacted under the 18^th Amendment and repealed under the 21^st Amendment. And the 21^st Amendment has somewhat complicated language. The first thing to understand is what this whole debate comes down to, fundamentally, is the traditional balance between the Commerce Clause and the federal government’s powers with respect to the  Commerce Clause related to interstate commerce, and the states’ traditional powers with respect to the police power. And obviously, alcohol regulation and things like that fit within the standard, traditional state reservoir of sovereignty under the police power.

 

And the way this has traditionally always been balanced, and I think the way it still remains to be balanced, is that the Constitution generally provides Congress with the power to regulate interstate commerce and, of course, provides power to the states to regulate in the police power. What that has meant traditionally is that the states can exercise their police power, but it is limited by the Commerce Clause. And in particular, it’s limited by the antidiscrimination prong of the Commerce Clause, not so much the balancing of the Commerce Clause, but the discrimination clause. That’s the way it was always interpreted.

 

And the way to understand that background to this is in the 19^th century there was a very robust Commerce Clause jurisprudence that the Supreme Court developed, which was specifically designed, going all the way back to Gibbons v. Ogden, specifically designed to basically limit the natural tendencies of the states to interfere in interstate commerce. Why is there a natural tendency? It’s basically rent seeking, which is in-state interest groups trying to erect barriers against interstate commerce to protect them from competitors and products from other states. And what the Supreme Court developed during the 19^th century -- and this actually matters to understand the 21^st Amendment, so bear with me a moment.

 

They developed a concept called the Original Package Doctrine. Under the Original Package Doctrine, what that meant was that anything shipped in interstate commerce, including alcohol, was considered to be an interstate commerce until it’s actually opened by the consumer and used in their house. So why did that matter? Why that mattered was because states that were trying to impose their own state prohibition during the 19^th century, dry states that wanted to by dry, found their efforts frustrated by the Original Package Doctrine and this muscular Commerce Clause jurisprudence that the Supreme Court had established during the 19^th century.

 

So what the states are trying to say is, "You are frustrating our legitimate police power, which is the ability to regulate the manufacture, distribution, and consumption of alcohol within our states.” And so what Congress ended up doing was passing a series of laws, the Wilson Act and the Webb-Kenyon Act, that basically said, "We are going to pass laws that allow the states’ police power to attach to alcohol that moves in interstate commerce the same as it attaches to alcohol that is produced and consumed within the state." Basically, to close this loophole that were keeping dry state from being dry, but in no way suggesting that this would empower states to be able to mettle in interstate commerce.

 

And that’s the key to understanding this. Because then, when you get the 18^th Amendment, the 18^th Amendment, of course, gives Congress the power—specifically, the 18^th Amendment—by empowering Congress to pass prohibition laws was essentially to create a unique police power that the federal government otherwise would not have. It basically says, "Now the federal government will have the power to exercise what essentially amounts to state police power, which otherwise the federal government would not have." 21^st Amendment, then against this background if properly understood, is intended to actually be, then, a limit on the federal government, not an empowerment for the state government.

 

Nothing in the 21^st Amendment says that the states’ traditional exercise of their police power, which was limited by the antidiscrimination prong, is now permitted to actually be asserted against interstate commerce. What it does say is this particular exception that we created to allow the federal government to operationalize, essentially, a federal police power to make prohibition work is now repealed. It’s a limit on the federal government, not an empower- -- exercising a novel police power, not an empowerment to the state government to meddle in interstate commerce.

 

So the Supreme Court got that right in Granholm, right? Which they as they basically say in Granholm, you can exercise your police power but not in a discriminatory fashion. And I think the same principle applies here.

 

Ilya very well summarized the Sixth Circuit case. I wanted to call attention to this concurrence/dissent by Judge Sutton where he looks at three issues in the case and draws a distinction between them. And this relates to this balance between the Commerce Clause and the 21^st Amendment. Which as he says, there’s three elements at stake here, which is the two-year residency requirement for the initial license, the ten-year residency requirement for the renewal of the license, and this bizarre provision that required that 100 percent of the stockholders of the corporation be resident within the state.

 

And what Judge Sutton says is, "I agree with the majority that both the ten-year residency requirement for renewal of the license is unconstitutional and the 100 percent stockholder requirement, which clearly makes no sense at all.” But he says the two-year initial residency requirement he says is valid, and his argument is just asserted, which is Granholm only speaks to products. It doesn’t speak to producers. Well, I’ve been not able to find anything anywhere in the history, any cites, nothing anywhere in the history that suggest that there’s a valid distinction between products and producers.

 

And so what he falls back on is, essentially, this view that somehow or another there’s this conflict between the Commerce Clause and the 21^st Amendment, and this is how I’m going to reconcile it. Which I think actually is an intuition on his part that Granholm was, to some extent, wrongly decided and that the 21^st Amendment gives the states some degree of plenary power to interfere in interstate commerce because he doesn’t give any principle justification for the product versus producers defense. But, importantly, he does agree that at least two the provisions are invalid. It really comes down to the two-year residency requirement, which I think, once you understand that it applies to products as well as producers and there’s no real reason to do otherwise, I think his opinion dissipates because he just kind of pulls that out of this conflict between Commerce and the 21^st Amendment.

 

I’ve actually filed an amicus brief on behalf of Law and Economics Scholars where what we basically did was -- along with Jerry Ellig, who’s an economist who studied interstate wine markets, Ted Gebhard, a former colleague of mine from the Federal Trade Commission, Don Boudreaux of the George Mason Economics department, we filed an amicus brief basically explaining why we have a Dormant -- why the Commerce Clause is concerned about this. And we call it the Amicus Brief of Law and Economic Scholars, focused on public choice and the political economy of laws like this. And the logic is pretty straightforward, which is that basically what this does, it protects in-state, the Tennessee -- the sellers, right? The guys who are arguing on the case because the Tennessee AG wouldn’t, essentially -- that this protects them from competition. It protects them from competition from outside companies, especially corporations, who could come in and provide more variety, higher quality, and lower price to consumers. The effect of this law is essentially to cartelize the market, to limit entry, which allows them to charge higher prices to consumers. And Jerry Ellig, we cite in our brief a 2013 article by Jerry Ellig where it looks at the impact of interstate competition in wine and shows that allowing greater in-state competition.

 

We’ve also looked at direct shipment in the past. It increases variety, decreases price, and basically benefits consumers. Why does that matter? Because what the Constitution cares about and what the Commerce Clause cares about was the power of factions. What was a faction? A faction is nothing more than an interest group. In the Constitution, the Founders in the Federalist Papers expresses great concern about interest groups. And in particular in a case like this where the out-of-state parties can’t even vote to change the law by definition, and the in-state parties that are effected are consumers who may pay an extra $0.50 or $0.75 for a bottle of wine, but it’s dispersed across many transactions by many consumers.

 

And they’re unlikely to be an effective political coalition to get the law changed. And so this taps into the underlying concern about the Commerce Clause, which is protecting in-state producers from competition from out-of-state parties at the behest of in-state interest groups. So that’s a very quick overview of 200 years of alcohol jurisprudence in the Supreme Court.

 

Micah Wallen:  And before we go to audience Q&A, Ilya, is there anything you wanted to respond to or add there?

 

Ilya Shapiro:  Just the one note about Sutton’s concurrent in the Sixth Circuit. The products versus producers line, to me, made me think of John Roberts on the First Amendment where he’s very strong that the First Amendment protects speech, not speakers. And that’s meant to say that it doesn’t matter who’s speaking, that you still get the full First Amendment protection. Here, Sutton, in effect, uses that to narrow the range of behaviors, or actions,    or statuses being protected. It’s an interesting distinction, but, as Todd said, as far as I can tell, he invented it.

 

Micah Wallen:  All right. We will now throw it to audience questions.

 

Tom Pedue (sp):  Hi, my name’s Tom Pedue. I’m a lawyer in private practice. Among my clients are wineries. Thank you very much for an interesting presentation. I have two questions. One, I’d be interested in the experts’ opinions on the hostility towards the Commerce Clause, or rather the Dormant Commerce Clause, exhibited by a couple of the Justices. And my second question goes to the asserted rationale for the government regulation or statute having locals sell booze means that the locals will be better able to serve the needs of the clients.

 

Tennessee allows wineries to sell to people in Tennessee over the internet and ship the wine directly to those people. Have any of the parties made any sort of an under-inclusive argument that the assert government rationale is undercut by the fact that the government in Tennessee allows California wineries, for example, to sell directly to customers in Tennessee, regardless of residency? Thank you.

 

Ilya Shapiro:  This is Ilya. That doesn’t ring a bell in the briefing. Todd might be able to correct me if I’ve missed something. I imagine the argument would be, well, the interest in regulating liquor stores is different than the interest in regulating shippers. And indeed, we don’t purport to regulate out-of-state retail stores, and the Supreme Court has told us, and we’re fine with regulating all shippers in state and out of state the same.

 

Prof. Todd J. Zwicki:  It points at the fallacy of talking about who can sell versus what they’re selling, which is we’ve come to think of -- Granholm, at least in some cases such as nearly Fifth Circuit cases, have tried to suggest that, well, it really just applies to the direct sale of wine, right? But implied in that is that what it really is is a functional exception to the three-tier system, which is the three-tier system, which exists in most states, distinguishes the manufacturer from the wholesaler to the retailer. And basically what happens when you have direct shipping is that, yeah, it’s the same person producing it shipping it to the consumer.

 

What that really means is they’re both the producer and the retailer. Implicit in Granholm, in the ability to sell wine is the ability of the winery to sell wine to people on exactly the same terms that people within the state can sell to the winery. So to characterize Granholm is being about selling wine, I don’t think is accurate. It’s about people, companies, wineries, to be able to sell wine to people. So I think implied in Granholm is this notion of the antidiscrimination principle and the idea that it is the ability to not just manufacture wine but actually sell it to people. So I’ve not seen that argument made, and it sounds like you may be familiar with what Tennessee’s rules are.

 

What Granholm says is that you must allow out-of-state wineries to sell over the internet the same as you allow in-state wineries. Some states responded to that by basically shutting the door to both intra and interstate. Other states basically expanded to allow free competition. I’m not sure where Tennessee’s laws are. I’ve not looked them up. But to the extent that Tennessee’s in-state wineries are allowed to sell impersonally over the internet, that implies that out-of-state would be able to also. If I take your point, the point is, if you’re just selling over the internet, what does this have to do with sort of knowing your local communities and that sort of thing?

 

To your first question, I think it’s an important one. I’d be interested in Ilya’s thoughts on this because I asked Ilya the same question as we were preparing for the call, which is the Dormant Commerce Clause creates a lot of headaches or a lot of tension kind of within conservative legal thinkers, which is on one hand, you have the obvious passion, concern, and value for competition and choice and the importance of the interstate markets. That, of course, was the lynch pin of the Constitution more than anything else was to create a powerful, central government that could knock down the trade barriers that states had erected.

 

And if you look back at the jurisprudence of the Supreme Court, they invoke this very often, going back to the earliest cases, that that was the purpose of the Supreme Court, going back to cases like Hood v. Du Mond, things like that. On the other hand, you have sort of states’ rights federalism, which tends to see a robust role for state police power, as well. And you see this in that peculiar line up I mentioned at the outset in the Granholm case itself in which you had Scalia and Kennedy combining with, who was it? Breyer -- Ginsberg, Souter, Breyer, Kennedy and Scalia was the majority in Granholm with Kennedy writing.

 

So you see these things sort of all over the place. My view is this becomes and easy case once you understand that this isn’t really just about policy, but it’s really about a proper understanding of the Commerce Clause as weighed against a proper understanding of the 21^st Amendment. I think that where conservatives have gotten themselves twisted up on this a bit is by misunderstanding the 21^st Amendment and by interpreting the 21^st Amendment backwards. Which, again, to stress my point, is the 21^st Amendment was intended as a limit on the federal government to keep the -- rather than empowering the states.

 

In particular, what the problem was was that after Prohibition was repealed, the statues were still on the books—the ones that I talked about earlier, the Wilson Act and the Webb-Kenyon Act—which empowered the states to apply the police power to alcohol that moved in interstate commerce; really, to put it simply, to allow dry states to stay dry. There was substantial concern about whether those statutes were even constitutional because of the fact that they basically were repealing the Original Package Doctrine, which was a constitutional doctrine, as the Supreme Court saw it, that they were essentially trying to repeal it by statute.

 

So that’s why they included that language in the 21^st Amendment was to basically say in so many words the Webb-Kenyon Act is now part of the Constitution, which will allow the dry states to stay dry and not have to worry that the federal government will come back in and the federal courts will say you’ve got to allow this alcohol to be shipped into your state. Once you understand that, I think, what otherwise would be this tension dissipates with the caveat that -- and most conservatives, including Scalia, I think traditionally have had less hostility to the nondiscrimination prong of the Dormant Commerce Clause than the balancing prong of the Dormant Commerce Clause.

 

I don’t know. I think Ilya has looked at this a little bit with respect to Gorsuch and Kavanagh, but obviously, Kavanagh was a Kennedy clerk. Maybe he’ll get that. I think Ilya has looked at some of Gorsuch’s Dormant Commerce Clause jurisprudence, so he may have something to say about that.

 

Ilya Shapiro:  Yeah. There’s a reason why, in my preview, or indeed of this entire program, which is a preview of the argument, neither of us have gotten into predicting because it’s very hard. As Todd mentioned about Granholm, the odd bedfellow 5-4 coalition, Scalia and Thomas, by the way, who are both noted opponents of the Dormant Commerce Clause, where on opposite sides. So even if you think "Ah-ha! I’ve identified the conservatives who are against the Dormant Commerce Clause for the reasons that Todd described and the ones that are for it, then, I can figure out similar pragmatic versus principle divisions among the liberals. And I’ll figure out the heterodoxy." But it’s very hard.

 

So Gorsuch is a big opponent of the Dormant Commerce Clause. So far, the only thing that I’ve found that I disagree with him on, frankly, to lay my cards on the table. But it’s very hard to predict how this will all turn out. And that’s why I think people will really be paying attention to oral argument because that will give some hint as to what concerns the various Justices. But I can’t even hazard a guess as to how this will go down.

 

Micah Wallen:  Caller, you may ask your question.

 

Tom Hanes (sp):  Hi, guys. This is Tom Hanes. Todd, you know me. I think, Ilya, you do, too. I’ve got sort of a conceptual question for you. To the extent that the Dormant Commerce Clause exists, is its scope consistent or inconsistent with the Affirmative Commerce Clause? And how would you view the Affirmative Commerce Clause coverage of local licensing of liquor retailing?

 

Prof. Todd J. Zwicki:  Could you elaborate on that last point, Tom? I don’t quite follow what you said -- local coverage -- the federal coverage of local licensing laws?

 

Tom Hanes:  Very simply, is Wickard v. Filburn the correct analysis assuming you’d stipple the Supreme Court analysis for both the federal power and both the limitations of the non-discrimination principle on state power?

 

Prof. Todd J. Zwicki:  I get it, and that’s what -- this is where I think people -- Justice O’Conner, for example, had a series of opinions when she was on the Court, or dissents and concurrences, where she showed a complete backwards understanding of the relationship between state and federal power, which is one of the reasons I wrote that article that I referred to early, which is the relationship between the states and the federal government today is completely the opposite of what it was in the 19^th century. And this is important because, remember, in the 19^th century what you had was essentially exclusive authority by the federal government over interstate commerce and essentially exclusive authority by the state governments over the police power. Right?

 

So this is brilliantly described in our friend Michael Greve’s great book The Upside-Down Constitution. The 20^th century, we’ve got this complete train wreck where basically the federal government, now, has a de facto police power through the expansion of the Affirmative Commerce Clause and the spending power. And the state governments have basically been unleashed to meddle in all this stuff in interstate commerce, right? So you have passed all these regulations with very little scrutiny from the federal government, right? And the Court seems inclined, such as in the internet tax case, to expand that even more. And so what we now have is kind of the worst of all worlds, which is where -- in the 19^th century, there was a line.

 

It was difficult to police between interstate commerce given to one sovereign, state police power given to another sovereign. Here, what we have are both basically being able to regulate both. We can be regulated by everybody all the time essentially. So that creates this muddle that we’ve run into ever since the New Deal basically unleashed the regulatory power of both the federal and the state governments.

 

As that relates to the Dormant Commerce Clause, your initial question, then, I think it’s a question we can avoid a little bit here, I think, to the extent that we continue to try to think of this through an originalist perspective. If we think of the 21^st Amendment and the Commerce Clause as, essentially, resting against this backdrop of 19^th century, pre-New Deal jurisprudence, then I think the lines shake out pretty well because the Dormant Commerce Clause was well-established, especially the nondiscrimination prong of the Dormant Commerce Clause was well-established. And I think, as Michael shows in his book, it makes since. The Dormant Commerce Clause is basically, in theory, designed to give an individual right of action to enforce the federal government’s control over interstate commerce from incursion by states, I think, is the simplified version of it.

 

So it does require some untangling because of the messed up Commerce Clause jurisprudence that the Supreme Court has developed since the New Deal. It muddles these lines so much, but it does come to a head in a case like this, where what you have is a discriminatory law. And everybody seems to think -- agrees it’s discriminatory. All Sutton disagrees with, with the majority -- is Sutton basically says, "Well, this kind of discrimination is okay,” essentially because of this distinction he draws. I’m not sure if that answers your question, but it’s a very long-winded response.

 

Ilya Shapiro:  I’ll add one thing, and this is perhaps a different way of thinking about it. I don’t think I’ve ever seen an argument that because the modern Commerce Clause interpretation allows federal regulation of every mom-and-pop shop because they’re ultimately connected to the stream and commerce and all that, or the Wickard situation, or the Raich situation of engaging in economic activity in your own backyard or what have you. The inverse of that being that the federal government can then prohibit states, or localities, from regulating that same thing that it’s occupied the field by not regulating, etc.

 

I’ve never seen that argument. To me, what I analogize, kind of dominant Dormant Commerce Clause theory, is kind of the constitutional version of implied preemption. So if Congress -- along classic Commerce Clause lines, meaning the actual meaning of the Commerce Clause. So if Congress can [inaudible 40:58] regulate interstate commerce but has declined to so, that doesn’t mean the states can go in and fill that vacuum and interfere with that aspect of interstate commerce that Congress has not been regulating. And so in effect, Congress has occupied that field. That’s, I think, at least in my mind, the stylized, simple version of thinking about Dormant Commerce Clause doctrine.

 

Micah Wallen:  All right. And as of now, we have no further questions lined up in the queue. Professor and Ilya, did you have any closing remarks?

 

Prof. Todd J. Zwicki:  I’ll just say that this is -- I’m glad the Court took this case because there’s been a lot of -- it’s kind of been under the radar, but there’s been a lot of cases kind of bumping down around in the district and circuit courts where lower courts have tried to figure out what exactly Granholm means. We see that in this case. We see this in some of the earlier Fifth Circuit cases. And so I hope that what the Supreme Court does here is ends up providing a ringing affirmation of the nondiscrimination principle, as it applies here, to recognize the states’ legitimate police powers but not to enable rent seeking parties to be able to protect themselves through what, essentially, is an end-run around Granholm that ends up hurting consumers and competition.

 

So I hope the Court is aware of the evasive -- the efforts of evasion that interest groups have done at the lower levels to try to circumvent Granholm and close that door. Because if they allow any of this to stand, I think it provides an open invitation to interest groups to basically gut Granholm and gut the Commerce Clause as it relates to this important area, an important area for the economy and for the agricultural economy as well, as we’ve seen a lot of -- more and more kind of variety in these various markets. And if they allow this door to be a vehicle for circumventing Granholm, interest groups are pretty savvy about exploiting that stuff.

 

Ilya Shapiro:  And I will add that I’m very curious to see whether this ends up being an alcohol case, an occupational licensing case, or kind of a general regulatory case, in the sense that plenty of state regulations that have spillover effect have nothing to do with occupational licenses. They’re environmental regulations or consumer safety or what have you. So there are potential ramifications in each of these areas, alcohol, obviously, being the narrowest. But still, it’s also kind of the quirkiest because of the 21^st Amendment, so we’ll see -- we’ll soon learn, at least, some from the oral argument why they took the case and what kind of motley coalition on both sides might be coming together.

 

Micah Wallen:  All right. Well, on behalf of the Federalist Society, I’d like to thank both of our experts for their valuable time and expertise today. We welcome listener feedback by email at [email protected]. Thank you all for joining us. We are adjourned.

 

Operator:  Thank you for listening. We hope you enjoyed this practice group podcast. For materials related to this podcast and other Federalist Society multimedia, please visit The Federalist Society's website at fedsoc.org/multimedia.