Home Wine Business Editorial DTC DTC Lawsuits Are Failing to Reach Supreme Court Resolution

DTC Lawsuits Are Failing to Reach Supreme Court Resolution

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Despite several legal setbacks over the past year or two, there seems to be reason for optimism in the DTC realm, yes? Maybe not.

By Jeff Siegel

 

At first glance, the variety of federal lawsuits aiming to open direct shipping for wine retail seem to be going apace: one case has been appealed to the Supreme Court and four more remain in various states of litigation. So, despite several legal setbacks over the past year or two, there seems to be reason for optimism, yes?

Maybe not. 

Talk to enough people not directly connected to the lawsuits, and there’s a sense of resignation — that direct shipping has gone as far as it can go in the courts, and that it may be time for its advocates to try something else.

“Those of us who see the legal cases as ‘A leads to B, and B leads to C to expand shipping rights,’ well, there seem to be a lot of judges who don’t see the same logical steps,” says Alex Koral, the regulatory general  counsel for Sovos ShipCompliant. “We may think the legal cases arguing direct shipping should also apply to retailers are clear cut, but the powers that be have been pushing back against [that idea].”

Six Current Cases

This definitely seems to be the case with the six lawsuits that have dominated the news recently. They’re each part of an attempt by prominent attorneys Robert Epstein and James Tanford (and their Epstein Cohen Seif & Porter law firm) to find a way to get the Supreme Court to hear a retail shipping case. The goal? Persuade the high court that retailers have the same right to ship to another state as wineries do, which the latter were given in 2005’s Granholm v. Heald decision.

But they’ve had little success:

  • An out of state retailer, suing to overturn North Carolina’s prohibition against retail direct shipping, has appealed its case to the Supreme Court. But a federal appeals court had upheld a lower court decision that found North Carolina’s law constitutional.
  • Similar federal cases, testing whether states can bar direct retail shipments in Rhode Island, Arizona, Ohio, and Indiana, either lost at the trial level or on appeal.
  • An Illinois case, which had won at the trial level but was overturned on appeal, was dismissed after the plaintiff sold its retail business.

These setbacks don’t include the Supreme Court’s refusal to take up Sarasota Wine Market v. Schmitt in 2021, which retail shipping advocates saw as an ideal case to expand Granholm, or what seems to be an increasingly limited victory in Tennessee Wine & Spirit Retailers Association vs. Thomas in 2019. In the Tennessee case, the high court struck down a residency requirement required to  get a state retail liquor license; however, most of the retail shipping rulings since then have not seen Tennessee as a precedent for retail shipping.

Three Stumbling Blocks

Why have Epstein, Tanford and their colleagues had such little success? Attorneys who work with these kinds of cases cite several reasons. First, says Richard Blau of GrayRobinon in Tampa, Fla., one of the leading lawyers in this field, the court doesn’t take many of these cases. It doesn’t consider  alcohol law as important as other constitutional issues. Hence, he says, there’s a sense the court only takes up alcohol cases when it sees a compelling need — and retail direct shipping doesn’t seem especially compelling.

Second, says Jason R. Canvasser, a member at Clark Hill in Detroit, most federal trial and appellate court judges hear few alcohol cases during their time on the bench. Given that, as well as that alcohol law is complicated even for U.S. law, the tendency is to fall back on precedent. And almost all precedent says state direct retail shipping bans are constitutional.

Third, says Ashley Brandt, a partner with Tucker Ellis in Chicago and the author of the Libation Law blog, those suing to expand retail shipping don’t emphasize the public health and safety issues inherent in these cases. He says states are allowed wide latitude in regulating alcohol so they can protect public health and safety. But in the 17 years since Granholm, winery direct shipping has not made the public less safe. Drunk driving, for one thing, is way down. In this, retail shipping probably won’t make the public any less safe, which should be a key part of any lawsuit.

In the end, says Canvasser, “those who want to expand retail direct shipping need to get behind it and talk it up. That way, they can give it some traction. 

“But that doesn’t mean, from a legal perspective, that they can win.”

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