By a 5-to-4 vote, the court overturned state liquor laws in New York and Michigan that gave preferential treatment to in-state wineries. Both states permit in-state wineries to ship directly to consumers, bypassing both retailers and wholesalers.
Michigan prohibited direct shipment by out-of-state wineries while New York nominally permitted it for out-of-state wineries that maintain a New York office, a requirement that no out-of-state winery has met and that the majority on Monday found so financially burdensome for small wineries as to amount to a prohibition.
In his majority opinion, Justice Anthony M. Kennedy said both states were engaging in the kind of protectionism that the Commerce Clause of the Constitution forbids and that the 21st Amendment does not excuse. The 21st Amendment repealed Prohibition and granted the states much leeway in regulating alcohol. But "state regulation of alcohol is limited by the nondiscrimination principle of the Commerce Clause," Justice Kennedy said.
It was this last part of the analysis that prompted four justices to dissent. Justice John Paul Stevens said that while the two states' laws "would be patently invalid" under ordinary Commerce Clause principles, "our Constitution has placed commerce in alcoholic beverages in a special category" and exempted it from those principles.
Justice Clarence Thomas, who wrote a dissenting opinion that was also signed by Justice Stevens, Justice Sandra Day O'Connor and Chief Justice William H. Rehnquist, said that "in holding that the Constitution prohibits Michigan's and New York's laws, the majority turns the amendment's text on its head."
Justice Thomas said that while the majority evidently "believes that its decision serves this nation well," both the 21st Amendment and a pre-Prohibition statute, the Webb-Kenyon Act, which served as a model for the 21st Amendment, "took those policy choices away from judges and returned them to the states."
Now that the Supreme Court has spoken, the issue does return to the states, though in a circumscribed form. The court's insistence on equal treatment leaves states free to decide how to respond: to permit direct shipment by all wineries or to prohibit it for all. The court's decision, Granholm v. Heald, No. 03-1116, did not address this remedial issue.
Hours after the ruling, the head of Michigan's Liquor Control Commission, Nida Samona, said at a telephone news conference that she would urge the state's Legislature to prohibit all direct sales. Ms. Samona said she viewed such a measure as the best way to police sales to minors.
By contrast, Gov. George E. Pataki, while also mentioning a concern about minors' access to wine, indicated his support for changing New York's law to open the state to direct shipment for all wineries. Speaking at a morning news conference, Mr. Pataki called the ruling "a plus for the wineries of New York," adding that "it's something I've thought is the right policy for some time."
In addition to New York and Michigan, six other states permit direct shipment by in-state wineries while restricting it for others. They are Connecticut, Massachusetts, Florida, Ohio, Indiana and Vermont. Thirteen others are known as reciprocity states, which permit direct sales only from wineries in states that in turn permit out-of-state direct shipments.
Under the court's analysis, which lamented "the current patchwork of laws" that Justice Kennedy said was "essentially the product of an ongoing, low-level trade war," those laws are also now invalid. The reciprocity states are California, Colorado, Hawaii, Idaho, Illinois, Idaho, Minnesota, Missouri, New Mexico, Oregon, Washington, Wisconsin and West Virginia.
An additional 15 states currently prohibit all direct-to-consumer wine shipments. They are Alabama, Arkansas, Delaware, Kansas, Kentucky, Maine, Maryland, Mississippi, Montana, New Jersey, Oklahoma, Pennsylvania, South Dakota, Tennessee and Utah.
New York was vigorous in its defense of the law, which was upheld by the federal appeals court in Manhattan in a lawsuit brought by small wineries in Virginia and California along with three New York wine drinkers. The Michigan law, challenged by a California winery and 13 Michigan residents, was overturned by the United States Court of Appeals for the Sixth Circuit, in Cincinnati.
An effort to repeal the New York law, which dates to 1970, failed in 1995 because of a veto by Governor Pataki. On Monday, he said he would support a direct-sale bill that had sufficient safeguards against purchases by minors.
In addition to their 21st Amendment arguments, New York and Michigan defended their laws as necessary to guard against sales to minors as well as tax evasion. The majority rebuffed these arguments, concluding that the states "provide little concrete evidence for the sweeping assertion that they cannot police direct shipments by out-of-state wineries." In any event, Justice Kennedy said, the states' concerns could not justify discrimination.
"Minors are just as likely to order wine from in-state producers as from out-of-state ones," he said.
The majority opinion was joined by Justices Antonin Scalia, David H. Souter, Ruth Bader Ginsburg and Stephen G. Breyer, making for one of the more unusual alignments on the current court. Also unusual was the fact that with the three senior justices - the chief justice and Justices Stevens and O'Connor - in dissent, Justice Scalia was the senior justice in the majority and therefore in the position to give the opinion-writing assignment to Justice Kennedy.
The big loser in the case was the wholesale liquor industry, which is now likely to expend considerable resources to preserve its niche in a market in which direct sales have been growing rapidly.
Direct sales to consumers account for $18 billion in annual sales from the more than 3,200 wineries in this country.