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Direct interstate wine shipping from producers to consumers continues to gain ground in the U.S. as the legal mêlée rumbles into a new decade. A U.S. Court of Appeals recently upheld a district court’s ruling that a Massachusetts’s direct shipping statute adopted in 2006 is unconstitutional because it discriminates against large out-of-state wineries. The Massachusetts’ law prevents wineries producing more than 30,000 gallons of wine per year from shipping wine into the state if they have wholesaler agreements to distribute to the retail level. Small wineries, however, have been permitted to make both direct shipments to consumers and to sell through wholesalers at the retail tier. In order to sell directly to state consumers, big wineries have to apply for a “large winery shipping license” and forfeit their right to distribute their wines through wholesalers to the retail tier.
While the January 14 ruling from the U.S. Court of Appeals for the First Circuit was a victory for direct shipping advocates, steep obstacles remain for direct interstate wine shipping in Massachusetts, including a provision requiring transporters to hold a permit for each delivery vehicle. This stipulation has kept major shipping companies such as FedEx and UPS away from the direct shipping business in Massachusetts. The state’s customer aggregate volume limit also limits the delivery of wine to 240 liters, or 320 750-ml bottles, per consumer from all wineries nationwide. This provision discourages wineries because it requires them to keep track of how much wine a consumer has purchased from all wineries. Violating this provision could lead to stiff fines and the loss of shipping rights.
Since there are no large wineries in Massachusetts (all produce less than 30,000 gallons, or approximately 12,667 nine-liter cases, per year), the appellate court determined the law unfairly favored in-state wineries and discriminated against out-of-state wineries. The court’s ruling echoes the Supreme Court’s (Granholm v. Heald) 2005 landmark decision that the 21st Amendment does not shield state alcohol laws that protect in-state over out-of-state interests. Under that landmark High Court ruling, states must have the same laws for out-of-state businesses as they do for in-state businesses. The appellate court’s ruling determined that Massachusetts’ law, which had been adopted in response to the Supreme Court ruling, gave advantages to in-state wineries and created significant burdens for out-state-wineries.
The Family Winemakers of California filed the lawsuit in September 2006 against the Massachusetts Alcoholic Beverages Control Commission. In November 2008, a District Court ruled the state statute violated the Constitution’s Commerce Clause and discriminated against interstate commerce. Massachusetts officials appealed that decision.
The Massachusetts Attorney Generals Office is reviewing the recent decision and has 14 days if it wants to file for a rehearing before the full First Circuit, rather than the three-judge panel that heard the recent appeal. The Attorney General also has 90 days if it wants to file a Cert petition with the US Supreme Court to consider the case.
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