Courthouse Steps Decision Teleforum: Tennessee Wine and Spirits Retailers Association v. Thomas

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On June 26, 2019, the Supreme Court, by a vote of 7-2, declared that two-year durational residency requirements for obtaining a retail liquor license are unconstitutional. In a decision written by Justice Alito, the Court held that it is a violation of the dormant Commerce Clause to discriminate in favor of in-state residents, even if this discrimination involves alcohol. After all, as Justice Alito wrote, there is no evidence that the Twenty-First Amendment "was understood to give States the power to enact protectionist laws." If there is no "demonstrable connection" to health and safety interests, Section 2 of the Twenty-First Amendment cannot save them.

Michael Bindas, the lead counsel for one of the respondents, will discuss the opinion and the dissent, written by Justice Gorsuch.  

Featuring: 

Michael Bindas, Senior Attorney, Institute for Justice

 

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Event Transcript

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Litigation Practice Group, was recorded on Friday, June 28, 2019, during a live teleforum conference call held exclusively for Federalist Society members.     

Micah Wallen:  Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is a "Courthouse Steps Decision Teleforum on Tennessee Wine and Spirits Retailers Association v. Thomas." My name is Micah Wallen, and I am the Assistant Director of Practice Groups at The Federalist Society.

 

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

 

      Today we are fortunate to have with us Michael Bindas, who is a Senior Attorney at the Institute for Justice. After our speaker gives his opening remarks, we will then go to audience Q&A. Thank you for sharing with us today. Michael, the floor is yours.

 

Michael Bindas:  Thank you, appreciate it. Happy to be here today to talk about Tennessee Wine and Spirits Retailers Association v. Thomas. We at Institute for Justice represented one of the respondents in that case, Affluere Investments, which is a company solely owned by a husband and wife, Doug and Mary Ketchum, who were attempting to purchase a small mom-and-pop retail liquor shop in Tennessee, until they ran into the dispute that gave rise to this case.

 

      So I'm going to start by talking a little bit about the facts that gave rise to the case: the lower court decisions in the case and then, obviously, what we're all here to learn about which is the Supreme Court's decision which came down Wednesday of this week. But before I get into all of that, I'd just like to layout, really, what the immediate dispute in this case was all about but also what the bigger picture issue was.

 

The immediate dispute concerned the constitutionality of Tennessee's durational residency requirements for brick-and-mortar retail liquor stores. Retail liquor store -- some folks might know those as package stores, but in Tennessee, in order to secure a license to open a store, an individual had to have resided in the state for at least two years immediately preceding the application. At that point, if they met all the other criteria for a license, they could secure one. The license was good for one year, but then in order to renew the license, you had to have resided in the state for ten consecutive years. So, in effect, an individual who wants to open or wanted to open a retail liquor shop could do so after living in the state for two years, could operate the store for one year, and then would have to sit around another seven before they can renew, bizarre to say the least.

 

As for corporate applicants, those same two and ten-year durational residency requirements applied, but they applied to every officer, director, and stockholder of the corporate applicant. So if a publicly traded company, for example, wanted to open a retail liquor store in Tennessee, every single one of its stockholders had to meet those two-year and ten-year durational residency requirements. The constitutionality of that regulation or those regulations was the immediate dispute in this case, but, really, the bigger picture issue was how do you reconcile the Dormant Commerce Clause doctrine with Section 2 of the Twenty-first Amendment?

 

The Dormant Commerce Clause doctrine, as I suspect a lot of listeners know, generally speaking, prohibits states from erecting discriminatory barriers that prohibit out-of-state economic interests in favor of in-state economic interests. Certainly, the durational residency requirements, which keep out-of-state residents or newly arrived in-state residents from purchasing and operating a retail liquor store, raised some significant Dormant Commerce Clause concerns, but then you have to consider Section 2 of the Twenty-first Amendment.

 

The Twenty-first Amendment, of course, repealed prohibition, and Section 2 of the Twenty-first Amendment -- summarizing here a bit, but provided that the transportation or impartation into any state of alcohol in violation of the laws of that state is prohibited. So, essentially, Section 2 gave the states broad authority to regulate alcohol and prohibited the transportation or impartation of alcohol into any state if it was in violation of the laws of that state. So you have this seemingly broad regulatory grant of authority to the states that was part of the repeal of prohibition. You have to ask, how does that interact with the limits that the Dormant Commerce Clause places on the states and their ability to regulate in a way that harms or burdens out-of-state economic interest. So that's really the bigger picture issue here is how do you reconcile those two things?

 

With that said, I'll talk a little bit about the facts that gave rise to the case. For quite a few years, the residency requirements were really a non-issue, and that was because the state was not enforcing them. The Attorney General of Tennessee had issued two opinions in 2012 and 2014, and he came to the conclusion that these durational residency requirements violated the Dormant Commerce Clause doctrine. In fact, he went so far as to call them "trade restraints and barriers that impermissibly discriminate against interstate commerce." So the state was not enforcing them. That started to change in 2016.

 

Around the same time, late spring or early summer of 2016, there were two new applications for retail liquor stores submitted. One was by the national alcohol chain-retailer Total Wine, I'm sure a lot of folks are familiar with them. I think they operate in thirty-some odd states. The other was by Doug and Mary Ketchum, a husband and wife who were seeking to purchase a small mom-and-pop liquor store in Memphis.

 

As I mentioned at the outset, Doug and Mary were our clients. At the outset, Doug and Mary were -- prior to submitting a license application, Doug and Mary were living in the Salt Lake City area. They have a severely disabled daughter Stacie, she's in her thirties. Stacie has cerebral palsy, quadriplegia, and a number of other health issues. And during a temperature inversion in the Salt Lake Valley, a particularly bad one, one of Stacie's lungs collapsed. Her doctors urged Doug and Mary to move her to a better environment, and they found an opportunity to purchase this small, historic liquor shop in Memphis. It's called Kimbrough Wine & Spirits. It's been there for a very long time. It's right down the road from Sun Studios, if folks are familiar with Memphis and its musical history, and some of the folks who recorded at Sun Studios back in the day, like Johnny Cash, used to frequent Kimbrough. It's somewhat of a historic institution in Memphis.

 

This was the great opportunity for Doug and Mary. It was a better climate for Stacie's health. It was an opportunity for them to own their own business and be able to support themselves. And it would give them the flexibility that they needed to take care of Stacie and meet her 24/7 healthcare needs. So Doug and Mary entered an agreement to purchase the shop, and they picked up and moved to Memphis in July of 2016. They knew of the residency requirements, but as I mentioned before, the state was not enforcing them at the time, so they were not too terribly concerned. But for one reason or another, the applications of Doug and Mary and of Total Wine drew the ire of the Tennessee Wine and Spirits Retailers Association. The Association is a trade or lobbying group for in-state retailers, and the Association threatened to sue the state, The Alcohol and Beverage Commission, if it issued the licenses to Doug and Mary and to Total Wine. It said that you have to enforce the durational residency requirements. These folks don't meet them, and we're going to sue you if you issue licenses to them.

 

The state deferred acting on the license applications for several months. Meanwhile, Doug and Mary were in Memphis but unable to do what they had gone there to do. And then, finally, several months later, the director of the Alcoholic Beverage Commission threw up his hands and went to court himself -- went to state court and filed a declaratory judgment action asking the state court to rule on the constitutionality of the durational residency requirements. As part of that action, he named as defendants Doug and Mary, Total Wine, and the Retailers Association. The Retailers Association moved the case to federal court, and the federal court then realigned the parties. Given the Attorney General's opinion that the laws were unconstitutional, the district court aligned the State as a plaintiff alongside Total Wine and the Ketchums and left the Retailers Association as a defendant to defend the state's residency requirements, so kind of a bizarre procedural court here.

 

But at that point, the State's position began to evolve. Total Wine moved for summary judgment, and the State actually opposed the motion and defended the residency requirements alongside the Association. Total Wine's summary judgment motion presented two arguments. One was that the durational residency requirement violated the Dormant Commerce Clause. The other was that it violated the Privileges and Immunities Clause of Article IV Section 2. The district court did not reach the latter provision, but it did reach the Commerce Clause issue.

 

And I'll talk a little bit about what the district court did. It noted at the outset that the Dormant Commerce Clause arises from a concern about economic protectionism, that is state regulations that attempt to benefit in-state economic interests at the expense of out-of-state competitors. And it noted that in the traditional Dormant Commerce Clause analysis, if a law discriminates against interstate commerce on its face, the law is subject to heightened scrutiny, and it can only prevail or be sustained if the law serves legitimate local purposes that cannot be adequately served by some reasonable non-discriminatory alternative. The court had no problem concluding that Tennessee's durational residency requirements were facially discriminatory and that in the ordinary course of things, they would be virtually per se invalid under that traditional Dormant Commerce Clause test that I just mentioned.

 

But the Association and the State argued that Section 2 of the Twenty-first Amendment saved those discriminatory provisions. They acknowledged that if traditional Dormant Commerce Clause analysis applied, the regulations would likely be unconstitutional, but they argued that the additional powers that the states received by virtue of Section 2 somehow saved the durational residency requirements. They noted, in making that argument, that the most recent case concerning these issues that the Supreme Court had decided, which is Granholm v. Heald, the 2005 case, had held that the Twenty-first Amendment grants the states, and I'm quoting here, "virtually complete control over whether to permit importation or sale of liquor and how to structure the liquor distribution system." They also noted that Granholm had said that the three-tier system, that is the system that many states use to regulate alcohol that divides the system up into producers, distributors, and retailers, Granholm had said that that system is unquestionably legitimate. And so the Association and the State argued that the durational residency requirements were just part and parcel of Tennessee's structuring of the three-tier system and that they were therefore constitutional -- even if they would violate the Commerce Clause had they concerned something other than alcohol.

 

Now, the problem is Granholm had also held that state regulation of alcohol is limited by the non-discrimination principle of the Commerce Clause. And the laws at issue there, in Granholm, were actually invalidated under the Commerce Clause. The laws at issue in that case authorized in-state but not out-of-state wineries to ship directly to consumers in Michigan and New York. And the Supreme Court held that that discrimination against out-of-state wineries violated the Commerce Clause, notwithstanding Section 2 of the Twenty-first Amendment.

 

In the Tennessee case, the Association and the State argued that Granholm's holding in that regard, its invalidation of those laws under the Commerce Clause, was limited to the producer or product tier of the three-tier system. They argued that so long as a state treated out-of-state alcohol the same as in-state alcohol, it was free to regulate how it saw fit. In effect, the non-discrimination principle applied to the producer tier but not to the wholesaler or retail tier of the three-tier system.

 

The district court rejected that understanding of Granholm. It noted that Granholm only talked about the producer tier specifically because the laws at issue in that case happened to concern the producer tier. And the district court reasoned that the durational residency requirements were not an inherent aspect of the three-tier system, and, therefore, that the Twenty-first Amendment did not save the durational residency requirements from traditional Commerce Clause analysis. And the Court had, again, no problem concluding that the laws were facially discriminatory, and it concluded that there were plenty of non-discriminatory, reasonable means of achieving the state's asserted public health and safety interest. So the district court invalidated the durational residency requirements.

 

That was great for Total Wine. That was great for the Ketchums. They were able to -- The Ketchums were able to purchase the liquor shop in Memphis, and they opened up in 2017. Total Wine took a little bit longer—I think there was some kind of lease issue with their store—but they eventually received a license and opened up as well. But the ordeal didn't end there. The Association appealed to the Sixth Circuit, and the State largely ceded defense of the durational residency requirements to the Association. The State filed a brief in the Sixth Circuit, but it waived oral argument and allowed the Association, again, the trade group for in-state retailers, to advocate the State's position.

 

The Sixth Circuit affirmed the district court's decision. The opinion of the Sixth Circuit was unanimous in some respects, but it was split 2-1 in other respects. As for the majority, it began by noting that there was confusion in the wake of Granholm among the lower courts, particularly on whether the Dormant Commerce Clause scrutiny applies only to alcohol laws that impact producers and products or, instead, whether it also applies to laws that impact wholesalers or retailers. Like the district court, the Sixth Circuit concluded that Granholm only spoke about producers specifically because it happened to involve laws that regulated the producers and that that language was in no way a limitation on Granholm's broader holding that the non-discrimination principle of the Commerce Clause applies even when it comes to alcohol regulation.

 

That said, the majority concluded that the Twenty-first Amendment could still immunize an alcohol law from Commerce Clause scrutiny if the interests implicated by the law were so closely related to powers reserved to the states by the Twenty-first Amendment if they were -- went to the core concerns of the Twenty-first Amendment, Section 2 specifically, that the Twenty-first Amendment might still immunize the regulation from Commerce Clause scrutiny. But the majority concluded that the interests implicated by Tennessee's durational residency requirements were in no way related or closely-related to the powers that the Twenty-first Amendment had reserved for the states. The Sixth Circuit's language, "The residency requirements do not relate to the flow of alcoholic beverages within the state. Instead, they regulate the flow of individuals who can and cannot engage in economic activities," and "The central purpose of the Twenty-first Amendment," the Sixth Circuit went on to say, "was not to empower states to favor local liquor industries by erecting barriers to competition."

 

So that obviously was a great outcome for the Ketchums and for Total Wine. I should mention that the decision was unanimous in some respects, but Judge Sutton dissented in part. He agreed with the two judges in the majority that the durational residency requirements were unconstitutional insofar as -- well, that the ten-year durational residency requirement to renew a liquor license was unconstitutional. In fact, he called it the height of arbitrariness, and he held -- he agreed with the majority that the two-year requirement, insofar as it applied to stockholders of a corporate applicant, was also unconstitutional. But he believed that the two-year requirement as it applied to individual applicants and as it applied to the directors or officers of a corporate applicant were permissible, that the Twenty-first Amendment saved them from invalidation under the Dormant Commerce Clause.

 

So that brings us to the Supreme Court. And it is, I think, very telling that, again, it was the Association, not the State of Tennessee, that petitioned for cert in the Supreme Court. And it's also telling that the State did not even file a merits brief or argue with the Supreme Court. It allowed, again, this trade association for in-state retailers to essentially stand in the State's shoes before the Court. And the argument occurred in January of this year, and we received the opinion Wednesday of this week. It was a 7-2 opinion. The majority was authored by Justice Alito. Justice Gorsuch authored a dissent that Justice Thomas joined.  Now I'll talk about the majority opinion first and talk a bit about Justice Gorsuch's dissent as well.

 

So Justice Alito began with an overview of the Commerce Clause -- a historical overview of the Commerce Clause, emphasizing the fact that this was the primary safeguard against economic protectionism in the original Constitution. He then turned to Section 2 of the Twenty-first Amendment, and he acknowledged that the text of Section 2 is potentially very broad insofar as it confers authority on the states to regulate liquor differently than other products. But he also came to the conclusion that Section 2 couldn't just supersede every provision of the Constitution that came before it. He stressed -- his words were that, "Section 2 has to be viewed as one part of a unified constitutional scheme," that you have to reconcile Section 2 with the Commerce Clause, or at least the Dormant Commerce Clause doctrine, that Section 2 isn't just a trump to everything else that came before it.

 

And so Justice Alito, in order to reconcile these two provisions, undertook a historical overview of alcohol regulation and jurisprudence both before prohibition and in the wake of the repeal of prohibition to see how the Court had traditionally approached these issues. And he came to the conclusion that the thrust of Section 2 of the Twenty-first Amendment was to constitutionalize the basic understanding of state power to regulate alcohol as it was understood prior to prohibition. And his understanding of what state's power to regulate alcohol was was that certainly states could regulate the product for purposes of protecting the public health and safety, but in doing so, they could not discriminate against citizens or the products of other states. He acknowledged that some of the early post-prohibition cases that the Supreme Court resolved suggested that Section 2 of the Twenty-first Amendment did, in fact, override earlier provisions of the Constitution. But he also noted that more recent opinions, in particular Granholm, had come to the conclusion that Section 2 did not entirely supersede the rest of the Constitution or supersede Congress's power to regulate commerce.

 

"The aim of Section 2," he stressed, "was not to give the States a free hand to restrict importation of alcohol for purely protectionist purposes." He went on to stress that protectionism is not a legitimate interest for regulating alcohol under Section 2 and that Section 2 is not a license to violate the non-discrimination principle that had prevailed prior to prohibition. The Court rejected the Association's attempt to limit Granholm to the producer and product tier of the three-tier system. Justice Alito noted, like the lower courts, that was just a consequence -- a kind of language about producers and products specifically in Granholm, was just a consequence of the fact that Granholm involved that tier of the system. And he came to the conclusion that the Twenty-first Amendment it is -- I'm sorry, that Commerce Clause, in fact, applies or the Dormant Commerce Clause doctrine applies this non-discrimination principle throughout the regulatory regime of alcohol, all three tiers.

 

As for Granholm's language that the three-tiers system was unquestionably legitimate, Justice Alito stressed that that doesn't mean every discriminatory feature of a three-tier system that a state might adopt is necessarily legitimate and that Tennessee's durational residency requirements were not an essential feature of a three-tier system. He noted that there were plenty of three-tier systems in other states that did not have durational residency requirements, and, in fact, there are some that don't even have simple residency requirements. And then he said that "each variation [of a state's regulatory structure of alcohol] must be judged based on its own features," in his words.

 

So that means at that point, the non-discrimination principle does apply to regulations that impact the retail tier of alcohol regulation, but Justice Alito also recognized that Section 2 of the Twenty-first Amendment has to mean something. He said that Section 2 requires the Court to engage, in his words, "a different analysis than the traditional Dormant Commerce Clause analysis," because Section 2 does give the state some regulatory authority that they wouldn't otherwise enjoy. And so he laid out a framework for reconciling these two doctrines. He said that the court has to ask if the challenge regulation can be justified on some public health or safety basis or some other legitimate non-protectionist ground and that if the predominant effect of the law is economic protectionism rather than protection of the public health and safety, it is not shielded by Section 2 and the traditional Dormant Commerce Clause analysis applied.

 

The Court put the burden on the government -- on the state to show that the predominant effect is of the durational residency requirements is protection of the public health and safety rather than economic protectionism. And in order to determine the predominant effect of the regulations, he looked at two things: evidence of how well the residency requirements actually promote the state's asserted public health and safety interest and evidence of whether non-discriminatory alternatives would be insufficient to achieve those interests. Thus, the burden is squarely on the state to demonstrate that the predominant interests are not protectionism.

 

And Justice Alito stressed that in undertaking that analysis, the state has to actually offer concrete evidence of the predominant effect being to serve the public health and safety. He specifically said that near speculation or unsupported assertions would not be sufficient to carry the state's burden. He applied this framework to the durational residency requirements, and he concluded, like the lower courts, that their predominant effect was not to protect the public health and safety but rather, in his words, the predominant effect was to "protect the Association's members from out-of-state competition." And in that light, he, along with six other justices, voted to invalidate the durational residency requirements.

 

Justice Gorsuch, as I mentioned, authored the dissent. He acknowledged that Section 2 did not insulate alcohol regulations from every conceivable constitutional claim. He mentioned, specifically, the First Amendment Equal Protection Clause that Section 2 would not insulate an alcohol regulation from a claim brought under one of those provisions. But he went on to say that the Dormant Commerce Clause doctrine is different, in his words, it's "a peculiar one." He said that unlike most constitutional rights, the Dormant Commerce Clause doctrine cannot be found in the text of any constitutional provision but is at best an implication from one.

 

And so he viewed the Twenty-first Amendment and its relation to the Commerce Clause a bit differently than he would in relation to some other provision of the Constitution such as the First Amendment or the Equal Protection Clause. What the Commerce Clause actually does, he stressed, is gives Congress the power to regulate interstate commerce. I think he was suggesting that dormant or negative aspect of the Commerce Clause, perhaps, is not legitimate rather the Commerce Clause should be viewed solely as a conferral on Congress of the power to regulate interstate commerce.

 

And he noted that Congress had actually done so in respect to alcohol in a pre-prohibition statute called the Webb-Kenyon Act, a law that's still on the books, in fact. That law basically says that the shipment or transportation of alcohol into another state in violation of any law of that state is prohibited. And Justice Gorsuch thought that the purpose of Section 2 was to essentially constitutionalize that idea, that exception to Dormant Commerce Clause analysis, that Section 2 in effect allowed states to enact laws that could keep out-of-state liquor out or they could discriminate against out-of-state interests in the sale of liquor and that Dormant Commerce Clause didn't have anything really to say in that respect.

 

He went on to note that there had been residency requirements on alcohol for at least 150 years in this country, and he stressed that Tennessee's had existed since 1939. He also noted that -- like Justice Alito had also acknowledged, that some of the Supreme Courts early post-prohibition decisions suggested the discriminatory treatment in alcohol regulations was not impermissible and that it was only in relatively recent cases like Granholm that the Court had suggested otherwise. And those more recent cases, he thought, were easily distinguishable from the case before the Court, the Tennessee case, and he would have, like the Association, limited Granholm's holding to the producer or product tier of the three-tier system.

 

So that's a real quick synopsis of Justice Gorsuch's dissent. There is a lot I'm leaving out. Both the majority and the dissent are really, really interesting reads. They both take a deep dive into the historical lay of the land of alcohol regulation and jurisprudence. And I would commend both of them to folks who are interested in this area. Some takeaways form the majority opinion, the first thing I would say it really is just a broad side indictment of economic protectionism. The Court stressed that economic protectionism, that is the desire to protect in-state interests from out-of-state competition, is never a legitimate governmental purpose under Section 2 of the Twenty-first Amendment. Second takeaway, I think this does spell the end of durational residency requirements in other states, and, perhaps, even simple residency requirements, those that do not have a durational component, at least at the retail level of alcohol regulation.

 

Another takeaway is a lot of folks have asked about what this means for physical presence requirements, that is the requirement that a retailer or wholesaler or producer, for that matter, have a physical presence in a state, even if they -- the ownership doesn’t have to be necessarily a resident of that state. I think that's an issue that the lower courts are going to have to resolve. Physical presence was not at issue in this case. Afterall, Total Wine and Doug and Mary Ketchum were attempting to operate brick-and-mortar stores that were physically present in the State of Tennessee. So I think we'll have to wait for another day for that issue.

 

And the last takeaway is that we now have this framework for reconciling Section 2 and the Dormant Commerce Clause, this, as Justice Alito called it, this predominant effects test. And lower courts now have, I think, a little bit better guidance in how they go about applying both of these seemingly at-lager heads concepts. And I think it'll be interesting to see how that plays out in future challenges. I certainly think there are going to be a lot of challenges that come about as a result of this opinion, and I'm sure it's not the last word that the Supreme Court's going to have on these issues. With that, I'll be happy to open it up to any questions.

 

Micah Wallen:  Terrific. Thank you, Michael, for those opening remarks. We'll now go to our first question.

 

Prof. Jim Ely:  Michael, this is Jim Ely of Vanderbilt Law School, emeritus now. I have a question about your discussion of the economic protectionism point which was hammered home. Did that have any legs, do you think, in cases aside from liquor control? I was thinking, for example, of challenges to occupational licensing which have often raised the question as being used to foster economic protectionism. Do you think this case will have any implications there?

 

Michael Bindas:  I certainly hope it does, Professor Ely. It's a great question, one that we at the Institute for Justice have certainly been thinking a lot about, and I think it will. And I say that because if economic protectionism is not a legitimate governmental interest for purposes of Section 2 of the Twenty-first Amendment, that is a provision of the Constitution that gives states heightened regulatory powers that they would not otherwise have. If it's not a legitimate interest for regulating under that heightened authority, I don't see why it should be considered a legitimate governmental interest for regulations where the states don't enjoy this heightened regulatory authority.

 

There is a split among the circuits right now as to whether or not economic protectionism in and of itself is a legitimate governmental interest. And I think this opinion certainly is strong support for the notion that it is not. And I think, perhaps, this is an indication that the Supreme Court is interested in resolving that question in a future case. I know it's an issue we've certainly have been trying to get up to the Supreme Court for quite a while, and I suspect that they, perhaps in the not too distant future, will take a case that squarely presents that issue.

 

Micah Wallen:  We'll now go to our next caller.

 

Michael Tenenbaum:  Hi Michael, this is Michael Tenenbaum in Los Angeles. I wanted to say thank you for your presentation, and congratulations on your win. The Court's opinion was pretty strong in terms of explaining the basis for the Dormant Commerce Clause doctrine and, at least after the Articles of Confederation, for the Commerce Clause was to stop trade barriers. And then it goes on to say that the worst kind, I suppose, are the ones where there's economic discrimination -- discrimination on economic protectionism.

 

But I'm wondering since the Court says trade barriers was one of the problems that plagued the colonies and since it also says that the State has to justify its law based on health or safety, it doesn't go farther than that to say welfare, morals, or other grounds, did you see anything in the briefing or anything from even the Court of Appeals, which opinion I didn't read, that suggests that the Court would be more open to striking similar laws where the basis isn't necessarily, we're going to favor our in-state product against an out-of-state product, but we're just going to ban products that come from out of state because we don't like, for example, the way they're made, or their environmental implications, or other aspects of them.

 

And do you see this case -- I'm referring specifically to the cases, for example, involving ethanol. There's a Tenth Circuit case -- I'm sorry, there's a Ninth Circuit case that bans ethanol if it was made with too much carbon. There's a Tenth Circuit case that bans electricity if it was made out-of-state with too much coal. There are eight cases in California and others where the state tries to ban -- basically, put up a trade barrier because it doesn't want the products from out-of-state or even its own products, but it acts as a barrier without any safety or health reasons.

 

Michael Bindas:  Sure. I'm not too familiar -- not at all familiar with those specific cases. But I think, really, in those cases it would come down to whether the state is regulating even-handedly with respect to in-state and out-of-state producers or rather whether the ban that it's implementing is facially discriminatory against out-of-state products or producers or at least is discriminatory in its purpose or effect on those out-of-state producers. If it's simply an even-handed non-discriminatory regulation that just happens to burden out-of-state producers in the same way it burdens in-state producers, then I think the Pike balancing test, the less-searching level of scrutiny under the Commerce Clause, would apply.

 

But, if instead, really what's going on is that a seemingly facially neutral regulation is targeted, in purpose and effect, at an out-of-state product in particular, then I think there would be a strong argument including support in this decision for applying the more rigorous degree of Commerce Clause scrutiny that applies in the facially discriminatory context. But I guess, really, it would depend on what the underlying motivation was or purpose of those regulations is. And I just don't know enough about those cases to be able to say confidently whether Wednesday's decision would or would not support one side or the other in those cases.

 

Micah Wallen:  We have another question, so we'll move to that caller.

 

Adolfo Valero (sp):  Hi Michael, this is Adolfo Valero. Great, great job on the part of IJ and the rest of the attorneys getting it this far and getting this resolution. I did have one question with respect to privileges and immunities under the Fourteenth Amendment. That was one of the issues for us. Do you see that the Court is still disinclined to engage in those kind of conversations?

 

Michael Bindas:  Sure, great question, and one that's near and dear to our hearts at IJ. So I mentioned before that in the district court there was a claim brought under the Privileges and Immunities provision of Article IV Section 2. Unfortunately, in the lower courts there was not a claim made under the Privileges or Immunities Clause of the Fourteenth Amendment. We're not involved in the case in the lower courts. I certainly wish that that claim had been made because, as folks may know, while the Privileges or Immunities Clause of the Fourteenth Amendment has largely been neutered by the Slaughterhouse Cases for the last century and a half, I guess, the one exception to that is a 1999 decision from the Supreme Court in a case called Saenz v. Roe where the Court held that a one-year durational residency requirement for certain welfare benefits in the State of California was unconstitutional in violation of the Privileges or Immunities Clause. When we got involved in this case, the Tennessee case, we did try to offer that as an alternative ground on which the Supreme Court could affirm the Sixth Circuit's judgment.

 

Unfortunately, the Court did not engage on that issue. And I wish it had, there are obvious reasons for why it didn't. Most importantly, the fact that it had not been raised below. But in the ordinary case, if this had been an issue that had been preserved along the way, I think it's an issue that Justice Thomas, in particular, is very, very interested in. I think he is a strong supporter, obviously, for restoring the Privileges or Immunities Clause to its rightful place as the primary bull-work of economic liberty.

 

And it would be fascinating to hear his views on how the Twenty-first Amendment and the Privileges and Immunities Clause of the Fourteenth Amendment interact because, certainly, the Court has already held that other provisions of the Fourteenth Amendment, such as the Equal Protection Clause, are not trumped by the Twenty-first Amendment. And I don't see any reason why the Privileges or Immunities Clause should be treated any differently. But, unfortunately, I'm guessing the Court concluded that because this issue had not been properly preserved below, it didn't need to reach it here. But, I think, perhaps in a future case, I would certainly urge advocates who are challenging these types of requirements to raise that as another basis on which to invalidate these types of restrictions.

 

Micah Wallen:  I also had a question of my own, Michael. This case was dealing with two brick-and-mortar stores. What are the implications for -- now we're seeing more and more online retailers who are going to be shipping alcohol into the state purely online with no minimum contacts presence in the state. How does that affect the analysis here, and did the opinion indicate a direction there at all?

 

Michael Bindas:  I don't think the opinion indicated a direction on the particular question. In fact, at one point in Justice Alito's decision, he stressed that these regulatory schemes have to be judged in and of themselves. That said, the Court provided some strong support for the notion that if a state is regulating or prohibiting online sales in a way that discriminates against out-of-state online retailers that that would be problematic. So, for example, if a state allowed online sales from in-state liquors but not from out-of-state liquor stores, that, I think, is potentially quite problematic under this decision. But if, on the other hand, a state just prohibited all online alcohol sales to consumers and took an even-handed approach, I'm not sure that this opinion has much to say on that. So I think we're just going to have to await one of those cases to make its way up. And, again, as Justice Alito stressed that the Court is going to take those issues as they come in light of the unique facets of that particular state's regulatory structure.

 

Micah Wallen:  Michael, did you have any closing remarks for us?

 

Michael Bindas:  No, just thank you for taking the time to listen today, and I look forward to seeing what comes from this opinion in the future. So thanks a lot for listening.

 

Micah Wallen:  And on behalf of The Federalist Society, I'd like to thank our expert for the benefit of his valuable time and expertise today. We welcome listener feedback by email at info@fedsoc.org. 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.