Retailer Asks Fed. Court to Overturn Ill. Ban on Direct Shipping by Out-of-State Retailers

Illinois’ liquor law discriminates against out-of-state businesses, a Seattle-based wine retailer told a Seventh Circuit Court of Appeals panel.

Full Pull Wines LLC challenged a provision of the liquor code that prohibits out-of-state retailers from shipping to Illinois consumers. Two Illinois oenophiles joined the Washington-based wine business in challenging the Illinois regulation, which they claim violates the commerce clause and 21st Amendment.

Plaintiffs’ attorney James Tanford maintained before the three-judge panel that Illinois has not met its burden to justify this sort of ban. Illinois must show the law addresses an actual public health problem and that it is reasonably necessary to discriminate against out-of-state interests to justify the regulation.

“Illinois allows in-state retailers to ship wine anywhere within the state but prohibits out-of-state businesses from doing so. This court previously, in* Lebamoff v. Rauner*, held that this was discriminatory, and the law has not changed since then,” he said.

The Illinois ban on out-of-state retail shipping was previously challenged in the 2018 Seventh Circuit case Lebamoff v. Rauner. In that case, the Seventh Circuit deemed the Illinois alcohol law discriminatory and remanded the case to determine whether Illinois could justify requiring a local presence for statewide mail-order sales. That determination, however, was never made because Lebamoff went out of business, and the consumer plaintiff could not continue for medical reasons.

Given the unfinished litigation and piecemeal nature of liquor regulations, the panel pressed the attorneys on what an appropriate liquor regulation might look like.

“The 21st Amendment gives the states broad deference to control the distribution of liquor in the state. There are many quirky state liquor laws that seem to have a very tenuous relation to health and safety,” U.S. Circuit Judge Ilana Rovner, who appeared remotely, said.

“For instance, until 2018, Oklahoma beer could only be sold at room temperature. In Pennsylvania to this day, liquor can only be sold at a state-run store; in Utah, until recently, bartenders had to mix and pour all alcoholic beverages behind an opaque barrier so that children couldn’t witness the glamorization of alcohol. In Virginia, restaurants had to ensure that at least 45% of their total sales came from the food.”

“Why isn’t the state’s rationale here enough?” the George H.W. Bush appointee asked.

Tanford noted, in the examples Rovner cited, in-state and out-of-state retailers were treated the same.

Broad but Limited Power

“I think the courts have been very clear that the 21st Amendment gives states broad power with one exception — that is that it’s limited by the nondiscrimination principle of the Commerce Clause,” Tanford said. “[F]or example, Oklahoma wasn’t allowing in-state businesses to sell beer chilled and requiring out-of-state businesses to sell [it] at room temperature; it was treating everyone the same.”

U.S. Circuit Judge Frank Easterbrook, a Ronald Reagan appointee, touched on a similar variation of Rovner’s question.

“Is there any material difference between the Illinois system and the Indiana system, which we said in Chicago Wine was consistent with the Commerce Clause?” he asked.

In Chicago Wine Co. v. Braun, an Illinois wine retailer challenged Indiana’s prohibition on out-of-state retailers shipping wine directly to Indiana consumers. The Seventh Circuit upheld the Indiana law, and Easterbrook noted in his concurring opinion that because it imposes the same costs on in-state and out-of-state consumers, it passes constitutional muster.

Tanford responded that there was one significant difference, and it was pointed out in Lebamoff, but Easterbrook cut him off before he could finish his sentence.

“Lebamoff against Rauner preceded Chicago Wine. Whatever consideration we were going to give to it was given in Chicago Wine,” Easterbrook said. “I’m asking whether there was some material difference for constitutional purposes between the Illinois system and the Indiana system.”

Tanford said in the Indiana case, there was no statewide shipping. He said the main focus was local delivery by employees of the business, and in this case, they’re asking for a broader right of distribution.

Sam Horan, an assistant attorney general for the state of Illinois, maintained the state’s liquor restrictions don’t violate the Commerce Clause and cited Easterbrook’s concurring opinion in Chicago Wine. He noted that in that case, the judge’s rule unanimously held Indiana’s regulations were constitutional.

Simply Ignore a Decision?

“My friend in their brief suggested that the court should basically ignore Chicago Wine because the two judges reached the same result by different reasoning, but I’m not aware of any principle that allows this court to simply ignore a published decision,” Horan said.

U.S. Circuit Judge Rebecca Taibleson, a Donald Trump appointee, appeared alongside Easterbrook and Rovner at Thursday’s arguments. The three did not indicate when they might rule on the matter. – Caitlyn Rosen, Courthouse News Service.